Corporate Social responsibility - Assignment Example

Nowadays unethical activities can no longer be hidden, as every activity against ethical CSR is investigated, communicated and broadcasted through internet by the media (Kakabadse, Rozuel, & Lee-Davies, 2005). However, if the other side of the coin is analyzed, it can be seen that that due to recent scandals, many reforms in business environment have been noticed. Firstly, the financial performance of the organization has improved (Galbreath, 2009). It has be analyzed by DePaul University that after the financial crisis and economic downturn, companies are engaging themselves into ethical business, which is revealing better financial performance as stated by S&P 500 Index (Silberhorn, & Warren, 2007).

The operating cost has reduced due to CSR initiatives because companies are more concern about reducing their rate of emission, cutting down waste and by selling the recycled materials. To enforce ethical CSR activities and corporate governance in companies after the Enron scandal the American government also introduced Sarbanes-Oxley Legislation (Cromb, 2008). Answer 2 Stakeholders are the people or groups of people who have major interest in the growth and profitability of the organization.

However, the interest of every stakeholder towards the organization is not the same. So based on the level of interest the stakeholders are segregated as primary and secondary stakeholder. The primary stakeholders are those who get the most affected by the positive or negative outcome or performance of the company. However, this differentiation is done for ethical decision-making. According to Figure 1, Freeman depicted a view of the primary and secondary stakeholders (Brockett, & Rezaee, 2012).

Figure 1: Freeman's Structure for Primary and Secondary Stakeholders Source: (Colle, 2005) The segregation is done on the basis of fiduciary duties, legitimate interest towards the firm, invested capital and efforts. As can be seen in Figure 1, the primary stakeholders are shareholders, suppliers, customers, employees and government. All these individuals and groups have financial and personal interest associated with the organization. They have direct contribution towards the positive or negative growth of the company, so they are the stakeholders who should be ethically receiving first priority in profits and decision-making.

The secondary stakeholders are the competitors, society, local and global communities, etc (Colle, 2005). They are not indirectly related to the organization, but neither do they contribute towards the profitability of the organization nor they receive a share of the profit of the company (Ayuso, Rodriguez, Garcia, & Arino, 2007). Answer 3 The sets of rules, polices, principles and processes set by the company to monitor and control the company and its functions is known as corporate governance.

The corporate governance also helps the company by providing guidelines for fulfilling the goals and objectives of the company. It is also responsible for safeguarding the stakeholder's interest. Corporate governance assists the companies to lay down the foundation for planning our CSR activities for the company because unless and until the operational functions are ethically conducted, CSR will reap no result. However, stakeholders of the company have significant role to play in this case, as it has been discussed further in this section of the study.

There are approaches around the world based on which the role of the shareholders in corporate