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What Is The Likely Influence Of Institutional Investors On Corporate Social Performance - Essay Example

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In today's competitive market atmosphere, business is dealing with a new set of challenges that are not merely economics-related. To endure and flourish, firms should link economic and social systems…
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What Is The Likely Influence Of Institutional Investors On Corporate Social Performance

Download file to see previous pages... The World Business Council for Sustainable Development proposes a definition for CSR which is " CSR is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large". Reference (this definition was developed in 1998 for the first WBCSD CSR dialogue in The Netherlands.)

There has been an increasing role of CSR in the community these days. This is because of the impact of globalization, where the effects of actions on the other side of the world are being debated in the press. There is also increasing attention from investors through the rise of socially responsible investment or SRI. Investment in ethical funds was given a boost when pension funds were obliged to state whether they took into account social and environmental impacts. The reason behind such an investment is that firms that closely manage their social and environmental conditions are subject to less risk, are possibly better managed and thus will also turn out as better investment, as well as satisfying a principled standard.
To promote CSR it is necessary to enter into a trust based relationship with stakeholders. In such an environment the firm will need to think of themselves as being part of a network in which value is created and where co-operation is more vital. The scheme of CSR basically is about moving away from a business focused approach towards a one that explores the impact and value on society which then further has impacts on the business. And thus if a business recognizes that it is a part of society and its aim is to create value in the society it will be able to consider the value that is created both for the firm and for society. Business and society have an impact on each other.
With the increasing focus on CSR, comes another scheme better recognized as Corporate Social Performance (also known as CSP) and which also enables to calculate and view the performance of business in the social ambit. The social performance needs to be handled and organized properly to get rid of other liabilities and to make the business move on the road to progress. CSP is not only a moral value but also helps the organization financially. CSP is highly correlated with the financial performance. It is connected and related with accounting return procedures rather than market return procedures. The reason of effectiveness of CSP seems to be due to status effects between a huge number of stakeholder groups, and not because of the organizational learning effects. In order to make CSP profitable and able to pay the full amount of a bill, debt or other financial obligations top administration must plan it with a tactical vision that is communicated all through the organization. To make a successful CSP policy, it should be kept in view that it must contain both "soft" and "hard" topics (soft topics like managerial trends and employee values and hard topics like social policies, programs and managerial structures.) Reference
Each of us can probably name more than ten cases in which unprincipled organizational performance had created serious consequences for organizational efficiency, both during and after the managerial "ethics crisis." Until now, however, a small number of efforts have been made to standardize the way that we think about organizational principles and social responsibility, greatly lessen the financial per ...Download file to see next pagesRead More
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