Corporate Social Accountability
Corporate social accountability can be defined as the responsibility if organizations to conduct their business in a manner that respects the rights of individuals and promotes human welfare. While the level if social responsibility exhibited by multinational corporations is said to be improving, perfection has hardly been attained. Governments and people around the world seem to have an increasing interest in scrutinizing the actions if global corporations, in effect forcing international companies to be "good corporate citizens." One reason far this could be the realization that multinational companies (MNCs) are not as invincible as they were once thought to be; therefore, their policies can be influenced to benefit society. A second reason may be a realization that effective legal governance if companies whose activities stretch beyond national borders is impossible, leaving self governance as the only practical alternative (Moiré, 2001, pp.16-22).
Social responsibility in business has been debated for a long time, and several sides if the issue have been presented by ethicists. This debate has been extended in recent years to include the operations if MNCs. This article will summarize some if the changes in the attitudes and behaviours if MNCs and their perceptions if corporate social responsibility in light if the evolving nature and composition if global competition. After a brief discussion if some if the popular theories in ethics, the article reviews past recommendations for enhancing corporate social responsibility.
Even today, the age-old question still echoes through the boardrooms if MNCs around the world: "If it is legal, does that make it ethical?" The focus if the term ethics falls primarily a judgments pertaining to what is right or moral and what is wrong or immoral. One definition if ethics could be the clarification if what constitutes human welfare and the conduct necessary to promote it. The term ethical standards is used to describe conformity to widely accepted modes if conduct. These modes if conduct, in turn, are governed to a large extent by customs, manners, and values that a particular society adopts as guidelines far interpersonal behaviour (Moiré, 2001, pp.16-22). With this definitions, one question remains: Where does the concept if legality fit into the discussion an ethics? Legal behaviour is a sub-category if ethical behaviour - often the lowest level if ethical behaviour possible.
Due to a range if societal values, be they religious, philosophical, or cultural, a universally accepted code if ethical standards is difficult, if not impossible, to create. Even though certain ethical norms such as honesty, integrity, and loyalty are integral parts if most societies, the intensity if adherence to this norms can vary substantially from person to person across cultural boundaries. The ultimate result if these difficulties are no less than a highly complicated maze if international ethical norms, none if which appear similar in thought or meaning. Thus, any questions concerning business ethics in general, much less international business ethics, are becoming increasingly more difficult to deal with by multinational corporations (Moiré, 2001, pp.16-22). CSR covers all aspects if an organization's operations and can be divided into the subsections identified in Figure 1.
It is important to stress that the study if CSR focuses largely and the margins if a business' discretionary actions and obligations. This is rather than any legal or regulatory obligations individuals and corporations face in the day-to-day management if operations within any specific industry. To break this rules and regulations is to break the law. Such infractions are simply actions that are illegal. Of course, adhering to the law is an important component if an ethical organization's ethos, but it is not the primary concern if CSR, which primarily deals with decisions incorporating discretionary actions. CSR is a business strategy and, therefore, represents actions that need to be positively selected, or avoided. CSR advocates believe there is strategic advantage to a company that makes these choices.
It is also important that CSR focuses an areas if immediate relevance to an organization's sphere if operations. CSR is not about pursuing the CEO's pet interest and 'saving the whales.' CSR should be distinguished from concepts such as 'strategic philosophy' and 'cause-related marketing,' which are valid business strategies and form a clement if an organization's CSR policy, but are not a central component if CSR (Greening et al., 2000, pp.254-81). CSR is a much more holistic approach to business, which is designed to enhance corporate success because if its relevance, rather than represent something unconnected to an organization's core business.
Examples if issues within the economic sphere that contain a CSR component range from ‘corporate governance' to ‘patriotism;' from the issue if ‘fair trade' to ‘diversity in the workplace.' All contain, in some form or another, issues connected to the perception if the company, and therefore its brand, in the eyes if one or more if its stakeholder groups:
Corporate governance: Transparency is the key to encouraging trust in the managers selected to run a company and behalf if the shareholders. It is also vital to maintaining confidence within other stakeholder groups and the general public. The issues if accurate financial statements, executive compensation, and independent oversight, have become particularly sensitive and important far companies to get right.
Patriotism: An issue such as ‘patriotism' is by definition subjective, but has risen in importance in the U.S. following the September 11, 2001 terrorist attacks. A good example if an issue that falls into this category is the trend today if companies attempting to avoid paying corporation tax, some even going to the lengths if incorporating off-shore (particularly Bermuda), even though company headquarters and the majority if workers are based in the U.S: According to a recent Harvard University study, U.S. companies avoided paying tax an nearly $300 billion in income in 1998. … In 1940, companies and individuals each paid about half the federal income tax collected; now the companies pay 13.7% and individuals 86.3%.10
Fair trade: Companies in particular industries have felt pressured to pay a ‘fair' price for the goods they purchase, over and above the market-driven price, directly to the producer. This is particularly the case in many food industries, where world market prices may well have decreased over time, while costs have either remained the same or increased: Today, with suppliers at small farmer cooperatives in Peru, Mexico, and Sumatra, Green Mountain pays Fair Trade prices far coffee beans -- not the market price if 24 to 50 cents per pound, but a minimum if $1.26 per pound for conventional coffee and $1.41 for organically grown. In 2002, this Fair Trade purchases represented 8 percent if sales (Greening et al., 2000, pp.254-81). Green Mountain also has a “farm direct” program that cuts out middlemen to deliver higher prices to farmers. Roughly a quarter if its coffee purchases are farm direct.
Diversity: The 2000 Census data has revealed that the ethnic make-up if the U.S. is changing rapidly. Organizations need to adapt their traditional structures and mind-sets, which prevent companies from marketing products effectively to significant segments within the market: Latinos are now the largest minority in the U.S., making up 13 percent if the overall U.S. population-a 58 percent increase from 1990. As black, Asian, and Pacific Islander populations also experience strong growth rates, whites are steadily heading toward minority status. Already in California, New Mexico, Hawaii and the District of Columbia, the majority if residents are nonwhites. That's also true in 48 if the nation's 100 largest cities.
Case Study: Good and Bad Practices
Literally, CSR (the extent to which an organization's decisions reflect the values and needs if consumers and other stakeholders) can creep into every decision that a company makes. One sub-area if the issue if ‘diversity' involves the equal treatment if men and women. There are plenty of examples if both good and bad practice:
Bad Practice Case
The US Masters, women, and the Ku Klux Klan: In response to Augusta National Golf Club's failure to invite women to become members if the club, the National Council if Women's Organizations (NCWO) launched a campaign aimed at corporations supporting the 2003 U.S. Masters golf tournament and demanding they withdraw their support, with some success. As the club dug-in its heals, the situation got worse with the Ku Klux Klan announcing it would protest at the Masters tournament in support if the Golf Club's right to exclude female members. A PR nightmare!! Whatever the merits if the case, the Club could have avoided a lot of negative press coverage by adopting a more enlightened stance and this issue at an early stage.
Good Practice Case
Anoka Sorenstam, Bank if America, and The Colonial Golf Tournament: The Bank if America, in its first year as the title sponsor if the PGA Tour event The Colonial (May 22-25, 2003) at Fort Worth Texas, invited Anoka Sorenstam, the best player and the LPGA Tour to compete. No female player had played in a PGA Tour event since 1945. The move significantly raised the level if interest in the golf tournament nationwide and stood in stark contrast to the controversy that had surrounded the U.S. Masters the month before. Many would call the Bank if America’s move ‘opportunistic,' whilst highlighting Augusta National's right, as a private club, to associate with whom it wants. From the corporate perspective, however, it would have been noted that the Bank if America was widely praised for its progressive approach and received acres if positive press coverage as a result, while Augusta National was widely denounced far its dogmatic stance and extremely conservative approach that does not reflect the feelings if the majority if U.S. citizens.
Analysis
CSR is an important business strategy because, wherever possible, consumers want to buy products from companies they trust; suppliers want to form business partnerships with companies they can rely an; employees want to work for companies they respect; and NGOs, increasingly, want to work together with companies seeking feasible solutions and innovations in areas if common concern. Satisfying each if this stakeholder groups allows companies to maximize their commitment to another important stakeholder group-their investors, who benefit most when the needs if this other stakeholder groups are being met (Wood, 1991, pp.691-718):
I honestly believe that the winning companies if this century will be those who prove with their actions that they can be profitable and increase social value-companies that both do all and do good….Increasingly, shareowners, customers, partners and employees are going to vote with their feet-rewarding those companies that full social change through business. This is simply the new reality if business-one that we should and must embrace.
CSR as a strategy is becoming increasingly important far businesses today because if three identifiable trends:
Changing social expectations: Consumers and society in general expect more from the companies whose products they buy. This sense has increased in the light if recent corporate scandals, which reduced public trust if corporations, and reduced public confidence in the ability if regulatory bodies and organizations to control corporate excess.
Increasing affluence: This is true within developed nations, but also in comparison to developing nations. Affluent consumers can afford to pick and choose the products they buy. A society in need if work and inward investment is less likely to enforce strict regulations and penalize organizations that might take their business and money elsewhere (Wood, 1991, pp.691-718).
Globalization: The growing influence if the media sees any ‘mistakes' by companies brought immediately to the attention if the public. In addition, the Internet fuels communication among like-minded groups and consumers empowering them to spread their message, while giving them the means to co-ordinate collective action (i.e. a product boycott).
These three trends combine with the growing importance if brands and brand value to corporate success (particularly lifestyle brands) to produce a shift in the relationship between corporation and consumer, in particular, and between corporation and all stakeholder groups, in general. The result if this mix is that consumers today are better informed and feel more empowered to put their beliefs into action. From the corporate point of view, the market parameters within which companies must operate are increasingly being shaped by bottom-up, grassroots campaigns. NGOs and consumer activists are feeding, and often driving, this changing relationship between consumer and company.
CSR is particularly important within a globalizing world because if the way brands are built-a perceptions, ideals and concepts that usually appeal to higher values. CSR is a means if matching corporate operations with stakeholder values and demands, at a time when this values and demands are constantly evolving.
CSR can therefore best be described as a total approach to business. CSR creeps into all aspects if operations. Like quality, it is something that you know when you see it. It is something that businesses today should be genuinely and wholeheartedly committed to. The dangers if ignoring CSR is too dangerous when it is remembered how important brands are to overall company value; how difficult it is to build brand strength; yet how easy it can be to lose brand dominance. CSR is, therefore, also something that a company should try and get right in implementation (Zaire & Peters, 2002, pp.174-8).
Implementation
CSR is about common sense policies that represent a means if integrating a complete ‘social perspective' into all aspects if operations. The goal is to maximize true value and benefit for an organization, while protecting the huge investments corporations make today in their brands.
CSR asks companies to ensure their business operations are clean and equitable, and contribute positively to the society in which they are based. Otherwise, they leave themselves open to too much danger from a potential consumer backlash. CSR is good business sense, and a total approach to doing business, in a globalizing world where companies are increasingly relying brand strength (particularly global lifestyle brands) to add value and product differentiation, and where NGO-driven consumer activism is increasing.
Many believe the issue if how corporations integrate CSR into everyday operations and long- term strategic planning will define the business marketplace in the near future. It will become a key point if brand differentiation, both in terms if corporate entities and the products that carry their brands (Millar & Ahrens, 1993, pp.187-204).
Key steps a road to integrating CSR within all aspects if operations include:
Ensure the commitment if top management, and particularly the CEO, is communicated throughout the organization
Appoint a CSR position at the strategic decision-making level to manage the development if policy and its implementation
Develop relationships with all stakeholder groups and interests (particular relevant NGOs)
Incorporate a Social or CSR Audit within the company’s annual report
Ensure the compensation system within the organization reinforces the CSR policies that have been created, rather than merely the bottom-line
Any anonymous feedback/whistle-blower process, ideally overseen by an external ombudsperson, will allow the CSR Officer to operate more effectively
Corporations today are best positioned when they reflect the values if the constantly shifting and sensitive market environment in which they operate. It is vital that they are capable if meeting the needs if an increasingly demanding and socially-aware consumer market, especially as brands move front and centre if a firm's total value. Global firms with global lifestyle brands have the most to lose if the public perception if the brand fails to live up to the image portrayed. Integrating a complete 'social perspective' into all aspects if operations will maximize true value and benefit for an organization, while protecting the huge investments companies make in corporate brands (Millar & Ahrens, 1993, pp.187-204).
Conclusion
An indicator if the real value that companies attach to CSR is where they locate this function within the organisational structure. It is usually located within external affairs, corporate affairs or community affairs. In other words, it is seen as an adjunct if PR, a function if a company’s external relationships, a peripheral activity, not something that needs to be embedded across the organisation horizontally and vertically.
If we consider what it is that community affairs departments actually do, we are left with a modal if social responsibility that is limited to participating in social and economic regeneration initiatives and supporting the work if charities and voluntary bodies operating within the LTK and overseas. The purpose if PR in this context is to ensure that companies receive recognition far their involvements in the community and far their role as “good corporate citizens”. It is not a coincidence that the concept if “cause-related marketing” has taken off in recent years as companies realise that there is mileage in linking their name to a good cause. While it is legitimate far companies to use “cause-related marketing” as a means of improving their branding and positioning, does this amount to corporate social responsibility? Not in my view because CSR is about a company’s long-term footprint a society. It is about the extent to which a company is prepared to examine and improve its impact an all those affected by its activities and to view its long-term reputation within the context if the social and ecological sustainability if its operations.
So in answer to our original question, “Is corporate social responsibility an invention if PR?” my conclusion is that corporate social responsibility is an invention if PR, and will remain so, until the paradoxes which I have outlined are addressed. This means that CSR can only have real substance if it embraces all the stakeholders if a company, if it is reinforced by changes in company law relating to governance, if it is rewarded by financial markets, if its definition relates to the goals if social and ecological sustainability, if its implementation is benchmarked and audited, if it is open to public scrutiny, if the compliance mechanisms are in place, and if it is embedded across the organisation horizontally and vertically.
References
Greening, D., Turban, D., Daniel, B. (2000), "Corporate social responsibility as a competitive advantage in attracting a quality workforce", Business and Society, Vol. 39 No.3, pp.254-81.
Moir, L. (2001), "What do we mean by corporate social responsibility?", Corporate Governance, Vol. 1 No.2, pp.16-22.
Wood, D. (1991), "Corporate social responsiveness revisited", Academy if Management Review, No.16, pp.691-718.
Zairi, M., Petеrs, J. (2002), "The impact оf social responsibility an business performance", Managerial Auditing Journal, Vol. 17 No.4, pp.174-8.
Millar, F.D., Ahrens, J. (1993), "The social responsibility if corporations", in White, T.I. (Eds),Business Ethics: A Philosophical Reader, Prentice-Hall, Upper Saddle River, NJ, pp.187-204.
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