Corporate Social Responsibility and Ethics in Northern Rock Bank - Case Study Example

Corporate social responsibility and ethics in Northern Rock Bank Introduction The global rate of competitionthreatens multinational corporations to seek association with the society and undertake socially responsible business approaches to secure loyalty and effective appeal upon the clientele community. Corporate social responsibility is an adaptable approach to critically assess internal organization’s practices and the extent at which such practices may affect the external environment to withdraw or engage on the business (Michalak, & Akseli, 2011:45). The approach further assesses the harms length that may emanate from unethical business practices in order to ascertain the role of societal inclusion in mentoring effective corporate, social, and public images to a company (Harrison, 2007:1). The following discussion seeks to identify the practical approach of corporate social responsibility in Northern Rock Bank in relation to the business practices, and the present theoretical approaches born therein. The internal managerial practices Executive remuneration is the amount paid to the top most managers of different ranks in any organization. It is set by the board of directors who may follow a certain set criteria and outlined in the organization’s salary and remuneration policy. Most of the managers’ demand for higher pay makes the parties involved in the remuneration system to have a hard time in resetting the system. However, sustained pay system may not be the best to reinforce executive performance (Idowu, & Leal Filho, 2008:56). It is impossible to regulate executive salaries due to various reasons, which are in a lane manifested in a range of activities. For instance; a manager may demand for a salary increment and may yet not be a good performer (Tricker, 2012:65). Others have the knowledge but lack the basic concepts of practicing what they have in their areas of responsibility. They have very little to do in the organisation compared to their subordinates who are in turn required to work hard for a low salary (Visser, 2010:156). The directors of the Northern Rock legally seize the bank shares which were to be sold and help settle all the debts it owed the bank of England. The shareholders are therefore liable to sue the directors (Innes, & Norris, 2005:128). This is due to the unfulfilled promise by the directors that they would compensate but they instead de-valued the shares so that the shareholders would get something very negligible. They did this by stating that they were; under a new management and were unable to operate as a successful business. It is the government, which led the Northern Rock to countenance the problems (Regester, Larkin, & Regester, 2008:45). They have a prima facie case for their rights having been violated by the government officials as is stipulated in the Human Rights Act of 1998, which deemed the plaintiff to compensation. The Northern Rock clients included business investment agencies, households and firms. These firms dealt with different business operations. The business investments were often in need of expenditures in the present to acquire returns in the future (Baxi, & Prasad, 2005:68). Therefore, businesses need to borrow to finance their investments since the lenders pursue to earn long-term profits from the capital investments (Idowu, & Leal Filho, 2008:58). Eventually, they demand flexible accounts, which allow them instant admittance to their deposits (this means, they value short development deposit accounts). The persons leading to the collapsing of the Northern Rock bank include; the directors, the shareholders, the savers, the stakeholders and the government. However, the stakeholders and the directors have greatly contributed since they led to the bank being nationalised by the British government. The British Bankers Association helped calm down the worried Northern Rock’s customers. The government interfered with the bank operations and took away the shareholders worries on their savings (Idowu, & Leal Filho, 2008:48). This was done through the government’s effort to have the collapsing bank be granted a loan, which it was later unable to repay due to the increasing financial constraints. Analyses of the concepts and theories of CSR and business ethics in Northern Rock The northern Rock Bank’s managerial practices deviated from the ideal corporate and social responsibility contexts in the manner they undertook business ethics and stipulated new ideological approaches to yield profits from the clientele community. For instance, the ideology that mortgages served as factors of increasing customer relations took a controversial turn after the company adapted the valuable aspect to lure clients in loaning with the notion that they would be earning value (Harrison, 2007:1). However, the management’s plans remained that through positive adoption of the offer, the bank would be accruing value as clients perceived that they were earning the desired financial values from the service. The underlying stakeholder concepts establish that they are dependent to the corporations that they seek belongingness thus; the corporation shall in turn reflect value by ascertaining their importance and acquainting them with the desired growth factors (Idowu, & Leal Filho, 2008:58). Mainly, theorists argue that corporations may serve to enhance or derail the lives of the stakeholders (Penman Brown, 2009:34). A reflection to the Northern Rock Bank denotes that the corporation’s management observed that the shareholders’ investments and the use of mortgage plans would be intrinsic in yielding capital base and increasing its competence in the UK and other countries of interest (Nonaka, & Zhu, 2012:67). Such an approach focused on draining stakeholders’ capacity through deception that the corporation targeted at undertaking business activities to benefit them rather than the intended secret growth and diversification to increase the capital basis at the management’s benefits. The instrumental theories of corporate social responsibility argue on an organization as a business entity that targets to deliver the accrued benefits to the stakeholders (Jones, White, & Dunse, 2012:46). Friedman observed and established that the organizations should seek to deliver shareholder value at its maximum. Secondly, it would be of benefit if the organizations struggled to deliver the desired edge of competence against rivals in the field of production (Harrison, 2007:1). The CSR theory stipulates that corporations should further establish precise protocols to achieve equity between the demand and supply variables, which eventually ascertains positive growth of the general economy (Sun, Stewart, & Pollard, 2010:133). Economic competence reputes that the organization’s business indulgence should seek to coagulate the stakeholder community to the understanding that the business undertakings target to enhance their social welfare thus establishing the need for competitive investments. Secondly, corporate social responsibility (CSR) revolves on political theories that argue on the importance of corporations to include their strategic business approaches to delivering value, and upholding on the societal ethics in their performances. The importance of the theory is to ensure that the organization affects the external environment positively (Idowu, & Leal Filho, 2008:59). Political theories include corporate constitutionalism and integrative social theories which dictate that businesses should restore the societal legal and ethical norms, and seek belongingness as part of the entire organization. Lastly, political theories comprise of the corporate citizenship approach that dictates the corporation to practice devotion in serving the entire community to the best as a form of showing devotion and patriotism. However, Northern Rock Bank seems to contrast with the theoretical approach as it amasses capital from the stakeholders, registers questionable cash-flow ledgers, and reflects lesser significance on the brand equity (Harrison, 2007:2). Corporate social responsibility perceives that corporations should uphold integrative theories in the line of business as a form of accruing mutual benefits given that the two entities depend on each other for existence. The theories include issues of management in ascertaining the extent at which the corporation shall derive acceptance in the society. Arguably, a business entity is likely to accrue benefits by establishing the shortcomings prevailing in the managerial practices that harbour positive reputation. The theories enforces that the differences cause a gap and its resolution is integral in building the desired reputation (Sun, Stewart, & Pollard, 2011:142). Therefore, the management should ensure public responsible approaches through stakeholder management, and corporate social performance. Further, ethical theories are important in ensuring that all practices reflect to the societal beliefs and norms. The relevance of the theories to the context of Northern Rock Bank Through the instrumental theoretical approaches, Rock Bank’s management seems to deviate from the norm of delivering value and benefits to the stakeholder community. Findings establish that Northern Bank adapted the mortgage funding plan to run other banks’ mortgages rather than its internal clients and stakeholders (Sun, Stewart, & Pollard, 2010:136). Despite the fact that the bank’s capital for the business plan emanated from the customers and investors, the investment approach neglected the stakeholders’ urge to benefit from all profitable projects therein. Such an approach deviated from the ideology that the corporation targeted to accrue competence on stakeholders’ positive indulgence and investment into the business. Given that the clients and investors pursued to derive benefits from the organization, the external mortgage investment in other banks limited the internal benefits thus neglecting the needs of the stakeholders accordingly (Harrison, 2007:3). Therefore, Northern Rock Bank established irrelevance to instrumental theoretical approaches as it deprived the stakeholders of the desired gains. Mortgaging was a traditional approach in the society to ensure that construction was continuous and that those who funded the programs accrued desirable and long-term benefits. However, after adoption by the banking firms, the stakeholders perceived that they would be earning the desired benefits as the banks would be setting a more reputable and trusted approach whereby the returns on investments would be more secure and guaranteed (Sun, Stewart, & Pollard, 2010:139). Despite the societal ideology held upon the investors, Northern Rock Bank’s management accrued stakeholders’ capital and reinvested it in other banks. The bank’s cash-flow ledgers seemed questionable on failure to reflect on the mortgages interests thus deviating from the political theories (Idowu, & Leal Filho, 2008:69). The essence is that the bank did not seem to reflect on theoretical stipulations that the society remained an important entity to business growth and propulsion as it extended the valuable factors to external businesses, and the returns did not benefit the stakeholders. The integrative theoretical approaches dictate corporations to engage on practices that benefit society satisfactorily while yielding the desired values. The controversy established by Rock’s management was that the investment approach targeted to accrue benefits for the organization rather than the expected mutual benefits with the clients and investors. Northern Bank funded external mortgages in other banks and the corporation’s clientele and stakeholders did not accrue any benefits as they remained locked out of mortgaging plans with external banks (Sun, Stewart, & Pollard, 2010:140). Such an approach further deprived them to mortgage for their construction needs thus they lagged behind in expected societal growth. Critically, Northern Rock Bank’s practices deviated from the intended mutual consensus as it failed to deliver value to the stakeholders while benefiting from their capital investments. Prevailing differences between CSR issues and stakeholders’ perspectives Corporate social responsibility issues denote on ascertaining valuable approaches to the stakeholders. Most of the theoretical approaches dictate corporations to engage on ethical business approaches and deliver benefits to the clientele and stakeholder groups of the organizations (Harrison, 2007:4). Corporations derive the effective value of upholding the CSR stipulations in ascertaining growth and competence while serving the society. However, the stakeholders perceive that disguise prevails and the majority shareholders together with the management to the corporations solely benefit from the available values. Such disguise diminishes the rate of investments due to reduced trust, perceptions, and loyalty to seek belongingness. CSR establishes valuable approaches, but the managerial practices present in many corporations deter the mutual intentions of the theories to ensure that growth and profitability rests in the company while stakeholders accrue little or no benefits in that case. Corporate social responsibility tames corporations to derive an understanding that stakeholders are the most important and integral assets of growth following their expected capital investment approaches with the companies. However, CSR fails to ensure that the organizations will deliver the desired values after benefiting from the stakeholders. For example, Northern Rock Bank ensures that all its mission and vision statements serve to deceive the stakeholders and clients of the values that they seek to deliver upon transactions (Harrison, 2007:4). At such a point, the stakeholders invest with the company to accrue the perceived benefits. On the contrary, the management aims at drawing capital to yield profits and attain the set objectives thus; the stakeholders serve as a ladder to success and achieve fewer benefits than the desired. This disguised and deceptive approach diminishes the level of trust thus; the stakeholders decline from further deceptions and seek to reinvest their capital in other areas of businesses where they forecast positive growth factors (Sun, Stewart, & Pollard, 2010:144). Therefore, stakeholders decline to abide by corporate social responsibility approaches as they do not nurture business ethics, but rather disguise them to ensure success for a single party and drawbacks to the majority parties. Evaluations of the future of CSR practices in Northern Rock Bank The northern Rock Bank management perceived that the corporate image was undergoing the threat of losing significance following the stakeholders’ understanding that it targeted sole benefits at their expenses. Therefore, the management resumed to implementing cohesive corporate social responsibility approach, which would be sufficient in establishing a positive image upon the stakeholders (Banerjee, 2007:84). The perception was that a new reflection of the corporate brand’s image would be intrinsic in luring stakeholders to perceive that the new resolutions would deliver the stipulated benefits accordingly. Northern Bank established reviews on the corporate governance, clientele approaches, financial accounting and auditing approaches as a guarantee that all projects would serve to the benefit of the clients and stakeholders (Sun, Stewart, & Pollard, 2010:146). The new CSR resolutions in restructuring the corporation’s integral business practices served as proper and modest grounds to improving the positive perceptions. The approach would persuade the target stakeholders to perceive that Northern Bank’s new resolutions targeted to ensuring equity amongst its affiliates. Therefore, the new CSR approaches ascertain a positive future growth as the corporation’s image turns to pose positive implications to the clientele groups. The UK banks establish programs on the basis of CSR to acquire the desired stakeholder and client communities to ensure competence within the domestic and foreign markets. This notion dictates the performance review departments to developing strategies that diminish negative perceptions and nurture positive corporate images for the organizations. Certainly, CSR approaches shall not decline as their relevance pursues a mode of change in accordance to current conditions in the global business environment (Sun, Stewart, & Pollard, 2010:146). The approach further assesses the harms length that may emanate from unethical business practices in order to ascertain the role of societal inclusion in mentoring effective corporate, social, and public images to a company. Therefore, corporate social responsibility seems inevitable nurturing corporations’ competence with the ideology that the practitioners seek to ascertain positive approaches all concerned variables. Conclusions The review on Northern Rock Bank’s practices establishes that business corporations applied CSR approaches to accrue sole benefits. For example, the clients and investors pursued to derive benefits from the organization, the external mortgage investment in other banks limited the internal benefits thus neglecting the needs of the stakeholders. The malicious approaches hit an end through the society’s awakening that the bank did not target to deliver benefits to the stakeholders as stipulated within the corporation’s memorandum (Sun, Stewart, & Pollard, 2011:154). After tarnishing the image, the management resumed to forecasting proper and precise approaches on CSR thus; the corporations deployed precise measures to deliver value to the society for equated and neutral benefits. Bibliography Banerjee, S. B. 2007. Corporate Social Responsibility The Good, The Bad And The Ugly. Cheltenham, Uk, Edward Elgar. Baxi, C. V., & Prasad, A. 2005. Corporate Social Responsibility: Concepts And Cases : The Indian Experience. New Delhi, India, Excel Books. Harrison, A. 2007. 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