Sustainable Management Futures - Corporate Social Responsibility - Assignment Example

? Word Count: 3000 Sustainable Management Futures Question 1 Free market economists have demonstrated and documented that free enterprise is the most competent and productive way of providing people’s economic desires. With free market economy, the easy and powerful logic of supply and demand cannot be refuted. In addition, the critics of the free market economy regarding the invisible hand can produce commodities and services without central planning and control (Schumpeter, 1994 pp53). The opponents of the free market economy have emerged victorious in convincing the world that there is immorality in the free enterprise and free market. Even though, they acknowledge its efficiency, they still claim that free enterprise is inherently exploitive or unfair. Although opponents agree that free market is productive, they still argue that it produces the wrong commodities. For instance, they argue that free market produces too much of the luxury goods at the expense of public goods. The opposition to free market is not much of economic considerations as moral. For example, profit comes from the workers, but the workers are only entitled to a small pay. The profit rightfully belongs to workers but end up being denied the right. Although production from the free market can be efficient, the commodities produced do not fit what people desire. The inequalities resulting from the free market depict unethical moral standards. Individuals gain wealth unequally favouring inequality in the distribution of resources, which is morally wrong (Schumpeter, 1994 pp 68). It is in the free market that individuals dictate what people should consume and what they should earn. These considerations represent a moral consideration. These considerations are based on values and goals rather than the real working of an economy. Moral equality supports that no individual should be superior to the other and, therefore, no one can impose his value, desire, and belief on another. Since each person has his to follow his discretion in what he decides to produce or sell, there is no coercion. When there is no coercion, there is no moral wrong; hence, since free market is free from coercion, the market is then ethical. It is only in the free-market that commodities and services are worth what individuals believe they are worth. This makes individuals be willing to pay for a charge that they feel is worth the value of the commodity or service. Moral equality in a free market is emphasized by the equal right of all individuals being free to act without coercion. Involvement of government in a free economy is unnecessary and wrong ethically. When governments are involved in a market economy, there is coercion to doing certain things. For example, people are coerced to pay taxes to sustain inefficient bureaucracies. These violate the rights of individuals. People, who oppose free market and prefer power of government in making things done, impose their views on others, which indicate moral superiority on others. A free economy depicts a free society, where every person can live as per his own values and principles. Since people need to be free without being coerced to act, free market exists as the only market practicing ethics. Capitalism represents a system of interaction, which utilizes money as the medium of exchanging commodities and services (Nelson, 2010 pp 16). The system evolved from barter trade, where individuals traded items in terms of value. Just like a free market, there is no coercion in the trading of products and services. Each person has the discretion of producing or selling what he feels is right for him. What makes capitalism a moral aspect is the presence of fair trade and involvement of voluntary transactions. Capitalism benefits the society through freeing up commerce, creation of wealth, and provides incentives necessary for technological advancements. Socialism usually exists in a parasitic association with capitalism (Mises, 2009 pp 51). It has to rely and work within a monetary system. The basic principle behind socialism is the redistribution of capital through the use of government force (Nelson, 2010 pp 28). Without government involvement to bind, the association, socialism cannot exist. This system encourages people to become dependent on others since money can be taken from one individual to another. Free market economy and capitalism should be given free reign. This is in consideration of the social costs involved. The only legitimate task of the government is to guard the rights of persons and ensuring that a fair trade exists. Gauging the social costs involved in the free market economy, capitalism should be advocated for rather than taking on socialism. Question 1.2 World economics and environmental situations require businesses to be conducted in an economically vibrant manner, which address the real desire and needs of people. They should operate in an ecologically informed manner so that the capacity of the earth to support life forms is maintained. In addition, the businesses should be ethically sensitive in order to preserve the human dignity. Any system that shows adequacy in corporate social responsibility has to meet three standards; economical, environmental and ethical standards. According to Friedman classical theory, businesses have a social conscience. This implies that businesses should not only be interested in the profit motive, but also should be involved in promoting the social ends. Businesses should be involved in social responsibilities such as providing employment, avoiding pollution, eliminating discrimination, and anything else, which supports sustainability. According to Friedman, he views socialism as a necessary evil in trying to support the economy, environment and ethical standards. In reviewing distributive justice, an aspect cannot be explicitly addressed or intended as an outcome in the free market economy. However, in certain circumstances, socialism has some well established advantages. For instance, in determining who to receive the scarce resources, a command economy or a combination of socialism and capitalism may be required. While the free market promotes the creation of aggregate wealth, which is a benefit enjoyed by everyone, the system exacerbates class and wage distinctions. According to Friedman, businesses have responsibilities. Although only individuals have responsibilities, a corporation is taken as an artificial person, which gives the corporation an artificial responsibility. A manager of a corporation has a responsibility of protecting and promoting the rights of the different stakeholders. According to Friedman, stakeholders include persons, whose existence is deemed essential for the survival of firm’s employees, stockholders, suppliers, customers, managers, and the local community. Neoclassical theory of Norman Bowie argues that the central role of a corporation is to make a profit in respect to avoiding inflicting harm on others. A corporation should earn profits while respecting individual justice and rights. By so doing, a corporate will have shown the corporate social responsibility (Graafland, 2007 pp 63). Norman is of the opinion that businesses have a moral responsibility of not causing harm, even if not restricted by law. The theories differ on the theme of maintaining a balance between deontological and utilitarian ethics. Through the pursuit of profit, the utilitarian goal of achieving consumer satisfaction is targeted through maximization of overall commodity. The utilitarian goal is constrained by the responsibilities that one has to individuals affected by the activities. Responsibilities to other individuals create boundaries free to the pursuit of profit. Depending on the right theory adopted, the constraints range from minimal responsibility of obeying the law to an extensive account of responsibilities related to stakeholder theory. Corporate social responsibility understands the common good in terms of utilitarian aim of satisfying the consumer demands, a perspective that collides with the catholic view of the common good. Catholic teaching has the view point that; social institutions must face a positive responsibility in promoting the common good; while the corporate social responsibility framework permits only negative responsibilities to constraint pursuit of profit. The classical and neoclassical theories of corporate social responsibility deny that businesses have any unique environmental responsibilities. Defenders of the free market and classical model associated with Friedman argue that; environmental aspects function well, when taken as side-constraints by business managers (Burke, 1994 pp 28). Businesses can have negative responsibilities related to the environment; responsibility not to inflict harm, but businesses have no positive responsibilities to conduct themselves in manners, which contribute to long-run environmental and ecological well being. Recommendations In order to have more sustainable market economies, the market system must be capable of practicing ethical responsibility, which involves taking positive actions in creating a more just and environmentally sustainable globe. The market system should allow businesses to take responsibilities for action that cause harm. This harm coexists in ethical and ecological dimensions. A business system that allows sustainability must have the capacity to allow economic productivity. Conclusion Without the productive capacity, then there would be no sustainability. The economic system should be capable of utilizing the scarce resources in an efficient way in order to encourage sustainability. In addition, the system should be ethical in carrying out its responsibilities. Through combining these three aspects of economic productivity, environmental protection and ethical standards, a system will be the most sustainable. This is possible with a combination of a free market and socialism. Question 2 Introduction Corporate social responsibility refers to strategies that corporations and firms conduct their businesses in a manner, which is ethical, beneficial to the community through developments, and society friendly. The utilitarian, relational and managerial theories of corporate social responsibility suggest that; corporate social responsibility becomes a global aspect due to the globalized nature of business. Corporate social responsibility has evolved in its practice and meaning (Kotler, 2005 pp 46). The classical analysis of corporate social responsibility was limited to philanthropy and later shifted to an emphasis on business – society associations. This referred to the contribution of corporations in solving of social problems. Presently, corporate social responsibility is viewed as a concept, in which, business organizations have to consider the interest of the society through taking responsibility for the consequences of their actions to supplies, employees, customers, communities, shareholders and any other stakeholder, as well as the environment. This assignment will discuss the corporate social responsibility of Enron Corporation in relation to the sustainability theories and ethics. Enron Corporation serves as an example of large scale victory achieved for a short span of time. Developed out of a merger between two gas companies in 1980s, Enron commenced trading as a gas corporation in 1989 and within remarkably few years, it had become the largest corporation trading gas commodities in the United States, with employees growing to 21000 in forty countries. Steering on a wave of optimism, the organization began diversifying its portfolio by using special purpose entities (SPEs). This allowed the organization to embark on less conventional ventures without reflecting the cost on the balance sheets. Enron made large financial associations, which removed it from its chief object of operation; energy, through trading entirely varying products such as steel, water, credit risk and paper. The organization’s theory transferred to; almost anything can turn into merchandise for carrying out transactions. The organization collapsed due to lack of application of ethics and integrity in the economic, social, and environment tiers. The multinational was involved in immense issues of corruption, which was against the corporate social responsibility. A manager of an organization should have a social responsibility in protecting the stakeholders of an organization. However, if the manager is involved in actions that deny sustainability of the organization or its stakeholders, then he does act responsibly. Different managers and employees were involved in corruption scandals in the organization, which represented a negation of corporate social responsibility (Fox, 2003 pp 15). The ethical part of the corruption scandals involving the managers and other employees came out clearly as unethical. In the analysis of ethics, an individual has to consider the responsibility for any actions. The managers and other employees involved in the corruption scandals could have acted in a responsible manner. They did not mind about the down fall of the organization and the economic contributions to the global economy. The corporation had provided employment opportunities to a vast population in the globe, which indicated the social responsibility that the organization had on both regional and the international community. However, with the ill-functioning managers and other employees, the corporate social responsibility of the organization was underrated. Enron marks an example of how pathetic publicity emanating from poor corporate social responsibility affects an organization. Enron had a strong corporate responsibility initially, but worsened resulting from defective leadership. In meeting its corporate responsibility, the company was involved in various corporate philanthropies and used to give millions of donations to various charity organizations (Fox, 2003 pp 18). This depicted an achievement of social responsibility since it applied ethics in helping the communities all over the globe. This made the organization be recognized and well ranked in terms of corporate social responsibility. When it came to the working conditions of the employees, the employees were treated with respect and were well paid. This made the company show ethics in corporate responsibility. It was not only in production and social environment that the company showed to recognize its corporate responsibility, but also in environmental protection. The organization won various awards for its corporate responsibility in climate protection. For instance, EPA award for climate protection. In addition, the organization showed increased production, which made it receive an award on Economic priorities from the council. Enron collapsed in 2001 after it ran into a huge debt. Failure to have the capacity of taking responsibility for its debts and liabilities was an indication of corporate irresponsibility. The organization did not have the ability to repay all its liabilities to its creditors, which was a denial of corporate responsibility (Fox, 2003 pp 28). This can also be indicated as a breach of ethical standards. A company should be capable of paying all its shareholders all the necessary dividends and value of stocks. Enron was not capable of paying its stockholders, which depicted a breach of ethical standards and rights of some of the stakeholders. A vast number of employees had invested in the organization; as members of Enron managers sold their stocks due to the deteriorating and declining performance of the organization, small shareholders were not permitted to sell their shares, which was a show of corporate irresponsibility and lack of application of ethical standards (Fox, 2003 pp 41). In demonstration of sustainability by an organization, the organization should be capable of using ethical standards in its operation. However, although Enron seemed successful economically, socially, and in the utilization of resources, it received unmerited favour from individuals in power. Rather than representing the true view of capitalism in a free market, the organization represented a view of the effects of corruption under the influence of government officials (Fox, 2003 pp 62). This organization depicted how capitalism can encourage corruption and inequality in the distribution of resources. The organization was favoured, which eliminated issues of competition with other such organizations. This hindered sustainability since without competition, economic entities would not be capable of producing economic goods with application of innovation, which means that the value of commodities produced can be of low standards. Strong competition promotes the application of innovation and development of new technologies, which foster increase of productivity and increase of value of the commodities produced. Relating to utilitarian theory, managerial and relational theories, it is evident that the corporate social responsibility of the organization was overrated. Looking at utilitarianism, the social costs involving the company rated remarkably high. This can be measured from how the operations of the organization affected the society at large. When the company restricted its shareholders from selling their shares, most of the employees, who invested in the company shares, suffered colossal losses. In addition, due to the corrupt nature of the leaders, the company collapsed affecting most employees, who relied on the company for their lifeline. Hence, the company did not support sustainability. According to managerial theory, the social responsibility for the company did not represent the true picture of the organization (Mallin, 2010 pp 19). The management was involved in various corruption scandals, which represented a misrepresentation in social accountability, auditing and reporting. According relation theory, the organization acted under the influence of government officials, who favoured the operating of the organization. This led to corporate, global citizenship of the company being overrated. In all the three theories of corporate social responsibility, the company did not show responsibility in its existence. Recommendations Promoting sustainability requires the attention of not only a few individuals, but also the involvement of governments. A measure of sustainability can be established through the analysis of environmental impact, economic and social impacts (Banerjee, 2007 pp 63). However, this is not enough since ethical standards should also be applied in the analysis. In measuring the corporate social responsibility of an organization, the three dimensions should be considered. Economic, environmental and social costs help an individual in judging the sustainability of an organization. Different economic, social and environmental activities judge the corporate social responsibility (Kotler, 2005 pp 69). Conclusion Corporate social responsibility has evolved in its practice and meaning. The classical analysis of corporate social responsibility was limited to philanthropy and later shifted to an emphasis on business – society associations (Matten & Visser, 2010 pp 22). This referred to the contribution of corporations in solving of social problems. Presently, corporate social responsibility is viewed as a concept, in which, business organizations have to consider the interest of the society through taking responsibility for the consequences of their actions to supplies, employees, customers, communities, shareholders and any other stakeholder as well as the environment (Idowu, 2010 pp 52). Enron marks an example of how pathetic publicity emanating from crooked corporate social responsibility affects an organization. Enron had a strong corporate responsibility initially, but worsened resulting from shoddy leadership. In meeting its corporate responsibility, the company was involved in various corporate philanthropies and used to give millions of donations to various charity organizations. Rather than representing the true view of capitalism in a free market, the organization represented a view of the effects of corruption under the influence of government officials (Fox, 2003 pp 77). References Kotler, P 2005, Corporate Social Responsibility, Continuum, London. Banerjee, S 2007, Corporate Social Responsibility: the good, the bad and the ugly, Cengage Publishing, New York. Mallin, C 2010, Corporate Social Responsibility: a case study approach, Taylor & Francis, London. Idowu, S 2010, Theory and Practice of Corporate Social Responsibility, Prentice Hall, London. Crane, A 2008, The Oxford Handbook of Corporate Social Responsibility, Oxford University Press, London. Nelson, A K 2010, Managing Business Ethics, Wiley & Sons, New York. Matten, D & Visser, W 2010, The A to Z of Corporate Social Responsibility, Routledge, London. Burke, T 1994, No Harm: ethical principles for a free market, McGraw-Hill, New York. Graafland, J 2007, Economics, Ethics and the Market: introduction and applications, Taylor & Francis, London. Schumpeter, J 1994, Capitalism, Socialism and Democracy, Routledge, London. Mises, L 2009, Socialism, Ludwig Von Mises Publishing, London. Fox, L 2003, Enron: The Rise and Fall, Wiley & Sons, New York. Read More