December 12, 2006 - There is widespread interest in the way in which companies conduct themselves, including in the environmental and social impact of their activities. Companies and those who govern their affairs do not operate in a values-free zone and their activities are and should be open to evaluation and criticism.

CAMAC's report on The Social Responsibility of Corporations, released today, aims to provide a pathway through the mass of material and opinions on this subject, as well as respond to questions raised in the terms of reference from the Government.

While largely focused on the conduct of business corporations, the report notes that issues of social responsibility also arise for other entities, including public sector, non-profit and unincorporated bodies.

Companies operate in a shifting marketplace of legal requirements, consumer preferences, employee views, investor sentiments, community attitudes and other pressures. Where social and environmental issues arise in relation to a company's business, they need to be managed, as do other issues that may impinge on business success or failure.

According to CAMAC's Convenor, Richard St John:

Companies should be judged on the way they conduct themselves in the context of pursuing their business aims and their overall economic and other contributions and impacts. This includes the way they deal with environmental or social issues that relate to their business. They should not be expected to direct their efforts to social ends regardless of the relevance of those ends to their own business.

The report suggests that a company will be socially responsible if it operates in an open and accountable manner, uses its resources for productive ends, complies with relevant regulatory requirements and acknowledges and takes responsibility for the consequences of its actions.

The report recognises the importance of companies being run with a proper regard to the social and environmental consequences of their conduct. It concludes that existing legal requirements are sufficiently flexible to enable corporate decision-makers to take into account the environmental and other social aspects of their decisions.

Any amendment of the Corporations Act expressly to require or permit directors to have regard to enumerated special interests would not be likely to improve the quality of corporate decision-making and could in fact be counterproductive by clouding the accountability of directors.

The report makes the point that transparency is a cornerstone of responsibility. It notes that corporate practice on the reporting of social and environmental aspects is evolving within a framework of legislative, stock exchange and market requirements and guidelines. It concludes that s 299A of the Corporations Act is an appropriate platform for the further development of such reporting. It recommends that this reporting obligation be extended beyond listed public companies to all listed entities. Beyond that, the Committee does not see a need at this stage for legislative elaboration of reporting requirements.

On the question of encouraging responsible corporate conduct, the report notes the key roles played by government in laying down boundaries for corporate behaviour through legislation in various areas, in providing a framework for corporate governance and accountability and in the pursuit of corporate compliance. Beyond those areas, the Committee points to possible steps in the areas of policy, leadership, promotion of engagement and encouragement of participation in industry and other initiatives.

Copies of the Report

The report is available: Click here to view or download the Report (PDF File, 882 KB)

To receive a bound copy, please send your postal details to: camac@camac.gov.au

Summary of submissions

Click here to view or download the Summary of submissions (PDF File, 678 KB)

CAMAC - Corporations and Markets Advisory Committee

CAMAC - Corporations and Markets Advisory Committee

The Corporations and Markets Advisory Committee (CAMAC) was established by the Australian Government in 1989 to provide a source of on-going independent advice on any aspect of corporate or financial markets law reform or any proposal to improve the efficiency of the financial markets. The Committee has published many reports on corporate and financial markets law.

More from CAMAC - Corporations and Markets Advisory Committee