Organizations Jobs and Bodies - Literature review Example

 Keith Davis definition related corporate social responsibility to company’s “decisions and actions taken for reasons at least partially beyond the firm’s direct economic or technical interest” / Davis, 1960/. Eells and Walton claim that the issue of social responsibility is connected with the “problems that arise when corporate enterprise casts its shadow on the social scene, and the ethical principles that ought to govern the relationship between the corporation and society” / Eells & Walton, 1961/. CSR is also defined as a level of responsibility, which is displayed in strategies and actions of the company, which have is direct or indirect impact on stakeholders and environment. According to Waddock, Corporate management can not avoid corporate social responsibility, as it is the basis for the formation of Corporate Citizenship / Waddock, 2005/ The Committee for Economic Development suggested one more definition of CSR, which is based on “three concentric circles” approach. In this approach the inner circle is composed of primary economic functions like economic development, company production and jobs offered. The next, intermediate, circle states the necessity for awareness of modification of social values in the process of goods production. Finally the third, outer, circle includes new and therefore still vague responsibilities, which are important for the company seeking to improve social environment / Committee of Economic Development, 1971/. However, the attitude to corporate social responsibility is not such simple. Some experts are quite inspired by the concern of the companies and their desire to make contributions to the society. Their opponents consider that the primary task of any business is to make money not to make the world better. It is not new that companies benefit from being socially responsible. It should be noticed that different companies experience different kinds and different levels of benefits from their CSR policies. This depends greatly on the nature of the business itself, on the country, where the company operates. Besides, it is quite difficult to measure the extend of the benefit from CSR. The question of the benefit to the companies from being socially responsible was one of the primary ones since the introduction of the practice of social responsibility policy. There exist a number of literature investigations focusing on the influence of the corporate social responsibility policy on the performance of the company of the market. Among the best-known researchers of this field are Orlizty, Schmidt, and Rynes. These researchers managed to establish dependence between the company’s social activity and its financial performance. Every company chooses its type of corporate social responsibility activity, s each company may focus on different group of its stakeholders. For the most part it depends on the peculiarities of the business sphere. Corporate social responsibility can influence various spheres of the company performance. Therefore, quite often companies provide well-considered and balanced policies to influence the following spheres. First of all, social responsibility policy results in the increase of profit. There were performed numerous studies, which tried to prove or to deny the social policy of the company for the sake of better profitability of the business performance. However, some researches established the correlation between socially responsible practices and better financial performance / Yeldar, 2006/. Among them the most prominent are the following ones: • A research conducted in 1997 by the team from DePaul University. This research proved that those companies, which stick more to the social policies perform better financially than companies, which don’t use the social responsibilities activities at all / Yeldar, 2006/. • The other research has been lasting for 11 years and was held by the members of Harvard University. This study managed to prove that those companies, which were “stakeholder-balanced” and implied various social responsibilities policies experienced four times more growth rate and eight times more the employment growth in the comparison with other companies, which oriented only on their shareholder / Yeldar, 2006/. The second benefit experienced by socially responsible company is greater access to capital. It was proved that CSR companies due to their public policies received the access to the capital, which would have not been available to them if they haven’t been socially responsible. This is quite often possible due to the work of the Socially Responsible Investment (SRI). A research conducted in 2001 estimated that nearly 12% of all investment was socially responsible in its nature. In 2003 it was stated that in Europe acted over 313 green, social and ethical funds, which was 12 % more than a year before / Yeldar, 2006/. Much research is done on the policies of the company before giving it a required investment. This is done through numerous indexes as the Dow Jones Group Sustainability Index, the FTSE4Good Index, Morley Fund Management Sustainability Index, BitC Corporate Responsibility Index, etc. Investors are generally greatly interested in company’s occupation with social responsibilities activities / Yeldar, 2006/. The third benefit, which receives a company from being socially responsible, is reduced operating costs combined with greater operational efficiency. Many people believe that improved environmental management systems require great costs and therefore are not efficient. However, in the course of time environmental systems lead to the improvement of the company’s operational efficiency through reduction of wastes, less water usage, better energy efficiency. Sometimes companies can even sell recycled materials. Thus, in this case the company pursues double motives – social (in this case environmental) and economic benefits / Yeldar, 2006/. The fourth benefit of the company from its CSR policy is better reputation of the company and its enhanced brand image. It is clear that it is not an easy task to build good reputation but very easy to loose. The reputation of the company is build mainly through the positive attitude of the stakeholders to the company. These positive attitudes can be achieved through environmental and social responsibility activities / Yeldar, 2006/. The fifth benefit is growth in sales and establishment of the customer loyalty. Much research was done to investigate this question and the results always showed that customer in their choice of the product were guided by not only the price and the quality of the product by also by the reputation of the company as being socially responsible. In the course of the CSR Europe/MORI research it became clear that 70% of European consumers believed CSR policies quite important and this belief influenced their choice of the product. 20% were even ready to pay more for products of socially responsible companies. Approximately 15% of shoppers boycott goods of the socially irresponsible companies / Yeldar, 2006/. The sixth benefit of social responsibility to business is the higher productivity and quality. Thus, there appeared many consulting centers for the company CSR management. Among them is Business for Social Responsibility, which was established in San Francisco and aimed to assist companies in building their CSR policy and choice of necessary CSR activities. According to the researches CSR practices in the sphere of labor conditions, environmental policies and greater employee involvement in decision-making processes usually result in greater productivity and lower error rate / Yeldar, 2006/. The seventh impact on the business due to the social responsibility of the company is its greater ability to attract new and better employees and retain existing ones. This is easily explained by the natural desire of people to work for the companies, which operate according to their expectations and values. It is not a secret that contemporary employee is interested not only in the salary and promotion. According to the research conducted by Cherenson Group approximately 78% of employees prefer to work in the ethical and socially responsible company than have a higher salary / Yeldar, 2006/. The eighth benefit which a company receives from being socially responsible is lower regulatory oversight. It became obvious that if the company shows its social responsibility loyalty the more indulgent is the government to the company’s infringements and violations. If the company applies to some permission socially responsible companies will receive preference and in case any accident happens the regulators will also behave more indulgently to the company, which is transparent in its nature and socially responsible / Yeldar, 2006/. The ninth benefit, which a company receives from being socially responsible is the reduction in risk. There is a direct link between the company’s commitment to CSR policies and the reduction of its business risk. For example, Morley Fund Management developed environmental reporting guidelines, which established the type of information, which it suggests to companies to write in their reports / Yeldar, 2006/. And finally it should be mentioned hat due to the social responsibility policies of the company helps it to effectively fight with competitors and find it as appropriate place on the market. In every part of the world people expect companies to act according to their expectations and want the companies to serve and protect their interests. If a company has a good understanding of corporate social responsibility issues it can use them to its business benefit and win better market positions and gain better competitor advantages. Those companies, which do not rely on CSR, have less influence on society perform worse on the market of developed countries / Yeldar, 2006/. So, I have just mentioned at least ten benefits, which a company has provided it applies corporate social responsibilities in its business practice. There are critics of CSR, who don’t believe at all that the companies can act in accordance with the interests of ordinary people. Even if they make use of certain corporate social responsibility practices this is made exclusively for their business benefits. Among the best-known CSR critics is economist Milton Friedman, who considers that the main intention of any company is “to maximize returns to its shareholders, while obeying the laws of the countries within which it works” /Friedman, 1970/. It is maintained by some critics that CSR is in fact the best and the most effective way to increase ones profits. This assumption gave birth to the CSR slogan “Doing Well by Doing Good”/Vogel, 2005 /. Philip Morris represents quite another segment of business. It is one of the most famous tobacco companies and therefore, it experiences negative attitudes of society from the very beginning. The company knows about bad connotations associated with its name and therefore made a decision to change it to Altria Group / Smarter Corporate Giving: Targeted donations, support for volunteers, and consumer awareness ads are paying off, 2005/. It should be understood that for the company like Phillip Morris it is very difficult to make oneself associated with positive image of socially responsible company. People are hardly predisposed to have a positive attitude towards industry, accountable for five million deaths per year. For Philip Morris CSR is of vital importance. It is one of not numerous sources of new clients for the industry, which products “kill” its consumers. Goal of business development of Philip Morris are not in line with desires and demands of society. Therefore, management of the company should view “corporate social responsibility as an important part of corporate strategy,” according to the words of economist Geoffrey M. Heal / Heal, 2005/. We can see that over the last decades Philip Morris overviewed its corporate culture, marketing and advertising. At the first glance, social actions Philip Morris undertakes regarding health aspects of smoking come into conflict with its business perspectives. But closer analysis shows that CSR actions improve Philip Morris image in the public mind and thus contributes to attraction of new customers. This activity is regarded by Philip Morris on its webpage as “responsible marketing”. The other positive result of this policy is establishment of closer relations enlist of the support of company’s stakeholders, among which the most important are government, NGOs, and the public /Philip Morris International, 2007 /. Another health care social responsibility program is informational campaign against youth smoking, which is represented by the following initiatives: the “We Card” campaign, the “Talk, they’ll listen” program, etc. Philip Morris declares its aim to reduce the quantity of young smokers and make sure that they have no access to cigarettes. For these purposes Philip Morris granted over $125 million during the period 1999 – 2004 and aimed to educate more than 880,000 kids in 2004 /Philip Morris, 2007/. However, this policy is quite double-faced as on the one hand, Philip Morris reduces the number of kids-smokers in European country, but promotes this habit overseas, in the countries in the developing world, and for children as well. Very often Philip Morris is claimed to enlist teenagers in Eastern Europe, Africa, Asia, and Latin America in the habit of smoking through different events and distribution of free samples. Philip Morris explains all the risks of second-hand smoking and youth smoking on their Web page, which is supported by links to many official health web pages. Among them are the following: the US Center for Disease Control and Prevention, the World Health Organization and the American Cancer Society. Critics assume that such detailed description of all possible effects of smoking on health can be explained by the desire of protection against future possible law suits / American Cancer Organization, 2007; Center for disease control, 2007; WHO, 2007/. Another important issue of the Altria/Philip Morris corporate social responsibility concerns its staff management. The company declares equal opportunities in the process of employment of people of all genders, ages and nationalities. Philip Morris also promotes absence of harassment in the workplace, employee confidentiality, and fights against child labor. Although these policies seem to contribute to ethical responsibilities of the pyramid of CSR, still they are simply in conformity with American and European labor laws. Philip Morris also claims to support the policy of gender equality and women promotion. However, this is more an ipse dixit – naked accession, which can be proved by the fact that their board of directors is represented by only one woman. Furthermore, Philip Morris supports no policies, which are directed on balancing work and families of employees, which is of vital importance for establishment of gender equality and women promotion /Acker, 2007/. Another important issue of corporate social responsibility is the issue of philanthropy. Statistics shows that from 1994 till 2004, Philip Morris endowed over $1.2 billion worldwide. However, it should be mentioned that these donations return with considerable profits of iver $ 90 billion /Altria Group Ins., 2004 /. In “The Competitive Advantage of Strategic Philanthropy” Porter and Kramer state that strategic philanthropy leads to improvement of the situation, in which company works, and even to the following benefit of the company. The most interesting fact is that by philanthropic policies Philip Morris actually does the opposite - sells greater number of cigarettes / Porter & Kramer, 2004/. Philip Morris contributed millions of dollars on charity. These charity donations included money given on wide number of issues from arts to environmental protection, from health research to children organizations. These charity actions of the company received not ambiguous attitude from social organizations, NGOs and all public in general / Smarter Corporate Giving: Targeted donations, support for volunteers, and consumer awareness ads are paying off, 2005/. So, we can see that even in case when the company product contradicts the health benefits of people, the company still can have a fame of the socially responsible company due to its CSR policies and activities and can win its appropriate firm place in the international market. References Altria Group, Inc.(2004) Annual Report ACKER, J.(1990). Organizations, Jobs and Bodies. Gender and Society, 4. American Cancer Society. [Online]. Available from: < http://www.cancer.org > [15 February 2007]. Center for Disease Control. [Online]. Available from: < http://www.cdc.gov > [15 February 2007]. Committee for Economic Development, Social Responsibilities of Business Corporations (1971). New York: CED. DAVIS, K. (1960). Can Business Afford to Ignore its Social Responsibilities? California Management Review. 2. 3, 70-76. EELLS, R. and C. WALTON. (1961) Conceptual Foundations of Business Homewood, ill.: Richard D. Irwin. FRIEDMAN, M. (1970). The Social Responsibility of Business is to Increase its Profits. The New York Times Magazine. HEAL, G. M. (2004).Corporate Social Responsibility: Corporate Profits vs. Social Goals. Hermes, Columbia Business School Alumni Magazine. Philip Morris. [Online]. Available from: < http://www/philipmorrisl.com > [15 February 2007]. Philip Morris International. [Online]. Available from: < http://www/philipmorrisinternational.com > [15 February 2007]. PORTER, M. E. and. KRAMER, M. (December 2004). The Competitive Advantage of Strategic Philanthropy. Harvard Business Review. Smarter Corporate Giving: Targeted donations, support for volunteers, and consumer awareness ads are paying off” (November 28, 2005) Business Week [Online]. Available from: < http://www.businessweek.com/magazine/content > [15 February 2007]. VOGEL, D. (2005). The market for virtue : the potential and limits of corporate social responsibility. Washington, D.C. : Brookings Institution Press. WADDOCK, S. (2005). Leading Corporate Citizens: Vision, Values, Value Added. Mc Grew-Hill. World Health Organization – Tobacco Free Initiative. [Online]. Available from: < http://www.who.int/tobacco > [15 February 2007]. YELDAR, R. (2006). The Top 10 Benefits of Engaging in Corporate Social Responsibility: The Business Case. ‘Why Bother with CSR? Read More