The Netherlands Embassy in Dhaka, Bangladesh

Corporate social responsibility and corporate governance

Corporate social responsibility

Businesses have an important role in supporting and respecting the protection of internationally proclaimed human rights. The goal of corporate social responsibility (CSR) is to embrace policies that proactively promote the public interest and eliminating practices that harm the public sphere or violate human rights (including labor rights, or right to a clean environment). In Bangladesh, however, many businesses consider CSR to be voluntary or consider that CSR should consist of charitable activities stemming from the goodwill of companies that want to give something back to the communities they work with or in. This lack of knowledge, together with a lack of understanding about the benefits of CSR, hampers implementation of a policy that could be win-win for business owners and society. Interestingly, the Bangladeshi private sector itself has called for more CSR compliance and established a multi-stakeholder platform, the CSR Centre, to address issues of state, corporate, social and environmental responsibilities. Indeed, a great need exists to raise awareness about the respective responsibilities of government and companies; the Embassy will intensify its support of various activities aiming for improved CSR awareness and behavior.

Corruption and corporate governance challenges

A large regulatory burden is often associated with corruption, involving payments to inspectors who visit firms or to officials who grant permits. This form of corruption is known as ‘speed money’ in Bangladesh. Reports of corruption in the awarding of public and private tenders are also frequent. Meanwhile, the capacity of the state to govern and to deliver services has deteriorated. Public institutions are not accountable for their performance. Civil servants face weak incentives and little in the way of checks and balances. Companies that would like to do business in Bangladesh are likely to encounter regulatory hassle and compliance problems. Registering a company and getting the required licenses in place usually takes more time than indicated in the guidelines from the authorities. Unfortunately, the most important institutions for providing facilitation for foreign businesses are known for “unofficial” practices and for delaying the process if their bribe demands are rejected. On-going programs work directly with these institutions to facilitate business, but there is still a long way to go. Firms view Bangladesh’s uneven regulatory environment as a serious deterrent to doing business here.

There are challenges in corporate governance as well that hinder private sector development. In a country like Bangladesh where a significant percentage of local organizations are owned and managed by family-run entities, the corporatization of management structures is sorely missing. Various leading local firms are experimenting with Western models of separation of ownership and management. Trends in globalization are adding to the pressure of adopting Anglo-American models of corporate governance across Asia. However, directly importing these models of corporate governance may not be suitable for family-owned businesses in Bangladesh.

 

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