Perspectives of Corporate Social Responsibility - Essay Example

Perspectives on CSR Name: Students ID: Unit Code: Instructor: Corporate Social Responsibility (CSR) is generally concerned with what is or what ought to be the connection between companies, governments, and citizens. Locally, it can be seen as a link between a company and the local society in which it is located in or operates. Others see it as the bond between a company and its stakeholders. Unfortunately there is no one definition that can give meaning to what CSR essentially is. CSR has been branded other names, such as corporate responsibility, social entrepreneurship, sustainable responsible business, corporate philanthropy, corporate citizenship, responsible business, or corporate social performance, among others (McWilliams et al., 2006). CSR has gained unprecedented momentum in business such that organizations of the 21st century can no longer restrict themselves to just producing and marketing products/services short of any anxiety for their effect on the public. If today’s organisations want to be revered by their employees, customers and the general public, they must observe corporate responsibility. Some view this as just a costly burden. But due to global competition, companies find themselves under intense pressure to look at their own operations, such as labour practices, and supply chains, from a CSR side (O'Rourke 2003). More and more of the global corporations publish corporate responsibility reports, and the public anticipates discernible CSR resourcefulness from companies of all sizes. However, a number of these companies use CSR as a way to create brand equity, polish their image, and boost employee loyalty, support policies across-the-board and labour rights. The question left in people’s minds is whether CSR is certainly a win-win situation - as its supporters claim - for both organisations and the public. Has CSR come to be a public relation instrument of multinational corporations to persuade consumers it is okay to keep purchasing? (Springett 2003). Global organisations yield a lot of power in the corporate world. The business perspective on CSR stems from the thinking that the use of such power ought to be inspired by a broad logic of social responsibility instead of a mere desire to maximise profits. Literature on this perspective started to lay emphasis on the voluntary nature of the discharge of social responsibility by companies. In its initial phases, this thinking attracted universal support. However, the intention that business ought to serve entirely the interests of its shareholders, as conventionally demarcated, and that assuming other responsibilities would be a fruitless disruption continued to draw great support. The fight against CSR in certain business and academic circles provoked considerate researchers and experts to step up their efforts to harden the analytical foundations of the concept (O'Dwyer, 2003). Large academic resources were directed into validating that business and society revel in an interdependent relationship characterised by a high degree of mutual benefit. Owing to the strength of the connection between the two sides and their mutual dependence, it was theorised that organisations could not serve their purpose successfully without reacting systematically to public demands. This happened against the background of major changes in the link between society, government, and business. There were also increasing political pressures on business as manifest by the examples of Nike, Dow Chemical, and Shell. It is at this point that a number of approaches to civil regulation were devised, such as voluntary codes of conduct, social investment funds, and social audits, among others. In the end, this led to the advent of the stakeholder approach as a substitute to the usual obsession with shareowners (Toyne, 2003). The stakeholder approach incorporated the interests of all parties with important relations to the business. The approach extends further than defining modern organisational realisms (what is) and purports to form organisational practices (what ought to be). Current studies have been entrenched on the stakeholder approach and apply to a social contract that presupposes an imbedded contract between business and society and that, as a result, the business must act in a socially responsible manner (Miles & Covin, 2000). Several case studies demonstrate that CSR has a positive impact in attracting, motivating and retaining employees. Brown and Grayson (2008) argues that “the principles of organisers and employees engage a vital in the growth and commercial feat of a smaller enterprise.” Cochran (2007) describes how the workstation aspect of CSR assists in “providing a big IT syndicate with a good setting for innovation.” Moreover, Montgomery and Ramus (2003) demonstrate that MBA students coming out of American and European Business Schools look at an organisation’s CSR activities before the opt to work for it. Almost all of the persons cross-examined said they would rather relinquish financial benefits and work for an organisation with an outstanding stand on CSR. In 2008, Aspen Institute MBA students published a survey indicating that 26 per cent of participants said the prospective to make an impact to society would be a key consideration in their job selection. This represents an increase of 11 per cent from 15 per cent in 2002. Evidence from a survey from Italy indicates that “the positive effects of CSR on the association with employees similarly hold for SMEs” (Longo et al. 2005). Toyne (2003) and Jenkins (2006) post similar results centred on interviews amongst UK SMEs. Moreover, analysis from Denmark put forward reduced costs related with hiring, retention, and absenteeism between SMEs that deal remarkably lavish employee benefits (Kramer et al., 2007). Innovation has been cited as an important beneficial outcome when explaining the incentives for addressing CSR. CSR is no longer merely being observed in terms of probable cost savings but now also embraces the prospective for creating new value and developing fresh sources of revenue. Grayson and Hodges (2004) also Little (2006) argue that “CSR can inspire innovation by using social, environmental or sustainability drivers to craft different ways of working, fresh products, services, practises and fresh market space.” In analysing innovative SMEs in the United Kingdom, Spain and Italy, Mendibil et al (2007) find a positive connection between CSR and innovation performance, even though the cause and effect link is not completely clear. Some critics argue that CSR is an expensive undertaking whose returns can only be seen after a long time into the future and there is no guarantee that they will be there. Friedman (1970), one of the strongest opponents of CSR, comes out to state that “there is just one social responsibility that businesses have. This is to make use of their resources so as to generate returns. He argued that CSR has no role any company and continues to state that it only creates an agency problem. The theory generally states that CSR is a waste of scarce organisational resources that can be diverted to other moneymaking activities. It also submits that CSR is a managerial sweetener, given that a number on managers employ CSR to progress their careers or other private plans. Methods to moderate material inputs and energy consumption are over and over again alluded to as a part of CSR that can result in cost savings. On the other hand, scholarly research on the cost-saving effects of the conservational aspect of CSR give varied results. Miles and Covin (2000) state that CSR-related conservational expenses constitute investments that pay off as a result of cost savings from, for example, low would-be legal expenses, continuous improvements, lower insurance and lesser energy costs. However, Chapple et al. (2005) finds that substantial expenditure accompanying CSR-related waste lessening practices using a cost function approach to UK industries at county level. There is little evidence available for CSR bearings on the cost structure of SMEs, even though a small number of the SMEs interrogated by Jenkins (2006) recounted CSR-induced cost savings. Some companies resort to using CSR merely as an advertising gimmick. McWilliams and Siegel (2001), using a resource-based-value RBV framework, sketched a simple model. They observed two companies producing one and the same product, except that one company adds an extra “social” aspect or feature to the product, which is dear to some consumers or, possibly, by other interested parties. However, by merely looking at CSR undertakings, it is hard to actually authenticate if the activities are being carried out. Quite a number of companies, such as Motorola, and Nike have been accused of publishing annual reports on CSR, yet they do not actively engage in CSR undertakings. Therefore, one can only look at such actions as mere advertisements. Even if such reports possibly will be worthwhile, a number of consumers see this information as subjective, as it is sifted through top executives. Moreover, public pressure may at times compel companies to corporate philanthropy short of the company’s exact interest in helping others. In order to show a serious concern with the environment and society, the companies publish codes that must be enforced and delivered. What is more, companies have to abide by lots of regulations and are under a stringent public scrutiny. Therefore, all their activities are checked by the media (Hannagan, Bennett et al, 2005). Some critics argue that CSR may create a conflict between different shareholders. Shareholders to any company can be grouped into two general categories: (1) Insiders; and (2) Institutional and Individual Investors. The level of insider ownership in a company can have two probable things. If the insiders together own a big shareholding, they are deeply-rooted into the organisation’s activities, which lets them to support non-value maximising undertakings (Waldman et al., 2004). On the other hand, as insiders own a bigger shareholding, they would bear more of the budget accompanying the non-value maximising undertakings. Even though there is a disagreement regarding the level of shareholding that would make a CEO deep-rooted, in general insiders as a group are more or less deep-rooted all the time since non-affiliated shareholders have a limited influence to the decision-making process of a company. Therefore, if CSR lowers firm value, a bigger insider ownership will not permit insiders to chase their will with no trouble (as insiders as a group are entrenchment already). In its place, insiders would have to incur greater outlays connected to the non-value-creating CSR undertakings. Therefore, the correlation between insider ownership and the CSR would be negative (Woidtke, 2002). On the other hand, the role of institutional ownership on CSR practices can take on varying forms. If CSR spending decreases firm value, the institutions are expected to keep an eye on the management and moderate this type of undertaking. A negative relation between institutional ownership measures and CSR is manifest. However, there is growing indication that institutions, particularly public pension funds, may well trail other goals. Woidtke (2002) argues that public pension funds do not improve firm value. They are often managed by officers with personal agendas in mind, such as campaigning for public office. Therefore, these institutions possibly will find that a pro-CSR program matches their isolated objectives even if it decreases firm value. According to Sethi (2005), public pension funds have been increasing their investment strategy in consideration of a company’s long standing effect on the environment, good corporate citizenship, and sustainability. In a nutshell, the real need for CSR emanates from changing business environment and social expectations. A lot of global organisations have benefited from engaging in CSR. Some companies have built stronger brands, improved their corporate image, gained a larger market share and increased their capacity to attract, motivate and retain employees. However, the practice of CSR has evolved amid varied controversy and criticism, mainly because it is understood that a company is solely responsible to its shareholders in financial terms (Bagnoli & Watts, 2003). Since there is consistent application of the term CSR, it is very hard to appreciate the motivation for CSR. This also leads to asymmetric information that makes it problematic to associate results across different studies, hindering the capacity to appreciate the effects of CSR undertakings. Therefore, there should be a singular definition to CSR that will offer a solid basis from which different perspectives on CSR can be discussed (Hillman & Keim, 2001). References Bagnoli, M. and Watts, S. 2003. “Selling to socially responsible consumers: Competition and the Private provision of public goods,” Journal of Economics and Management Strategy, 12: 419-445. Chapple, W., Morrison Paul, C.J. and Harris, R. 2005. “Manufacturing and Corporate Environmental Responsibility: Cost Implications of Voluntary Waste Minimisation.” Structural Change and Economic Dynamics 16, 347-373. Cochran, P.L. 2007. “The Evolution of Corporate Social Responsibility.” Business Horizons 50, 449-454. Friedman, M. 1970. “The Social Responsibility of Business is to Increase its Profits”, The New York Times Magazine. Grayson, D. and Hodges, A. 2004. “Corporate Social Opportunity! Seven Steps to Make Corporate Social Responsibility Work for Your Business.” Greenleaf Publishing, UK. Hannagan, T., Bennett, R. et al. 2005. “Management: Concepts & Practices,” 4th edition, Harlow: Pearson Education Limited. Hillman, A. and Keim, G. 2001. “Shareholder value, stakeholder management, and social issues: What’s the bottom line?” Strategic Management Journal, 22: 125-139. Jenkins, H. 2006. “Small Business Champions for Corporate Social Responsibility”, Journal of Business Ethics 67, 241-256. Kramer, M., Pfizer, M. and Lee, P. 2007. “Competitive Social Responsibility: Uncovering the Economic Rationale for Corporate Social Responsibility among Danish Small- and Medium-Sized Enterprises.” Project Report, Copenhagen. Little, A. D. 2006. “The Innovation Highground – Winning tomorrow’s Customers Using Sustainability driven Innovation”, Strategic Direction, 22, 35-37. Longo, M., Mura, M. and Bonoli, A. 2005. “Corporate Social Responsibility and Corporate Performance: The Case of Italian SMEs.” Corporate Governance, 5, 28-42. Miles, M.P. and Covin, J.G. 2000, “Environmental Marketing: A Source of Reputational, Competitive, and Financial Advantage”, Journal of Business Ethics, 23, 299-311. McWilliams, A. and Siegel, D. 2001. “Corporate social responsibility: A theory of the firm perspective.” Academy of Management Review, 26: 117-127. McWilliams, A., D. S. Siegel and P. M. Wright: 2006. “Corporate Social Responsibility: International perspectives.” Journal of Business Strategies, 23, 1–8. Mendibil, K., Hernandez, J. Espinach, X. Garriga, E. and Macgregor, S. 2007. “How Can CSR Practices Lead to Successful Innovation in SMEs?” Publication from the RESPONSE Project, Strathclyde, 141. Montgomery, D.B. and Ramus, C.A. 2003. “Corporate Social Responsibility. Reputation Effects on MBA Job Choice.” Stanford Graduate School of Business Research Paper No. 1805, Stanford. O'Dwyer B. 2003. “Conceptions of corporate social responsibility: The nature of managerial capture.” Accounting, Auditing and Accountability Journal 16 (4): 523-557. O'Rourke A. 2003. “A new politics of engagement: shareholder activism for corporate social responsibility.” Business Strategy and the Environment, 12: 227-239. Piga, C. 2002. “Corporate social responsibility: A theory of the firm perspective, A few comments and some suggestions.” Academy of Management Review, 27: 13-15. Sethi, P. 2005. ‘Investing in Socially Responsible Companies is a Must for Public Pension Funds – Because There is no Better Alternative.” Journal of Business Ethics, 56, 99–129. Springett D. 2003. “Business conceptions of sustainable development: A perspective from critical theory.” Business Strategy and the Environment 12: 71-86. Toyne, P. 2003. “Corporate Social Responsibility – Good Business Practice and a Source of Competitive Edge for SMEs?” London. Waldman, D., Siegel, D. and Javidan, M. 2004. “CEO transformational leadership and corporate social responsibility.” Mimeo. Woidtke, T.: 2002. “Agents Watching Agents? Evidence from Pension Fund Ownership and Firm Value.” Journal of Financial Economics, 63, 99–131. Read More

Large academic resources were directed into validating that business and society revel in an interdependent relationship characterised by a high degree of mutual benefit. Owing to the strength of the connection between the two sides and their mutual dependence, it was theorised that organisations could not serve their purpose successfully without reacting systematically to public demands. This happened against the background of major changes in the link between society, government, and business.

There were also increasing political pressures on business as manifest by the examples of Nike, Dow Chemical, and Shell. It is at this point that a number of approaches to civil regulation were devised, such as voluntary codes of conduct, social investment funds, and social audits, among others. In the end, this led to the advent of the stakeholder approach as a substitute to the usual obsession with shareowners (Toyne, 2003). The stakeholder approach incorporated the interests of all parties with important relations to the business.

The approach extends further than defining modern organisational realisms (what is) and purports to form organisational practices (what ought to be). Current studies have been entrenched on the stakeholder approach and apply to a social contract that presupposes an imbedded contract between business and society and that, as a result, the business must act in a socially responsible manner (Miles & Covin, 2000). Several case studies demonstrate that CSR has a positive impact in attracting, motivating and retaining employees.

Brown and Grayson (2008) argues that “the principles of organisers and employees engage a vital in the growth and commercial feat of a smaller enterprise.” Cochran (2007) describes how the workstation aspect of CSR assists in “providing a big IT syndicate with a good setting for innovation.” Moreover, Montgomery and Ramus (2003) demonstrate that MBA students coming out of American and European Business Schools look at an organisation’s CSR activities before the opt to work for it. Almost all of the persons cross-examined said they would rather relinquish financial benefits and work for an organisation with an outstanding stand on CSR.

In 2008, Aspen Institute MBA students published a survey indicating that 26 per cent of participants said the prospective to make an impact to society would be a key consideration in their job selection. This represents an increase of 11 per cent from 15 per cent in 2002. Evidence from a survey from Italy indicates that “the positive effects of CSR on the association with employees similarly hold for SMEs” (Longo et al. 2005). Toyne (2003) and Jenkins (2006) post similar results centred on interviews amongst UK SMEs.

Moreover, analysis from Denmark put forward reduced costs related with hiring, retention, and absenteeism between SMEs that deal remarkably lavish employee benefits (Kramer et al., 2007). Innovation has been cited as an important beneficial outcome when explaining the incentives for addressing CSR. CSR is no longer merely being observed in terms of probable cost savings but now also embraces the prospective for creating new value and developing fresh sources of revenue. Grayson and Hodges (2004) also Little (2006) argue that “CSR can inspire innovation by using social, environmental or sustainability drivers to craft different ways of working, fresh products, services, practises and fresh market space.

” In analysing innovative SMEs in the United Kingdom, Spain and Italy, Mendibil et al (2007) find a positive connection between CSR and innovation performance, even though the cause and effect link is not completely clear. Some critics argue that CSR is an expensive undertaking whose returns can only be seen after a long time into the future and there is no guarantee that they will be there. Friedman (1970), one of the strongest opponents of CSR, comes out to state that “there is just one social responsibility that businesses have.

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