Corporate Social Responsibility
It has always been the general belief in the corporate world that managers “primarily have a duty to maximize shareholder returns” (Smith, 2003, p.85). But with the recent scandals that hogged news headlines such as Enron, WorldCom, and even factories in China that produce substandard products had created a clamor for a reevaluation of corporate strategy and corporate policies. Many are saying that there should be a return to the principles of Corporate Social Responsibility (CSR). In a nutshell, CSR is doing ethically accepted behavior while at the same doing business. Skeptics say that it is a much-idealized view of how a multinational firm should operate and in the real world, it will not work. This was expounded by the former CEO of IBM, T. Learson who said:
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Business usually profits best when it serves the public interest within its ability to do so. But we can never loosen ourselves from the iron law of profit … If a corporation so diverts its energies and resources as to go broke, there is nothing it can do – nothing at all – even if its claims to have a heart and conscience as big as the world (Prout, 2006, p.185).
This is a valid argument Learson made a succinct explanation of why businessmen should care about the bottom line – if they go bankrupt their ability to goodwill not be sustained and whatever they did in the past will be in vain. However, a complete disregard of CSR may result in weak brand loyalty or it may encourage CEOs and business leaders to simply focus on making money and exploit the environment, the community, and the people that work for them.
This is based on the idea that the stakeholders in the firm are not just the investors and the employees. This is why management experts proposed a new definition of a stakeholder and defined as follows: “The stakeholders, in a firm are individuals and constituencies that contribute, either voluntarily or involuntarily, to its wealth-creating capacity and activities, and who are therefore its potential beneficiaries and/or risk bearers” (Post, Preston, & Sachs, 2002, p.8). In this regard, a company must also consider the community as one of its stakeholders.
A more balanced view perhaps was provided by CSR advocates who coined the phrase, “Doing the most good for your company and your cause” (Kotler & Lee, 2005, p.2). Carly Fiorina of Hewlett-Packard asserts that more and more organizations are experiencing a paradigm shift, “…that cutting-edge innovation and competitive advantage can result from weaving social and environmental considerations into business strategy from the beginning” (Kotler & Lee, 2005, p.182). This simply means that companies from the very beginning must already incorporate doing what is good as part of their overall strategy and not treat it as a separate and non-priority endeavor.
Protestant Work Ethic vs. Islamic Work Ethic
The one who wrote this post may be a sympathizer to Islam or simply an open-minded person willing to turn a blind eye against the problems associated with Islam specifically extremism. It is also possible that the writer is a Muslim. It is understandable that Muslims from all over the world, especially those who are citizens and residents of highly industrialized nations in the world like the US, Britain, France, and Germany would come to the defense of their religion. These people have grown prosperous by becoming model citizens and they have learned how to behave in accordance with the rules and social norms of their own country.
It is unacceptable for them to be linked to terror groups. It is bad for their social standing and also bad for their business. There is utmost shame in the knowledge that your chosen religion is a deviant from other major religion whose basic tenet is to live in peace with others. It is therefore understandable why Muslims in the Western world would want the rest of the world to view them in a positive light.
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This is not an easy proposition for those who felt the fear and unpredictability brought upon by terror groups. The attacks in the US and recently in the United Kingdom show a group that is knowledgeable about sophisticated methods of warfare. There is also evidence that they are connected to financiers with deep pockets. With regards to the events of September 11, it is now common knowledge that terrorists can enter the country using different types of “cover”; they can come as an immigrant, a tourist, and even a student. It is therefore also understandable why there is a current “islamophobia” in the Western world.
On the other hand, it is important to consider the benefits of the Islamic Work Ethic (IWE). There is a need to understand that the average Muslim man or woman on the street is not a terrorist. If a manager will allow “islamophobia” to taint his or her judgment then it is possible that they cannot maximize the potential of an employee who is observing principle gleaned from IWE. This is significant in the Western world but more so in companies that are located in the Middle East or in territories that have a predominantly Muslim population. A manager must understand the principles of IWE and figure out its similarities and differences from the Western way of doing things. If this is achieved then IWE can be seen as an important tool in increasing the efficiency of the company.
Leadership Styles and the Moral Choice of Internal Auditors
There are those who believe that business ethics should be thrown out of the window because business is all about the survival of the fittest. This idea is prevalent in many circles that many are willing to cut corners in order to achieve that much needed competitive advantage. Age-old wisdom also dictates that a lie can be said so many times and in so different ways that the general public is forced to accept it as truth even if it is not.
The best example is the destruction of Enron and WorldCom not from external forces but from within. Things began to go out of hand when corporate leaders did not allow standard accounting procedures to take precedence in their accounting practices (Fusaro & Miller, 2002, p.11). In order to create an image of high-profitability, the corporate leaders began tolerating an unethical practice, which is the manipulation of financial data.
For instance, in preparing their financial reports there were some expenses that were listed as assets. Those who are not accountants can easily be fooled by this trick. Others may not care but for many investors, financial statements are important tools to gauge the company’s profitability. The increase in the number of investors’ money pouring into Enron is proof that this strategy worked but it is unethical. This is because, in the long run, people will come to realize that the company is not really profitable and the moment panic ensues then all the stakeholders – including employees and other businesses connected to Enron – will suffer.
The story behind the scandals and the media frenzy that it has generated seems to support the idea that crime does not pay and in the end, it is not profitable to break the law or to engage in business practices that are ethically wrong. The top leaders of Enron and WorldCom are now spending time in jail. Hundreds of millions of dollars are not worth the time spent in prison and a tarnished reputation. But these leaders were not even able to keep their loot. In the long run, it will be discovered that companies, adhering to high ethical standards are those that will survive the test of time. These are also the companies that offer a product or service that customers continue to patronize even after many decades of existence.
The need to observe strict corporate protocols is not simply done to help internal auditors adhere within the bounds of moral conduct; its primary purpose is to achieve superior corporate governance. According to experts, it is not an added feature of a corporation; it is a basic requirement, without which a company will increase its risk of bankruptcy and other financial problems (Nohria, 2004, p.7). Corporate leaders must make a firm decision not to deviate from this path.
Skin Fairness Creams in Pakistan
According to a case study focused on successful and struggling companies, the proponent discovered that an organization must make a commitment to achieve “the most stringent quality levels” and “delight customers by exceeding their expectations” (Nohria, 2004, p.9). A company cannot expect to survive and thrive if they fail to meet expectations in terms of quality. This is common sense a customer will expect a result and if the product does not perform as advertised then the customers will not even give a second look. They may even use their influence to spread a negative report about this particular product.
Interestingly this is not a universal truth. In Pakistan, there is a company that sells fairness cream and the product is notoriously unreliable. However, the company continues to produce this product. They are not accountable for their actions and if that is not enough the product is not only useless it is also harmful. According to the report this particular company is able to get away with it because the customers are poor and uneducated and therefore they cannot log a formal complaint and they have no ability to let their voices be heard. This is important proof that quality control does not only come from the manufacturer but also from the vigilance and feedback of the consumers.
Crowther, D. & Rayman-Bacchus, L. (2004). Perspective on Corporate Social Responsibility. Burlington, VT: Ashgate Publishing Company.
Fusaro, P. & R. Miller. (2002) What went wrong at Enron. New Jersey: John Wiley & Sons, Inc.
Hulnick, A. (2004), Keeping Us Safe: Secret Intelligence and Homeland Security. Westport, CT: Praeger Publishers.
Kotler, P. & N. Lee. (2005). Corporate Social Responsibility: Doing the Most Good for your Company and Your Cause. New Jersey: John Wiley & Sons, Inc.
Nohria, N. (2004). Lecture Text: What Really Matters. MA: Harvard Business School.
Post, J., L. L. Preston, & S. Sachs. (2002) Managing the Extended Enterprise: The New Stakeholder View. California Management Review. 45(1): 6-28.
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Prout, J. (2006) Corporate responsibility in the global economy: a business case. Society and Business Review. 1(2), 184-191.
Smith, J. (2003) The Shareholders vs. Stakeholders Debate. MIT Sloan Management Review. 85-90.