WHAT IS 'Corporate Citizenship'

Corporate citizenship involves the social responsibility of businesses, and the extent to which they meet legal, ethical and economic responsibilities, as established by shareholders.

BREAKING DOWN 'Corporate Citizenship'

Corporate citizenship refers to a company’s responsibilities toward society. The goal is to produce higher standards of living and quality of life for the communities that surround them and still maintain profitability for stakeholders. The demand for socially responsible corporations continues to grow, encouraging investors, consumers and employees to use their individual power to negatively affect companies that do not share their values.

All businesses have basic ethical and legal responsibilities, however the most successful businesses establish a strong foundation of corporate citizenship, showing a commitment to ethical behavior by creating a balance between the needs of shareholders and the needs of the community and environment in the surrounding area. These practices help bring in consumers and establish brand and company loyalty.

Companies go through different stages during the process of developing corporate citizenship. Companies rise to the higher stages of corporate citizenship based on their capacity and credibility when supporting community activities, a strong understanding of community needs, and their dedication to incorporate citizenship within the culture and structure of their company.

Development of Corporate Citizenship

The five stages of corporate citizenship are elementary, engaged, innovative, integrated and transforming.

In the elementary stage, a company’s citizenship activities are basic and undefined because there is scant corporate awareness and little to no senior management involvement. Small businesses in particular tend to linger in this stage. They are able to comply with the standard health, safety and environmental laws, but they do not have the time nor the resources to fully develop greater community involvement.

In the engagement stage, companies will often develop policies that promote the involvement of employees and managers in activities that exceed rudimentary compliance to basic laws. Citizenship policies become more comprehensive in the innovative stage, with increased meetings and consultations with shareholders and through participation in forums and other outlets that promote innovative corporate citizenship policies. In the integrated stage, citizenship activities are formalized and blend in fluidly with the company’s regular operations. Performance in community activities is monitored, and these activities are driven into the lines of a business. Once companies reach the transforming stage, they understand that corporate citizenship plays a strategic part in fueling sales growth and expansion to new markets. Economic and social involvement is a regular part of a company’s daily operations in this stage.

RELATED TERMS
  1. Citizenship Test

    A key criteria test set forth by the IRS, that an individual ...
  2. Corporate Governance

    Corporate governance is the structure of rules, practices and ...
  3. Ethical Investing

    Ethical investing refers to the practice of using one's own ethical ...
  4. Business Ethics

    Business ethics is the study of proper business policies and ...
  5. Corporation

    A corporation is a legal entity that is separate and distinct ...
  6. Green Card

    Green card is a colloquial name for the identification card issued ...
Related Articles
  1. Investing

    5 Hardest Countries to Gain Citizenship

    The United States is one of five countries that puts up very high barriers for foreigners to get citizenship. Here's how it compares to the other four.
  2. Taxes

    When is Dual Citizenship Not a Good Idea?

    It may sound useful, but there are a number of reasons that make dual citizenship a questionable choice.
  3. Taxes

    Advantages And Disadvantages Of Dual Citizenship

    A person with dual citizenship is a citizen of two countries at the same time. Dual citizenship is complex, so it’s important to understand the pros and cons.
  4. Retirement

    5 Developed Countries That Welcome Expats

    Investigate these expat havens if you seek a developed country with low barriers for getting a permanent resident visa – sometimes even citizenship.
  5. Investing

    Socially Responsible Mutual Funds

    It is possible to avoid unethical investments and still profit from mutual funds. Find out how!
  6. Investing

    Impact Investing Basics

    Learn about impact investing, including some of the common phrases used and how it differs from traditional investing.
  7. Trading

    Trading With Stage Analysis

    Stage analysis offers market participants a powerful tool to identify current market conditions.
  8. Small Business

    What are Business Ethics?

    Business ethics is the system of laws and guidelines by which business professionals and corporations operate in a fair, legal and moral fashion. It’s a broad topic, covering everything from ...
  9. Retirement

    Best Places to Retire Abroad

    Mexico beats Panama out for the best country to retire to. Check out why, and other news about the best retirement countries.
  10. Investing

    Community Investing 101

    Discover a type of socially responsible investing that helps to contribute to noble causes close to home.
RELATED FAQS
  1. Why is business ethics important?

    No matter the size, industry or level of profitability of an organization, business ethics are one of the most important ... Read Answer >>
  2. Can I still pass the CFA Level I if I do poorly in the ethics section?

    You may still pass the Chartered Financial Analysis (CFA) Level I even if you fare poorly in the ethics section, but don't ... Read Answer >>
Trading Center