Concept and Role of Corporate Social Responsibility

Introduction

De George, R. T. (2006) addressed that corporate social responsibility is the awareness of business organisation that their accomplishments have not at all kept any negative impact on the society as well as on the social advancement and welfare activities like consciousness on environment pollution, infrastructural advancement like repairing roads, beautification of the towns and waste removal etc. Behavior of people, their relationship among each other including daily life represents ethics.

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Stoner, J. A. F., Freeman, R. E., Gilbert, D. R. (2006) added that the international companies in terms of multinational companies’ are encouraged to treat their employees in same way regardless to the race colour or ethic.

This paper would go to analyse the business ethics, corporate social responsibility and employee behavior in different countries in order to determine whether it is rational to maintain equal treatment to all employees without any discrimination.

In this regards to justify the depth of today’s CRS of corporate houses this paper would go to presents almost all of relevant phases with example. This paper also holds a few criticisms that the companies frequently faced.

Ethics and social responsibility and its concept transformation

Fisher, C. and Lovell, A. (2006) mentioned that the concept of ethics and social responsibility states the relationship among peoples and living standard over time. In case of multinational companies, the corporate social responsibility is the societal factors that affect the interest of an organisational decision-making would be fluctuated radically. With the rapid growth of technology, societal factors interplayed in front of business ethics and their social responsibility.

Velasquez G. & Manuel, (2002) also added that the motto of ethics indicates how other people affect by the decision making of another’s morals. On the other hand, social responsibility is awareness of individual and the also of an organisation that their act do not reflect negatively on the society. For instance, Reebok spent a part of their profit in developing basketball court of Florida that ravaged by Hurricane in 1991.

Lowry, J. & Dignam, A. (2007) argued that the large firms always have faced criticised of their contribution on social responsibility and ethical issues. For example, though there have government regulations but managers of large organisation cannot answer the starting and ending phase of their company.

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In 2003, two US company Enron and Worldcom had collapsed for lack of corporate social responsibility and the evidence shows that recent global financial crisis is also the consequence of lack of corporate social responsibility. The NED1 was considered as an unsuccessful scrutinizes of administration because of the serious fall down of Enron and US banks.

Levels of ethics in a business organisation

Johnson, G. Seholes, K. & Whittington, R. (2006) addressed that in regular practice, there are no chance to avoid ethical issues in business sectors. There have four categories of ethical question in business described in bellow-

Societal: Society is the basic institution in a country. Does society a group of people accurately preserve ethics in their system? Is there any awareness of capitalism advantages? Is there any movement against wealth discrimination, power and status?

Stakeholder: Stakeholders are those who directly and indirectly affected by an organisation’s decision-making. Employees, customers, suppliers, shareholders altogether are denoted as stakeholders. In case of suppliers, what are the obligations against them? What are the ways or considerations in decision making of an organisation? Which group of people and where the business would operate?

Internal policy: Relationship between an organisation and its employees faced question under this category. A comprehensive form of employee benefit is required here. Here employee befits includes- working hour, layoffs, separation, termination, working rules, health and hygiene, safety and security, compensation structure etc.

Personal or the individual: Inter-personal behavior of an organisation is treating here. Loyalty, working rules, obligations are considered here as the factors of involvement of the employees. There also have the issues and ways to avoid conflict among co-workers.

Levels of ethical questions
Figure: Levels of ethical questions

Tools of ethics

The daily life involves in a set of ethical interpretation unintentionally or deliberately. With the aim of develop our ethical reasoning should analyse that continuously and unequivocally.

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Values: With the belief of realistic effecting, people keep values. Values are the aspirations that reflect good like-peace, goodwill in human being. Value represents the answer of the question “why”. Corporations also hold values as well as in a people. The means of corporate values are-size or volume, quality product manufacture, profitability ratios.

Rights and duties: Enable person to take necessary actions required by a number of claims is the concept of right. On the other hand, duties are those activities or obligations that should obey the laws.

Moral rules: A set of rules that are for controlling behavior is considered as moral rules. Sometimes moral rules internalized as values.

Human relationships: Carry out goals and for mutual support people connected to others. In case of management decision making, it holds the values and concern for ethics.

Common morality: Common morality includes-keep promises, mutual aid, no malevolence, respect for both of people and property. Common morality assembles a circular flow that presides over the common ethical crises.

Morality of care: Morality of care deals with two different point of views. Morality of care is denoted as alternative way of ethical tools that especially for women in an organisation.

Applying ethics: Rules of modern organisation make difficulty with general moral ethical rules. There must have applicable modes that would remove conflict between common rules of ethics and recent organisational rules. Application of ethics would proper through following questions:

  1. Does it shape the problem exactly?
  2. How would it perspective in defining the problem?
  3. How did the problem arise?
  4. What factors should preferred in decision-making?
  5. Where would it build loyalty?
  6. How would it compare the decision-making factors?
  7. Who could recommend the decisions?

Ethics institutionalisation: Concept of ethical institutionalisation involves in- ethics committee, judicial boards, ombudsman offices, corporate codes of conduct, social audits and ethics training programs.

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For more clarification, application of ethics code is shown in following table:

Conduct toward Percentage (0-100), %
Employees (205) 95
Employees’ families (102) 45
Local communities (107) 50
Customers (195) 65
Suppliers (195) 65
Shareholders (91) 40
Home country government (127) 55
Foreign government (103) 45
Source:Berenbeim, R., (1987), Corporate Ethics

Principles of corporate social responsibility

Griffin, R. W. (2006) mentioned that in 1970s, “equal pay for equal work” policy has been raised to establishing equal opportunity within black and white. Under this policy, there considered four fundamentals factorsutilitarianism, rights, justice and care.

Taking into account, all of the above, moral principles need to establish in respect of social corporate responsibility and remove distinctions between black and white. Approaches under Principles of corporate social responsibility are-

Utilitarianism (Social costs and benefits): The concept of utilitarianism suggests to increasing social benefits and reducing social costs. This approach also considered as consequentiality or as utilitarian approach. In the basic consideration of a business, decision requires this approach and through which many people capable dramatically change their lives.

This part of the principles requires a set of steps- understand the application of government laws, safety and security and study the internal cost-benefit policies and systems. Course of actions those are socially responsible could reduce a company’s cost or expenses.

Rights and duties: Human rights that require meeting up basic rights are treated through this principle. The concept of right defines that factors that enable persons to take necessary actions required by a number of claims.

On the other hand, duties are those activities or obligations that should obey the laws. In another word, practice of duties is bound by rules and regulations. Rights and duties could be positive, negative, contractual, moral and imperative.

Justice and fairness: Keep up rights of people and pays equal opportunity at any circumstance is the concept of justice and fairness. Justice is applied in different form as-distributive justice, justice as equality or egalitarianism, capitalist justice or justice as par contribution, socialism or justice for needs and abilities, libertarianism or justice for freedom or justice in terms of fairness, retributive justice and compensatory justice. All of these categories are applied both in social responsibility and in business decision making.

The ethics of care: The ethics of care applied especially for the women who work in factory and for those employees who get payment though don’t continue their work.

Consequently, to perform this ethic of care has faced partiality and a number of obligations. Obligations arise in case of special care and close relationship that demands a great value. Key concept of “ethic of acre” denotes as- dependency on particular relationship and the factors of obligations stated above.

Utility, rights, justice and caring assembling: On top of today’s moral judgment and moral standards proficient an individual, grasp different dimensions of factors in decision making in both employee management and corporate decisions.

Not only in decision making but also policy creation, resource allocation, balance between social costs and benefits, identify the forces that have a great influence on social welfare and social responsibility, changing employee behavior, continue essential rights of the employees and both internal and external agreements. For more clarification, this approach is shown in following figure:

figure moral standards information and moral judgment

Choose alternative moral principles in terms of virtue ethics: Virtue ethics emphasizes on moral issues than practical uses of ethics at various perspective. Therefore, decision at the viewpoint of virtual issues differ from the decision depart from practical ethics.

Virtue ethics deals with the nature of virtues, moral virtues and virtues, actions and institutions. All of these facts present the behavior of the people, a guideline of daily life. Though there have criticism against this approach is that– for a while it fails to guide on the act of people.

Morality in International contexts: Operating business activities of a multinational company in abroad should require obeying and it should preserve government laws, understand their culture, custom, ethical code, development ratios diversely compare to their home country.

Concerning all of these aforementioned approaches of ethical principle needed to diverse performance in different country. For instance, in USA compare to other states societal factors of Mexico is contradictory.

Arguments for and against business ethics

Johnson, G. Seholes, K. & Whittington, R. (2006) argued by evaluating moral standards of a business organisation’s ethics is a rational process. Not only this, application of the evaluated standard is also deals under this fact. There have three impediment and complimentary spots those grounds the business ethics.

Behavior of people in doing works is treated as the standard of ethics. At first, arguments for business ethics are to choose perfectly competitive free market to facilitate utmost profit people of the society. Regarding this, organisations ought to deliver what consumers want through out accessible and cheapest way.

Based on “loyal agent’s argument” managers may ignore the ethical issues and makes decision individually. This argument is for in favor of a business firm’s profit enlargement and that could easily ignore ethical issues.

Third phase of business ethics arguments totally contradict of business ethics. Adage of this argument is- merely obey laws and government regulation of business people.

The challenge of relativism

Griffin, R. W. (2006) added that for all categories of business organisation- domestic and multinational is required to confront relativism challenges in terms of moral relativism and not in a very rational way. In case of decision-making, rational factors raised that answered by an individual. Moral relativism is formed into two broad category described as follow:

Naive relativism: Broader form of moral relativism is naïve relativism in which actions or decision taking by a human being is judged whether it is right or wrong. Under the concept of ethics important, personal and complex are the features of decision-making and there considerable that decision maker should decide at relevant viewpoint. Another important thing is that morality in our daily life is vital at an extreme point. Concerning this, people should involve in moral reasoning process to acquire best execution of their ideas in their working area.

Cultural relativism: As the nature of human being, they engage in a group in terms of society. Every group of a country holds different cultures and communities. Cultural relativism is formed as a part of moral relativism that connects different communities.

However, there is no chance to judge morality of a particular community but it is possible to understand society’s custom and moral codes. For instance, Japan, Saudi Arabia, France, China, Korea, Brazil grasp diverse cultural factors, manners and religion. For a multinational company, to operate their business, ought to obligate local, laws, moral codes and customs.

Business ethics and the multinational company

Velasquez G. & Manuel, (2002) argued that today multinational companies treat as the largest corporations that operate both service and manufacturing activities of business. In USA, there are almost 500 multinational companies those operate their business in more than one country. These companies faced different ethical issues and cultural factors in abroad.

Griffin, R. W. (2006) mentioned that to be a multinational organisation, an organisation need to promote large investment scale, abundant raw materials, effective and efficient personnel.

Their served products and services should be attributing as- cheap, available and skilled almost all host counties. For instance, General Electric’s headquarter is in New York and they have more than 100 host countries and half of their total earning grasp from host countries.

At last, business in aboard of a multinational country has to pay attention in their payment system. Most of the multinational companies are establish in highly developed countries and their host countries are mostly developing and under developed countries. As for this, payment through US dollar in developing and under developed countries is not equal at all. In not only payment, safety and security sometimes faces questions at viewpoint of ethics.

Functions of multinational companies in different countries

Johnson, G. Seholes, K. & Whittington, R. (2006) addressed that the different societies hold different customs and on behalf of this there is no chance of a multinational organisation taking decision rationally. Considering this, employee management in abroad requires different methods and policies, payment system, safety and security arrangement, recruitment and selection, training and development, technology, information system.

For instance, an organisation cannot follow same rules in Saudi Arabia use in USA. Another important point, taking bribe is socially acceptable in Saudi Arabia but in USA, it is treated as immortal. Under ethical relativism theory, a businessperson takes decision at different moral aspect though this approach has faced criticism a lot.

Market system, command system and marketplace ethics

Fisher, C. and Lovell, A. (2006) stated that the term ‘market’ reefers the potential and growing consumers for whom products and services manufactured and marketed. These activities need an economic atmosphere to operate them. Different countries adopt different market system and for this economic and market system is diverse.

Free market system: Now is the time of free market and in this system every one has the right owing individual business and acquire profit, manufacture and exchange goods and services. This category of market system boosts profit of an organisation and benefited consumers serving product and services at lower price.

Mixed economy: Another market system is mixed system a combination of public and private property system regulated by government laws and rules. This sort of economic system deposits money in welfare activities or in labor legislation like-union laws, safety laws and wage laws. In monitoring this policy there have another government assurance is that reduce unemployment and social harmful behavior.

Property system and new technology: Proper balance between property systems and new technology emphasizes on individual ownership. Computer and genetic engineering is now termed as tangible intellectual property. On the other hand, intangible intellectual property includes- software, idea, song, digital image or sound, a recipe.

Perfect competition: Under this free market system, there is no power to buyer or seller in exchanging goods and effect prices of the goods. On the other hand, there is no difficulty to leave and entry into market, every buyer and seller has right to know each other and right to increase utility.

Monopoly competition: Seven features compose the body of monopoly competition in which not all of them are present in practice. Number of seller is one where as buyers are numerous.

Oligopolistic competition: Numerous sellers are exists here to serve buyers of the market. In an oligopolistic competition, there must have at least four competitors in an industry. These competitors enjoys diverse market share in proportion to their efficiency and effectiveness. Internal factors like- employee management of these industries also has an impact on their market share.

The Do-Nothing view under oligopolies and public policy: Two factors make up the do-nothing view. First, competition between substitute product and industries and second, balance the countervailing power. In the light of globalization, multinational companies need to operate their business in different countries. Through out this operation, they have to consider, pricing method, market nature, nature of job order, substitute products, business culture, HRM (Human Resource Management) practice and corporate legal staffs.

Ethics of an organisation’s internal constituencies in view point of employees

De George, R.T. (2006) argued that internal constituencies in viewpoint of employees are a brief description of organisation’s duties to employees. Factors under this part are:

Wages of fair form in different countries would consider nature of job, living costs of the area, minimum wage laws.

  • Proper continuation of working condition, health and safety would bring job satisfaction.
  • Proper continuation of employee rights like-individual privacy, relevance, consent, freedom of conscience, whistle blowing, participate and participatory management, employment versus due process, employee rights and plant closing, union and right to organize and finally, ethics of political tactics.

Previously mentioned issues are different in different countries so that multinational organisations need to adopt different policies, strategies and human resource management process.

Criticism of corporate social-responsibility

Shah, A., (2007) argued that CRS has been condemned by the environmental NGO’s and anti-globalisation activists. They protest against enthusiastic free trade and the way of irrational profits those really impact to increasing poverty of the society.

There are many other perspectives of protest rising from local communities, which are different from country to country. However, the corporate houses are trying to make themselves more accountable beyond their ethics, operational conditions as well as ecological sustainability.

The RCI2 from the British NGOs and Brazilian business school has been demonstrated that in 2007, 96% of global GDP in 108 countries has been generated by the corporate bodies with geological illustration of all the five continents.

Another most frequent condemnation on CRS is that the economists of advanced block have repeatedly stimulated their further polluted workshops and industries from their own country to other areas of the world where the ecological and social standards are low and people are backward. Consequently, those parts of the world have been polluting on behalf of them who don’t care about CRS.

Friedman, M (2007) argued that the companies are not yet come out from their pursuit of profit. Consequently, the companies are harming the free societies with out their responsibility to the society when they are obliged to their shareholders and aimed to their ultimate goal to maximising the profit. These types of companies are trying to act for CRS just as a propagations rather then real execution.

Conclusion

Considering all of aforementioned facts, it has clearly stated that employee management of a multinational company very diverse in different countries though there have a numerous common issues and few criticisms. Presenting these diverse activities, this paper has described normatively almost all issues under this topic.

Common level of organisational ethics, tools of ethics, principles of corporate social responsibility, significance of ethics in business organisation, ethics of multinational companies and their functions, command system versus market system and market place, ethical challenges, inter organisational constituencies in view point of employees and criticism of corporate social responsibility are integrate here.

Appropriate nursing of these forces could convey assistance both for the organisation and for the employees of the organisation and keep ethics and corporate social responsibility that would have no negative reflection in society.

Bibliography

Berenbeim, R., (1987), Corporate Ethics, New York: The Conference Board, Survey of 225 Corporations

De George, R.T. (2005), Business Ethics, 6th edition, Pearson- Prentice Hall, London

Dignam, A., (2007), Capturing corporate governance: The end of the UK self-regulating system, International Journal of Disclosure and Governance Vol 4, 24–41.

Fisher, C. and Lovell, A. (2006), Business Ethics and Values, 2nd edition, FT Prentice Hall

Griffin, R. W. (2006), Management, 8th Edition, Houghton Mifflin Company, Boston New York, ISBN: 0-618-35459x

Johnson, G. Seholes, K. & Whittington, R. (2006), Exploring Corporate Strategy: Text & Cases, 8th edition, London: FT Prentrice Hall.

Lowry, J. & Dignam, A. (2007), Company Law, 4th edition, Oxford University Press, ISBN: 0-19-928446-6

Shah, A., (2007), Corporate Social Responsibility.

Stoner, J. A. F., Freeman, R. E., Gilbert, D. R. (2006), Management, 6th Edition, Prentice-Hall of India Private Limited, ISBN: 81-203-0981-2

Velasquez G. & Manuel, (2002), 5th Ed, Business ethics concepts and cases, Pearson Education, India, and ISBN: 81-7808-633-6.

Footnotes

1 Non Executive Directors

2 Responsible Competitiveness Index

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