Corporate Social Responsibility Conflict With the Interests of Shareholders - Essay Example

In what ways does Corporate Social Responsibility (CSR) conflict with the interests of shareholders? Corporate Social Responsibility (CSR) is a very common phenomenon in the time and age of today within the organizations. This is because CSR has changed the way the organizations have looked upon their own selves from the eyes of its stakeholders – the customers, shareholders, different publics, the government, etc. Thus the role of these stakeholders is of utmost significance as they shape up the organizational strategies and processes on a consistent basis. Within this discussion, the emphasis will be placed wholly on the role of the shareholders and how their pertinent interests are safeguarded or otherwise in the wake of the CSR campaigns, adopted by different organizations from time to time. The shareholders invest within the reigns of a business so that they could reap rich dividends from it as well as bolster the manner under which the organization tries to achieve its short term objectives and long term goals. This is indeed a symbiotic relationship because the shareholders feel that their linkage with the organization would benefit both of them and hence the development would instill a sense of confidence amongst the other shareholders to invest as well. (Dobson, 1991) The shareholders feel that it is also in their interest to go with the tide and invest heavily within the domains of the business so that their investments could extract the best possible returns and thus the exponential increases are there for the taking. However these investments are more reliant on the market conditions and might just fluctuate in the event of a natural calamity or catastrophe to hit the region, country or even the industry. The shareholders need to be ready for the losses that might be incurred on their part and consequently their constant vigilance in this regard pay huge dividends. The shareholders are always on the lookout for better returns and thus they do not stick within the reigns of a singular organization. They will either shift back and forth or keep switching until they get the best returns on their investments. Considering a scenario where an organization undergoes CSR in order to boost its falling market reputation, the shareholders might just raise concerns since they do not like to be a part of the organization’s social awareness tenets and hence they believe that their money should not be wasted. However this is the negative philosophy put forward by the conventional mindset of the shareholders. The modern day philosophy has changed for the better. Now the organizations which have CSR activities rampant within their reigns are considered the most sophisticated and up to date. Also these organizations showcase their care giving attitude for humanity, animals and environmental issues from time to time. (Riahi-Belkaoui, 1999) The shareholders have started to comprehend the role of CSR now and hence they are willing to allow the organization under question to move ahead with this idea. However when they examine that the money making exercise on the part of the organization has been overtaken by reputation building regimes, one that focuses on a positive vibe within the publics, the shareholders feel that their money is going to be wasted and thus they express resentment at the CSR regimes within the company. They suggest alternative measures to be taken by the CSR agents so that the financial measures are rectified at the earliest and the economic settings within the organization be restored at the earliest. It is a fact that the shareholders rely heavily on the organization’s name and thus want to earn quick bucks out of the whole deal. (Levi, 1999) They care less about the manner which the organization has undertaken and thus their CSR efforts are usually brought to an abrupt end by the organization itself or continue without the proper funding regimes that were established in the starting of such a movement. The shareholders become upset at the manner under which the organization loses its focus. It is not entirely true that the organization has lot its way yet what the shareholders seem to miss is the point that the business needs positive reinforcement so that it could stay within the industry for a long period of time. This is made possible by efforts on the part of the organization’s CSR activities. (Shrader, 1994) An oil company would most probably go green and show to all and sundry its care giving attitude by demonstrating anti-pollution drives. Similarly, a tobacco company would run advertisements that would make the public aware of the hazards of consuming tobacco and more so towards the youngsters. Indeed this is an act that demands one to say that these companies are having double standards within their ranks but then again they are conducting something worthwhile for the whole society which is a missing link within their day to day business operations and thus it should be appreciated by one and all. CSR must come to the fore of all such initiatives that are undertaken by the organizations and thus the positive message needs to be taken in the right spirit by the different publics. It is important that the organization continues with its mission to teach, make aware and consistent reinforce the pertinent message so that no one feels left out of the said equation. At the same time, the organization which has conducted CSR initiatives must educate the shareholders as well. It must tell these shareholders that the long run impact of CSR would positively impact upon the organizational domains as well as the shareholders’ investments. It is only those shareholders’ money which will get increased at the end of the day and for that they must wait for a certain period of time. CSR movements need caution while promoting their achievements because there are many critics around who can question the legitimacy of a particular accomplishment and can sabotage it altogether. (Jones, 2003) Corporate Social Responsibility can be applied to a business in a very innovative way. The company can invest in the social arena with much return in mind, not in the short-term but of course in the long run. Such is the example of Shell, which has introduced education programs for children all over the globe thus acting as a consumer-friendly company. People in return like to buy products of Shell because it gives them the pleasure that some proportion of the money earned by Shell would be spent on its different social and literary programs. (Anderson Jr., 1989) Culturally, CSR can prove to be a very vital agent that can really highlight the problem areas of different people within a particular society and then go about correcting and reforming them in the best manner possible with the aid of funds and grants. This is the basic way in which CSR has been acting to do something for the sake of community welfare. The companies from the economic aspects can earn a due share with arranging all sorts of cultural activities in the name of charity that will benefit their cause and help the poor and needy. Tesco, which is a supermarket franchise, has been involved in Corporate Social Commitment ever since 1988. It formed a new team that had the mission of raising about 2 million pounds for Macmillan nurses, which was termed as the charity of that particular year. Thus, Tesco did its part in the field of community service for the people and the Macmillan nurses in specific. Same is the case with Diageo, which is an international consumer goods company that highlights on the responsibilities of the corporate citizenship in its code of conduct. This policy encourages the community welfare work to its fullest from the company’s side. It has set up different programs in this very respect, one such of them is the Skills for Life program that gives the people a chance to come and discover their secret talent, attain new skills and know about themselves. (Cowe, 2002) Their Bartender project helps provide training and job experience for unemployed young men in Brazil. This is all community welfare work on the part of Diageo. Now moving towards the conflicting regimes of CSR alongside the interests of the shareholders, one finds that there are a number of avenues where such problems might arise at any point in time. These could include the shareholders’ inability to gauge the gravity of the problem at hand for which the organization has decided to go about carrying out the CSR initiatives. This could make the shareholders feel secluded within the whole ballgame of CSR and thus they would require explanations be given to them in a comprehensive fashion. (Sims, 2003) Also the CSR activities could mean disaster for these shareholders if the CSR directly attacks another business, of which the respective shareholders are a part of. This indeed is a situation which means that there is a conflict of interest within the related ranks and demands understanding on the part of both the organization as well as the shareholders themselves. There are certain situations when it is best to examine the pros and cons of relating one’s own self with the organization’s CSR initiatives and if the shareholders feel that there is a missing link at any instance, it is best advisable for them to consult the CSR regimes within the organization and seek proper guidance and solicit advice – a point of betterment for both the parties. (Reilly, 1994) The financial spending on the part of the organization under the CSR initiatives could also be asked for by the shareholders so that they find where their money is being spent and in what amount and capacity. In fact, it is a good practice on the part of the organization carrying out a CSR activity to keep its shareholders on board so that there are no problems at a later stage. Thus it is to suffice to suggest that CSR can really get the best out of business companies and industries. When they find out that their market is in direct proportion to what they do in the social sector, they invest more and more which ultimately profits the society and the needy in particular. The citizens, no, matter what they feel about the responsibilities they own to the society, must agree in principle that these business companies can really get the best out of themselves and help the society in more than a single way. Thus the role played by CSR with regards to the corporate world of present times is immense and cannot be denied its due place in the related scheme of things. (Doane, 2005) References ANDERSON Jr., Jerry W. (1989). Corporate Social Responsibility: Guidelines for Top Management. Quorum Books COWE, Roger. (2002). When Business Cannibals Take Up Forks: Corporate Social Responsibility Was Once Thought to Be an Idea Bordering on Communism. Now Most Firms Pay Lip-Service. But Have They Really Changed. New Statesman, Vol. 131, 8 July DOANE, Deborah. (2005). Beyond Corporate Social Responsibility: Minnows, Mammoths and Markets. Futures, Vol. 37 DOBSON, John. (1991). Ethics of Shareholder Referendums: Corporate Democracy or Hypocrisy. Review of Business, Vol. 13 JONES, Cynthia. (2003). A Future for Everyone: Innovative Social Responsibility and Community Partnerships. Routledge LEVI, Maurice D. (1999). Sustainability and Finance: Teaching the Real Value of Good Corporate Stewardship. Journal of Business Administration and Policy Analysis REILLY, Bernard J. (1994). Corporate Citizenship. Review of Business, Vol. 16 RIAHI-BELKAOUI, Ahmed. (1999). Corporate Social Awareness and Financial Outcomes. Quorum Books SHRADER, C. B. (1994). Investigating the Dimensions of Social Responsibility and the Consequences for Corporate Financial Performance. Journal of Managerial Issues, Vol. 6 SIMS, Ronald R. (2003). Ethics and Corporate Social Responsibility: Why Giants Fall. Praeger Word Count: 1,773 Read More