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"Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development, while improving the quality of life of the workforce and their families as of the local community at large" (Holme & Watts 1999).
It signifies the continuing commitment of corporate to achieve the desired goals through excellence. The ultimate objective is to contribute to the economic development of a nation in terms of improving the quality of products the companies offer to the customers, and enhancing the productivity of the workforce, thereby benefiting the local community and society. (Balachandran .V, 2009)
Corporate Social responsibility issues
Corporate Social responsibility has various areas, which are discussed in brief now.
Legal responsibilities, Economic responsibilities, Ethical responsibilities
Owners and investors relations: business in first must be response to their owners who are concerned with earning profit.
Employees' relation: employees have an important part in the businesses without employees business cannot achieve its target. Good salary, congenial and standard working conditions are some of the employees expectation. The major responsibility is fairness and equity towards all employees.
Consumer relation: the consumer looks to business that provide his/her satisfaction, safe product, acceptable price, good quality, product improvement and respect to his/her right as a consumer.
Companies should concerns about Pollution control, greenhouse gas emissions reduction, repair of environment and recycling of waste material.
What is ethics?
Ethics, in short is a true understanding of the right and the wrong and the ability to distinguish between them. (Oak M, 2010) Right from wrong diagnosis is not always simple. Therefore, a sometimes-correct solution depends on the location and condition and that the diagnosis is the correct solution for each individual.
Ethical values relate to many aspects of organizations life, such as: social responsibility, environment welfare, use of expense accounts, transparency in decision making, accuracy and so on.
Ethics factor defines as:
Individual factors: individual factors include personal ethics, ones self-control as leaven to the formation of the main areas of ethical management in organizations.
Organizational factors: Organizational factors include organizational regulations, organizational culture and organizational structure.
Business society factors: Business society factors include government, economic conditions, business environment and international environment is the cause of ethical management orientation and management ultimately moral and practical applications in organizations.
Why does ethical behavior matter in organization?
Ethical behavior has an important role in organizations.
"A company's values, what it stands for, what its people believe in are crucial to its competitive success."(Hass R, 2006) Companies must be concerned about promoting ethical behavior because being ethical creates long-term relationship within another companies, customers and government that earns long-term profit. Ethical concern also conciliates many of today's legal regulation. (Greenberg and Baron, 2008) In the other hand when companies practice unethical, performance cost goes up. These costs can be in various areas such as enterprise identified low productivity, slow dynamics of the organization, lack of transparency and time casting organizational communication.
For example Vodafone is one the largest companies in Europe. That made the first UK mobile call on 1985, and since then Vodafone has gone to became one the largest communication companies in the world. Vodafone was rated (2005) third in the accountability ratings, which evaluate companies across areas such as framework for social, ethical, and the environmental management. (Charistine M, 2007) Vodafone scored 71 out of 100. "Obviously Vodafone is high profile in terms of its corporate social responsibility (CSR) as well as its financial and spectral performance." (Charistine M, 2007)
Using corporate ethics programs to promote ethical behavior
Most companies today are promoting the corporate ethics programs, which create organizational culture that based on ethical values to encourage people, behave ethically and understand a true value of being ethical. (Greenberg J and Baron R, 2008)
Some combination of corporate ethics programs are:
Code of ethics: code of ethics is an instruction of the behavior of a company and its members. It is specifically important in the circumstance that a company has to decide what type of behavior consent to acceptable or reasonable standards. Code of ethics can handle copnays activity in issues such as investments, health care and so on.
Ethical training: simply reading about ethics act will not turn an unethical person, an ethical person. Without effective ethics training, the ethics act does not make any different. Good ethics training shows employees how to live those standards in real, concrete workplace situation by offering examples and case studies; it helps employees internal-internalize and live the goal of ethics act. (fornoff C, 2006)
The term of stakeholder refers to any individual or group on the company activities impact. There are variegated stakeholder group which some are directly connected to the company such as suppliers and customer, employees and so on; others are indirectly connected to the company such as local communities. (Christine M,2007)
According to Domènec Melé (2010) that based on catholic social thought (CST) who discussed about "Stakeholder Theory" (Mele D, 2010), This theory is about the stakeholder right that is farther than law "corporations have an obligation to constituent groups in society other than stockholders and beyond that prescribed by law or union contact." (Jones, 1980).
The benefit of the company should manage fairly for stakeholders, employee, society, customers and owners. Moreover, the stakeholders and the management are responsible for consequences of the company's effects. The interests of the stakeholders must be taken into account. (Christine M,2007)
For example NOVO NORDISK is a healthcare company that is a world leader in diabetes care. NOVO NORDISk Company is the 12th largest company in the Denmark consistent by turnover and it has a second place in the largest company in terms of profitability. They believe that it is possible to balance business concerns with those of stakeholders, and consisting bottom line method to achieve their belief. This consists encompasses social and environment itself, animal welfare, social responsibility for employees, society, and also it includes financial and economic viability such as national growth, corporate growth and investors' expectations.
NOVO NORDISK's strategy is based on the corporate governance structure; stakeholders engagement approach that can stay accommodated to stakeholder concerns and using the systematic follow-up procedures advances ongoing improvement organizational practices. (Christine M, 2007)
"NOVO NORDISK received a number of awards, one of which was ranked Super Sector Leader in Healthcare." (Christine M, 2007)
Corporate Social Performance Theory
One of the practical theory is "corporate social performance" (chi-jui H, 2010) that practice the theory in the work frame which leads general organizations' issue to the corporate social responsibility firm. Corporate social performance links social responsibility moral and behavioral outcomes. This theory narrows down the emphasis on maximization of profit. In this theory business sees as a social institution with both power and responsibility that shows how corporations are held accountable to stakeholders and the society in the way of their operation. (Balachandran .V, 2009)
Corporate social performance significance connection between society and the three principles of corporate social responsibility:
Institutional legitimacy Principle: society grants legitimacy and power to business. The business institution must use the power in a way that society considers responsible. By complying with institutional expectations, Organizational legitimacy can be achieved and maintained.
Public responsibility Principle: This principle definitely those business organizations are responsible for the outcomes related to their areas of social involvement. Each business organizations have responsibilities depending on its type, size, industry, market, an product. For example, some businesses pollute air and water, some are suited to take advantage of poor population, some routinely are face ethical issues of honest discloser and others face product safety issues. (Balachandran .V, 2009)
Managerial discretion Principle: this principle deal with society responsible out comes. The principle emphasizes various domains of activities, namely, economic, legal, and ethical. (Balachandran .V, 2009)
Institutional theory is about how organizations modify to the political and social values and demands of their institutional environment that suggest organizations flourish if they can satisfies the demands, and there by establish their authority In stakeholders concerns. (Cunliffe A 2008)Organizations in the same institutional environment might develop similar structures, practices and process to deal with the demands. This similarity between organizations is known as ISOMORPHISM, and is seen to occur in three main ways:
Coercive isomorphism: organizations adopt similar practices because of the laws, regulations, political sanctions or public outcry. (Cunliffe A 2008)
Mimetic isomorphism: this way can be particularly useful for new organizations that have no experience dealing with environmental demands. Organizations imitate the practices of other successful organizations to ensure their survival. (Cunliffe A 2008)
Normative isomorphism: organizations adopt the values of other successful companies in their discipline that can be through professional or industry associations, publications, hiring in managers from other companies and so on. (Cunliffe A 2008)
Social responsibility aim
Applying CSR concept in the organization provides advantages to business including:
Image of Community organizations: Increase stakeholder confidence in the organization that care democratic values, builds strong consumer loyalty, creates a sense of pride for itself and for related groups. Those give the chance to company of being rated as the best business leadership awards from public organizations. (Balachandran .V, 2009)
Safer and healthy Workplace: For example, Alps Company provides mental health education for all employees and managers and counseling rooms from 2004 at all facilities for all employees to use. They present counselor on designated days for those who want to take up the opportunity to get advice. Oxy is another company that is one the safest company in united state (2009) which "rate of injury and illness per 100 workers per year has been 1.0" (2009).
Governance structure and regulations: corporate social responsibility is farther than regulation of business. Corporate responsibility is recognition of cooperation between business and government. CSR is not only for the benefit of business, but is also as solving some of basic social and environmental problems. In the other words, corporate responsibility is for benefit of society as a whole. (Balachandran .V, 2009)
In addition, CSR provides the stronger risk management and, more motivated employees' increased brand value, Greater access to financing sources and so on.
Example of Top 10 most CSR companies in the world (2008)
Google's name is in the most influential companies list in the world. Google.org, helping to resolved the challenging problems in the world such as, disasters and disease. (Peter Liria, Jr, 2008)Additionally, Google also is working with NGOs to dealing with governments to achieve their goals that suppress free expression and privacy. "World class technology is only the tip of the iceberg at Google. Google wants to change the world for the better in very fundamental ways. That is part of what makes us a 'different' kind of company. " (Peter Liria, Jr, 2008)
Example of the Top 10 CSR companies' scandals (2010)
Google's battle for free speech
at the beginning of the year 2010 Google's withdrawal from the china was a battle decision for free speech on the web. However, Google's consecutive legal problems in Italy, where senior executives were convicted of privacy violations, establish how complicated this battle is going to be.(Crane, 2010)
As you can see in the example part Google has part in both. It is confusing that one company has place in the both top 10 worst and top 10 most. In addition, it is not just about Google also it is about another companies. That shows where companies have had to make some hard ethical choices. And how much is difficult to keep the company from the CSR scandals. Corporate social responsibility never was easy. According to Mitcham "Ethical problems of personal and public decision making are not new. The need to undertake ethical reflection is part--indeed a central part--of what it means to be human" (1996).