Corporate Social Responsibility - Literature review Example

Corporate Social Responsibility Name: Corporate Social Responsibility Course: Tutor: Institution: Date: Table of Contents Table of Contents 2 1.0 Case Analysis and Comparison 3 1.1 Case Analysis Issues 3 1.2 Reasons for and Against Raised Issues 4 1.3 The Fast Food Industry Similarity 5 2.0 CSR and Stakeholder Analysis 5 2.1 CSR Definition 5 2.2 Stakeholder analysis 6 2.2.1 Employees 6 2.2.2 Consumers 7 2.2.3 Investors 7 2.2.4 Interest Groups 7 2.2.5 Government 8 3.0 Industry Theory Application and CSR Stage 8 3.1 The Shareholder Theory against the Stakeholders Theory 8 3.2 Pyramid of Corporate Social Responsibility 10 4.0 Summary and Recommendations 11 4.1 CEO Dilemma 11 4.2 Recommendations 12 4.2.1 Independent Directors Appointment 12 4.2.2 Ethical Based Management 13 References 14 1.0 Case Analysis and Comparison 1.1 Case Analysis Issues An evaluation of the Tobacco case study illustrates a wide range of issues facing the industry. In this regard, among the raised issues is the concept of lack of transparency of the produced cigarette and other tobacco products. As such, the industry is perceived as having a secrecy approach over the years through which the public and the consumers were unaware of the intense health risks posed by the consumed industry products. Moreover, an issue of collusion with other third parties to advance the industry interest has been established. In this case, the issue assertion is evidenced by a study developed by Otanez, Mamudu and Glantz, (2009, 1762) in the case of Malawi. In this case, the study evaluated the nature to which the pro-tobacco lobby groups and camps regarded as independent entities were indeed independent. In the analysis, it established that indeed, a majority of the organizations acquired their funding from the tobacco companies as a means of ensuring business safety and the proposition of their argument on the safety nature of the passive smoking health implications. Finally, the case raises the issue of the industry targeting the underage population. In this case, the industry is perceived as developing a platform through which to recruit replacement smokers as the current smokers age as a means of developing and expanding a going concern for the industry. In this regard, Campbell and Balbach (2009, p.1189) conducted a study evaluating the various approaches through which the industry recruited and targeted the young population in the market. In this regard, the study established that through sponsoring social and sporting events involving the young, as well as aligning the brand identities with ambitions of younger generations, the brands were indirectly targeting the young generation for increased smoking culture extension. 1.2 Reasons for and Against Raised Issues On one hand, there are numerous reasons for the development issues with studies and theoretical arguments supporting the adopted business models and operations. On one hand, the approach to target new target markets for the industry is based on the principles of a going business concern. In this case, a theoretical review by Bone (2006, p.110) argued that in order for a venture or industry to ensure business operations perpetuity and continuity, such organizations should seek to develop and expand their consumer base. Therefore, based on the above analysis, the tobacco industry stakeholder approach would be justified as a means of developing and expanding their business operations. Nevertheless, arguments against the operations and functioning of the industry have since been developed. In this regard, arguments against the influence of smoking for younger generation have been highly argued against based on the young generation inability to make relevant and rational decisions on their own. Tai and Ting-Jui Chou (2009, p.147) conducted a study to evaluate the children decision making model. In the study analysis, it established that unlike the adults with the ability to make rational, independent decisions, the youths were influenced by external stimuli and forces in their decision making process. Therefore, advertising and supporting youth based effects is unjustified as it serves as an external stimulus to encourage a smoking decision among the youths. Finally, an additional argument against the industry operations could be based on the concept of transparency and accountability. In this regard, in order to develop consumer confidence, all supplied products conditions and ingredients should be disclosed. As such, the tobacco industry has failed to the honesty test through collisions with research and lobby groups to deceive and hold the truth from the consumer base, a move legally unjustifiable. 1.3 The Fast Food Industry Similarity A critical evaluation of the tobacco industry and the nature of operations and type of challenges the industry has faced over the decades, a mirror image reflects on the fast food industry. On its part, despite its currently being in the growth stage of the product life cycle, the industry has faced numerous challenges. As Mello, Rimm and Studdert (2003, p.208) noted, the industry has faced numerous suits and legal restrictions based on its direct relationship with increased lifestyle diseases such as obesity and high blood pressure. In this regard, the industry has been further accused of targeting the children and the younger generation through attractive and influential advertisements to increase its consumer base. Consequently, lobby groups have emerged to counter these developments through court cases, a move similar to the tobacco industry US consumer lobby group cases in the late 1990s. Consequently, the fast food industry has resulted to the use of CSR practices as a move to reduce and counter the effects of the current market challenges, seeking to offset the hostile perception through improved community support programs. 2.0 CSR and Stakeholder Analysis 2.1 CSR Definition The concept of corporate social responsibility (CSR) has acquired popularity, especially based on the diverse perceptions that the industry stakeholders have on the concept. In this case, a CSR definition is influenced and based on the stakeholder interest in the supply chain. However, in general, CSR can be described as the process through which organizations seek to develop sustainable structures and systems through which, besides earning profit increase the consumer base welfare. As such, Hopkins (2007, p.15) further noted that CSR involves the development of programs and structures to support the society and create a sustainable environment base. Therefore, a relevant CSR program is one that seeks to plough back an organizational earnings to developing a sustainable base that not only guarantees the organizational well being and continuity, but also enhances the society well being in the long run period by creating sustainability in all life areas in health, environment, education and economic status respectively. 2.2 Stakeholder analysis Phillips (2003, p.42) described organizational stakeholders as individuals, both internal and external who hold interests in an industry. In this regard, the stakeholders’ actions and status influence the respective industries and organization operations. In an analysis of the tobacco industry operations, this report’s analysis establishes the employees, consumers, investors, interest groups and the government among others as key stakeholders. As such, this sub-section evaluates how each of the stakeholder actions influences the industry and how the industry has developed CSR programs tailored for each of the stakeholder groups. 2.2.1 Employees The industry employees are a major component of the internal industry stakeholders. In this regard, the employees’ production quality and productivity levels directly influence the industry organization’s market output as well as product quality. As an analysis by Manas and Graham (2002, p.45) established, an organizational employee base serves as a critical sustainable competitive edge in a highly competitive market base, such as the tobacco industry. On the other hand, the industry, organizational CSR polices to them include remunerations, working environment condition and career growth opportunities. In this regard, the CSR programs for the employees by the respective organizations are meant o increase their health, wellbeing as well as increase their economic status Therefore; this analysis establishes that a close relationship between the industry and its employees is a key ingredient to a successful production and market base, 2.2.2 Consumers The consumers are a component of the external industry stakeholders. In this regard, as Shortliffe and Cimino (2014, p.432) noted, the consumers are a critical stakeholder aspect as they represent a complete value and supply chain in any industry through consuming the availed and supplied products. Therefore, a strong consumer base with a positive perception of organizations and industry operations is relevant for increased market gains in the long run period, as well as production system sustainability. In this case, the consumer base influences an organizational operation through taste and preferences change, where such needs are matched through new product development. Some of the industry CSR practices targeting the consumers include the development of society, educational programs as well as supporting social events as campaigns to reduce young age smoking, all that directly influence the consumers. 2.2.3 Investors The investors play a crucial part of any industrial development. An evaluation of the Tobacco industry, that has been on a growth trend for decades now illustrate that external investors have played a key role in increasing and promoting the growth trends, In this case, in the tobacco industry, the industry has had challenges to contend with the bad reputation to attract investors through the adoption of CSR strategies in community and environmental sustainability projects such as tree planting, educational programs and event sponsorships, 2.2.4 Interest Groups A key stakeholder in the tobacco industry is the interest groups that represent the interest of various stakeholders such as the suppliers, consumers and the organizations themselves. In this regard, the interest groups have been instrumental in the development of international standards and governance policies. For instance, tobacco farmer lobby groups have been instrumental in the stalling of regulations against the industrial operations, while the consumer groups, through case such as in the US have enhanced increased corporate governance and accountability in the industry. Therefore, this analysis establishes that interest groups have been critical in the evolution and development of the industry to its current form and status. Key among the developed industry CSR programs targeting this consumer base group include corporate governance, where there is increased transparency and accountability in the production and management process, with initiative such as disclosing cigarette ingredients to the public. 2.2.5 Government Finally, this report stakeholder analysis establishes that the global governments have been crucial stakeholders in the evolution and growth of the tobacco industry. On one hand, while as some governments such as the Chinese government have been directly involved in the tobacco industry, commerce, business, others, such as the USA and a majority of the EU governments have been instrumental in regulations and standards development. Moreover, through the WHO platform and international standards established, the industry operations have been gradually standardized. In this case, industry CSR programs targeting the government is through provision of basic needs of the society such as education and environmental conservation efforts all that supplement the government responsibility, programs and spending. 3.0 Industry Theory Application and CSR Stage 3.1 The Shareholder Theory against the Stakeholders Theory The Friedman (1970) shareholders theory of management asserted that managers are agents of the shareholders and as such should strive to increase the shareholders returns on investments. In this regard, the theory held that managers should strive to invest the shareholder capital contributions in investments that yield the highest profits for increased shareholder earnings. However, the theory asserted that managers should only engage in such activities to the extent to which there are legal and with fair competition, thus allowing for managers code of conduct conformance. On the other hand, Friedman (1984) developed an additional management theory referred to as the stakeholders’ theory. As Friedman and Miles (2006, p.21) argued, the stakeholder theory sought to factor in the interests of other stakeholders such as employees, suppliers and the local society to those of the shareholders. Therefore, the theory perceived the stakeholder interest as an end result of concern, rather as a means of developing and acquiring profits. Thus, the theory held that managers should balance between the stakeholders’ interest and wellbeing, although such a move could at times reduce overall venture profitability rates. In this regard, this report’s analysis asserts that the Tobacco industry should adopt the stakeholder theory approach. As already noted above, the industry has numerous stakeholders who influence its operations and eventual market competitiveness in the long run period. In this case, through the consideration of the industry stakeholder interests, the industry will facilitate its reputation. Mard (2002, p.54) argued that reputation and market goodwill are key ingredients for any organization or industry success. As such, the evaluation revealed that a strategic approach through which to increase industry market reputation is through consumer involvement and an engagement. As such, with a perception that the industry is concerned with the consumer challenges such as the risk of poor health and the need to reduce underage smoking, the industry will eventually gain increased market reputation and goodwill, enhancing its long term sustainability. On the other hand, the stakeholder theory adoption would support the industry current SR programs. In this regard, instead of developing CSR programs as independent variables from the overall management system, the industry could incorporate the CSR strategies under a stakeholder theory approach. As such, this would promote increased program efficiency as well as reduced operational and program management costs. Therefore, it would serve to increase the CSR program benefits against the incurred costs. Therefore, this would enhance the development of a balance between the need to increase profitability s well as retain a substantial market sustainability and consumer satisfaction. 3.2 Pyramid of Corporate Social Responsibility In order to develop rational CSR program recommendations, one of the critical steps is the evaluation of the CSR stage under which the industry operates in. As such, this report section evaluates the tobacco industry CSR stage through the adoption of the Carroll’s (1989) model of the pyramid of CSR as demonstrated in the figure below . In this regard, the analysis concludes that the industry is currently at the third stage of the model, the ethical responsibilities stage. As Carroll (1989, p.35) noted, the ethical responsibilities stage involves the development of industry and individual organizational systems which promote and uphold societal and consumer well being. In this regard, the stage is characterized by organizational strategies and systems that target on doing what is good for the society rather than barely meeting the legal requirements in the respective markets. One of the organizational examples to illustrate this concept could be the JTI Company and its operations in Tanzania, the third largest Tobacco export base in Africa. In This case, the organization developed a CSR program through which a modern tobacco curing method was applied through providing modern machines to the farmers to replace the traditional reliance on wood that was associated with deforestation. In this case, although there was no legal compulsion for the company to adopt and supply the modern machines to the farmers, it supplied them based on ethics. As such, the ethical compulsion for sustaining the environment influenced and shaped the organizational CSR program. Similarly, an evaluation of the BAT Company CSR program in Zambia. In this case, the government had set the minimum smoking age of 16 years and as such, the company was legally obligated to dissuade and not sell its products to children under the age. However, as a means of ensuring the societal wellbeing and following ethical conviction, the BAT Company rolled out a campaign discouraging smoking at a minimum 18 years of age. Therefore, the above two case studies illustrate and evidence that indeed the Tobacco industry is at its ethical responsibilities stage, 4.0 Summary and Recommendations 4.1 CEO Dilemma The current CEO dilemma is based on the need to develop and incorporate CSR programs in the overall organizational management and operational strategies. As such, the critical challenge to the CEO is the development of CSR programs that incorporate and reflect on the organizational values and principles, rather than serving as public relation tools to the tobacco industry consumer base. In addition, the CEO is faced with a challenge to adopt a proactive management approach through which to develop a consumer base confidence rather than relying on the application of reactive strategies that the CEO attributes with the current industry challenges. 4.2 Recommendations In order to counter the current Tobacco industry challenges incorporated in the CEO’s dilemma, this analysis this report offers execution recommendations to counter the challenges and increase the industry reputation. Among the recommendations in the study include independent directors’ appointments, consumer surveys and the development of ethical based CSR programs. 4.2.1 Independent Directors Appointment The highest decision making body in any company is the board of directors. In this regard, the board advises and consults the CEO on the development and adoption of relevant business strategies. In this regard, as Monks and Minow (2011, p.336) argued, a majority of the external stakeholders perceives such governing bodies with suspicion as they are assumed not to represent their interests in the decision making process. Therefore, one approach to counter this market perception, as well as ensure the actual external stakeholder interests, consideration, and the company could incorporate independent directors. The directors would be selected from the external stakeholders such as the consumer groups, the interest lobby groups among others, to ensure that their interests are represented in the organizational decision making process. In this case, such an appointment approach, would enhance the development of the current corporate governance CR practice from a PR activity, to an actual stakeholders representation and involvement in the decision making process. In addition, the inclusion of the diverse stakeholders in the decision making organ would promote the quality of CSR programs. As such, instead of adopting a push approach where an organization designs a CSR program, the inclusion would facilitate a pull strategy in which the stakeholders raise their issues to the board, and subsequently CSR programs are developed from the raised issues in the society. Therefore, this would support in both image development as well as in facilitating stakeholders’ consideration in the venture operations. 4.2.2 Ethical Based Management As the CEO dilemma illustrates, the venture is currently at the legal responsibilities stage in the CSR pyramid. As such, the organizational management and strategies are all geared towards the development of a performance level that meets the current market standard and legal needs. For instance, due to the legal requirement for corporate governance, the organization developed CSR programs that the CEO perceives PR strategy, rather an actual management paradigm shift. Therefore, based on this understanding, this report offers a recommendation for a rise in the organizations CSR level to the ethical level. In this regard, under the ethical responsibility level, the organization management would be motivated to develop strategies geared towards improving the community and consumer base welfare, benchmarked against the moral and ethical values of what is just and right rather than against the legal parameters, which are often open ended and subject to manipulation. In summary, this report concludes that with the adoption and application of ethical based CR approach as well as the inclusion of independent directors, the CEO’s current dilemma will be overcome and a consequent proactive organizational management system developed for future industrial development and success. References Bone, J. S., 2006, California property tax, CCH Inc, Chicago Campbell, R.B., ScD. & Balbach, E.D., PhD. 2009, "Building Alliances in Unlikely Places: Progressive Allies and the Tobacco Institute's Coalition Strategy on Cigarette Excise Taxes", American Journal of Public Health, vol. 99, no. 7, pp. 1188-96. Carroll, A.B., 1989, Business & Society: Ethics and Stakeholder Management, South-Western Publishing Company, Cincinnati Freeman, R.E., 1984, Strategic management: A stakeholder approach, Pitman, Boston Friedman, A. L., & Miles, S., 2006, Stakeholders: Theory and practice, Oxford University Press, Oxford Friedman, M., 1970, ‘The social responsibility of business is to increase profits’. New York Times Magazine, September 13. Hopkins, M., 2007, Corporate social responsibility and international development: Is business the solution?, Earthscan, London Manas, T. M., & Graham, M. D., 2002, Creating a Total Rewards Strategy: A Toolkit for Designing Business-Based Plans, AMACOM, New York Mard, M. J., 2002, Valuation for financial reporting: Intangible assets, goodwill, and impairment analysis, SFAS 141 and 142, John Wiley & Sons, New York Mello, M.M., Rimm, E.B. & Studdert, D.M. 2003, "The McLawsuit: The fast-food industry and legal accountability for obesity", Health affairs, vol. 22, no. 6, pp. 207-16. Monks, R. A. G., & Minow, N., 2011, Corporate governance, Wiley, Chichester Otañez, M.G., Mamudu, H.M., & Glantz, S.A.,. 2009, "Tobacco Companies' Use of Developing Countries' Economic Reliance on Tobacco to Lobby Against Global Tobacco Control: The Case of Malawi", American Journal of Public Health, vol. 99, no. 10, pp. 1759-71. Phillips, R., 2003, Stakeholder theory and organizational ethics, Berrett-Koehler, San Francisco, Calif: Shortliffe, E. H., & Cimino, J. J., 2014, Biomedical informatics: Computer applications in health care and biomedicine, Springer, London. Tai, M.W. & Ting-Jui Chou 2009, "Children's influences on family decision making in Hong Kong", Young Consumers, vol. 10, no. 2, pp. 146-156. Read More