Concern Of Chief Finance Officer Commerce Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Corporate Social Responsibility (CSR) is broadly conceptualized and has different meanings to different players of the business world. According to Bowen (1953), corporate social responsibility entails doing business that is in line with the values, objectives and aspirations of society. He proposes that the essence of business goes beyond profit maximization and adherence to the legal framework.

The World Business Council for Sustainable Development also proposed that leading global companies of 2020 will be those who do business that addresses the challenges of mankind including globalization, environmental degradation, climate change, poverty, demographic shift and resource depletion (WBCSD, 1998). The actions and results of a business should be sustainable and profitable as well. However, the contribution of a business entity to society should be the positive outcome of the business rather than philanthropic gestures. Stakeholders` value should be a factor to determine or assess how successful a business has contributed to society.

The idea of stakeholders' theory was initially suggested by Johnson (1971). In his view, a socially responsible firm balances the interests of the group or individual interest in the dealings of the corporation such that while striving for larger profits for its stockholders, it also takes into account several other stakeholders of the corporation.

These stakeholders include employees, customers, suppliers, local communities, government authorities, the surrounding human and natural environment and the corporation's managers. In the stakeholder theory, the corporation is the centre of analysis and is visualized as surrounded by its stakeholders (Freeman and Phillips, 2002). Stakeholder groups vary both in terms of their interest in the business activities in relations to Carroll`s pyramid of corporate social responsibility. The table below is a summary.





Profit and share price growth, dividend payment

Being profitable, the foundation upon which all others rest


Interest & principal repayment and maintaining credit rating

Being ethical, the obligation to do what is right, just and fair in the business sense

Directors & Managers

Salary, share options, job satisfaction and motivation

Being ethical, the obligation to do what is right, just and fair in the business sense


Salaries & wages, job security, job satisfaction and motivation

Being ethical, the obligation to do what is right, just and fair in the business sense


Long term contracts, prompt payment and growth of purchasing

Being ethical, the obligation to do what is right, just and fair in the business sense


Reliable quality products, value for money products & services, product availability and quality customer service

Being ethical, the obligation to do what is right, just and fair in the business sense


Clean & sustainable environment, local jobs and local impact

Be a good corporate citizen, contribute resources to the community and improve quality of life


Legal operations, tax receipts and job creation

Obey the law and play by the rules. The law is society`s codification of right and wrong

The social implications of the Chief Financial Officer of BO limited in the case can be understood within the context of corporate social responsibility (CSR). The core business of the company is to make more money for the shareholders, by improving the share value. For instance, in a capitalist perspective, the executive officer of a business is an employee of the stockholders and responds solely to their interest which is to do business according to the norms of society and gain profit as much as possible. Therefore, the social responsibility of a business entity is to execute business and make profit. The relationship between managers and shareholders is a contractual one and any disbursement of funds outside the agreement is inimical to business objectives (Friedman, 1970).

Again, the argument that firms have a responsibility to act in the public interest and will profit from doing so is misplaced. Many businesses trumpet their efforts to produce quality or more efficient products, conserve energy and protect other resources in their operations, or otherwise make the world a safer place. It is a very appealing proposition. You cannot eat your cake and have it.

Put simply, in situations where the private profit interest and public well-being interests are in agreement, corporate social responsibility is an illusion. The company is simply doing what it has to do to boost profit which is in consonance with the public interest, hence increasing social welfare in the developed world. In African circumstance in which the profit interest of BO Limited and social good are not in agreement, corporate social responsibility will not be effective, because managers will not voluntarily act in the interest of the public against the shareholders' interests for which they have an agency relationship. And so the CFO and the CMO are just being courageous, honest and ethical in the business sense.


Traditionally, Corporate Social Responsibility (CSR) has been defined as the responsibility to comply with the laws and the interest of shareholders. The concept of CSR has evolved over time to include the impact of operations on the different stakeholders such as employees, customers, investors, local communities, and government.

In the business world, ethics is the study of morally appropriate behaviours and decisions, examining what should be done. Although the two are linked in most firms, CSR activities are no guarantee of ethical behaviour. But the quality of management of a commercial business firm will depend on how the business conducts itself towards the four main divisions of Corporate Social Responsibility (CSR): marketplace (Economic), environment (Legal), workplace (Ethical), and community (Philanthropic).

Whilst the applications of these concepts are widespread in the developed world (Europe, America and Asia), in Africa and Ghana in particular, they are considered an afterthought and issue for the resolution of conflicts arising between companies and the host communities. Several community investment initiatives in Africa have not yielded the expected results due to improper intervention (Hilson and Bachiringah, 2009).

The External Relations Director (ERD) raised important issues in favour of social responsibility of the company which can be grouped as business/economic, legal, moral/ethical and social/philanthropic as illustrated by the Carroll`s Corporate Social Responsibility Pyramid below.

Economic/Business Issues of CSR

Empirical evidence have show that being socially responsible is profitable in the economic sense. There is positive relationship between CSR and profitability though this conclusion is not definitive, as the relationship depends on the country and the environment in which the operations are carried out (Margolis et al., 2007).

Being responsible may also have benefits in relations with customers and suppliers, including a better image, brand and reputation, or more loyal customers, who may even be willing to pay more for the company`s products because of respect for the environment, human rights or satisfactory employment relationships.

Being socially responsible may well have an edge when it comes to attracting, retaining and motivating the best employees with greater transparency, moral trust in relations with its internal stakeholders, and specifically, more satisfactory employment relationships, a better working atmosphere, more effective management systems, diffusion of good practices, and better supervision of supply chain.

On the other hand, the fact that social performance and financial performance are correlated does not necessarily mean that they are causally related. It may be that more responsible firms are also more profitable, and but it may also be that CSR actions consist of distributing corporate profits among stakeholder groups (Devinney, 2009).

Legal Issues of CSR

Again, the term responsibility is used in legal language. It is the responsibility that directly or indirectly attach to certain acts or omissions and their effects. Legal responsibility is easy to establish and allows us to determine some of the effects of the action. However, it is widely agreed that CSR goes beyond the law, which means that the legal issues are not a good explanation of why the company must act in a socially responsible way though there is a broad movement calling for greater legal backing for CSR.

The Moral/Ethical Issues of CSR

Being responsible can have a moral or ethical meaning, as well as legal. "To say that a person is responsible for a given action is only to say that it is appropriate to take the action as a basis of moral appraisal of that person" (Scanlon, 1998). From the moral point of view, responsibility appears when an action or omission and its effects are attributed to a person not only as the cause of the action, but also as a moral agent (Watson, 1996).

From the moral point of view, responsibility implies that the agents must be accountable for their actions or omissions, and the consequences, not only to themselves but also to others, and not only for what is done, but also for the moral reasons that justify the action. (Eshleman, 2004).

The Social/Philanthropic Issues of CSR

The company must act responsibly because society expects and demands or requests it to do so (Wood, 1991). Certainly, society expects or demands certain behavior from all those who belong to it, individuals and organizations alike. If they do, it is probably for the following reasons:

There are many situations in which people or organizations feel obliged to act in accordance with social norms within the framework of a social contract (Donaldson and Dunfee, 1999).

Again, corporate responsibility is sometimes said to be social on the grounds that companies are agents that operate in society and are a part of society, and so need a social license to operate or that they have an obligation to improve the society in which they operate, by being good citizens (McIntosh et al., 1998).

Finally, CSR prevents harm or brings benefits, economic or otherwise, to the company in the form of lower costs, stronger customer and employee loyalty, higher productivity and enhanced reputation (Geczy et al., 2005).

Hence, the company ought to handle the impact of these activities through social investment in the communities to improve economic, social and environmental standards as postulated by the Enterprise Relations Director of BO Limited. Socio-economic arrangements that will make the communities resilient against negative impacts must be put in place to avert the social unrest usually provoked by complaints of lack of development as witnessed in other parts of the country.


In any case, it is not likely that an organization will implement CSR policies simply because empirical evidence shows that such policies have positive impact on financial performance. More direct and cogent arguments, showing the obvious relationship between the two variables for a particular sector, location and company, will be needed. That is, if it can be shown that implementing CSR policies can attract the best workforce, make work more interesting, increase pride in the organization and result in more efficiency and loyal, then the case for the profitability of CSR policies can be accepted.

The External Relations Director`s view, if I may assume, presupposes that the company is ethical and socially responsibly. But a socially conscious organization recognizes its responsibilities on several different levels, being economic, legal, ethical and philanthropic.

All the internal and external advantages of being ethical and socially responsible, may translate into better financial and economic performance. For instance, it may give the company a strategic edge over its competitors in the form of higher or more stable sales, product differentiation, higher price and many other benefits (Porter and Kramer, 2006).

It may also reduce costs, perhaps because the company runs fewer risk of problems with employees, products, productions processes, litigation and boycotts, which will reduce finance and operating or management costs. A policy of honesty is likely also to reduce other costs on litigation, complaints and fraud, which will enhance employee productivity through higher motivation and commitment.

As it has already been pointed out, all these are not enough to warrant higher accounting profits or higher share price. Although a socially responsible company is in the position to increase the social value of its contribution to society, that value can be used by employees in the form of higher wages and salaries or other benefits, or by customers in the form of better products at the same price, or other stakeholders such as the owners in the form of dividends.

The main contention is that organizations must be socially responsible not only because it is demanded by society, or it makes more profitable, or it is expected under a certain conception of business ethics, but because CSR is part of good corporate management. An ethically and socially responsible organization is a good corporate entity, and a manager who manages according to socially responsible criteria is an excellent manager, or at least, is in a good position to become a good manager.

Local and International standards to which BO Company Limited must adhere to in order to achieve a harmonious collective environment include:

Human Rights Issues - Strict respect for human right principles, such as commitment to humane principles; Respect for the dignity of every individual, the recognition of indigenous people's right to participate in business decisions that affect their ancestral lands and socio-cultural sites. These are enshrined in the Universal Declaration of Human Rights (UN framework for human rights) and the Constitution of the Republic of Ghana.

Labour Right Issues -; respect for every worker to join a trade union of his or her preference in order to get a fair collective bargaining with employers and that every worker is entitled to quality health care including access to antiretroviral for the treatment of AIDS supported by The International Labor Organization (ILO.

Environmental Issues - A sustainable interaction with the environment whose result shall not compromise the needs of future generations. Implementation of sustainable system of production and a just system for the distribution of benefits derived from production and the environment, backed by The Rio Declaration on Environment and Development.

Corruption Issues - Monitoring and assessment of the conduct of corporations by local government institutions and non-governmental organizations through a strict code of conduct. This supported by The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Ethical and CSR Issues - Stakeholders and communities must be actively involved in decision-making on issues that directly affect them. A CSR principle which tries to harmonize the contrasting interest of communities, managers, stockholders, employees which are based on ethical values including integrity, honesty, justice and transparency. This is supported by Global Reporting Initiative reporting guidelines for.

BO Company Limited cannot be socially responsible if it only looks at its economic and legal responsibilities. This is especially true for multi-national organizations that operate in countries with varying legal responsibilities such as Ghana. The company must be driven by ethical standards above and go beyond the mere minimum legal requirements.