Corporate Social Responsibility in China - Research Paper Example

Corporate Social Responsibility in China Introduction The concept of corporate social responsibility is one of the most important for the current time. Businesses are using this as a foundation for ethical principles and applications to the functioning of their company. The implications that corporate social responsibility has are not only related specifically to the concepts of ethics among a business, but also relates to laws and policies that govern a corporation. It becomes a foundational aspect of any corporation and offers different concepts that apply to the business for the needs of the time. China has specific laws and policies within businesses that apply to corporate social responsibility and the way in which it governs different aspects of society. Understanding how China has used corporate social responsibility and the implications that have followed the business policies and procedures has created an alternative for the business growth of China. Defining Corporate Social Responsibility The concept of corporate social responsibility is based on the ideology that businesses should give back to the community and society from the main financial gain that is made. When a corporation decides to move into a specific community, there is an implication that they need to have a sense of responsibility toward the society and what is occurring around the business. The concept of corporate social responsibility, or CSR, began in the 1950s when the emergence of industrial and mass production became a staple for many communities. As corporations began to grow into multinational entities, there were specific focuses on what was needed to ensure they were able to create a different level of commitment to the communities. By the 1980s, the concept of corporate social responsibility changed into several levels of definitions, including themes that were based on stakeholder theories, business ethics and governance of a corporation. Today, the concept of corporate social responsibility is expected as a foundational principle that is able to move into alternative thematic frameworks, all which create a part of the basis of corporations that are working at different levels (Carroll, 268, 1999). The level of social output that has defined corporate social responsibility is now being followed by strategies that are used to assist businesses in building the foundation of their business through the concept of CSR. While the concept remains defined as going outside of the business to help communities, the strategies that businesses are using are helping to promote the business through the social constructs which are used. “CSR activities have been posited to include incorporating social characteristics or features into products and manufacturing processes adopting progressive human resource management practices, achieving higher levels of environmental performance through recycling and pollution abatement, and advancing the goals of community organizations” (McWilliams, Siegel, Wright, 1, 2006). The concept of CSR has developed not only because of the basic need to have social connections to communities while assisting those in the area. More important, corporations are required to look into the way that the business functions to ensure that there is sustainable performance that links to community development and which implements progression within a community. By doing this, there is the ability for a business to grow with the corporate responsibility based on the main functions within the business. Corporate Social Responsibility in China The concept of CSR is not only divided by strategic activities which a corporation decides to take in relation to the company. More important, there is the ability to define and grow within a company based on the external environment and the way in which a corporation functions within a given context. An example of this is seen through the businesses that are functioning in China and the expected levels of corporate social responsibility that are defined in this arena. The businesses are responsible for looking at the political arena, social standards and the culture that is surrounding the area. More important, if the business in China is interested in expansion into other multinational areas, then there is the need to reexamine CSR through the concepts that apply to other regions and which are based out of the expectations of Chinese law and regulations. Looking into these specific implications can provide the businesses with a strategy that is based on the concept of CSR and which initiates growth among the company. Currently, there has been a change in the concept of CSR within China. The development of private businesses in the area and the alterations within the government are some of the ways that have allowed for a change within the business arena. There are also alterations that have taken place with the main structures of business, specifically because of the trends in governance that are associated with corporations and the way in which these are restructuring the main needs within China. The result has been a development into different areas of CSR, such as changing codes of conduct, relationships to legalities and structures that are being redefined within each corporate entity. For China to continue to meet the demands of the changes within CSR is also the need to continue to change the internal and external components that are driving forward CSR both within the internal organization and from the external environment. Looking at the business codes of conduct, governance policies and the values that are expected within the culture are some of the responses that China has to have to continue to meet the growing demands that are associated with CSR (Junju, 2, 2000). There are three levels of CSR which have been examined in China and which initiate the expected responsibilities of a corporation. The first is the political realm, which has created policies, standards and regulations that every business should follow. For a business to begin to build its foundation and to move forward with the methodologies used for CSR is also the need to align with the governance that is in the nation. The main focus of the government in China is essential as the corporations are intertwined with the government and the expectations are based on standards that are associated with this. The second level of responsibility is from the corruption that is within businesses. Many are trying to overlook the ethical standards that are within businesses for financial reasons and activities which lead to corruption. Businesses that are interested in CSR are also developing ethical responses in the foundation of their business, specifically to change the way in which corruption is referred to within the corporation. The third level is based on social and cultural expectations and the way in which the corporation gives back to the community. This links to the other two types of CSR and the way in which Chinese corporations are able to build their company (Rodriguez et al, 733, 2006). Cultural and Social Implications in China The first way in which businesses look at the concept of CSR within their country is through the cultural and social implications. Businesses that are in China associate responsibility with values and beliefs which have been created in the culture and which allow the company to base the sense of responsibility in a specific manner. The first set of concepts is based on each individual having a sense of leadership and being liable for the products and services that are within the corporation. The second is based on cultural and social implications that are related to honor of a company and which create specific implications on decision making and the way in which business functions. The moral and social roles that are in China come from the basis of beliefs and the values that are a part of the culture and which specifically relate to the values which each corporation has built through family and in the schooling systems available. China is specifically known for business ethics related to fair trade, value of products and from quality that is based on the work ethics within a corporation. The visionary leadership and integrity that has resulted from this has made a difference in how each of the countries is able to function within society (Waldman, 823, 2006). The concept of virtue that is being developed in China is further being defined by noticing how different businesses are impacting the external environment. This is one of the driving forces that constitute how a Chinese firm responds to the environment and what is expected from the firm. The governance practices, effects of decisions and the way that this affects the surrounding community and economy are the three main questions asked in terms of developing virtue within a business. The concept that has been developed in China is known as a control based model, which defines that specific controls within the organization directly impact the community. The codes of conduct, governance and the stakeholders will change the way in which the products are bought as well as what is associated within the community. This is being used as opposed to the market – oriented model. The market oriented concept is one that is associated with going into the community and advertising the governance that is used through social responsibility and the actions that are taken. For instance, volunteer work, giving donations to a non – profit entity and advertising the promotion of environmentally friendly products are often associated with this. Currently, China is more interested in the concepts of helping employees, adding value to the administration of the company and ensuring that products and services add into the overall value that is a part of a corporation (Liu, 415, 2006). When looking at the consumer viewpoint of the model used in China, there are specific implications of value and how this creates business integrity. Most businesses are focused on the control oriented model, specifically because it creates a different type of response within the community. Consumer awareness in China is known to be increasing and is based on consumers, employee and government response. By having a specific set of codes of conduct and initiating different levels of responsibility within the corporate structure, is the ability for different consumers to respond in a specific manner. If a consumer believes that a corporation doesn’t have a level of virtue, then they will ensure that they don’t use the company anymore. However, if a consumer feels a sense of trust and loyalty, specifically because of relations to the governance and the corporate structure, then they are more likely to use the company for specific needs. The concept of trusty and loyalty has led most businesses to change the structure and the main entity that is used for business. The result is that most of the consumers will respond in a positive or negative manner based on the performance of the company. The performance relates directly to codes of conduct and the way in which the company creates awareness within the internal structure and the control based model, as opposed to the market value that is a result from the corporation (Li-yin, 6, 2006). Governance and Chinese Business The concept of virtue is one that is combined with the governance and expectations in China. There are several examples of the smaller components which make up the governance within businesses and which relate specifically to the laws that are withheld by the government of China. For instance, China restricts things such as the independent formation of unions. There are also laws such as the minimum age of workers being 15 and having a safe and healthy working environment. Training and management is expected in the firms and technical requirements have to be met if required within the corporation to add into the comfort of employees. These mandates are not only a part of the CSR, but come in the form of the government, making it applicable to all businesses within China. If a business is trying to move into multinational facilities, then working around these concepts and following the ethics and laws that have been constructed within China is essential. It is these basic laws that define the concept of virtue for the nation and which have created a level of corporate social responsibility for those that are building a business within a given community (Vogel, 83, 2006). To follow with the main concepts are also several outside organizations that have pushed and initiated the CSR for China so there can be substantial growth within the organization. For instance, the Fair Labor Association was developed in 1996 as a response to allegations made about corporations moving into China which were creating sweatshop conditions. Unions and NGOs were formed, all which were specifically based on getting the organizations out of the public domain while ensuring that CSR was implemented through the governance of China. The Workers Rights Consortium was another initiative developed in 1999 which was specifically against the sweatshop conditions developed in China from outside corporations. Legal implications and the expectation that workers had to be treated with fair conditions were implied with the consortium. Legal policies and laws were developed for both Chinese businesses and multinational businesses which were developing within China. From this, production codes began to be initiated, which consisted of the type of production and labor which could be a part of the Chinese factories as well as how this related specifically to standards which were expected in the labor market (Vogel, 86, 2006). From the organizations and the expectations from the government have been several changes made with the legal implications that have been made. The multinational corporations which moved into China created a stronger basis for companies, specifically with legal implications that were based on the expectations of those that were within China. The CSR that is now in China is based on good practices within the company. Employee fairness and virtue with the products and services that are sold are the main implications that are applied to this. Codes of conduct are also expected by those within the government, which is based on labor issues as well as rights of workers. This has grown into social responsibility that is based on the values of the labor markets and which reduces the amount of risk that is within a corporation. The production techniques and the way in which businesses function within China are all expected to go through specific regulations from the government and have far reaching implications that are based on meeting specific standards from the government and organizations, both which overlook the communities and the businesses which are functioning in each area (Welford, Frost, 166, 2006). Codes of Conduct and Business The legal implications with CSR has developed into other concepts that are directly associated with how a business functions. Businesses are now required to have a mandate of CSR within the country to ensure proper functioning. Codes of conduct and ethical considerations are overlooked through government policies and implications that are from different organizations and legal entities. While most apply to the product and manufacturing, as well as employee conditions, there are other aspects that are also considered with how different Chinese organizations work. The concepts which have been applied to this are based on the way in which a corporation decides to design the foundation of their company, specifically to comply with the needs of those that are within the CSR. The social responsibility that is now expected has changed the main infrastructure within a business and has created a difference in how individuals have associated with the business that has been done. The first way that different corporations in China have changed the response to ethics and codes of conduct is to alter the main structure within the business. There are currently two main ways in which businesses have been built. The first is through family structures, which passes down the leadership of a business from the head of the family to the children. The structure that is using this specific option also has values associated with the way that the family has worked on the business as well as what is expected within the corporation. The second concept that is associated with this is based on the corporate and enterprise structure, which has developed a hierarchical structure. The main ideology is to have managers and leaders responsible for upholding the code of conducts within each business while ensuring that each individual is able to look at specific aspects of the corporation. More important, this structure is able to provide a foundation that ensures that all employees are cared for and the health and safety of the corporation is maintained (Xun, Ya-qin, 9, 2005). Stakeholders and CSR Another level of impact that is being made within the internal structure is based on the stakeholders that invest in specific companies and the way in which they impact the structure of the CSR. The relationships with stakeholders and those which have corporate responsibility are defined by the expectations that specific stakeholders have. China also has specific legalities through governance stakeholders which associate the stakeholders and investors first with the codes of conduct and legalities that are a part of the entity and structure. The non – government stakeholder that functions outside of this are expected to uphold different levels of conduct and ethical expectations when dealing with the corporation. The concept is leading to governance effectiveness, scale economics and professional management among corporations in China. This is because the state shares are beginning to decrease and there is more control in the markets, specifically because there is a division between private investors and government stakeholders. More important, the stakeholder changes and the associations with legalities are making a difference in how investors work within a corporation with the expectation that they need to follow ethical principles and codes of conduct as they are overlooked by a legal or governmental entity (Xiaodong, Xiaoyue, 2, 2003). Even though there is a division with investors and expectations that are related to governance and legalities for codes of conduct, there are also divided interests in how the CSR should be implied to investors that are working within the corporation. Internal and external control systems have become the main conflict with those that are working with Chinese corporations, specifically because of the expectations from the government and the codes of conduct that have limited the amount of change that is a part of the corporation. The traditional corporate governance was based on the government handling the investor relationships to ensure that there were fair dealings and laws which were followed. However, the growth into private entities has altered the contracts and relationships with investors and has initiated a different type of dialogue with Chinese corporations. The problem that has arisen with this is a change in the values and the codes of conduct which are expected. More important, there is still a set of controls and management from both corporations and the government which have initiated specific types of change within the government. The control systems and CSR then creates a growing conflict with investors and the way in which the codes of conduct should be handled when working with shareholders that are associated with the corporation (Zhigang, 7, 2004). Creating Value from CSR The changes that have been made within the control based model of the Chinese based industries and from the response on all three levels of Chinese business has changed the way in which CSR is looked into. The concepts within governance as well as through codes of conduct and implications with consumers have all led to creating a sense of value within the market. This has developed into one of the most important implications for CSR. As opposed to having development in areas of society, is an impact that has developed based on the way in which the business functions and the contributions which are made to the economy based on the business value. Creating an alternative understanding toward what is expected with the CSR has also led to a change in how most businesses function as well as how ethics is considered within businesses as well as through consumers. The concept of corporate governance and enterprise value are some of the main considerations that have developed from the value of CSR. An enterprise is now valued specifically on the ability to uphold the governance and the codes of conduct that are associated with the CSR. The four aspects that define the value include shareholding structures, governance mechanisms, such as a board of directors, stimulation of management and companies outside of the institutions. When a consumer looks at the development of the corporate entity and sees each of these are functioning at a high level, than there is a response that is positive. The controls that are noted are based on the ability to have a high level of security within the business while understanding the correlativity of how each works with consumers. The structure and the way in which different consumers notice the positive aspects of the company then create the underlying value which is associated with the corporation. As this is done, there is the ability to develop a sense of loyalty to the corporation because of the ethical values which are withheld through the structure and controls of the organization (Fu-xiang, 54, 2004). Implications for Corporate Law and Governance in China The concept of value that has developed through the internal structure and which is related specifically to consumer response is furthered by the implications of corporate law and governance in China. This is the main impact that is associated with China and has made a difference in how businesses respond with their business structure and the implications for development. Each area of development for Chinese businesses is now based on the ability to create corporate law and governance that is associated with codes of conduct and the way in which the main structure of the corporation is able to work in relation to the main business. The associations with this have allowed the businesses to develop in a specific manner while reaching different concepts with how a business can function best within a corporation. The first implication that is associated with corporate law and governance in China is based on the concept of the structure and foundation of the business. A code of conduct and governance that is associated with virtue is first developed. Concepts such as product quality, employer relations and the ability to develop high end structures are able to provide a different approach to a corporation. The more that these are developed, the better it is for corporations to begin to associate with the law and governance that is a part of this. The social capital that is created from the internal structure is reflected in the economic prosperity of the corporation as well as the way in which these are created through the code of conduct. Since consumers respond first to the treatment of employees and the codes of conduct from the hierarchy and stakeholders, there are specific responses to the amount of demand that is dependent on the code of conduct created. More important, those that have a high end sense of social capital within the internal structure are able to respond specifically to the competitive advantages that help to sustain a business. Value becomes a main component within the business and the way in which most consumers respond to the value within the corporation (Xiao-hu, Chuan – ming, 7, 2004). The main concept which businesses should look for with the internal corporate governance is how consumers respond to various situations. The consumers that are within China will directly look into the social responsibility which a corporation is taking. This is noted first by the CSR behaviors that are a part of the business, as well as how this relates to the specific aspects of the company. The relationship between the corporation and the consumers is based not only on the ability to create and develop internal structures, but also to show consumers how there is a high level of conduct and codes that are followed. The way in which this is shown is through the product quality and the services which are provided to the consumers. The CSR is known to directly impact the response of consumers. If there are difficulties with employees, stakeholders or the hierarchy that has been developed, then it will directly impact the consumer response and the values which are withheld through the individuals. If a corporation sees that there is a difference in the consumer demand, then relooking aspects of the corporate governance have to arise, specifically to understand how consumers are responding to the characteristics of the company. Personal characteristics, price value and the overall value of the product are all known to alter the way in which individuals respond to a given situation (Yan – feng, 3, 2007). The performance initiatives that are taken are furthered with social disclosures that directly impact companies. According to current research (Hongtao, 2007), several companies listed in China noted differences in the way that the codes of conduct affected social disclosures. The stock pricing of companies were known to increase or decrease specifically based on the corporate social responsibility which they withheld. Areas which were affected included long term performance, disclosing social information, leveraging different types of information, disclosure periods and social disclosure. The amount of information available directly affected the performance of the corporation, specifically because it linked to the environment of the business as well as consumer and stakeholder response. The difference constituted of rankings within the stock market first as well as consumer responses that distinguished the amount of quality in the products and services as well as the way in which businesses responded to a given situation (Hongtao, 3, 2007). As the amount of CSR increases within a company, is the ability for the level of corporate sustainability to begin to alter. Corporate sustainability is one of the implications associated with the governance of a company and the way in which it responds to specific codes of conduct. The social and environmental management issues are directly affected by this. The first level of impact is through the governance and codes of conduct that are associated with Chinese firms. If there is fair value noted through employees and with product manufacturing, then the Chinese firm will grow and increase. This will create a level of sustainability which can then continue to function within the corporation. The concept of corporate sustainability then begins to grow and alter with the social and environmental management. If there are issues that are associated with management, then it is known to be directly affected by the governance and the way in which employees respond to a given condition. However, if the codes of conduct are secure, then corporate sustainability will continue to grow and offer more prospects within the corporation. Identifying the difference between CSR and corporate sustainability and understanding how each of these alters according to the expectations of governance. For a corporation to continue to grow and configure their system for positive responses, is the need to look at the foundational aspects of CSR and how this pertains to the sustainability of the company (Montiel, 245, 2008). Conclusion The concept of corporate social responsibility is based on how a business relates to the external environment. Codes of conduct, ethics, corporate governance, stakeholder value and associations with society and community are some of the several values that pertain to the corporation with CSR. For a corporation to have a specific relationship to CSR is the need to establish a foundation and set of principles that define the level of ethics within the business. For China, the basic model is based on controlled operations, which ensure that employees, stakeholders and the structure of the business uphold levels of conduct. The result is that there is the ability to product quality materials and to ensure that all that are linked to the business are able to uphold specific levels of conduct. More important, the control model used directly affects the consumer response, both in terms of growth in the economy and product value. Consumer loyalty and trust then grows and implies different concepts about the business for increased growth and performance. As this continues, there is the ability for the corporation to offer corporate sustainability within the internal environment, which allows employees and those that are a part of the manufacturing process to have specific relations to the way in which the products are developed. Complete CSR in the Chinese corporations is linked specifically to how a business functions and leads to growth based on the values which each of the corporations provide to the business standards in which they uphold. 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