Colin Crouch on Corporate Accountability - Essay Example

Introduction Corporate social responsibility is a universal concept adopted by all organisations across the globe irrespective of their scope of operation. The concept of CSR has existed for more than 50 years and has been adopted by organisations as part of their voluntary activities targeting the society where they operate. Though the definition of CSR may vary depending on the approach adopted by scholars, neoliberal angle based on Crouch’s work defines CSR as an adoption of various voluntary policies. Such policies include specific codes and guidelines, which target the society but developed internally by the corporation (Amalric & Hauser, 2005). As a result, businesses must engage in open and free competitive practices without necessarily deceiving and defrauding the clients and the stakeholders. Changes in the economic and financial environment of businesses arising from the financial meltdowns have significantly affected the performance of business across the globe. Though analysts believed that changes might be witnessed that will affect the boom and bust capitalism, Crouch argues to the contrary (Robertson, 2011). According to Crouch, the bust and boom phenomena will continue because the neoliberal ideology has long time implications on the decisions made by organizations. Though there is need for the interests of organisations and the public good to be pursued, the government cannot interfere in the operations of businesses. Likewise, organisations cannot interfere with the business policies developed by the government despite the impacts it has on its operations. Therefore, in order to eliminate this dilemma, Crouch (2011) argues that a middle ground must be achieved that brings together the profits interests of businesses with the public good. The middle ground can only be achieved through corporate social responsibility as corporations have today grown into major actors in the public domain. In this paper, the position taken by Crouch that corporation must reduce their dominance with profit success and embrace corporate social accountability will be evaluated. This evaluation will be based on the views adopted by other management scholars in line with the neoliberal attitude towards corporate social responsibility. Crouch’s on corporate social responsibility in neoliberalism In Crouch (2011), the impacts neoliberalism and the financial turmoil on the behaviour of corporations have been addressed in the face of their accountability to the society. Today, neoliberalism has provided a new definition to the position held by organization in the pursuit of social responsibility and good practices. In 2007, a conference on corporate accountability and the extent of liability by the global businesses triggered the debate of the impacts of neoliberalism and financial impulses on CSR. Under the banner of limited liability status, companies have continuously evaded their social accountabilities and continued to act in a manner that contravenes the social environment that they operate in (Robertson, 2011). Whenever organisations behave in a manner that harms other parties who are not in any way involved in the operations and management of the organization, the limited liability banner has been used to deny responsibility to the shareholders and even to the communities within which they operate (Amalric & Hauser, 2005). In the face of the challenges that are currently witnessed in global organization, Crouch argues that there is a major shift towards ‘responsibilisation’, an event that has continued to affect different stakeholders in the business environment. citizens, governments, employees to organisations and even investors are developing a strong urge to give back to the society through social accountability program. This new phenomena is a strong distinguishing factor that does not necessarily call for willingness of the social stakeholders to neither respect or follow the rules written. Instead, it is guided by the voluntary application of values and morals that are established for organisations in different sectors. This new phenomena can be considered as the premise upon which various moral values are built which enables businesses to embrace the impacts of their deeds (Blyth, 2013). However, Crouch (2011) agrees that impacts of the new phenomena on the global business have not significantly sunk into the mind-set of business people. As a result, there is a great need to understand the relationship that exists between the development of corporate accountability and the current trends in neoliberalism. Though economic scholars have argued that neoliberalism is a static form of capitalism prompted by the financial challenges facing the business environment, it has actually attained the plateau level of development (Robertson, 2011). Though a narrow leadership evaluation of this argument can be sustained, the importance of the neoliberal economic development cannot be ignored by businesses operating in the global environment. The success of neoliberalism, despite the negative predictions that were provided, can be attributed to its integration into the political arrangement of different economies. The significance of neoliberalism in the management of global organisations according to Crouch (2011) arises from its ability to ‘responsibilise’ agents or corporations that are legally autonomous. Though these agents are considered free with distinct management and government structures, neoliberalism has provided a way through which the government indirectly intervenes through the social accountability programs. The need for developing code of conduct that guides the behaviours of organisations towards the society is common phenomena in neoliberal societies. Corporate noblesse oblige In Crouch (2008), the role of welfare policies adopted by transnational corporation belonging to the development elites is weighed in the eyes of noblesse oblige. Crouch (2008) attempts to evaluate whether such policies are the noblesse oblige of the transnational corporations that fall under the development elites category. The noblesse oblige was developed from the French aristocracies, which demanded that members of the aristocratic class took certain social obligations. These obligations was a show of respect and prestige for the position that they held in the society. As a result, the social corporate responsibility in the current dispensation has moved from the control of the government to the civil societies. Transnational corporations and multinationals are merely required to provide the resources while the government acts as the watchdog to monitor its implementation by members of the civil society (Warhurst, 2005). Crouch (2008) thus attributes the adoption of corporate accountability by transnational organisations as a way of depoliticizing the labour system. For example, Wal-Mart in china adopted the same approach in china in order to narrow the points of leverage enjoyed by the labour organisations. Most transnational organisations have thus embraced or accepted to factor in social accountability into their management as a way of legitimising the privatisation of labour and the environmental standards set by the government agencies in countries that they operate in (Blyth, 2013). With neoliberalism, the role of governments in controlling the action of businesses and corporations has been significantly limited. As a result, social corporate accountability is the new front and replacement of a government that is significantly detached from the society. For example, a country like Kazakhstan according to Crouch (2008), failed to flourish during the Soviet Union due to lack of corporate accountability. However, the entry of transnational companies into the country changed everything as they adopted corporate social responsibility as a replacement for a detached and uninvolved governance system. According to Crouch (2006), the process of reducing the production of negative externalities or increasing the production of positive results can only be achieved through the adoption of costly actions. In undertaking such actions, the organisation does not however expect to receive payment if all factors are kept constant. This has remained the major puzzle of profit making organisations whose desire is to increase their overall profits and meet the needs of the stakeholders. Organisations have found themselves at a crossroad when it comes to the need for developing corporate accountability issues as it violates its guiding principle of making profits. In addressing and demystifying this challenge, Crouch (2011) provides ways through which organisations can change their focus from profit maximisation and adopt policies aimed at increasing their commitment to the society. Corporate social responsibility cannot be approached through superficial angles that most firms use in the name of developing social accountable policies. For example, most organisations have continued to argue that by availing the best products in the market advertised through agreed approaches contribute to corporate accountability. This cannot be in any way considered CSR especially in current neoliberal environment where the actions of the businesses must be reflected by the benefits that the stakeholders acquire. A firm cannot claim to be accountable to the society by adopting non costly approaches through the change in the pricing policy among other approaches. Instead, it must demonstrate active governance of the externalities, which include the active environment within which the same environment operates. In most cases, corporations adopt the normal approaches available for dealing with externalities, which include allowing governments and the respective public institutions to define them. These institutions have a number of avenues that they can actively use to increase the impact of the corporations on the sustainability of the society including taxation and regulation. However, Crouch (2011) argues that firms must define social accountability through their own lenses as opposed to concentrating on profit maximisation while allowing the government to define their role in corporate responsibility. As Friedman recollected, the need for developing corporate accountability among firms can approached through answering different questions on the issue of CSR. For example, is it logical to limit an organisation’s maximand to the value of the shareholders or beyond to include the wider values? Though Friedman argues that firms have no responsibility beyond that which they owe the shareholders, Crouch (2011) argues to the contrary. Firms cannot act in a manner to suggest that they are second-guessing the policies that will be adopted by the government aimed at promoting the social good. This is more so in a neoliberal environment where the actions and position of the government in controlling the behaviour of firms is limited. Most firms in this environment are merely bound by legal obligations and company laws as opposed to policies implemented by the government, a situation that creates a free market where profit maximisation cannot override corporate accountability. Though multinationals have developed to become major power players that cannot necessarily be controlled by government actions, collaboration is key in implementing actions aimed at promoting public good. This can only be achieved if the desire to maximise profits does not override the responsibility that such organisations have towards the public through CSR. CSR and corporate externalities Crouch (2006) argues that the adoption of corporate social responsibility in a neoliberal society as a demonstration of proper risk management strategies. Organisations must demonstrate alertness to social issues that exist, are due to arise or have affected the normal development of the society in the past. Firms must show recognition to social points that are facing challenges today in anticipation to the shifts which may arise in future and affect their position of influence. As a result, prioritising corporate social responsibility as compared to profit maximisation can be used as a risk management strategy used to predict disturbances in the future and eliminate them in time (Valor, 2005). Through CSR, organisations are provided with the opportunity to spy into activities that its operation may sensitively react to the in the future. This can be achieved through the adoption of corporate accountability that aims to develop collaborative governance with the public sector. Research has related the actions of big firms towards government policies today as procrastinating, by merely hoping that today’s externalities change into internalities in the future (Van Oosterhout, 2005). In an interview with Andrew Stones in 2012, Colin Crouch emphasised the need for multinationals and even domestic firms to shift from the financial gains mind set into embracing social responsibility and corporate accountability. According to Crouch, the term corporate social responsibility has existed in the business environment for over 40 years but its implications on the policies and actions of businesses can only be traced to 10 years ago. However, corporate social responsibility and the accountability of corporations has remained a business environment side noise, without much commitment of the businesses to it (Valor, 2005). The financial crisis has further led to a decline in the interest that businesses have placed on developing policies aimed at strengthening its corporate accountability. In most cases, businesses view sustainability and accountability as an expensive venture that may be productive in the short term but affect the performance of the business in the end. As a result of the perception towards the financial crisis in different sectors of the economy, Crouch (2011) argues that the response of the organisations has significantly differed. Organisations in industries that are affected by the crisis adopt short-term approaches aimed at salvaging their position, thus committing less time and resources to social accountability and sustainability. The political landscape has significantly changed the view that firms have on corporate social responsibility according to Crouch (2011). Even though firms may view themselves in the eyes of business and profits, they are institutions protected by the law in the eyes of the public. As a result, it is common today for firms to be criticised and even vilified for events that they may consider as externalities. This will increase the negative publicity to such organisation and affect their pursuit for better profit margins at the expense of accountability. Despite their political powers, the fact that businesses are exposed public criticism explains the need for adopting corporate accountability. This paradox makes corporate accountability to be associated with the emergence of neoliberalism today. Within the societies, the belief that the governments cannot effectively address business issues has taken root thus forcing business to act in a manner that they initially did not have to (Freeman, 2011). As a result, pressure is continuing to pile on business to embrace responsible behaviour through the actions of campaign groups and civil society organisations. Though political actions and pressures may affect the willingness of the business to continue their presence in a country, campaign groups aimed at increasing the involvement of organisations in corporate accountability cannot be ignored. Consequentially, organisations cannot threaten to withdraw their operations from a specific market due to the pressures associated with the need to embrace corporate accountability (De Man, 2005). Crouch (2006) argues that a number of reasons make it essential for businesses to embrace corporate social responsibility apart from the need to manage the reputational risks. Today, as compared to 20 years ago, corporate accountability and responsibility cannot just be a mere public relation gimmick due to the emergence of informed campaign groups across the globe. The ease in information availability has turned the table on businesses, thus making it mandatory for them to embrace corporate social responsibility, not as public relation process, but a commitment to the entire society (Jenkins, 2005). As a result, competitive edge can only be acquired in the neoliberal environment by firms that have the ability to identify and act on externalities. Companies that care about externalities are finding it hard to effectively succeed in developing competitive approaches aimed at attracting the market (Freeman, 2011). Finally, Crouch believes that a number of risks exist that will affect the success of organisations that pursue profit maximisation while ignoring the impacts that externalities have on them. Organisations whose competition is more pegged on the price of the product are racing towards the bottom of the competition and will be affected with a number of issues including labour. Such companies will miss the opportunity to race to the top and remain competitive due to the impacts that the externalities will have on them. Organisations that will be focused just on the price of their products will remain static, as the externalities will outweigh the internalities (Jenkins, 2005). Crouch (2011) thus argues that the emergence of neoliberalism has affected the position of organisations in global arena, thus influencing their corporate accountability roles. With neoliberalism, governments have limited influencing roles on corporations, thus making them full institutions recognised by the public. Their action towards different situations will be pre-empted by members of the public and this will define how the externalities affect their success. Conclusion Organisations that ignore the externalities cannot improve their profitability despite this being their primary desire and focus. Crouch (2011) has thus emphasised the need for embracing corporate accountability in line with accepting the new role of organisations in the neoliberal setting. As a result, the profitability and success of organisations cannot just be a determined by the internal factors, but also the externalities. References Amalric, F. and J. Hauser. 2005. 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