Corporate Governance & Corporate Social Responsibility Study Guide

Comprehensive vocabulary terms and definitions covering the core concepts of Corporate Governance, Ethics, and Corporate Social Responsibility.

Corporate Governance

The system that ensures companies are managed responsibly and in the interests of shareholders and stakeholders.

Enron Scandal

A major corporate failure characterized by accounting fraud, highlighting the need for stronger audits and board oversight.

Volkswagen Dieselgate

A corporate scandal involving emissions cheating that demonstrated the importance of ethics and compliance.

Principal-Agent Theory

A theory suggesting that owners (principals) and managers (agents) have conflicting interests, often exacerbated by information asymmetry.

Information Asymmetry

A situation where managers (agents) possess more knowledge about a company's operations than the shareholders (principals).

Dualistic System

A two-tier governance structure, such as in Germany, consisting of an Executive Board to run the company and a Supervisory Board to monitor management.

Monistic System

A one-tier governance structure, common in the UK and US, involving a single Board of Directors with both executive and non-executive members.

Cross-over Interlacing

A forbidden practice in Germany where a manager of Company A sits on Company B’s board while a manager of Company B sits on Company A’s board.

Three Lines of Defense Model

A governance system dividing risk responsibilities: 1st line (operational management), 2nd line (risk & compliance), and 3rd line (internal audit).

IDW PS 980

The 2011 auditors' standard used to evaluate Compliance Management System quality based on adequacy, effectiveness, and efficiency.

Comply or Explain (C-Rules)

A principle in national governance codes where companies follow recommendations or must publicly explain why they do not.

OECD Principles (1999)

International principles for good corporate governance aimed at achieving sustainable economic growth and financial stability.

Corporate Social Responsibility (CSR)

The concept that companies are responsible for their impact on society and the environment beyond just generating profit.

Pyramid of Responsibility

Archie B. Carroll's model balancing four levels of company responsibility: economic, legal, ethical, and philanthropic.

CSRD (2023)

The Corporate Sustainability Reporting Directive, which significantly expanded EU sustainability reporting requirements to cover approximately 49,000 companies.

Brundtland-Report Definition

Sustainability defined as meeting present needs without harming the ability of future generations to meet their own needs.

Triple Bottom Line

The three pillars of sustainability: People (Social), Planet (Ecological), and Profit (Economic).

ISO 26000

An international voluntary guideline providing guidance on seven core subjects, including human rights and labor practices.

UN Global Compact

The world's largest voluntary CSR initiative involving 10 principles across human rights, labor, environment, and anti-corruption.

Sustainability Triad

A strategy for sustainable development that combines efficiency, sufficiency, and consistency.

Corporate Citizenship

A status whereby a company supports society through corporate giving, volunteering, foundations, and cause-related marketing.

Greenwashing

The practice of using misleading advertising or false claims to make a company or product appear more environmentally friendly than it is.

Supply Chain Due Diligence Act

A law requiring businesses to implement risk management to identify and remedy human rights and environmental risks in their supply chains.

ILO Labor Standards

International standards covering freedom of association, and the abolition of forced labor, child labor, and discrimination.

Homann vs. Ulrich

Different theoretical foundations: Homann focuses on economic ethics and rules, while Ulrich emphasizes integrative business ethics and personal responsibility.

Friedman vs. Drucker

The contrast between the shareholder-value view (profit-first) and the management-responsibility view (society-first).

Archetype Model (Cameron & Freeman)

A framework for understanding corporate culture through four types: clan, adhocracy, hierarchy, and market.