Wal-marts Corporate Social Responsibility - Essay Example

Wal-mart’s Corporate Social Responsibility In the contemporary business environment, corporate social responsibility refers to the ability of any business organization to comply with the expectations of its stakeholders. Every corporate body has a responsibility to impact positively on its major stake holders that include the workers, the government, consumers, the surrounding community and even the environment. However, in the recent past, the concept of corporate social responsibility has become controversial as organizations evaluate a number of theories that scholars have proposed to define the relationship between organizations and the society. While some theories identify that organization’s primary role is to optimize profits, other illustrate that organizations have the responsibility of satisfying all its stakeholders (Weber, 2008). Furthermore, another school of thought claims that mutual benefit results from a positive interaction between stakeholders. From a critical point of view, while corporate social responsibility is an expense to an organization, it is clear that it bears great benefits for business organizations. The essay uses Wal-Mart as a sample case to show the role of stakeholders in a corporate social responsibility strategy and to illustrate its benefit to organizations. Corporate social responsibility is a topic that has gained a lot of popularity in the contemporary business environment. Various theories show that somehow there exists a strong relationship between all the stakeholders within an organization (Mitchell, Agle, & Wood, 1997). Stakeholders are those people who are either direct or indirectly affected by the activities of an organization. From a different dimension, Stakeholders have direct or indirect influence on the activities of the organization. However, there seems to be a heated debate on the real value of corporate social responsibility within an organization. The proponents of the CSR theories indicate that organizations profit from adapting CSR approaches and that ignorance of their stakeholders would be a great cost to the business. On the other hand, a different school thought states that organizations’ primary role is to conduct business in a manner that optimizes profits for the benefits of its shareholders. Steib (2008) is among the authors who have focused on the issue of corporate social responsibility from a multi-dimension perspective. His first focus is on the theory developed by Freeman on the idea that business has fiduciary relationship with the stakeholders. In Freeman’s context, any business entity that employs a proper CSR approach realizes benefits from its stakeholders. This idea has attracted a lot of support in the contemporary business environment. A wide range of organizations have used corporate social responsibility to support its business operations within target market segments. Wal-Mart is among organizations that have leveraged its market position by satisfying its stakeholders. For instance, the company has consistently focused on developing environmental conscious operations to ensure that they win the customers loyalty. Wal-Mart CSR strategy has, in a great way, contributed to the development of the society, hence profiting from a good public image and smooth operation in its target markets. There exists evidence that organizations, as Freeman stated, have a mutual relationship with theirstakeholders. Evidently, corporate social responsibility creates a good reputation for a company within the public and attracts more buyers. This approach is linked with customer-based marketing strategies that seek to market products that satisfy the needs of the target customers. Corporate social responsibility helps to build the organizational image, which is an essential part of business development. Providing natural products builds Wal-Mart’s corporate image in two ways (PR, 2013). First, it complies with the government regulations that require that all organizations adhere to environmental friendly business operations (Mihalache, 2013). As such, using natural products makes the company avoid any legal challenges that is likely to spoil the reputation in the organization. Secondly, it meets the health needs of the society and avoids any criticism from the public. As such the company enjoys loyalty from customers and this ensures that the company survives even during periods of harsh market competition. The public is an important stakeholder within an organizations CSR structure. Therefore, organizations have obligations to satisfy the public by contributing to society development. For instance, Wal-Mart contributes to the society development by empowering the people within it. Employment is one CSR approach that Wal-Mart employs within its business environment (Banerjee, 2008). For instance, in India, the company provided employment to the local communities as one way of giving back to the society. Employing local member benefits the public by empowering them to become economically independent and to make life more comfortable for the public. From the organizations perspective, there is benefit that comes from the costs of corporate social responsibility. For instance, by employing the public, Wal-Mart enjoys increases the number of members in the public who can afford to purchase their products (Graff, 2014.). From this point of view, it is possible to agree with Freeman’s idea that organizations have a mutual relationship with their stakeholders. However, Freeman’s theories have garnered criticism from many modern scholars. Authors such as Friedman have opposed the idea that organizations have a responsibility to all its stakeholders. Friedman developed the free market of view of business operation. He states that the primary role of business is to create wealth by providing goods and services. On social responsibility, he stated that the only role that organizations have is to use its resources and engage in activities designed to increase profit for its shareholders. The proponents of Free Market criticize CSR strategies that do not directly profit the shareholders. They perceive corporate social responsibilities as self-imposed tax for organizations. Evidently, organizations such as Wal-Mart use their resources to support the public even if this does not contribute to organizational benefit. For instance, Wal-Mart used over $10 million in 2014 to support local organization in the US as part of their social responsibilities. It this kind of spending that the proponents of the Free market theory that criticizes as an unnecessary cost. A number of authors have come up to support the idea that organizations have no role to spend on the stakeholder, when such expenses do not contribute to an increase in shareholder value. In “The Case against Corporate Social Responsibility” by Aneel Karnani (2010), the idea that organizations support the public is inverted to imply that this is an illusion that only exists in the mind of many in the society but does not exist. The author argues that the idea that companies have a duty to address social ills is not just flawed but also makes it more likely that we ignore the real solutions to the prevalent problems. While he agrees that companies can do well when the have strong CSR plans, he disagrees that the companies design schemes to support the public. He points out that companies are solely interested with optimization their profits and not in watching the interests of the public. However, Karnani (2010) does not refuse that companies contribute to social wellbeing. To argue out his point, he states that companies merely do well to the public, only when doing so contributes to the optimization of the profits. For instance, when a company pays the employees well, they perform better and the company profits from this relationship. Therefore, the companies do not do good to the society unless this act benefits them. The problem is that human resource managers are employed to optimize profits and not to contribute to the social welfare. From a realistic approach, there is evidence that organizations focus on responsibilities that directly contribute to their benefit. For instance, Wal-Mart’s CSR approach is mainly geared to increasing the shareholder value. The organizations effort to win employee loyalty has become one of its strongest drivers of business success. The organization pays its employees competitive salaries to ensure that they play their role efficiently to the benefit of the organizations. Employees are major stakeholders within an organization and the role they play has a direct impact on the organization output. Employees play key role in implementing the strategic management goals of the organization at the operational level. The commitment of the employees and their alignment determines the level of organizational performance. Organizations consider addressing employees’ issues as one of the corporate social responsibility strategies. However, in one way, this is a strategy that organizations use notto benefit the employees but for their own benefit. Wal-Mart is among organizations that use employee empowerment as a strategy to optimize their profits. For instance, the company pays high overtime rates to its workers as one way of motivating the employees to increase their output value (Kampf, 2007). Resultantly, employees work day and night to deliver the management goals. Notably, Wal-Mart employees complain about sleepless nights but still remain loyal due to the high pay rates. From a critical point of view, Wal-Mart uses CSR strategy not to benefit the employees benefit the employees but to attain their own goals. Therefore, as the opponents of CSR strategy state, organization involve in those activities that benefit them in the long-term and that help them increase the shareholder value. The stakeholder benefits come secondary after an organization has realized its primary goals. The government is another major stakeholder in that play key role in influencing the business environment.The government in every country have the role to remain active in regulating the business environment. Under this role, the government needs to develop a strategy to regulate unhealthy competition within the business environment by discouraging monopolistic competition that breeds exploitation of the public. The regulations need to provide all investors to survive in the market, so that the public benefits from competitive price mechanisms. Secondly, the government needs to regulate individual organizations to ensure that they maintain high ethical standards in the work environment (Albareda et al, 2008). The government should regulate worker salaries, the social corporate responsibilities and provide environment regulations. For instance, the government should establish minimum wages in the employment sector to ensure that the employees’ rights are upheld and that organization work within the ethical framework. This way, it is possible for the government to ensure that ethical standards are maintained in the business environment. Karnani (2010) proposes various strategies that can be deployed to ensure that companies contribute to social wellbeing. First, he asserts that government policies can be enacted to compel organizations to contribute to social wellbeing. Since this will be a legal agenda, the companies will be compelled to use their profits to benefit the society. For instance, the companies can be forced to reduce air pollution through strict government policies. However, the author finds that this mechanism may be over-restrictive, leading to demotivation of the companies. Self-regulation is another way that Karnani (2010) finds crucial for regulation of CSR activities of companies. In this case, the companies have their own mechanisms to ensure that they contribute to social wellbeing. The author notes that each method has its own weaknesses that make it ineffective. Therefore, he concludes that organizations fulfill their CSR roles not to benefit the society but to remain within the legal framework. From this point of view, the definition of CSR activities, as Steib (2008) illustrates, remains dynamic depending on its application. The stakeholder theory provides a new approach that can be used to define the stakeholder roles within the business environment. Berman and Johnson-Cramer (2007) state thatemployees the stakeholder roles are defined by the firm-stakeholder relationship, which is subject to timely changes. The scholars identify that stakeholder management is complex and all organization use different approach to manager their stakeholders. They present evidence that organization responsibility to its stakeholders is dependent on the specific roles that stakeholders play in influencing the organizational success. Therefore, there exists a defined hierarchy in the prioritization of stakeholder value within an organization. On this note, organization designs a corporate social responsibility that prioritizes those stakeholders that have greater influence to the organizational performance. This idea is similar to the free market theory that defines the goal of the organization as the increase in shareholder value. The stakeholder value in a great way defines how Wal-Mart implements its CSR strategy. The company treats its employees as a priority due to their pivotal role in the organizational performance. The organization understand that putting the employees first will ensure that the company will achieve team behavior, loyalty and employee alignment that are crucial in achieving management goals. Satisfying the employees ensures that the organization can provide quality and quantity services to its international customer, hence improving its profit returns. Secondly, Wal-Mart uses CSR as a strategy to win customers within its organization (Banerjee, 2008). The organization uses diversity management strategies within its international markets to attract positive attitude within new markets. For instance, Wal-Mart absorbed many Indians in its work force to ensure that it does not receive rejection in this market. The fact that corporate social responsibility is a large expense to any organization brings a new dimension of the role of CSR in business development.From a critical point of view, the contemporary market conditions have become a great challenge for many business organizations especially when it comes to implementing CSR approaches. To begin with, there has been great competition squeezing the profit margins making it impossible for companies to risk losing their profits. Next, there has been great pressure to reduce expenses within organizations to ensure that companies survive during the harsh market conditions. Therefore, it has become a dilemma to spend the profits on social responsibilities or avoid such expenses (Key, 1999). Resultantly, many companies have avoided expenses that come along with CSR approaches to remain profitable. Resultantly, companies have limited their expenses only to those activities that profit the shareholders. For an organization to survive it must realize the role that public plays in supporting an organizations operations. When companies enter new business market, they are always worried about their long-term survival in the business environment. The public, who are major stakeholders within any business market, influence the performance of business. This is because organization targets the public as potential customers for their products. Therefore, organization recognize this role if they have to win support. Organizations that neglect their public responsibilities are likely to face rejection by the public, hence impacting negatively on the shareholder value (Dahlsrud, 2008). The public are likely to support organizations that are friendly to them and those that directly contribute to their wellbeing. Therefore, role of the public influence the firm-shareholder relationship to a great extent. This seems to be in line with Freeman’s theory that proposes a mutual relationship between different stakeholder roles. It is the stakeholder contribution to the organization that puts the corporate bodies under an obligation to its stakeholders. As the stakeholder theories point out, the way various stakeholders engage with one another is defined by the roles that each stakeholder plays within the business environment. One major deduction from the shareholder theory is that organizations engage in CSR as an obligational role rather than from free will. The behavioural theories have come up to provide an approach to personal organizational behaviour. In the business scope, the management have a role to maintain healthy social relationships that promote harmony and peace within an organization. The behavioural theories judge provides the ethics that the managers should use while modelling business decisions (Carroll& Shabana, 2010). According to these theories, the right behaviour is one that paves way for every person in the work environment to live happily with the other and avoid misconduct within the organization. For instance, communication is one of the significant channels of expressing personal opinions within an organization. Ethically, every employee has the right to express their opinions and the management should create this opportunity to create harmony in the work place. Therefore, organizations fulfil their responsibilities to avoid the losses that would arise if they fail to fulfil obligations. A good example is when organizations suffer losses due to strikes and high labour turnovers when they fail to satisfy their employees. On this light, managers use corporate social responsibilities to appeal to other stakeholders to play their roles efficiently towards positive transformation of their firms. The non-governmental bodies play key role in defining the CSR approaches within the business environment. The international labour office has played key role in the development and implementation of the corporate social responsibility. This office has contributed in the development of the labour law by asserting on the need for countries to comply with international labour standards. For instance, the international law requires that the employee working hours comply with the international working standards. All employees are expected to work for a maximum of 48hours per week and the overtime work should be under a consensual agreement between the employee and the company management. This is a fundamental labour right that the Wal-Mart has had to comply with. Wal-Mart allows employees towork for 48 hours and agrees on the terms for extra work hours (Antonacopoulou& Meric,2005). This occurred after international labour force stepped in to neutralize the poor work culture that has been upheld in this country. Therefore, Non-government bodies and the international bodies are stakeholders within business as the play a critical role in influencing the organizational worker relations within the international business environment. In conclusion, a close analysis of the theories underpinning corporate social responsibilities shows that, to some extent, there is mutual relationship between various stakeholders in the business circles. In some way, each stakeholder plays a role that may either support or limit the business potential. Evidently, the corporate social responsibility helps organizations to win the employee and customer loyalty, propel business within legal framework and win the public support which is crucial for profit optimization. Any organization that neglects social responsibility is bound to incur losses. The shareholder theory explains that organizations prioritize their responsibility depending on how individual stakeholder contributes to the wellbeing of the business. There appears to be a point of concession between the Free Market theories and theories that support the notion that there exists a mutual relationship between an organization and its stakeholders. The CSR strategy is a means that organizations use to ensure that they improve the shareholder value by optimizing the organizational profits. However, it is clear that CSR is an expensive obligation that organizations have to fulfil if theyhave to remain competitive within their target markets. This explains why Wal-Mart has remained at the top of competition after implementing a strong corporate social responsibility. Bibliography Antonacopoulou, E. P., & Meric, J. 2005. A critique of stake-holder theory: management science or a sophisticated ideology of control?. Corporate Governance, 5(2), 22-33. Albareda, L., Lozano, J. M., Tencati, A., Midttun, A., & Perrini, F. 2008, The changing role of governments in corporate social responsibility: drivers and responses. Business Ethics: A European Review, 17(4), 347-363. doi:10.1111/j.1467-8608.2008.00539.x Banerjee, S. B. 2008. Corporate social responsibility: The good, the bad and the ugly. Critical Sociology, 34(1), 51-79. Carroll, A. B., & Shabana, K. M. 2010. The business case for corporate social responsibility: a review of concepts, research and practice. International Journal of Management Reviews, 12(1), 85-105. Dahlsrud, A. 2008. How corporate social responsibility is defined: an analysis of 37 definitions. Corporate social responsibility and environmental management, 15(1), 1-13. Graff, T. O. 2014. The locations of Wal-Mart and Kmart supercenters: contrasting corporate strategies. The Professional Geographer, 50(1), 46-57. Johnson-Cramer, M., & Berman, S. 2007. A dynamic model of stakeholder management. Kampf, C. 2007, Corporate social responsibility: WalMart, Maersk and the cultural bounds of representation in corporate web sites. Corporate Communications: An International Journal, 12(1), 41-57. Karnani, A., (2010). The Case against Corporate Social Responsibility. Wall Street Journal. Key, S. 1999, Toward a new theory of the firm: a critique of stakeholder “theory”. Management Decision, 37(4), 317-328. Mihalache, S 2013, 'Aspects regarding corporate social responsibility definition and dimensions', Proceedings Of The International Conference Marketing - From Information To Decision, 6, pp. 130-144, Business Source Complete, EBSCOhost, viewed 2 April 2014. Mitchell, R. K., Agle, B. R., & Wood, D. J. 1997, Toward a theory of stakeholder identification and salience: Defining the principle of who and what really counts. Academy of management review, 22(4), 853-886. PR, N 2013, 'Walmart's Great Value Brand Goes Green with New Cleaning Products', PR Newswire US, 8 November, Regional Business News, EBSCOhost, viewed 2 April 2014. Stieb, J. A. 2009, Assessing Freeman’s stakeholder theory. Journal of Business Ethics, 87(3), 401-414. Weber, M. 2008, The business case for corporate social responsibility: A company-level measurement approach for CSR. European Management Journal, 26(4), 247-261. Read More