Corporate Social Responsibility in the Australian Kmart Company in Relation to the Collapse of Bangladesh Factory - Case Study Example

Corporate Social Responsibility Student’s Name: Instructor’s Name: Course Code: Date of Submission: Introduction Corporate social responsibility is where an organization is committed to gaining competitive advantage and also benefit the whole society by providing incentives which could raise the living standards of the society in which the organization operates and transform the society into business partners (Bhatia 2004). Many organizations in the global business are contemplating of applying corporate social responsibility so that they gain competitive advantage by convincing the society that the organization is concerned about its welfare. The society expects that the organization should be a good citizen to them by developing partnerships with the society. In this essay I will discuss how the organization’s responsibility towards its shareholders conflict with the expectations of the society that the organization should a good corporate citizen. This discussion will be based on Kmart Company which is based in Australia in relation to collapse of Bangladesh factory (Guy Russo 2013). This was a company which was a business partner of the Bangladesh Company. To start with, the shareholders’ expectations are very different from those of the customers or the society. One of the expectations of the shareholders is to maximize profits so that they can get high dividends from the company (Boeger et al 2008). As a way of getting better dividends, among the shareholders, the company must be not be so much concerned about the welfare of the community. This is because with the welfare of the community, it means that the organization has to spend more in the society projects which will lower the profitability of the organization. The Bangladesh Company collapsed because the company did not take into account the welfare of its stakeholders like the employees hence the company did not perform well thus it collapsed. The expectation of getting higher dividends contradicts the corporate social responsibility of the organization hence the society cannot get what it expects from the organization. Kmart upholds the corporate social responsibility by ensuring that the business partners observe the ethical standards of upholding the wellbeing of employees at their work place or Kmart will provoke the business transactions with that company. Another responsibility of the organization towards the shareholders is to ensure the organization is profitable as possible. The shareholders’ expectation is to maximize the profits. Therefore it is the responsibility of the Kmart to ensure that its shareholders are taken care of that the organization engages in operations which will increase the profit of the organization (Clarkson 1995). The Bangladesh Company collapsed because it did not consider the welfare of the shareholders instead it was much concerned with the profits. The shareholders increased pressure on the management of the organization not to consider the corporate social responsibility issues. This greatly conflicted the society’s expectations that the organization should show good citizenship to the community as the society did not get what it expected from the company. This fact puzzled Kmart together with other companies to set regulations which should be met by Bangladesh business partners before conducting any business. This initiative protected employees from exploitation by their respective companies. In addition, the responsibility of the organization to the shareholders is to increase the market positions of the company. The shareholders expect that the company should gain competitive advantage through effective utilization of resources including the financial resources (Garain 2001). One way of improving effective utilization of resources is to cut down costs of the organization so as to increase the returns of the organization. This reduces the involvement of companies in the community affairs. Therefore, the company’s responsibility towards the shareholders reduces the involvement of the organization in the society affairs. Kmart stopped operating with the Bangladesh Company because the company exploited its stakeholders and did not consider the welfare of its stakeholders. That is why Kmart designed standard merits to be met by an organization before the company offers any business assignment with the company. It did some audits of the company if it considered any corporate social responsibility of the stakeholders for instance how the employees are paid. In addition, another responsibility which the organization should offer to the shareholders is being honest to them. Some shareholders oppose the need to engage the organization in the corporate social responsibilities (Hazarika 1998). This is because they are not interested with the society but are conscious about their resources. Being honest to the shareholders ensures implies that they need to know everything about the company and if it engages in the corporate social responsibility then the shareholders may oppose it and put pressure of the management not to be involved so much in the affairs of the community (Joshi 2004). Like in the case of Bangladesh Company, the company collapsed because it did not consider its shareholders and the employees were not happy with the management besides the business partners withdrawing their contracts with the company which led to the company making losses thus it collapsed. Furthermore, the responsibility of the organization towards the shareholders is to safeguard their interests. This responsibility conflicts with the expectations of the society that the organization should be a good citizen to the community (Kerby 2001). The shareholders argue that it is unethical for the manager to spend the organization money for community development projects. On the other hand, the expectation of the community is that the organization will be able to increase the corporate social responsibilities. These two expectations contradict one another as the society expects good citizenship from the company while the shareholders restrain the manager from spending the company’s financial resources for the benefit of the society (Kotler 2005). Kmart sets standards for the all organizations which it would conduct business with and conducts auditting before entering into any business agreement. Kmart was much concerned with welfare of the employees because they are the people who enabled the company to succeed by buying its products. Another responsibility of the organization towards the shareholders is to follow the structure of the organization. The shareholders expect that the management of the organization should only follow the laid down structure of the organization and avoid anything which is outside the organizational structure (McWilliams & Siegel 2001). On the other side, the expectation of the society is that the organization will be a good citizen in the society. The shareholders do not consider the interests of the society and therefore they conflict the role of the organization being a good citizen in the society because they don’t support the manager to involve the resources of the company in the corporate social responsibility. Were it not for this responsibility of the organization towards the shareholders, the manager could use the resources of the company to form partnerships with the local community who buy the products of the organization. Kmart observed this responsibility of organizations towards their shareholders and found out that it exploits the employees and the society. This led to setting standards which must be met by suppliers before transacting businesses with them. This forced many organizations to start observing the corporate social responsibility. The organization also has the responsibility of safeguarding the interests of the shareholders and the authority. The fact that shareholders are the owners of the company gives them the right to dictate the kind of leadership in then organization. The management of the organization has no right to engage in the social responsibilities and therefore the manager does not have any right using the resources of the organization to engage in the corporate social responsibility (Reddy 2005). Therefore, the rights of the shareholders hinder the organization from being a good citizen by not engaging in the corporate social responsibility with the local community and at work place in terms of paying salaries and wages. In the case of Bangladesh Company collapsing, the shareholders had put pressure on the management not to consider the corporate social responsibility and therefore the company lost many business partners thus it lost market and made severe losses leading to its collapsing hence the organization did become a good citizen to the society. In addition, the responsibility of the organization is to reduce the costs of the organization as possible to ensure that then organization remains competitive in the market through good image. When the organization engages in the corporate social responsibility, there are some demands which the organization cannot be able to meet (Sims 2003). Failure to achieve these complex issues, the reputation of the organization will be destroyed thus the company will not be able to compete effectively because the society have a negative attitude towards the organization. In this regard, the shareholders discourage the management from involving itself in the corporate social responsibility. This conflict the expectation of the society of wanting the organization to be a good citizen in the society. Considering the corporate social responsibility, Kmart Company was encouraging companies and the business partners to observe and consider the welfare of the stakeholders. Kmart could not conduct any business with companies which exploit its stakeholders. The condition was that it could withdraw any contracts with companies which do involve themselves in corporate social responsibility. In addition, Kmart together with other responsible companies set clear ethical standards with its business partners which need to be observed. Kmart aimed at improving corporate social responsibility at work place before conducting any business. Any organization which does not uphold these ethical standards will not conduct business with Kmart. This aimed at improving the safety of employees at their workplaces because they are the people who make the products that Kmart sale. Importance of corporate social responsibility Corporate social responsibility plays a great role in any organization. The benefits of corporate social responsibility include; the organization will be able to attract and retain more customers. This is because the reputation of the organization will be good hence the products are received with a positive attitude than those of the competitors (Singh 1999). The organization is able to have a brand image than those of the competitors because it is perceived as an organization which is concerned with the welfare of the stakeholders. More professional skills will want to work in the organization because it takes into account wellbeing thus the organization will have a competitive advantage than the competitors (Bowie 2001). Corporate social responsibility also increases productivity and quality of the products. This is because the employees will be satisfied with their jobs which will encourage them to offer best skills in their operations which will improve the quality of the products (Rajaram 2000). This will in the sales of the company as it will be able to meet the expectations of the customers and the local community who some are the business partners with the organization. Conclusion Corporate social responsibility is the involvement of an organization in the social responsibilities in the society. The responsibility of an organization towards the shareholders conflicts the expectation of the society that the organization will be a good citizen. Some of the responsibilities of the organization include safeguarding the shareholders’ interests, improving the productivity of the organization, observing the organizational structure and goals, improving the dividend of shares and ensuring that the organization has gained a competitive advantage in the global market. Through corporate social responsibility an organization can improve its productivity, good reputation and ability to attract and maintain skills in the organization. References Bhatia, R.L 2004, Corporate Renaissance in the New Millennium, New Delhi, Wheeler Publishing. Boeger, N. Murray, R & Villiers, C 2008, Perspectives on Corporate Social Responsibility: Corporations, Globalization and the Law, UK, Edward Elgar Publishing. Bowie, N 2001, "The Role of Business Ethics", Business Ethics a European Review, Vol. 7, No. 2, pp. 81–87. 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