Corporate Social Responsibility - Essay Example

Revision draft Corporate Social Responsibility Number: Introduction Corporate Social Responsibility refers to a phenomenon whereby large corporates or organizations consider the interests of the society and the neighborhood in general by being responsible over their actions as well as the impacts of their deeds on the stakeholders, employees, and the customers (Phillips, 2007, p. 69). It is regularly seen to extend past the legislative obligations. In most cases, business organizations do it on voluntary basis since they feel it is part of their responsibility to ensure that the interest of the employees, their families and the entire society is well taken care-of (Sims, 2003, p. 78). Corporate Social Responsibility has recently become a foremost element of strategic policy of most corporates. In real sense, companies or business entities without CRS may not survive or succeed in the 21st century whereby people easily get information about corporate (Mullerat, 2011 pg 60). Theories are used by business organizations to develop their public image in the market place. Good public image enables a business build a strong and respectable identity in that particular market. This is one of the ways used by corporates to maintain good market supremacy. There are numerous theories of CRS that most business organizations apply in creating the image of a socially oriented firm. They include integrative theorem, instrumental theorem, political theorem, agency theorem, stewardship theory, stakeholder theory among other theories (Lee& Kotler, 2013, p. 23). However, this essay will focus on the stakeholder theory (freeman 1984), agency theory (Friedman 1970), stakeholder theorem (Donaldson) and stewardship theorem (Donaldson and Davis 1991) for they are the most applicable in the movie Class Action. The writer will be using Argo Auto manufacturer, a corporate featured in the Class Action Film of 1991 as the base for argument. Question 1: Class Action is a movie that was played in 1991. It involved an auto manufacturer firm by the name of Argo Motors (defendant), which was manufacturing defective cars. Out of the company’s negligence, their Volkswagen cars’ gas tanks were exploding whenever making a left turn. This led to a serious accident that made the casualty never walk again and instead was using a wheel chair; this could be argued out in line with Duty of care – Neighbour – Act? – Case: Caparo v Dickman (1990), whereby there ought to be predictable harm based on defendant’s behaviour. In this lawsuit, Maggie was the attorney who was representing the company while Jed was representing the plaintiff (Robert David Hall). Jed was an activist lawyer and he represented the oppressed in the society. However, Maggie was an alienated daughter and never enjoyed fatherly love since Jed’s marriage broke up because he was cheating on Maggie’s mother. The movie is very conventional since it involves opposition in the court of law between the father and the daughter who had decided to take opposite sides in this controversial case of corporate negligence. Maggie uses her law prowess to portray her rebellion to her father and used it as the only opportunity to present her resents to her father for abandoning her. This case could also be argued in line with Nettleship v Weston (1971) in which the issue of being reasonable and fair is necessary; the case argument states that irrespective of the level of experience in any activity one is indulged in, the client ought to get standard services. On the other hand, the issue of causation is addressed in Barnett v Chelsea (1968), whereby, if the cause of a failure is beyond ones capability irrespective of whether they carry out their duties, negligence should not be used in favour of a case. Stakeholder theory deals with management and application of business ethics as well as values and morals in the day-to-day running of an organization (Phillips, 2007, p. 69). The theory recognizes and models shareholders as the main group in a corporation and puts forward various methods through which the management can cater for the group’s interests. The theory claims that any business management has a fiducially role of prioritizing the stockowners’ interests. Shareholders in this case refer to the actual owners of the corporate. The theory also recognizes presence of other parties such as customers, employees, financiers, governmental bodies, trade unions, competitors and suppliers just to mention a few, whom are considered as stakeholder as well (Fineman & Mccluskey, 1997, p. 30). Stakeholder theory has been violated in a number of ways in this organization as depicted by the movie. First, Michael, the junior partner mentioned in the film misleads the company client by advising him that the report was acceptable though he had not read it. Because of his misleading information, he tries to destroy the report during the litigation in order to bury it since he learnt that it was very unfavorable. Maggie raises alarm about this high level of misconduct and incompetence to a point of reporting it to Quinn, the senior partner. Initially Quinn seemed to apprehend Maggie’s concerns and commanded the report to be buried in the hefty set of booklets that were to be conveyed by Jed in boxes. Later Quinn bears with Michael’s misconduct and helps in burying the report by misfiling it (Fineman&Mccluskey, 1997, p. 55). Michael’s behaviors are completely unethical and unprofessional and instead of Quinn condemning his behaviors or taking disciplinary actions, he tolerates his conducts proving that these types of behaviors are acceptable in the organization. Another violation of the stakeholder theory in this organization is the fact that Maggie was sleeping with her boss Michael. This is completely unethical, unacceptable, and can only be termed as unprofessional and deserves condemnation of the highest level. Their relationship was supposed to remain being job relation and should not have been taken to this level. In addition, Maggie was a heavy drinker and could drink every single night in order to reduce her guilt because of what she was doing to her boss. In addition, the corporate depicted in the films engages in dubious sales, antitrust issues, pricing policies as well as deceit which ultimately cause injuries to the consumers because the automobiles sold were defective (Fineman & Mccluskey, 1997, p. 45). The vehicles that the corporate was producing were exploding on impact whenever they were making a left turn in a patterned manner. Deliberate production of defective products by this corporate while on the other hand pocketing huge sums of profit is a clear violation of the theory. At one point, the owner of the auto manufacturing company tells Maggie that she could only win the case by cheating his company was as guilty as hell. This proves that their impunity was all deliberate. According to the agency theory, there subsists a contractual relationship between members of a corporate. The theory recognizes presence of two sets of people in an organization namely the principals also referred to as the superiors and the agents commonly known as subordinates. According to this theory, principals, or the superiors delegate duties to their subordinates (agents), who on the other hand carryout the assigned duties in return for a reward. The two groups of people may differ in beliefs, preferences, as well as information, but it is presumed that they are both rational economic individuals whose motivation is triggered by their personal interests (Bowie& Freeman, 1992 p. 100). This relationship between the principal and the agent may exist in any type of organization even though it normally begins between the shareowners and the director, and the ends with that of a supervisor and the shop floor worker. Agents are supposed to perform their delegated duties for the benefits of the principal even though this is not always the case. At times, agents may be unfaithful hence perform their duties specifically for to benefit themselves. This may lead to some conflicts in an organization and may ruin the relationship between these two parties. This conflicts of interest are known as agency problem (Bowie& Freeman, 1992 p. 105). In order to curb this problem, the principal who in this case might be the owner may monitor agent’s activities using various systems such as accounting information system. This may involve carrying out audit works as well as having an effective incentive scheme. Monitoring systems make the principal to incur huge costs referred to as agency cost while developing these systems. This conflict between the principal and the agents arises because their interests may never match at all. Therefore, agents who in this case are the key decision makers opt to pursue their own interests rather than those of the principals. In such a scenario, agents tend to spend the available free cash flow in meeting their own needs for various reasons rather than returning it to the shareowners. This marks one of the major problems that principals face in this type of relationship since they (shareholders) it is their responsibility to ensure that the excessive cash flow is returned to them in whatever form such as paying out of dividends. This theory is applicable in the film Class Action. First, Maggie betrayed her organization by letting her father Jed who was the plaintiff’s lawyer access the report that Michael was hiding. Her action was not meant to benefit her principals, and this ended up making the organization to lose the case. Despite the fact that she was correcting misconduct, her action proves the argument of this theory that agents may at times work for their interests rather than the interests of the organization. Stewardship theory offers completely opposing predictions to the ones offered by agency theory. It gives an absolutely different opinion about corporate board restructuring and its model is based on managers being the stewards rather than being interested rational economic beings. Donaldson and Davis (1991 and 1993) were the ones who developed this theory, which gave a completely new understanding of the relationship between the management and the ownership of the business organization. The theory’s argument is based on sociology and psychology and it closely examines circumstances under which management (agents) are inspired to perform for the benefit of their principals. It creates a scenario whereby stewards’ behaviours are seen to be pro-organizational, meaning that they act in good faith for the benefit of the organization or shareholders rather than being individualistic or self-centred. It assumes that stewards (management) prioritize the interests of the organization. This makes the steward’s behaviours to be termed as being rational. According to this theory, managers are supposed to have interests of the organization at hand and they should do their best in order to achieve the organization’s objectives, which include sale growth, increase in productivity, profit increase, reducing unnecessary expenses that the organization incurs among many others. Their actions are meant to be benefiting the principals who in this case are the owners of the company and at times the superordinate managers. Their behaviours are organizational centred. This theory is evidenced in the movie since despite the fact that Maggie exposed some information her father Jed, she had tried her level best to win the case. This can be proved by the fact that she was stressed the moment she realized that she the company had lost the case law. In addition, it is clear that Michael was hiding the report showing the wiring system of the cars that the company was producing purposely for the benefit of the company (Lindgreen & Swaen, 2010, p. 28). Another application is the fact that the management hired one of the best law firms to defend it. This proves that the management was acting in good faith and that interests of the organization were their priority. The management hired Maggie as the company’s attorney whose prowess can be clearly seen from how she defends the company despite facts showing that the company was wrong. At one given point Michael is quoted saying that instead of recalling the car model in question, it would be easier and cheaper to defend 200 preceding lawsuits (Fineman & Mccluskey, 1997, p. 45). Question 2: Despite the UK Corporate Governance Code not comprehensively addressing CSR, it is mutually accepted that corporates have duties beyond that of their shareholders. For instance, principle A1 states that the board of directors should set the organization’s values and standards and ensure that their obligations are met. The Sale of Goods Act 1979 would be very essential in arguing the case as it deals with transactions that have monetary consideration. The 2006 Companies Act also requires directors to have community’s concerns as well as the environment whenever carrying out their business. In addition, the Turnbull Guidance that is attached to the code stipulates that risk assessment in a corporate should include other issues like safety, health, reputation, business integrity issues and environment. Grant v the Australian Knitting Mills (1936) is very useful in dealing with issues that revolve around consumer law. In conclusion, Corporate Social Responsibility (CRS) refers to organizations or corporates having the interests of the society and the general neighborhood at hand by being obliged to take care of their actions and the impacts of their deeds. There are four main theories of CRS that are applicable in the Class Action movie namely stakeholder theory (freeman 1984), agency theory (Friedman 1970), stakeholder theorem (Donaldson) and stewardship theorem (Donaldson and Davis 1991. Agency theory states that there is a contractual relationship among different members in an organization. The theory recognizes presence of two sets of people in an organization namely the principals also referred to as the superiors and the agents commonly known as subordinates. According to the theory, agents perform the duties they have been assigned by their principals in exchange for a reward. Stakeholder theory deals with supervision and application of ethics in the day-to-day running of business organizations. The theory handles issues concerning values and morals in the administration of organizations. Stewardship theory offers completely opposing predictions to the ones offered by agency theory. It gives an absolutely different opinion about corporate board restructuring and its model is based on managers being the stewards rather than being interested rational economic beings. It assumes that all the management undertakings are for the benefit of the organization and in particular the owners. Bibliography Bowie, N. E., & Freeman, R. E. (1992). Ethics and agency theory: an introduction. New York, Oxford University Press. Lee, N., & Kotler, P. (2013).Corporate social responsibility doing the most good for your company and your cause.Hoboken, N.J., Wiley. Lindgreen, A., &Swaen, V. (2010).Corporate social responsibility.International Journal of Management Reviews, 12(1), 1-7. Mullerat, R., & Brennan, D. (2011).Corporate social responsibility: the corporate governance of the 21st century. Alphen aan den Rijn, Kluwer Law International. Phillips, R. A. (2007). Stakeholder Theory Impacts and Prospects. Cheltenham, Edward Elgar. Sims, R. R. (2003). Ethics and corporate social responsibility: why giants fall. Westport, Conn. [u.a.], Praeger. Read More