Corporate Social Responsibility - Essay Example

Corporate Social Responsibility in International Business Introduction: The main requirement of corporate sector is to get sustainable international business. For this, it is important to understand the roles and social responsibilities of corporate sector. The strategies should be globally acceptable. Companies should obey business ethics, depending on the principles of legal rules and regulations. They should structure an effective ethical strategy (Michael, 2006, p.4) which can maintain the accepted principles in their work procedure. Constructing an ethical strategy in international business is a very tough job to do because in this case companies have to consider many legal rules and regulations of different countries. Depending on the variation in political, economical, social and cultural aspects, they have to set up a feasible ethical strategy. Sometime, these variations create dilemmas in business to maintain all rules and regulations of different countries. As these companies are dealing with different countries, the ethical strategy should consider moral obligation of different Multinational Corporations. This strategy involves in employment practices and human rights. To maintain legal rules and regulation this strategy considers all the environmental regulations and avoiding corruption. Though, it helps to maintain the economic, social and environmental sustainability, it has some negative impacts also. In this study, we have discussed both negative and positive effects of Corporate Social Responsibility in International Business. Pros and Cons of Corporate Social Responsibility: Improved corporate social responsibility increases the level of economic efficiency. It encourages to obey all legal rules, regulations and company’s and social ethics. Carroll’s Stakeholder Theory and model presented a clear idea of the structure of Corporate social responsibility system. It can set up more stability in economic and social aspects. It also has some negative impacts. If an organization fails to meet requirements of society, then the organization suffers a big loss. Employees and managers should be very efficient to understand the difference between the managerial and market capitalisms. Organizations should identify the differences between the corporate social responsiveness and responsibility. The negative effect of CSR on the comparative advantage is very important for the developing countries. The developing countries are very reluctant and trying to avoid western pattern of corporate social responsibility. Moreover, its positive impacts are sufficient to control its negative impacts but organizations should continuously try to cut down all negative impacts. Social Responsibility: Society has some expectations from the organizations on economic, legal and ethical issues. Carroll introduced a model of the corporate social responsibility. Four different but mutually related issues of the model are philanthropic, ethical, legal and economic responsibilities (Visser, 2005, pp.32-35). These responsibilities are the most important requirement of a society. Depending on the regional differences between the Anglo-American world and the Continental Europe, companies are applying different approaches to CSR. In the case of Anglo-American world, each individual is responsible under the guidelines of corporate codes of ethics. The corporation has to play a vital role. They give more importance on ethical and philanthropic responsibilities. To meet these social responsibilities in continental Europe, the government, trade unions and corporate associations have to play the key role under respective social conditions. Companies should know the legal obligations very well (Michael, 2006, p.4). They are more interested in constructing a proper structure of business. Therefore, they are giving more importance on social issues in framing the business. Moreover, it gives a positive impacts on corporate society. History of CSR concepts: The term, ‘Business Ethics’, was discussed first in the corporate sector in 1960s (Michael, 2006, p.4). Within the next decade, the emergence of the ‘corporate social responsibility’ was observed and in 1979, Carroll introduced a model of corporate social responsibility (Visser, 2005, pp.32-35). Freeman gave a concept of the Stakeholder Theory in 1984. To set up a more effective model in this perspective, Wartick and Cochran introduced the concept of corporate social performance (CSP) in 1985 (Orlitzky, 2000, pp.5-6). In the early 1900s, the issues dipped during the neo-liberal era which included the ‘Thatcherism’ and ‘Reagonomics’ in most of industrialized countries (Argy, 1994, pp.537-538). From the mid 1990s, those countries introduced the ‘Corporate Citizenship’ in the economy. Stakeholder Theory: Corporation should not violate others’ rights and to obey this rules and regulations, the ‘Stakeholder Theory’ in very useful for the corporation (Cooper, 2004, p.13). Companies will be responsible for the effects on other companies. According to the traditional model of stakeholder theory, the main sources of a firm are the shareholders and the suppliers of the firm. Employees are the main input sources of the firm. Firm sales their productions to the customers and shareholders (Cooper, 2004, pp.13-18). In this process, the shareholders and the firm both are benefited by each other. Involvement of government, competitors and civil society makes this model more efficient for the firm. The firm benefits all these external factors. In the case of employment contract, some stakes are protected by legal obligations. Most of the stakes are protected by the mutual advantageous relationship between the firm and stakeholders. The stakeholders are interested on the profit of the firm because they are mutually related with firm. Economic Efficiency: The role of business in society is to increase the economic efficiency level to develop good society. The main objectives to get more incentives are to maximize shareholders’ value and long-term profit. This can increase the societal efficiency in the society. The power of creating economic efficiency is judged by the moral concepts of the firms. Most importantly, the ability of utilitarianism is considered as an input factor for economic efficiency. CSR also helps to maximize profit. According to Friedman, CSR can be differentiated from shareholder value maximization through political and managerial process. CSR is not a responsibility only for firms; customers, employees, suppliers, financiers, communities, society and shareholders are equally responsible. Market and Managerial capitalism: In market capitalism, the allocation of resources depends on markets. For managerial capitalism, it depends only on the managers. The social and public expectation contains more issues than the legal requirements. Firm has to fulfill those requirements also. Therefore, firms’ role of business is much broader than only the economic efficiency. The proper allocation of resources is not a legal requirement; it is a social and public requirement to increase the economic efficiency level. Responsibility and responsiveness: The corporate social responsibility and responsiveness are different from each other. The corporate social responsibility (CSR) depends on the moral principles to fulfill the social requirements in economic, environmental and legal aspects. The moral supports from the social and ethical responsibilities are very import requirement for introducing an integrated strategy. The market support comes through the proper market structure, positioning, branding and competitors. There are some other non-market assistance from the institutions, information and non-market positioning to help to construct an integrated strategy. On the other hand, the corporate social responsiveness is the cause of the potential harm from non-market pressure (Visser, 2005, p.32). There is a positive correlation between the corporate social performance (CSP) and corporate financial performance (CFP). Therefore, good financial performance helps to get a good social performance. Financially stable companies spend more money on CSR, not on CSP because CSR is easier to afford . Conclusion: Though, CSR has some negative impacts when it fails to attain the requirements of society and government, it provides many positive impacts to the society through sustainable development. CSR is very important to meet all legal, social and economic requirements of society. To control CSR and make it more effective instrument for gaining economic efficiency, firms need efficient managers and employees with good ethics. If firms are not able to fulfil the expectations of the society, then government takes serious actions against those firms. Firms should obey all moral principles provided by the society. Firms will be rewarded if they manage to fulfil these expectations of the society. Legal regulation is a subset of CSR process. CSR considers more aspects than only the legal regulations. Therefore, without legal regulation, CSR process will not be a complete and perfect process to meet the requirements of social responsibilities. References: 1. Michael, M. L. March, 2006. “Business Ethics: The Law of Rules”. Corporate Social responsibility Initiative. Working Paper No. 19. Cambridge. Available at: http://www.hks.harvard.edu/m-rcbg/CSRI/publications/workingpaper_19_michael.pdf 2. Visser, W. 2005. “Revisiting Carroll’s CSR Pyramid”. Available at: http://www.waynevisser.com/chapter_wvisser_africa_csr_pyramid.pdf 3. Orlitzky, M. June 2000. “Corporate Social Performance: Developing Effective Strategies”. Available at: http://www2.agsm.edu.au/agsm/web.nsf/AttachmentsByTitle/A02_Paper_RB004_MOrlitzky_CSR.pdf/$FILE/A02_Paper_RB004_MOrlitzky_CSR.pdf 4. Cooper, S. 2004. “Corporate social performance: a stakeholder approach”. Ashgate Publishing, Ltd. 5. Argy, V. E. 1994. “International macroeconomics: theory and policy”. Routledge. Read More