Corporate Accountability in CSR: Legal or Ethical - Essay Example

?Running Head: Corporate Accountability Corporate Accountability in CSR: Legal or Ethical Corporate Accountability in CSR: Legal or Ethical Corporatesocial responsibility (CSR) is one of those issues concerning business which, in the public’s perception, occupy the narrow demarcation between ethical duty and legal mandate. There was a time when a firm’s community projects were undertaken as form of philanthropy and even public relations (Cheney, May & Munshi, 2010:234). Recent events involving firms in issues of product safety have appeared to intensify public clamor for the imposition of stronger accountability measures by the government. The thesis of this brief discussion is that social responsibility, while acknowledged to be a matter of ethics, is increasingly assuming a legal or mandatory character, and that even now corporations are being increasingly held accountable by government authorities for perceived failure to comply with what should be an ethical matter. Product safety cases: Firestone 1996 and Toyota 2007 Bagley & Savage (2010:37) related the case of “Bridgestone/Firestone, Ford, and Tire Failures”. The case relates that during the last few years of the 1990s, approximately 300 people died and another 700 had been injured in accidents involving Firestone tires. Apparently, the tread on these tires had a tendency to separate from the rest of the tire, a defect which appeared in 10 per cent of Firestone tires per 1996 test results. The company took a huge loss on the legal expenses during the litigation for the injuries and deaths, not to mention the lay-off of 1,380 workers when it closed the plant which manufactured the defective tires. What was not known nor disclosed to the American public was that the tread separation problem was also experienced by Firestone in Saudi Arabia, a matter that was concealed even from U.S. officials. Although Firestone replaced 6.5 million tires in 2000 to 2001 at a cost of $450 million, in 2001 Ford announced its recall and replacement of all 13 million Firestone tires in its sports utility vehicles, including those 1.5 million already replaced by Firestone. The move cost Ford $3 billion, but For CEO Nasser stated that Ford had serious doubts that Firestone’s tires could perform reliably in order to assure their customers’ safety. To this, Firestone CEO Lampe lashed out, calling Ford’s statement “an attempt to scapegoat our tires by falsely alarming consumers about some very real safety problems of [Ford’s] vehicle” (Bagley & Savage, 2010:37-38). Some ten years after the Firestone case, another product safety case, also involving motoring safety, emerged in the form of defectively designed Toyota vehicles. Piotrowski and Guyette (2010:89) relate that, despite a reputation for unstinting quality and attention to detail, Toyota, the world’s leading car manufacturer, had been experiencing a series of car model recalls involving their best-selling models such as the Camry, Corolla and Prius (i.e. unforeseen problems in acceleration, brake system defects, steering malfunctions, and software glitches). The recalls have totalled more than ten million between the years 2007 to 2010, with repair costs estimated to exceed $2 billion. In February 2010, an investigatory Congressional panel have summoned Akio Toyoda, president of Toyota, to be present to answer incisive, probing, and seemingly accusatory questions on the recalls (National Press Club, 2010). During the session, Toyoda was reported to have said before Congress, “I’m deeply sorry” (Raum & Thomas, 2010). Implications on corporate social responsibility There are clearly legal implications in those defects that resulted in incidents causing damage, injury and death, but the aspects of recall on these two cases should be viewed from the point of view of social responsibility. Clearly, within the span of ten years between Firestone and Toyota, CSR has assumed significantly increased importance. “It is no longer acceptable for a corporation to experience economic prosperity in isolation from those agents impacted by its actions” (D’Amato, Henderson & Florence, 2009:1). While it is a fact that corporate social responsibility is acknowledged an ethical duty that businesses are expected to substantially meet, there have nevertheless been intensifying efforts to bring at least some of its elements under the helm of some regulatory framework. For instance, fundamental difference exist in the manner the two cases – the Firestone tires defects and the Toyota vehicles design lapses – have been addressed. Both employed recalls, but Firestone’s was done after being brought to court and losing, and in a way that did not inspire confidence even among car manufacturers as Ford. On the other hand, Toyota’s recalls were done voluntarily and proactively, on a large scale, and appear to restore confidence even among its customers (Carmona, 2010:39). The first, because of the injuries and fatalities involved, was clearly a case of violating the law. The second was more of a case of social responsibility with attention being called due to the number of recalls the company has called in an effort to avoid injury and loss of life. However, despite the difference, Toyota’s president was summoned before Congress to explain the recalls – a matter, I believe, of being held publicly accountable, though not before a court of law, still before a government authority as if a violation had already been committed in issuing the preventive recalls. Academic literature has clearly espoused a position in favour of increased official accountability. “A relevant point raised in some literature has to do with the effectiveness of strategies undertaken by communities to demand corporate accountability (Garvy & Newell, 2005). This literature argues that the success of community-based strategies for corporate accountability is conditional upon the right combination of state, civil, societal, and corporate factors.” (D’Amato, Henderson & Florence, 2009:6). The automobile and auto accessory industry should not be the only one held to account. According to Frynas (2005:581) on the oil industry, mounting evidence suggests that there is a growing gap between what business leaders promise or pronounce as their intentions, and how they actually behave or what their companies eventually accomplish. For this industry at least, there is limited potential for CSR to result in any useful outcome given the matter it is practiced. Short-term economic costs of rectifying a mistake may be “enormous” but in the long term it could be a critical consideration in keeping the existing clientele and creating a reputation of responsible corporate citizenship for the company. In the case of Johnson & Johnson it was evident in the manner it had regained its market share after it had recalled 31 million bottles of Tylenol when some deaths were reported to its tampered products (Bagley & Savage, 2010:45). Insights and conclusion As explained in Bagley & Savage (2010:22), “An action that is unethical may nonetheless be legal.” Actions relating to social responsibility are of such nature, because strictly speaking, they do not have the mandate of law. After having read through the articles on CSR and the above cases, it has occurred to me that the absence of a law to compel companies to abide by CSR is not due to any lapse in effort or intention, but fundamentally because: (1) CSR is indefinable. In truth, there is a great deal of debate as to what the social responsibility of a business is, even at a single point in time. Varied expectations range from defining CSR within the limits of the shareholder theory, to the more expansive theory of the social contract and corporate citizenship. The very term “responsibility” in CSR begs the question: responsible to whom, for what? To these there are no definite answers. (2) CSR is constantly evolving. “Organizations can also be considered on a developmental continuum with respect to how deeply and how well they are integrating social responsibility approaches into both strategy and daily operations worldwide” (D’Amato, Henderson & Florence, 2009:1). The constantly changing perception of CSR is part of its nature as a social process in development that defies definition. Without a specific definition, any attempts to codify it into an enforceable piece of legislation will be an attempt at futility. (3) The ends of CSR are not served by mere formal or technical compliance. D’Amato, Henderson and Florence (2009:1) observed that CSR is not thought of in terms of the strategies firms employ to deal with “this intersection of societal needs, the natural environment, and corresponding business imperatives.” In short, the ends of CSR are attained only when there is a substantial and sufficiently profound synergy among the activities that forward the interests of society, the business organization, and the environment. The end is served by the outcome, not by the form of the deed or the elements that comprise it – which, if CSR were to be legislated, would have to be explicitly identified, defined and described. Today, public expectations of companies to comply with their social responsibility, however it is perceived, is increasingly assuming the nature of a mandate. While CSR may never be codified into a hard and fast law, the political, social, and economic mechanisms by which corporations may be held to account may nevertheless become a compelling force for businesses to more seriously integrate environmental sustainability, societal needs, and its own good governance towards stakeholders in the course of its daily operations. A law may thus not be needed after all. References Bagley, C.E. & Savage, D.W. (2010) Managers and the Legal Environment, 6th ed., West Publishing Carmona, J.L. (2010) “Toyota dealers say local owners remain loyal to brand despite recalls.” Autos. March 11, 2010, p. 39. Cheney, G., May, S., & Munshi, D. (2010) The Handbook of Communication Ethics. New York: Routledge Frynas, J. G. (2005). “The false promise of corporate social responsibility: Evidence from multinational oil companies.” International Affairs, 81:581–598. National Press Club (2010) “Toyota president testifies before Congress.” CNN Politics [online], 24 Feb. Accessed 5 October 2011 from http://articles.cnn.com/2010-02-24/politics/toyota.hearing.updates_1_toyoda-inaba-national-press-club?_s=PM:POLITICS Piotrowski, C. & Guyette, R.W. Jr. (2010) “Public Attitudes on Leadership and Ethics.” Organization Development Journal. 28(2):89-97 Raum, T. & Thomas, K. (2010) Toyota CEO Akio Toyoda To Congress: ‘I’m Deeply Sorry’,” The Huffington Post: Business Section, 24 February 2010. Accessed 5 October 2011 from http://www.huffingtonpost.com/2010/02/24/toyota-ceo-akio-toyoda-to_n_475341.html Read More