Responsible Management of the Global Businesses - Essay Example

? Responsible Management of the Global Businesses In the context of globalization a number of companies have spread their wings to various parts of the world. The companies have to therefore several markets and varying standards of labour rights and other practices. The paper tries to address the issues faced by the companies in the management of the company. The paper also discusses the guidelines laid down by the United Nations Global Compact in maintain international standard of management of resources along with the impact of good governance on the health of a business in the global world. Introduction In the twenty first century, the companies are experiencing unprecedented global competition and economic uncertainties along with challenges of managing their social responsibilities. As the companies expand their business globally they are facing a number of challenges regarding their human resources and several other issues regarding the conduct of their businesses. Human resource management is a key issue for consolidating the business globally as well as maintains a healthy image of the company (Palthe, n.d.) According to Morrison, integration of the nations and the citizen towards a global market opens up opportunities as well as risks for large corporations (Mennen, 2010, p.2). Globalization has also led to a change in the paradigm of how business is conducted globally. The organizations have to take into account various other issues apart from their sales and production to sustain their profitability. The company’s image, participation in the stock exchange and taking care of the social responsibilities find high priority in the company’s agendas. The three principles of sustainable development of an organization suggest profit, people, and planet. Management of this is a crucial issue for any company as efficient management of all three contributes measurably to the profits for any company. Good social behavior along with ethical corporate has made many of the global companies flourish. 77% of the executives from various corporate have confirmed that undertaking corporate social responsibility programs and good governance practices have benefitted their companies in terms of profit. Corporate Social Responsibility programs of any company have different dimensions. The company has to address the environmental issues like their carbon footprint and maintenance of local environment, have proper corporate ethics regarding employees, customers and other stakeholders and product safety. CSR as a crucial aspect of corporate management have gained importance in the recent years. Companies that have a good reputation in this regard have outperformed their counterparts that are less reputed. For a company recognitions come in various ways like the Most Admired Company List or the Corporate Citizenship List as well as a rise in profit. The image of the company and the trust it enjoys from the customer helps it develop business for a long period of time. Companies are eager to get enrolled in the Dow Jones Environmental and Social Criteria. All this is evident of the increasing consciousness among the organizations to reshape their businesses to the new trends and practices of the global businesses. The perception about the responsibility of the business towards the society in terms of human rights, labour standards, environmental concern, and attitude towards corruption has changed over the years due to globalization. This has resulted in the companies addressing the issues and challenges faced by the global businesses. Research is being conducted everywhere and new models of businesses are being developed and incorporated by the companies (Palthe, n.d.) We shall try to investigate the role of the stock exchanges in the businesses of a company and also the issues regarding the responsible management practices especially the principles laid down by the United Nations Global Compact on responsible management. Social Responsibility Management and Stock Exchange The most important role of a stock exchange is to provide liquidity for capital. It helps a company to raise funds for new business as well as create employment. For the people of a country it provides a place for investing their savings. The stock exchange of a country helps all kind of people belonging to different income groups to invest and gain from their savings (Adekola, Sergi, 2007, p.83). Another significant role played by the various stock exchanges is to uphold the corporate values and ensure good corporate governance by the participating companies. In the interest of gaining liquidity the corporate can have a compulsion to abide by the rules and principles laid down by certain stock exchange. The OMX Nordic Exchange has laid down stringent directions for the companies. Any kind of violation of their guidelines is investigated by the OMX Nordic Stock Exchange. Violations can be of different kinds. Some may occur due to the operation risk of the company, or regular violations of human rights. There are international rules for maintaining ethical conduct. These rules may also be violated. Multinational companies operating in the developing countries often take advantage of the poor labour market standards of the country and violate human rights laws and labour laws. The financial crisis of the world in 2008 had displayed the corrupt practices undertaken by the profit seeking companies. Therefore many stock exchanges globally, especially the influential ones put down guidelines for the companies intending to remain in the list of these stock exchanges. There are various examples of stock exchange playing proactive role in ensuring healthy corporate governance and responsible management of businesses by the executives. The corporate themselves disclose their social policies. Sometimes the stock exchange follows a policy of taking annual reports from the company on their governance standard. A notable example would be the Johannesburg Stock Exchange. They have a number of rules for the enlisted companies. The companies had to either comply with this rule or explain their reason for non-compliance in the reports. This annual disclosure compels the global companies to follow proper business practices. Other methods of reporting and disclosure have been adopted by the European Union, United Kingdom, Australia, and South Africa. South Africa recovering from their apartheid period makes it compulsory for the companies to report their employment in their annual report. Sweden resorts to blocking the company’s participation and UK, France and Australia compels the firms to add social and environmental issues in their investment. This shows an increased activities related to corporate social responsibility (Horrigon, 2009, pp. 56-178). Responsible Management and the United Nations Compact The global businesses have faced a number of challenges in the recent years. The financial meltdown and the consequent collapse of the global credit market had been a major problem. The global enterprises also experience a stifling of resources like energy and food. The environmental issues have also raised questions about a number of investments. The multi polar economic powers and fragmentation of production and markets have also raised the issue of good governance. In this context a number of people believed that addressing issues related to sustainability are required for long term growth. In the Ashridge Survey (2008) 76% of well placed executives responded that it is crucial to learn and acquire skills to tackle the problems like scarce resources and reduce carbon footprint. A surprising result was that less than 8% of the respondents believed that their company is successfully helping them to learn and acquire these skills. As a result a number of guidelines and principles have been laid down globally. Significant among these guidelines is the United Nations Global Compact. It is global code of conduct for businesses, governments, and individuals. It comprises of ten principles that have gained significant momentum as issues in the course of economic development in the past several decades. The motive of the United Nations Compact is to create responsibility among the corporate citizens. The UN Global Compact has two goals. Firstly it wants the companies to follow the ten principles regarding human rights, labour standards, environment and against corruption. It also wants the companies to help the United Nations and the world to achieve several agendas like the Millennium Development goal. The principles ensure the international standards of conducting business globally. They take care of the human rights issues, labour issues, the environmental issues, and the problem of corruption. It is a comprehensive guideline to tackle the various problems faced by the companies (Escudero, n.d.; About the UN Global Compact, n.d.). Principles for Human Rights Issues The first two principles of the UN Global Compact are about human rights. They state that the companies should respect and not violate the human right norms that have been established globally as well as locally. It also wants the company to abstain from any involvement in acts of human rights abuse in the form of being a party to any organization or government that is involved in human right abuse. It goes beyond the direct operation of the company. This has three aspects. Firstly the company should ensure that its products are not being used for human rights abuse. Secondly the company should not remain oblivious to any abuse that helps the business but the company is not involved directly. The expansion of business and delocalization of production stretches the activities of the company to various nations. The company must be proactive and do a proper assessment of the human right abuses in those countries. Commitments to these laws benefit the company because laborers who are fairly treated have a better productivity and loyalty (About the UN Global Compact, n.d.; Overview of the UN Global Compact, 2011). Principles for Labour Right Issues The United Nations Compact also has four well defined principles on the treatment to the labors. Adherence to the principles ensures a high labor standard for any company. It asks the companies to eliminate the different types of forced labour or compulsion to work. The compact discourages the companies to employ child labour. Moreover it calls for the companies to promote equal opportunities for all their workers in terms of employment, remuneration, job security etc. The third principle of the UN Global Compact calls for freedom of association for the workers. It also acknowledges the rights of the workers for collective bargaining. The principle encourages the voluntary participation of the workers, freedom of expression and non-interference. These principles are highlighted from the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work. The labour principles aim at building a healthy and constructive association between the workers and the employers which is required for the sustainability of the company. The social consciousness of the companies must be developed in order to operate efficiently in the various parts of the world (About the UN Global Compact, n.d.; Overview of the UN Global Compact, 2011). Principle for Environmental Issues Apart from social consciousness, caring and protection of the environment is also emphasized by the seventh, eight, and the ninth principles. According to these principles the companies should adopt a cautious approach towards the environmental issues. Before any project or investment proper assessment of the risk and the cost to the environment should be done. An improved environment will lead to long term projects with less risk. Research should be done to develop environment friendly products. The other principles suggest that the companies must be proactive and initiate projects and programs for the awareness and promotion of environmental responsibility. The ninth principle suggests that the companies must undertake research for the development of technologies that are congenial to the environment. They must also encourage the adoption of such technologies by other enterprises and individuals. The UN Global Compact not only promotes the adoption healthy environmental practices by the enthusiastic companies but also defines a role for them promote the cause of environment to the others (About the UN Global Compact, n.d.; Overview of the UN Global Compact, 2011). Principle for Anti-corruption Issue In 2004, UN Global Compact adopted a tenth principle. This was the compacts stance against corrupt practices by the various organizations. The enthusiasm of the participating companies signaled their support to weed out corruption from the various domains of their operation. The principle stated that the companies should fight against the corrupt practices prevalent in various forms. The different types of corruption included bribes and extorting money from companies. In the modern world the corrupt practices acts as major decelerating force against free competition in the global markets and growth of companies. For the sustainable development of the world economy and reduction of crises the stand towards corruption by all companies is essential. Apart from serious effects on the growth of the company and the market corruption also has serious consequences on the society. It influences the poorer section of the society unreasonably. Among the various kinds of corruption bribery is one of the major forms. According to World Bank, bribery amount to $1 trillion annually. The cost of corruption is very high. The added financial burden of corruption is as high as 10% of the total operational cost. The companies that have taken a strict stance against corruption reap several benefits. To protect the reputation of the company, the administrations of the companies have taken several internal and external measures. On one hand they control the internal corruption through clear rules and regulations. On the other hand they steer clear of corruption in the form of bribes or favors taken by the government officials. Complying with corruption leads to several risks for a company. On one hand it involves legal risk. The violation of law risks the prosecution or even closure of business. Apart from legal risks, the company also faces a risk towards its reputation. Even if the company is finally acquitted from the charges, it has to incur damage to its reputation. Therefore a casual policy towards ethical practices can hamper the business of the company. There are also considerable financial costs to company. A united stance against corruption will help the companies to save this cost. A company which succumbs to corruption usually opens up a floodgate of further such corruptions. Therefore a total abstinence from the very beginning serves as a better policy for a company (About the UN Global Compact, n.d.; Overview of the UN Global Compact, 2011). Concluding remarks In the course of their operation in a flat world, the Transnational Corporations have understood the necessity to add values to the lives of their employees and the society in which they does their business as well as share a responsibility towards the environment. International standards for the management of business in a global environment have been set and more and more companies are setting examples of good governance and benevolence towards employees and society. Novartis, a multinational pharmaceutical company advocates a fair wage for all their employees that are more than their basic requirements. Titan, an Indian manufacturing company has undertaken various programs to develop the community and promote equal opportunities for everyone with a special emphasis on the disabled. Tata Steel, adopted benevolent labour practices like 8 hours working duration and maternity leaves long before they became law. Johnson Controls provided solutions for reduced energy consumption and undertook projects to develop energy efficiency. Nedbank of South Africa redeemed their reputation through effective internal control and good governance in 2004. There are various other examples (UN Global Compact Annual Review 2007 Leader Summit, 2007). Participation in the UN Global Compact is a voluntary decision for any country. But conforming to these principles develops the corporate governance and builds the reputation of the business. The role of the community, environment, and business is of mutual benefits. Therefore developing these practices helps the company for a sustainable management of their business. Therefore it can be recommended that the leaders and executives should learn from the principles and develop them in their own business. One such guideline that intends to educate the executives is the Principle for Responsible Management (PRME). The PRME is parallel to the UN Global Compact and wants to develop the same set of moral and ethical values in the governance of the global businesses. As the world grows smaller the actions of the businesses becomes integral. The businesses must establish a standard for their code of conduct without and discrimination towards race, religious practices, ethnicity, cultural diversity, economic conditions, political orientation or gender. The UN global compact lays down this standards that serve as an idea. It is comprehensive and at the same time has an inherent flexibility. It defines a direction for the businesses but leaves enough room for the companies to form their own policies and undertake projects based on the need of the situation and place. The standard also has the merit of universality in the sense it is relevant for any business irrespective of their operation in the advanced countries or emerging countries. In the age of globalization there is an immense demand for good governance like integrity, equal opportunities, respect for the workers and environmental responsibilities come from a number of stakeholders including the civil society, local governments and the non-governmental organizations (Rasche, & Kell, 2010, pp. 146-150; UN Global Compact Annual Review 2007 Leader Summit, n.d.). The companies need to understand this aspiration of the stakeholders for the long run survival of the organization. The UN global compact provides a standard for this aspiration. A concern for the environment, humane treatment to the workers should be inculcated as a corporate culture in near future. Bibliography 1. About the UN Global Compact (n.d.), The Foundation for the Global Compact, available at: http://www.globalcompactfoundation.org/about-ungc.php (accessed on May 19, 2011). 2. Adekola, A. & Sergi, B. S. (2007), Global business management: a cross-cultural perspective, United Kingdom, Ashgate Publishing Ltd. 3. Escudero, M. (n.d.), Principles for Responsible Management Education, International Association of Jesuit Business School, available at: http://iajbs.org/16iajbs/presentations/keynote/keynote.pdf (accessed on May 19, 2011). 4. Horrigon, B. (2009), Corporate Social Responsibility in the 21st Century: Debates, Models and Practices Across Government, Law and Businesses, Massachusetts, Edward Elgar Publishing. 5. Mennen, M. (2010), International Business Environment: About the Merits of Globalization, the Role of WTO in World Trade, Emerging and Transition Economies (China and Western Europe) and Trade Liberalization, Munich, GRIN Verlag. 6. Palthe, J. (n.d.), Managing Human Rights and Human Resources: The Dual Responsibility of Global Corporations, Forum on Public Policy, available at: http://forumonpublicpolicy.com/summer08papers/archivesummer08/palthe.pdf (accessed on May 19, 2011). 7. Rasche, A. & G. Kell (2010), The United Nations Global Compact: Achievement, Trends and Challenges, United Kingdom, Cambridge University Press. 8. Overview of the UN Global Compact (April 30, 2011), United Nations Global Compact, available at: http://www.unglobalcompact.org/AboutTheGC/index.html (accessed on May 19, 2011). 9. UN Global Compact Annual Review 2007 Leader Summit (n.d.), UNEPTIE, available at: http://www.uneptie.org/scp/compact/pdf/GCAnnualReview2007.pdf (accessed on May 19, 2011). Read More