Contrastive Studies On Legal System Of Corporate Social Responsibility Of Usa And China

In traditional corporate law theory, corporations are regarded as instruments for generating profits for the shareholders, thus the general view is that corporate managers only need to be responsible for shareholders. However, as monopoly increases in capitalism, companies and corporations’ share of social resources keep increasing, so did their impact on the whole society. If corporations are giving a free hand for pursuit of profits, it will negatively impact social development and economic order. Thus, people start to view corporations more as “Social Beings”, and begin to contemplate corporate identities and responsibilities besides the economic sides.The United States is the first country in the world to systematically study corporate social responsibilities. In 1924, American scholar Sheldon was the first the put forward the concept of CSR. Though the theory did not bring much attention at that time, the ensuing Great Depression between 1929-1932 stroke a hard blow to people’s confidence in corporations. Afterwards, the debate between Professors Dodd and Berle on whether corporations shall bear social responsibilities brought the issue back to the public’s attention. The controversy ended with Prof Berle acknowledging the need for corporations to undertake CSR.For an extended period of time, the US legal system pursued the doctrine of ultra vires and shareholders’ interest above all. Specifically, the doctrine of ultra vires refers to the view that corporations shall only act according to its statues. Any corporate actions outside what is defined in the statues shall be invalid. Such practices underwent changes in the 1950 s as legal precedents supporting corporate actions for the benefits of the society as a whole started to emerge. On the legislative level, in 1983 the state of Pennsylvania was the first to amend its corporate law to include items for “other stakeholders”. Subsequently, other states also made such amendment and by now, almost all states have adopted such regulations. In practice, American corporations normally outline procedures to perform CSR in their internal rules and regulations and require employee compliance. They also set up litigation systems for public interest, punitive compensation system and external monitor system to promote the fulfillment of CSR. In addition, the US CSR information disclosure system is optimized. The American capital market is the primary force behind the disclosure of CSR by corporations, the US securities laws clearly outlined the scope of corporations bearing obligations for information disclosure and the content and methods of such disclosures. Other department laws also specify the obligations of corporation to disclose certain information. Finally, there even existed social responsibility investment funds that evaluate the merits of how corporations perform their CSR in the US.This article examines the legal implementation mechanisms of CSR in the United States and deficiencies in China’s enforcement of CSR. Through such comparison, the author summarizes issues that China could draw lessons from the US.Due to historical reasons, CSR developed only recently in China. Throughout the centrally planned economy period, no true modern corporations or CSR existed in China. After the market economy has established, Chinese corporations rapidly accumulated capitals riding the tides of the economic reform. During this process, corporations are widely criticized for only concentrating on economic efficiency while ignoring social responsibilities, which result in recurring food safety issues, industrial accidents, etc. One major reason is the lack of legislations on this issue. The 5th item of Corporate Law of China stipulates that the production and management processes of corporations shall abide relevant laws and administrative rule and regulations, uphold social morality, honesty and good faith, accept government and public supervision, undertake social responsibility. However, this item did not define the connotation of corporate social responsibility or the objects of corporate CSR. Although other department laws define certain obligations of the corporation to employee, creditors, consumers and the society, due to the fragmented nature of various legislations, conflicts existed between different laws. Furthermore, such laws mostly remain as slogans and lack legal substantiality. In practice, Chinese corporations merely focus on general charities while omitting other more important responsibilities. Finally, CSR information disclosure system remains deficient in China, as manifested by narrow applicable subjects, substandard report quality and lack of third party authentication, etc.In conclusion, given the defective CSR legislations, loose penalty system, and lack of external supervision, China shall further perfect its legislative system, clarify define connotation and extensions of CSR, reduce conflicts among department laws, promote self-managements inside corporation, improve information disclosure system for CSR, and strengthen external supervision force. Together, these will greatly enhance the legal implementation mechanisms of CSR.