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. 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.

BREAKING DOWN 'Corporate Citizenship'

All businesses have basic ethical and legal responsibilities; however, successful businesses establish a strong belief in 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.

Development of Corporate Citizenship

There are stages that companies go through 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.

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

Elementary

In the elementary stage, known also as the compliant 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 a greater involvement in community activities.

Engaged

In this stage, companies will often develop policies that promote the involvement of employees and managers in activities that exceed rudimentary compliance to basic laws. Senior management is more active in developing policies for the entire corporation and assigning to all levels of management more sophisticated standards for corporate citizenship.

Innovative

Citizenship policies become more comprehensive in this stage. This occurs through increased meetings and consultations with shareholders and through participation in forums and other outlets that promote innovative corporate citizenship policies. Typically, this is the stage where corporate citizenship policies are funded and activated and become functional with assistance and support from upper-level management. Transparency comes into play in this stage as companies typically monitor how successfully they have become involved in the community, with results of this monitoring being made available through public reports.

Integrated

Citizenship activities are formalized and blend in fluidly with the company’s regular operations. Performance in community activities is monitored. Citizenship activities are driven into the lines of a business. Consultations with shareholders continues, and some companies may even set up formal training in the area of community involvement for employees and management.

Transforming

Companies that have reached this stage understand that corporate citizenship plays a strategic part in fueling sales growth and expansion to new markets. Economic and social involvement, support and integration is a regular part of a company’s daily operations in this stage.

RELATED TERMS
  1. Expatriation Tax

    An expatriation tax is a tax on someone who renounces their citizenship. ...
  2. Corporate Social Responsibility

    Corporate initiative to assess and take responsibility for the ...
  3. Community Investing

    Community investing refers to direct investments into poor communities ...
  4. Community Currency

    A form of paper scrip issued at the county, town or community ...
  5. Commercialization

    Commercialization is the process by which a new product or service ...
  6. Code of Ethics

    A code of ethics is a guide of principles designed to help professionals ...
Related Articles
  1. Retirement

    5 Easiest Countries to get Citizenship to Retire

    Discover five of the countries that make it easiest for you to obtain citizenship and a second passport through residency, investment or other means.
  2. Managing Wealth

    Record Number of People Renounced Their U.S. Citizenship in 2016

    This year, the highest number of Americans ever took the irrevocable step of giving up their citizenship. Here's why.
  3. Investing

    Why Are So Many Renouncing U.S. Citizenship?

    One reason many Americans are renouncing citizenship may be the Foreign Account Tax Compliance Act.
  4. 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.
  5. Insights

    Renouncing Your Citizenship: Madness Or Sanity?

    Here's a breakdown of when it might be a good idea to give up your citizenship.
  6. Taxes

    The 5 Countries Without Income Taxes

    Discover information on some of the best countries to consider relocating to that offer the financial benefit of charging no income tax.
  7. 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.
  8. Managing Wealth

    Go Green With Socially Responsible Investing

    Find out how morals and ethics can bring you a surprising return.
  9. Investing

    A Guide to Socially Responsible Investing

    This is where socially responsible investing came from and what it means.
RELATED FAQS
  1. What are key points to a good corporate social responsibility policy?

    Learn the main components of a good corporate social responsibility policy, including communication with stakeholders, partnerships ... Read Answer >>
  2. 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 >>
  3. Are investments in the drug sector appropriate for ethical investors?

    Explore the question of whether investments in the pharmaceutical industry are appropriate for investors who wish to pursue ... Read Answer >>
  4. What is the difference between a shareholder and a stakeholder?

    Shareholders are always stakeholders in a corporation, but stakeholders are not always shareholders. Read Answer >>
  5. Why is social responsibility important to a business?

    Companies that engage in social responsibility help improve the company's brand, attract and retain top talent, and improve ... Read Answer >>
Hot Definitions
  1. Working Capital

    Working capital, also known as net working capital is a measure of a company's liquidity and operational efficiency.
  2. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  3. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  4. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  5. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  6. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
Trading Center