Social Accounting: Corporate Social Responsibility - Essay Example

Social Accounting: Corporate Social Responsibility Many companies in the modern world have in the recent past, increasingly come to be expected to provide assistance in the addressing of the most pressing problems in the globe and these problems have included climate change, fighting poverty and the prevalence of diseases. The societies of both the developing and the developed world are among those people who have come to be affected by the activities of these companies, many of which are multinational corporations. They not only make purchases of these companies’ products, but their environment has also come to be affected by the various processes through which they manufacture their products. As a result, these people have come to have expectations from these companies to assume more responsibilities to the public, since they make so much at the expense of the latter. It is believed that these expectations will continue to increase in the future as these companies carry on expanding their activities all over the globe. Companies from diverse industries have come to adopt the theory of corporate social responsibility, which is an approach they use when they are dealing with the impact that their industrial activities have on the societies and environment, in which they are involved. These companies have tried to do their best to ensure that the communities that are affected by their activities have been well compensated, and that their standards of living are higher than they were before. In addition, they have come up with environmentally friendly plans to ensure that their negative impact on the environment remains minimal. Thus, corporate social responsibility can be said to have increased the role of companies in the society by making sure that they participate in making it a better place in which to live. Jacquie Etang (1994) questions the current statements about the advantages of corporate social responsibility and the declarations that companies make on behalf of their corporate social responsibility programs. In particular, it is suggested that the use of corporate social responsibility for the sake of public relations raises ethical predicaments over the motivation of corporations. The article warns that the reasons that corporations use may be either dissolute or erroneous with view to the practical facts obtained from a modest qualitative study voted for in the United Kingdom, in the late nineteen eighties, an era when the practice of corporate social accountability was growing fast. There is the suggestion that companies only take such actions when they feel obliged to do so by consumer and environmental groups. Etang argues that companies need to find proper validation for their moral actions and to ensure that corporate social responsibility applications live up to the assertions made by their public relations practitioners. Moreover, Etang assess the character of public relations and provides illustrations on how its duty in corporate social accountability goes beyond truthfulness in exposure. Etang begins by discussing definitions and the role and scope of public relations and then goes on to discuss in some detail its relationship with corporate social responsibility. The argument of the article is that public relations and corporate social responsibility are not separate activities that should be evaluated separately but that all too often; these business activities are interrelated in such a way that corporate social responsibility becomes a tool for public relations. According to Etang (1994), some parties contend that social accountability and public relations are distinct business functions, which should be evaluated independently. An example is provided where one major financial institution separates the functions in that it has charitable foundations to which it contributes but the work of these is not managed or publicized by the institution; on the other hand, this turns out to be the exclusion rather than being the rule. Public relations practitioners entrusted to public relations often find themselves managing corporate social responsibility, in many companies, and for that reason, this corporate social responsibility can be considered a subset of public relations tool and a technique to establish relations with society. Among the groups that are targeted the local communities within which the company’s social responsibility activities are being conducted as well as other groups that are influential in society. Etang argues that corporate social responsibility has become significant to public relations because the programs involved in it offer the chance to establish good will by endorsing the advantages of the company to its stakeholders. In addition to its advice-giving administrative role public relations also provides the techniques to communicate these activities to targeted people and these may include the media and individuals seen to be of influence to the company. Therefore, corporate social accountability is part of public relations docket because it influences a companys image and standing; and public relations practitioners will do all they can in order to capitalize on the opportunity because it tells the desired people exactly what sort of company they are dealing with. Pava and Krausz (1997), in their article discusses four different criteria for assessing the authenticity of viable plans for initializing social responsibility that include local knowledge, the stage of responsibility, shared agreement, and financial performance. They conclude their argument by make a note of those cases where the company has knowledge about an exact setback and its solution, is directly accountable for causing harm, where a shared agreement among all significant stakeholders exists, and financial performance will be increased, social responsibility schemes are best. Since none of the programs proposed will meet all of the criteria, it is likely that both the company and the people involved will have to come to a compromise. In fact, Pava and Krausz’s model proposes that there is often an exchange between the first three criteria and the final one. The example given is based on those situations where the company directly inflicts impairment on third parties, and where a high level of compromise exists among all stakeholders; there is little need to connect the social accountability program to financial performance. In contrast, as the company seeks practical solutions to problems which are only incidental to it, and where little consensus exists; the foreseen relationship to financial performance becomes more crucial. Hence, through properly examining the interactions of these four criteria, a business develops a better understanding of the relationship between social accountability and the financial impacts associated. Pava and Krausz state that in order to design effective programs to satisfy social responsibilities, the company must have proper information concerning the specific social problem. An example of such a problem is prior to a company being expected to institutionalize new safety program, the administration of this company must be aware of the dangers that can be found in their production procedures. If those who make decisions within the company are not aware of a particular problem, it will be impossible for them to come up with reasonable solutions. In the article, it is stated that among the most important characteristics that a company’s administration has make to make a decision on the authenticity of social responsibility programs is whether the company is accountable for a particular situation. If the administration and the concerned stakeholders decide that there is a cause and effect link between the company’s activities and the suffering of a particular group, then it is suggested that it is almost universally accepted that companies are expected to look for answers. In this case, either companies must stop engaging in the dangerous activities or, if that is not possible, the victims must be offered compensation. An important condition, which, Pava and Krausz suggest, is for a company has to consider when initiating social responsibility programs are a moderately high amount of consensus among the company’s stakeholders. This is particularly correct for practical social responsibility programs which are planned to solve social problems for which the company cannot be held directly, or even indirectly, responsible. Therefore, if a company has not caused any proven harm, the answer lies in developing a shared consensus among all stakeholders, including shareholders. Creating a sense of common intention among organizational players is a crucial plan in order to put into practice such programs effectively. Rodrigues (2006) states that companies partake in corporate social responsibility in order to have competitive advantages; in addition, he contends that resource based perspectives are helpful when attempting to appreciate why firms engage in corporate social responsibility activities and revelation. From a resource based viewpoint corporate social responsibility is seen as providing many advantages, since according to this article, investments in socially accountable activities may be advantageous in assisting a company to accumulating and attracting new resources and capabilities related to its corporate culture. In essence, investing in social responsibility undertakings has significant significances on the development or exhaustion of basic incorporeal resources, such as those associated with employees, customers loyalty. Therefore, corporate social status is a very important incorporeal resource that can be developed or exhausted because of the decisions to engage or not in social responsibility activities and disclosure. Companies with good social responsibility status may improve relations with outside actors; moreover, they may also catch the attention of better workers or increase current workers’ inspiration, morale, dedication and loyalty to the company. This article is important in appreciating why corporate social responsibility is vital in the current world of business and understanding why it has a strategic value for firms and how resource based perspective- RBP is employed. Schnietz and Epstein (2005), asserts that a monetary value is should be associated to the corporate social responsibility status of a business during a disaster. In this article, it is stated that there is practical verification that there has been a mixture of corporate social-financial performance link, and this is perhaps because most studies stress on a reputations impact on positive news. The question being studied in the article is whether a reputation for social responsibility acts as reserve of goodwill during corporate crises or not. This article considers literature from the fields of reputation, policy; threats or risks and social accountability in order to summarize the explanations as to why monetary value should be attached to a business social accountability during a crisis and then examines them by assessing shareholders response to the 1999 Seattle World Trade Organization fiasco. This failure was caused by differences among member nations on work and ecological standards and public objections over the same. Seattle signified obvious heightened demand for corporate social responsibility and an increased danger of stricter, future regulation. It was found that a status for social responsibility protected companies from stock declines connected with this predicament, even when controlling for possible market and industry effects. Experimental studies of the corporate social-financial performance connection have a standing for imprecise execution and mixed results, and this is despite the surfacing of new studies that address the earlier studies problems of small sample mass, biased evaluation of social responsibility and insufficient hypothetical establishment. It is stated that there is indeed a developing body of trustworthy verification that company investments in social performance provide substantial financial benefits. However, these new studies do not seem to have had as much impact as they could among administrators or management academics. On the other hand, there also may be monetary value in a standing for corporate social responsibility during a predicament - where the benefit of a standing comes not from increases in fiscal performance, but rather from padding from negative fiscal performance. Academics have formerly suggested that companies with good standings may survive crises, such as the Tylenol interfering in the 1980s experienced by Johnson & Johnson, with lesser financial losses than firms without a good standing do. In this case, the article claims that reputations have substantial hidden worth as a form of indemnity since they function as a reserve of goodwill. Unfortunately, for both strategy academics and administrators, there is still a scarcity of experiential support for this claim. The crisis theory, as a corporate reputation, has been subjected to a test on a large sample. It was found that companies that scored highly in Fortune magazines annual survey of the Most Admired Firms in America went through lower market estimation failures in the stock market plunge in the late eighties, than companies with lower Fortune status ratings. Rundle-Thiele, Ball and Gillespie (2008) declare that agreement is rising that companies should be socially accountable although the temperament and amount of responsibility persists to be the basis of debate. The aim of this article is to propose a change from corporate social accountability to corporate social performance as a means to evaluate policies and practices. A damaging product group was selected to show how corporate social performance using a consumers point of view could be evaluated. Writings concerned with alcohol information were used to devise a survey to consider whether customers were sufficiently enlightened about alcohol. An expediency sample was used to survey Australian grownups and in the process, 217 studies were considered. Australian alcohol dealers are currently believed to be socially accountable through promoting the “enjoy responsibly” message along with many other policies and agendas; however, moving from social responsibility to social presentation would have much positive impact. This is because consumers are not cognizant of safe drinking levels of alcohol as is the case in United States and Britain; therefore, a change in view to social presentation would recommend that companies need to amend their policies and practices. This study was founded on a small expediency sample that was different to some extent from the Australian populace. Studies in the future, on a superior scale, are needed to ensure representativeness, while duplication in other countries is given confidence. To meet their social responsibilities, dealers must ensure that customers are prepared with adequate knowledge to make informed decisions. Customers need to be able to differentiate between secure and dangerous alcohol consumption levels and they need to know the amount of standard units in alcoholic drinks. The article shows that there is substantial room for improvement from key participants in the Australian market. This research suggests that the mechanisms for rating corporate social responsibility should be adjusted to ensure the usefulness of the agendas and policies that are put in place, are meticulously assessed. Using current views of corporate social responsibility, we may conclude that companies promoting alcohol are doing so in an accountable way, based on policies and programs, such as the enjoy responsibly messages placed on merchandise packaging and monetary support driving campaigns. Changing the present view of corporate social responsibility to evaluate methodically the efficiency of these programs from a consumer point of view may lead to an entirely different assessment. Following the approach discussed in this article, one may wrap up by stating that there is substantial room for enhancement before one looks upon key players in the Australian alcohol production to be socially responsible. In conclusion, it can be said that in the developed countries, in this case, the United States, stakeholder meetings are very common, and an example of this is in oil producing states such as Texas. The stakeholder meetings in oil producing states can be attended by anyone and they often address how the oil industry is affecting people as well as having exchange of ideas and discussions in matters concerning all stakeholders. When companies consider getting involved in corporate social responsibility, they often consider putting the stakeholder management theory in place. This theory states that other people should be consulted when dealing with the affairs of a company other than its shareholders or owners. These people are those whose daily lives are affected by the activities of the company or are concerned about these activities. These other people or parties include governmental organizations, trade unions, buyers and suppliers of products, the societies involved as well as the employees of the company involved. In the developed countries, the stakeholders in various industries tend have a great say in its activities and this is mainly because of the freedom of speech which is guaranteed to them by their governments. An example is the oil and gas industry, which is obligated to listen to these groups because of the powerful influence that they have in the political arena. However, in the developing countries and in this case Africa, there is a tendency by the multinational corporations, which have operations there not to involve any of the stakeholders in their major decision, making process. These companies are instead only accountable to their shareholders because the other groups are not sufficiently well developed to have any major influence on the industrial sector of their countries. The only major stakeholder in the industries dominated by multinational corporations in Africa is the government and it rarely opposes any decision made by these companies, on the other hand detrimental to its people and the country’s environment, because of the need for investment so that it can have revenue. Companies that undertake social responsibilities are those that need to improve their public image or those that are genuinely concerned about the welfare of the stakeholders in society. There are others, however, which only undertake such responsibilities only when under pressure from trade unions and similar organizations. Trade unions have been some of the major advocates for companies to undertake their responsibilities especially towards their own employees who are the ones who work hard to achieve the companies’ objectives. Despite the fact that this has been the case, unions have recently seen some of the lowest levels of their membership since their formation and perhaps this is due to the development of a lack of confidence in them by workers. Many union members feel that the greatest cause of the weakening of unions is the corporate greed that is condoned by government as well as the economic manoeuvres being made by these companies on a global scale. The weakening of trade unions has had an impact on how companies conduct their corporate social responsibilities towards their employees, because they no longer feel the pressure to take care of their interests as they previously did. References Etang, J. 1994, "Public relations and corporate social responsibility: Some issues arising", Journal of Business Ethics, vol. 13, no. 2, pp. 111-111. Rodrigues, L. 2006, "Corporate Social Responsibility and Resource-Based Perspectives", Journal of Business Ethics, vol. 69, no. 2, pp. 111-132. Pava, M.L. and Krausz, J. 1997, "Criteria for evaluating the legitimacy of corporate social responsibility", Journal of Business Ethics, vol. 16, no. 3, pp. 337-347. Rundle-Thiele, S., Ball, K. & Gillespie, M. 2008, "Raising the bar: from corporate social responsibility to corporate social performance", The Journal of Consumer Marketing, vol. 25, no. 4, pp. 245-253. Schnietz, K.E. and Epstein, M.J. 2005, "Exploring the Financial Value of a Reputation for Corporate Social Responsibility During a Crisis", Corporate Reputation Review, vol. 7, no. 4, pp. 327-345. Read More