Corporate Ethics & Corporate Social Responsibility - Essay Example

Introduction: Corporate Social Responsibility (CSR) and Corporate Ethics have become buzzwords in the world of business today. Rapidly increasing globalization and corporate size has also raised concerns about the consequences of corporate policies and actions. More there is a growing hands off policies or in other words, the policy of deregulation, by governments in many parts of the world. This is especially true for the United Kingdom. Traditionally, government control over the education system was considered to be essential. But the policy of the government to increase private participating in the education sector has set off a controversy with some sections of the society welcoming it while others have raised concerns over it. This paper is a study of corporate social responsibility in the context of increasing privatization of schools in the country. It also takes a look at whether education can be equated with other industries in the same context. During the course of the study it will also touch issues like the role of education and who are the ultimate beneficiaries of the education system. To arrive at a conclusion, the paper will take the following structure. After the introduction a review of what CSR is will be given, followed by privatization in general and with particular reference to education, both in the context of the UK. A deeper analysis of CSR with reference to education will be given next and this will be followed by a look at whether global capitalism exists or not in the field of education as a whole and the UK in particular Corporate Social Responsibility: Like individuals, organizations large and small are expected to behave in a responsible way towards the society and the environment. Privately owned companies have a bigger area of responsibilities when compared to other organizations. Apart from the above mentioned responsibilities towards the society and the environment, they have to show their responsibilities towards its owners, shareholders, creditors and customers. "Corporate social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large." (Corporate Social Responsibility: Making Good Business Sense. 2000). According to the definition, companies should commit themselves to behave in an ethical way and should also ensure that they contribute towards economic development and also ensure that its workers, the local community and the society at large. Even though no direct reference to profitability is made, it can be understood from the words 'contribute to economic development' is indicative of the fact. This definition is nearly a decade old and the scope of CSR has taken a much bigger dimension with the passage of time. According to the publication, CSR, from peoples perceptions across the globe should have, to name a few, a concern for future generation, concern for the environment, transparency, a global outlook and partnerships with other organizations in furthering its obligations. For more clarity a more contemporary view is also given here. "CSR covers all aspects of corporate governance. It is about how companies conduct their business in an ethical way, taking account of their impact economically, socially, environmentally and in terms of human rights. This moves beyond traditional business stakeholders such as shareholders or local suppliers." (Corporate Social Responsibility: What is CSR 2006). What all this ultimately suggest is that CSR is gaining in scope and importance and will continue to do so in the future with newer and additional responsibilities being added. Stakeholders: For any organization to grow it has to see that its stakeholders are well looked after. It is easy to say, but a difficult thing to achieve. Stakeholders include everyone who is having a direct or indirect interest in the affairs of the organisation. It means that a diverse range of people with diverse interests can be considered to be its stakeholders. It can include the owners, shareholders, employees, customers, creditors, the society, the government and the economy of the country. "According to R. Edward Freeman, whose work in stakeholder theory is well known, the stakeholder concept was originally defined as including "those groups without whose support the organization would cease to exist." (Stakeholder Theory. 2006). In the education sector it would include the students and parents as well. The government and the industry where the students will work after graduation are also stakeholders here. A low cost education will satisfy the students and parents, but it will result in low revenues which in turn will affect employees. This is a difficult matter as far as primary education is concerned since it is be considered to be essential How such a scenario will work in the private sector is to be analysed before any suggestions can be given. It is a strange scenario in this case because when private companies (other than education sector) talk about CSR, they include educational aid to poor students as a part of their policies. But in a privatized education sector, they become customers and stakeholders instead of being beneficiaries of a CSR programme. So, where does CSR end and stakeholder satisfaction begin or should the organisation treat students/parents as part of their CSR programmes or treat them as their customers. In higher education which is not as compulsory as primary education and which is expensive anyway, this switch might be fine. But in the case of primary education, how can the privatised education sector balance this If the noted economist, Milton Friedman's views (whose views about primary education are given later in this paper) about CSR and stakeholders are to be acceptable, then it would be better that private players keep out of the education sector. Friedman is of the opinion is that the management responsibility to the organisation is only to maximise profits without being unscrupulous and also without any responsibility towards other stakeholders. "That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society," (Theaker 2004, P. 137). . But the concept of CSR is steadily growing and such theories are now having little or no prominence now. Privatization in the UK: The largest privatizations in the UK happened during the 1980's and 1990's as a result of the of the government's policy to give up control over the publicly run utilities like water, electricity, waste management and healthcare ancillary services. There are a few lessons that can be learnt from privatization in the UK. As long as there is competition among the private companies in the sectors privatized, the industry was run efficiently with benefits like increased efficiency and reduced cost for the consumers. Benefits of privatization in general: Before moving on to discussing privatization of the education sector, it would be worthwhile to look at the benefits of privatization for the country and its economy. a. Revenue for the government: Privatization entails selling off of usually large organization to privately owned corporations or a consortium of companies. This would result in a large inflow of capital for the government. b. Efficiency: There is a general consensus that publicly run organizations lag behind the privately owned ones in general efficiency of operations. A reason for this probability is that state owned sectors generally tend to be monopolistic in nature and such a system does not have a reputation for efficiency and quality. c. Streamlining the government itself: Privatization results in a lot of responsibility being shifted to the private sector. The will help the government to focus on other important issues and hence result in better governance. Privatization of education: The UK does not seem to have succeeded very well in their efforts to privatize education in the country. There have been widespread protests against the move by student bodies and staff of colleges and universities. A move to privatize teaching English to foreign students has been met with widespread protests. An excerpt from a letter sent to the University of Liverpool by the president of the University and College Union strikes home this point. "My concern is at the possible negative impact of these ventures upon the quality of education provided and the impact on the terms and conditions of the staff where private provision replaces that of the institution itself. At the University of East Anglia, it is reported that the INTO venture is advertising for new staff with lower than usual qualifications and at lower levels of pay." (Bone 2007, P. 1). In another development, the Oxford Brookes University pulled out of a plan to privatize their International Centre for English Language Studies supposedly due to protests from the college lecturers. "Lecturers were claiming a victory today after their university pulled out of a deal which would have lead to the privatisation of their English language studies department." (Andalo 2007). The general feeling is that quality of education will suffer and that salary and other perquisites enjoyed by the staff will be negatively affected. If the concept of responsibility does not exist arises on if there is no competition or strong regulations, then the privatisation of education has to be looked into seriously. Another way to look at the scenario is to see whether privatization of education will create conditions for a market style economy. What this means is that education sector will be run just like a business whereby schools compete amongst each other for students by offering attractive fees or by quality of education. It is assumed that lowering fees may affect the quality of education given. Given the current scenario of what little privatisation has occurred in the country such market conditions do not exist. "Yet some observers note that market-driven reforms typically do not represent a true market. In view of continued state involvement in funding, controlling costs, regulating and restricting entry of new providers, there is no "market" in the laissez faire sense". (Lubienski 2006). If the government opens up the education sector to private organizations for administrative purposes only, but with stringent controls especially on restriction of new entry the chance of a laid back attitude can develop among the existing players. This is because there would be no real threat of competition among them. In such a situation, privatization will take place, but not in a market driven way. The Role of Education: In this context it would be worthwhile to analyse the role of education in people's lives. The question is whether the high and lofty ideals that has been attributed to the vales of education is being realised. In a particular online publication twenty eight attributes have been given to the role of education. A few of the attributes are analysed here. It can be seen that the role of knowledge to equip students to earn a living is only one of them. Others include ability to understand the truth without prejudice though a combination of faith and faith and reason, capability to analyse, self confidence, self motivation, ability to bring about a change in the society, self discovery, moral responsibility, balance between culture and values, decision making skills, a balance between culture and values, concern for others, service mentality and spirituality. It is quite clear that no education system anywhere in the world will be able to provide such a wide range of qualities to its students. "Education is a continuous and creative process. Its aim is to develop the capacities latent in human nature and to coordinate their expression for the enrichment and progress of society, by equipping children with spiritual, moral and material knowledge." (Role and Goal of Education: Role of Education: Aim of education). It would also be interesting to have a look at noted economist Milton Friedman's view on education especially primary education. He too was of the opinion that education had a multi role to play especially among the early stages of development. He argued that at the least basic education is a necessity and that parents should be supported financially in enabling children to attain a basic level of education. he also went on to say that government administration can give way to private administration and that the role of the government be that of a regulatory authority. "Yet, since there is a public benefit to education, especially of the young, Friedman argued that some public action should be taken to ensure education of all members of the society." (Hakim, Ryan and Stull 2000, P. 130). A few views that support the multi-role that education plays are given here. 'Education is not filling a bucket but lighting a fire' (William B. Yeats), 'The great aim of education is not knowledge, but action' (Herbert Spencer) and 'An educated man is one who can entertain a new idea, entertain another person and entertain himself' (Sydney Wood) are some of the views that shed light on the many facets of education. "The educational process has been the subject of much comment by academics and writers." (Quotes on Education). Consumers of education: It would be pertinent to analyse who the consumers are in any education system. It is not so easy to identify them as in the case of other activities. A manufacturing or service providing company can easily identify them as their customers. but since education is not a commodity it can be said that there are more than one class or level of consumers here. The parents can be considered to a consumer, at least in the early stages of education because they have a responsibility in seeing that their children have a good life. It is also because it is the parents who pay for the child's education. The students themselves are consumers because they get themselves educated mainly to get employment or work as a self employed professional. The organisations that employ the graduates are consumers because they need qualified people to work for them. The country as whole are also consumers because the economy is dependent on having a pool of talent along with other factors, for the welfare of the economy. In a way it is a complicated structure and privatizing such a system should be done if at all with a lot of care. Corporate Ethics: Long with CSR another word that is being used today business ethics. All companies want to be seen as behaving ethically while in reality this might not be so. To put simple business ethics can be defined as "Accepted principles of right or wrong governing the conduct of businesspeople." (Glossary: Business Ethics. (2006). But in today's context this is too broad a definition. A more elaborate definition that can be given to it is "The examination of the variety of problems that can arise from the business environment, and how employees, management, and the corporation can deal with them ethically. Problems such as fiduciary responsibility, corporate social responsibility, corporate governance, shareholder relations, insider trading, bribery and discrimination are examined in business ethics." (Business Ethics: Definition. 1997-2008). This definition of ethics covers a broad range of issues and also the fact that it is getting more and more easer to be branded as unethical. An analysis of ethical issues among companies with specific reference to the UK throws up some interesting facts. "Le Jeune and Webley based their conclusion on a survey of fifty-seven companies operating within the United Kingdom to determine how businesses are using their codes of business conduct and what their experiences have been with the codes." (Business Ethics Resources: Company Use of Codes of Business Conduct. 1999). The good news is that many of the major corporations do have a code of conduct or ethics. They also take the trouble to update the code often. But thirty of those surveyed did not distribute the code to all employees. Fifty four percent did not take the trouble to train and make its employees comprehend what is given in the code of ethics. Only thirty three of the companies did a sort of check or audit of its ethical practices. In most economies in the world, a majority of people working in the private sector work in firms that have fifty or less employees, but such firms constitute 95% of the total number all companies put together. Studies have been conducted on larger firms or corporations and smaller firms have not yet come under scrutiny regarding ethics. So it would be difficult to gauge the accuracy of level of ethics in any economy, based upon such studies. There is also disagreement among businessmen as to what is ethical behaviour. "Research has shown that certain terms of value - integrity, trust, fairness - recur in the mission statements or prefaces to company codes. They are not, however, universally accepted, and business leaders do not appear to see eye-to-eye on the issue." (Webley 2001). Globalization of business has also thrown up a host of problems regarding ethical behaviour. For example, in economies where corruption is rampant, most companies both local and multinational, engage in such acts. The multinationals back home will not engage in such practices if it is located in countries where corruption levels are very low. Global Capitalism in Education: There is very little material available on the influence of global capitalism on education. But there are many countries where private participation exists to a large extent. But till date presence of multinational corporations in this area is rare or non-existent. An overview of private participation in the education sector follows this section of the patper. This is assumed to be an indication that such an influence does not exist. The argument can now focus more on higher education since its quality is important in determining the quality of the youngsters who are ready to face the world. It is true that there are many private universities in many countries in the world. But very few of these are formed for profit motives. Most of them are registered as not for profit societies. With reference to the UK, there is only one university that does not depend on funding from the government and it is the University of Buckingham founded in 1973. it is registered as a non-profit educational charity. The University also has its own syllabus. "A suitable site was found in Buckingham and on March 29th 1973 the University College at Buckingham (UCB) was incorporated, in the form of a non-profit making company registered as an educational charity." (History of the University. 2007). All the other universities in the country come under the ambit of Universities and Colleges Admission Services. A brief look at the private education sector in other countries: as mentioned earlier, privatisation especially in the higher education sector has not taken place extensively. But other countries have the presence of private organisations in the education sector. An emerging economy like India is an example. Almost 50% of higher education is privatized here. The situation here is that even though private sector participation is through not-for profit organizations, the situation is such that many of those organizations are in fact making huge profits. Existence of corruption also safeguards many of these colleges from many government guidelines and regulations. "Private higher education in India has thus become a lucrative business." (Gupta 2007). School education in India is also dominated by private sector players. The US has small but well run private universities. In Europe, especially in central Europe the number of private universities is rising to meet higher demand without increasing state spending. In China the number of private universities are increasing at a fast pace, even though quality is questionable. It appears that the number of countries having private universities are more in Asia. Moreover Western Developed economies have a lower concentration of private universities. CSR in case of privatization: In the probability that the education sector in the UK is privatized fully or to a large extent, the CSR of the companies in the sector would be no different from that of other private firms in other sectors. The only difference would be that stakeholders would be different here. One of the stakeholders would be the students and companies should see that quality of education is not affected by reduced prices necessitated due to high competition. Responsibility to society, individuals, owners, environment and shareholders should remain the same across all the sectors. The problem would come as mentioned earlier if the situation is highly regulated as to entry of new players. In such a case existing players would become laid-back resulting in poor service and quality. Company loyalty to stakeholders: In the private sector, it is natural that benefits to shareholders and owners are given high priority. This can be good and bad. In a competitive environment companies will be forced to offer good service, that is quality at reduced costs. But if the situation is not very profitable, companies would be forced to cut costs. For example, lowering of salaries will result in losing qualified staff which will ultimately reflect on the quality of education. In a state aided education policy, the government can bail out poorly performing institutions whereas it is not possible always in a privatized environment. But is should be noted that in a privatized environment priority will always be focused on the bottom line. Conclusion: A lot of factors have been analysed here. A look at privatization in general in the UK and its consequences has been done. The benefits of privatization too have been analysed. The role of education and the customers in such a sector has been looked into. The ethics of private organizations and the CSR of firms operating in a privatized education system was reviewed. The main issue that has to be seen in arriving at conclusion is that whether education is a commodity like water, gas or transportation. Education, especially in the primary and secondary education is essential and not a luxury. It is essential for the individual, the society and the nation as a whole. My opinion is that it should not be treated as a commodity. Cost of travel could be reduced by cutting down some amenities provided. But to bring down cost of education what all items should be sacrificed. Nothing that will bring down the quality should be sacrificed and it would be impossible in the case of education. Even if privately owned organizations are able to give impartial good quality education would they be able to make it affordable Again the answer would be no. hence at least in the primary and secondary level, privatization should not take place taking into consideration the factor of affordability. With regard to higher education, the situation is somewhat different. Bright but otherwise economically backward students can avail of scholarships. As to whether university level education be privatized or at least allow a greater participation the views two people connected with college level education in the UK can be considered. According to Andrew Oswald, Professor of Economics, University of Warwick, what the country is suffering from is lack of privately owned universities. To quote him -"For instance, I was struck by the fact that out of this 231-strong world elite (mathematicians), only 2 work at the University of Cambridge. That is the same number as at the University of Connecticut. Stanford University, a private university in California, has on its own 11 of the world's top mathematicians." (Oswald 2003). Another viewpoint was given by the Vice Chancellor of Cambridge University in the Annual Address to the Regent House, 1 October 2005. According to him a university should have autonomy, but should find its funds from a variety of sources which includes fees, donations and government aid. "At Cambridge, we must be explicit and clear about our societal obligations, and honour them even as we use our freedom to provide the quality of education and research that keeps us among the foremost universities in the world. Financially, we must broaden and deepen the range of our funding sources and avoid heavy dependence on any one source." (Public and Private: Universities, Government, and Society: Introduction. 2005). My concluding remarks will be as follows. Global capitalism has no impact on the education sector in the UK. Corporate social responsibility will remain the same because a privatized sector will tend to behave in the same way across different sectors. It is profitability and free market enterprise that ultimately determines CSR. Primary and secondary education is necessary and compulsory to every citizen and hence it is better that it remain in the public sector. I take the view given by Friedman that education, especially primary education is compulsory. Education at that stage has a multi-role to play. A privatized sector will not be able to give quality education at low prices or for free. The university level education can be privatized, again under the following conditions. All universities have to be given autonomy as far as syllabus and teaching methodology are concerned. The UK has a long history of distinguished institutions and there would be no lack of experience in creating quality syllabus and methodology. State funding can remain, but there is no harm in allowing privately owned universities in the country. But such institutions should be registered as not-for profit societies. Initiatives can be taken up by philanthropic and visionary businessmen. Such organizations will have a greater sense of responsibility than organizations formed for profit. Whatever be the outcome, education should have quality and should be affordable to everyone at least in the early periods. Bibliography ANDALO, Debbie (2007). University Drops English Privatization Plans. [online]. guardian.co.uk. Last accessed 10 May 2008 at: http://education.guardian.co.uk/administration/story/0,,2046653,00.html BONE, Drummond (2007). [online]. UCU - University and College Union. 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