Stakeholder and Shareholder Theories of Corporate Social Responsibility - Coursework Example

Running Head: SYDNEY 2000 OLYMPICS Sydney 2000 Olympics Name Institution Date Introduction Corporate social responsibility refers to the way organizations incorporate environmental, economic and social matters into their administrative operations, strategy, culture and values in a responsive and transparent manner and thus establish better practices in the firm, generate wealth and improve the society. Because businesses play a crucial role in wealth and job creation in the society, corporate social responsibility is a core management concern. It positions organizations to practically take care of their risks and take advantage of prospects, particularly with respect their business status and wider engagement of stakeholders such as governments, communities, customers, and suppliers (Matten, & Crane, 2005). Additionally corporate social responsibility is about performance with performance reporting being a portion of accountable, transparent and thus credible corporate behavior. In the case study, the Olympic movement, the Sydney 2000 Olympics and its organization for buying votes to secure the Olympics is an unethical behavior in the sports industry. Additionally, Sydney 2000 reserved majority of the best tickets for wealthy individuals and sponsors, an action that was not revealed by SOCOG board. The following literature aims at identifying the most significant and knowledgably important practical and academic works on the concept of corporate social responsibility ad ethics. Literature review on corporate social responsibility In recent periods corporate social responsibility has become a topic of interest amongst practitioners and researchers. Nevertheless, a precise definition of CSR is subtle and opinions differ. Corporate social responsibility has been described as a function that goes beyond but entails profit making, jobs creation and production of services and goods. According to Garriga, &Mele, (2004) numerous researchers assert that CSR has come to imply the positive activities that organizations undertake to assist discharge its responsibilities to exterior stakeholders. Additionally, other definitions entail financial performance as a feature of corporate social responsibility. Based o this definition, a variety of behaviors are categorized under CSR entailing cause related marketing, sponsorship of charitable events, provision of employee volunteerism programs, using environmental initiatives and displaying commitment to safety and health issues. The exact nature of corporate social responsibility is understood in diverse ways, with disparities in representation or understanding of the concept relevant to diverse concerns and paradigms. Eve though there are numerous contested notions of what corporate social responsibility must be and how it is supposed to function, there is a great degree of agreement on what it generally entails. Numerous issues and concepts are common in definitions of CSR such as human rights, diversity management, environmental responsibility, philanthropy and sustainability, implying that it is an intricate area having an interdisciplinary focus. It is usually agreed that corporate social responsibility involves companies willingly going beyond their legal responsibilities to take into consideration the environmental, social and economic effects of their operations (McWilliams & Siegel, 2001). However, while a universally recognized definition of corporate social responsibility, CSR could imply diverse things to diverse stakeholder groups. To the shareholders, CSR might imply maximization of profits while to governments, it might imply to complying with legislative requirements and safety workplace ad products. To customers, CSR might imply high quality products at a reasonable price and possibly philanthropic or ethical behavior. Early advocates of corporate social responsibility emphasizes that CSR theorists dispute that organizational management is supposed to integrate ethics into strategic goals and objectives because it is the appropriate thing to do. This was obviously the right thing to state, looking at the preset development of CSR and its practices, but this argument did not have a solid ground. According Lantos, (2001), following the advocates of corporate social responsibility, any huge organization is fundamentally a social institution and also an economic enterprise. Thus, every business affair is supposed to be cautiously weighted on the basis of the probable social effects a s the consequence of such activities ad carefully balance the conflicting responsibilities to numerous stakeholders. Marquez & Fombrun (2005) define CSR in the view of the responsibilities of the organization to its stakeholders; the groups and people who can influence or who are influenced by corporate practices and polices. These obligations surpass legal obligations and the duty of the firm to its stakeholders. The fulfilment of these duties is aimed at minimising any damage and maximizing the future beneficial effect of the organization on the society. They, summarizes their definition of corporate social responsibility by stating that CSR involves the duty stemming from the inherent social contracts between business and society. Stakeholder and shareholder theories of corporate social responsibility The shareholder theory of CSR holds that organizations possess a social obligation that needs money that belongs to other people. Asking organizations to take part in corporate governance activities is regarded to destructive to foundations of a free community with free enterprise as well as private property scheme. Barry (2005) argues that organizations can solely engage in CSR in order to attain a competitive advantage within the markets they operate in and this is a type of rent seeking by managers. Henderson (2005) is a critic of CSR whose focus is of exterior interruptions with effective allocation of resources. Henderson argues that CSR negatively affects the performance of a company. Nevertheless, his argument against CSR primarily rests on the debate that CSR impairs the performance of a business enterprise its primary function and would generally make people poorer. Supporters of stakeholder theory, like Freeman et al (2004), question the options available fro managers to generate shareholder value rather than creating services ad products that the consumers are eager to purchase , providing jobs that workers are wiling to fill, developing relationships with suppliers that organizations are willing to have and displaying good citizenship in the society. According to Freeman et al (2004), the single objective view of shareholder is a narrow outlook that cat probably do impartiality to the panoply human action that is trade and value creation or business. While the shareholder viewpoint is that sees a distinctive answer, and features a single objective function to all organizations, the stakeholder theory admits a variety of answers. Freeman et al (2004) also deems shareholder and stakeholder theories of CSR must not be regarded as opposed, in the sense that even the stakeholder theory may be considered as a version of the stakeholder theory since stakeholder theory admit numerous probable normative cores. Porter ad Kramer (2002) argues that in CSR, economic ad social objectives are distinct ad separate, and through dealing with social objectives organizations don’t offer more gain than is offered by individual donors. Jensen, (2001) argues that the shareholder theory of CSR is managers have the only responsibility of serving shareholders’ interests in the best way possible, utilizing the resources of the company to increase shareholders’ wealth through seeking profits. Other modern authors support value maximization of shareholder as a major objective of every organization but are not essentially against CSR activities by organizations. Coelhol et al (2003), notes that when companies have more than one objective, it becomes difficulty for managers to make decisions. On the contrary, placing value maximization of shareholder as an objective is deemed to enable managers to make decisions that promote outcomes for several stakeholders. However, numerous authors believe that corporate social responsibility is usually helpful in producing long tern value of the company. The argument have been based on strategic CSR , from the classical notion that the only objective of ay business is to maximize the wealth of shareholder and that a organization must observe CSR actions solely if it permits creation of value. This model is developed by Siegel ad McWilliams (2001) whose argument is that decisions concerning CSR must be treated by the managers in exactly the same way they treat every investment decision. Inkpen and Sundaram (2004) identifies that decisions to increase efficiency are made to promote shareholder value and to compel costs on other stakeholders, ad thus it is a suitable trade-off. According to the stakeholder theory, these costs are not acceptable unless it is clear that gains fro the community outweigh them. Existing variation amid short run effects of business actions ad long run alignment of social and business interests in creation of wealth leave sufficient scope for market power or abuse and irresponsible conduct (McLaughlin, & Jawahar 2001). Conclusion Corporate social responsibility is an important that requires a organization to integrate environmental, social and economic concerns into its values, strategy and decision making. CSR surpasses maximization of shareholder wealth ad profitability and includes taking to consideration the needs of other stakeholders such as customers, suppliers and governments. This in turn produces long term value of a organizations. Therefore, Sydney organizational management should integrate ethics into strategic objectives because ethical behavior will lead to good reputation and increased performance of the organization. Recommendations Sydney 2000 Olympics organization is supposed to be conscious of and apply corporate social responsibility principles in national, multilateral and regional levels and also integrate stakeholders in its business activities than merely concentrating on maximization of shareholder value in order to attain it business objectives. These corporate social responsibility principles will attempt to codify ethical behavior into objective standards of practice. Because the corporate social responsibility revolves around the reality that organizations that do not engage stakeholders, or parties influenced by their activities might jeopardize their capability to generate organizational wealth as well as societal wealth, Sydney organization should take into account the contributions and interests of the groups and people it interacts with as the basis for its ethical behavior and sound governance. This is because CSR is fundamentally strategic model for organizations to expect ad address issues that are associated with their interactions with other people and firms, and via these interactions, to be successful I their business endeavors. The organization should adopt a coherent corporate social responsibility strategy based on sound values, integrity, together with a log term approach so as to offer apparent business benefits ad lead to the well being of the entire society. References Barry, N, (2002). The stakeholder concept of corporate control is illogical and impractical, The Independent Review, 6(4):541-544. Coelho, R, McLure, E, & Spry, A, (2003). The social responsibility of corporate management: A classical critique. Mid-America Journal of Business, 18(1):15-24. Henderson, D. (2005). The role of business in the world of today. Journal of corporate citizenship, 17, 30-32. Jensen, C. (2001). Value maximization, stakeholder theory and the corporate objective function, Journal of Applied Corporate Finance, 14(3):8-21. Lantos, P. (2001). Corporate social responsibility revisited, redefined, California Management Review, 22(2): 59-67. Sundaram, K., & Inkpen, C. (2004). The corporate objective revisited, Organization Science, 15(3): 350-363. Matten, D, & Crane, A., (2005). Corporate citizenship: toward and extended theoretical conceptualization, Academy of management review, 30(1): 166-179. Garriga, E., &Mele, D, (2004). "Corporate Social Responsibility Theories: Mapping the Territory." Journal of Business Ethics 53 (2004): 51–71. Marquez, A., &. Fombrun, J., (2005). "Measuring Corporate Social Responsibility." Corporate Reputation Review 7, 304–308. McLaughlin, L, & Jawahar M., (2001).Towards descriptive stakeholder theory: an organizational life cycle approach. Academy Management Review, 26(3): 397-414. Read More