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What is the evolving meaning of CSR and corporate governance in a credit market meltdown? I asked this question in late October…and one month later, I still don’t have a clear answer.

In the midst of the debilitating financial freefall, it is somewhat surreal to observe corporate “social responsibility” and “governance” continuing to tread wearily along clearly demarcated furrows of engagement between companies and their key stakeholders.  To wit: if you look at corporate social responsibility and governance activities over the last month, you will see that non-governmental organizations and advocacy groups continue to pose well-worn questions, challenging:

In response, proponents of voluntary corporate responsibility and governance continue to press for self-regulation – most recently, the International Business Leaders Forum, IFC and the UN Global Compact have launched the “integration process”, as an alternative to the Human Rights Impact Assessment.  This integration process has been developed specifically for companies that want to integrate human rights issues into their existing environmental and social impact assessments.

But, who is asking about the corporate responsibility and governance implications of a growing recession triggered by a credit crisis? There is an elephant in the room that we are all trying hard to ignore.

Yes, there is dialogue about the implications for migrant workers in international supply chains, and sincere questions are being asked by the IMF and the United Nations about the implications of a global recession on near-to-starving communities in have-not countries. And, bonuses, stock options and compensation paid to executives, and even poor-performing corporate management teams, are under intense public scrutiny. Our reaction to the hubris of American automobile manufacturers (including our collective gulp at their insensitive rationalization of lavish corporate jets) starts to move us closer to the essential questions. Yet far more dialogue is needed to delineate emerging expectations for ethical and corporate responsibilities in the midst of a credit and financial crisis.

Do corporate accountabilities – to consumers and employees, for example – remain constant in times of crisis? Is it now ethically offensive:

  • for retailers to aggressively target children and teens in the marketing of expensive electronic toys in this year’s pre-Christmas sales campaigns…knowing that many parents don’t have available credit or cash?
  • for manufacturers to advertise “no down-payment, no interest for 12 months” on large scale consumer purchases (assuming of course that credit is even available)?
  • for companies to reduce benefits to retired employees in response to the financial crisis?

The Subprime Credit Crisis, we now are likely to admit, was triggered by greed and enabled by subprime lending to home purchasers in America with modest incomes and poor credit histories. Ironically, this enriched accessibility to credit by less-qualified borrowers was dressed up by some financial institutions as a virtue –  enabling home-ownership, “one foundation of the great American dream”.

Members of minority groups received a disproportionate number of subprime mortgages and as a consequence, have experienced a disproportionate share of financial ruin and loss of their homes.  Even renters have become innocent victims, evicted from their residences when their landlord’s property has been foreclosed.

There is no denying, now, that corporate decisions to make credit available without eligibility to unqualified borrowers – via high-interest credit card purchases, subprime mortgages, and high-pressure enjoy now and pay later credit terms – have ethical dimensions. And, now, in the wake of this credit binge (including a global economic recession and severe limitations on access to credit), there is even more need to talk about our evolving expectations of corporations.  Corporate social responsibility and governance accountabilities are not static.

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