Managing Corporate Responsibility In Globalization And National Economies Business Essay

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Simply, globalization can be regarded as "being global". Different meanings are associated with globalization depending on the context and scenario. Globalization can be defined as integration of the economies of the world through uninhibited trade and financial flows and it also involves the mutual exchange of technology and knowledge. Free inter country movement is possible in the process of globalization. Developing economies refers globalization as increase in foreign direct investment (FDI) in the national economy. (BBC News, 2008)

The most significant impact of globalization on national economies is that the national economies are directly integrated and synchronized with the global economy. This integration is done through trade, foreign direct investment, capital flows, migration, the spread of technology, and military presence. There are certain economic, technological, socio-cultural, political, and biological factors are involved in the process of globalization of national economies. It is also a transnational circulation of ideas, languages, or popular culture through acculturation. The economy that has undergone globalization is regarded to be globalized on open economy. Different impacts of globalization are as follows:


Globalization has enabled the corporations to access worldwide production markets and it has provided access to international customers and suppliers. Movement of produced or finished goods and services is now easy across national borders.


Globalization enables the consumers to access international financial markets and enables the people to borrow or lend internationally. Corporations can achieve financial efficiency through globalization because they have access to international capital due to globalization.

Job Market

Job markets are now international due to increased globalization. Corporations now hire internationally rather than locally. In the past, workers were only tied to their local or national economies with their fate determined by the local factors. But, due to globalization, labor market has now become international and now people can get jobs internationally to the corporations operating in the international economy.


Economies are now internationally integrated due to globalization of economies with free exchange of goods and services across national borders. European Union is a significant example for that.


Political powers have now also become global rather than local due to increased globalization. For example, United States (US) now enjoys international political power due to internationalization and globalization. Similarly, nations also have the international political influence due to the increased internationalization and globalization.


Corporations have access to international markets and now they compete internationally rather than locally. Competition has now become more intense with competitors having more access to international markets.


Information and technology now flows freely across national borders.


Languages have now become more international now due to globalization.


Integrated global economies and increased shared knowledge is causing harmonization of national cultures into an international culture.


Now there are international legal systems. For example, different international criminal courts have now been established across the world.

Influence of international institutions on organizations

Internationally, there are certain international institutions present in the international environment that could influence the organizations internationally. These institutions include the states, inter-governmental organizations, international nongovernmental organizations, nongovernmental organizations and multinational corporations. These organizations play the most critical role in the economy and the organization that enter the national economy or also local corporations.

The most important influence of international institutions on organizations is in the form of international relations. It is interesting to note that international relations depend on different diverse factors such as factors related to economics, history, culture, social work, technology and language. Organizations have to face different challenges under the influence of international institutions which are stated above in the form of globalization, nationalism, economic development, and culture. (Baylis, John, Smith, & Owens, 2011)

The most critical influence of international institutions on organization in the international environment is the culture and values. For example, some states of the world like in china has a very hostile economic culture and government attempts to takeover every international organization that enters the Chinese economy. It is a developed culture in china that most of the corporations are state-owned. International organization has to cope with this influence of Chinese economy and its institutions and every corporation that enters the Chinese economy has to develop or maintain a partnership with a state-owned corporation to tackle this cultural challenge. (Baylis, John, Smith, & Owens, 2011)

European Union Membership

When a country or economy enters in the membership of European Union then it become answerable to the European Union Membership and it has to integrate itself with the European Union Policies and Laws. Similarly, the work responsibilities of corporations which are operating in the environment of that particular country increase and corporations have to fulfill their responsibilities for survival and tackling international pressures from the state and European Union. The corporations have to play their role to meet the corporate social responsibility, ethics, strategies and norms defined by the European Union because the economies of European Union members are integrated with each other and they believe on collective progress of all the member countries. By effectively and efficiently fulfilling the responsibilities of European Union, corporations could gain sustainable competitive advantages in the marketplace and it also enables them to enter the international markets effectively because of low trade barriers, European monetary union, single national economic policies for the member countries, and same objectives which are defined by European Union. Therefore, the most important responsibility and role for an organization is to fulfill corporate social responsibility defined by the European Union to avail the opportunities of European Union Membership.\

Importance of Responsible Corporate Governance in the organization

Corporate governance refers to a set of processes, laws, policies and customs affecting the management, administration and control of an organization. It involves the relationship among all the stakeholders of the organization and it enables the organization to reach its goals. Stakeholders of an organization include shareholders, suppliers, customers, intermediaries, employees and the government. The importance of responsible corporate governance can be judged from different facts and realities. Roles of the organizations are needed to be defined and redefined because the changing business environments such as resource-based view, the knowledge-based view, the networker view and the communitarian view and responsible corporate governance plays the most dominant role in the defining or redefining the roles for an organization. Due to the changing business dynamics, organizations need shift their traditional or conventional principal-agent theory to the management of complex principal agent relationships while considering all the stakeholders' interests rather than just shareholders' interests. It is again possible only through responsible corporate governance in the organization. Another fact is that now organizations need to think for creating value for all the stakeholders rather than just shareholders which is not possible without responsible corporate governance. Similarly, an organization has to be in compliance with the legislation and laws of an economy and it has to fulfill its corporate social responsibilities which is possible only through responsible corporate governance. (Berghe & Louche, No Date)

Regulatory environment and corporate governance

Regulatory environment is directly influential to the corporate governance of corporations because government is an important stakeholder in the organizations. Regulatory environment set boundaries for the corporate social responsibility of an organization and it defines the values and culture for an organization to operate and set the ethical limits for organization. Any change in regulatory environment of an organization directly changes the corporate governance policies and it directly influences the corporate governance of organizations. For example, when the number of shareholders for corporations increased in India, it became the largest emerging market in terms of market capitalization. Therefore, regulatory environment was changed in India in April 2001 which directly influenced the corporate responsibility of corporations in India. The government asked every shareholder to disclose all the information about them and changed the corporate governance mechanism of corporations. The results of this change in regulatory environment caused transparency and better corporate governance mechanisms that reduced the risks of companies in the Indian economy. (Bhattacharyya & Rao, 2001)

Regulatory environment and interests of Stakeholders

Stakeholders' interests change directly with the changes in the regulatory environment as revealed in the previous example. It can be argued that regulatory environment directly shapes the shareholders' interests of a corporation. For example, if the government sets a limit on the price of a product or service to provide relief to the end consumers then the interests of all the stakeholders will be change. In this case, suppliers would bring more efficiency by reducing their overall costs, the focus of shareholders will be on savings, employees and management will focus on lean operations to meet the pricing targets, and the government will reduce taxes as well in return for making organization able to meet the price limits and competition challenges.


In this paper, globalization, corporate governance and corporate social responsibility was analyzed and discussed. Globalization has opened new horizons for organizations and national economies such as reduced trade barriers, resource sharing and internationalization. Corporate governance is important for an organization to meet the modern business world challenges. Regulatory environment directly influences the corporate social responsibility, corporate governance and interests of shareholders in corporations. It is important to note that an organization needs to be socially responsible if it wants to gain a sustainable competitive advantage in the marketplace.