Social Justice and Corporate Social Responsibility - Essay Example

Social Justice and Corporate Social Responsibility Introduction Corporate Social responsibility (CSR) is not a new concept in the corporate world. The business organizations across the globe, both small and big have realized the significance of being socially responsible from the past experiences of many socially unsuccessful companies such as Enron. It has been well acknowledged by the corporate community that companies that seriously take care of CSR are more likely to sustain than those who do not. CSR means and includes all the efforts that a firm takes in identifying the social, economic and environmental problems of a society in which it operates and finding solutions to those problems in such a way that they are firm's problems too. The European Commission defines CSR as "a concept whereby companies integrate social and environmental concerns in their business operations and their interaction with their stakeholders on a voluntary basis." (A Business Contribution to Sustainable Development. n.d.) In an article by John Richardson (2008) pointed out that a company is said to be socially responsible if "it conducts itself reasonably with respect to: the workers it employs around the world; its investors as manifested in its corporate governance practices; local communities in which it operates; how it conducts itself ethically ion its domicile country and in other countries around the world; the environment" (section 2). The CSR is also advocated by authorities mainly because of the fact that CSR principles are in conformity with social justice. The essence CSR lies in the fulfillment of social justice to the various stakeholders. The companies, therefore, are socially obliged to deal with the societal, ecological and economical issues so that all the stakeholders including shareholders are satisfied and eventually results in economic sustainability. A firm which has obligations only towards its shareholders is socially irresponsible and will no longer survive in the modern corporate environment. This approach is not advisable as indicated by 'stakeholder theory' propounded by R. Edward Freeman. In one of his papers, he writes that "corporations shall be managed in the interests of its stakeholders, defined as employers, financiers, customers, employees, and communities." (Carson L. Thomas. 2003, page. No.1). The recent years have experienced many such cases which shocked the entire corporate world, which, later on, became the lessons for the rest in future. Enron Collapse The failure of Enron, the world Energy Giant, is an unforgettable incident in the history of corporate world. The company which became the seventh largest one in the United States of America in just 15 years has become the by-word for corporate irresponsibility. The issues raised were misrepresentation of accounting information, which resulted in unfair accounting, lobbying with politicians and misappropriation of employee savings. The profit figure shown by the company was not true and fair and company's massive debts were concealed from the financial statement. The company had political lobbying with many legislators and the highly paid executives pocketed the life savings of thousands of its employees. What made Enron to socially irresponsible even though it had taken some steps to adhere to CSR The self-interest. The company had not tried to strictly adhere to the guidelines of CSR. Rather, it tried to window dress its financial statements so as to achieve huge market support and high prestige and thereby protecting the interest of shareholders and a few executives. The Enron collapse taught the corporate community a lesson about which Sims responds (2003) "How a Failure of Leadership, Culture, and Unethical Behavior Brought a Giant to Its Knees" (p. 147) Apart from Enron collapse, corporates like Arthur Andersen, Philip Morris and Union Carbide also fell in the category of socially irresponsible companies. Arthur Andersen case is closely associated with Enron for which the former was the auditor. In the accounting scam with Enron Arthur Andersen, one of the five largest accountancy firms in the U.S. was also collapsed. Philip Morris, the U.S. based tobacco giant was also a failure from CSR perspective. The concept CSR contributed not only negatives but good results as well, of course, numerous than negatives. The companies which have been following CSR guideline and successfully meeting their stake holders interests include Google, Campbell Soup, Johnson and Johnson, Walt Disney, Kraft Foods etc. (Google, Campbell Soup, J&J Tops in CSR. 2008) The study finds that a company's reputation is closely linked closely to the public's perception of its corporate responsibility. A Study conducted in the U.S. in this respect reveals that "Companies who have invested in high-profile CSR initiatives get a much higher level of support than other companies." (Google, Campbell Soup, J&J Tops in CSR. 2008) Significance of Going Socially Responsible Conforming to the social and ethical corporate practices results in not only corporate citizenship but it offers a numerous benefits as well. Consumers always prefer to buy products of those who are at the helm of CSR. In an article from Practical advice for Business, the relevance of being CSR conscious is illustrated as, "sales of "environmentally friendly" products continue to grow - and these products often sell at a premium price. Ben & Jerry's ice cream became as famous for its approach to responsible business as for its products." (Corporate Social Responsibility, n.d.) The benefits of CSR companies as an entity of society are manifold. They include Economic, Social, and Ecological Benefits. Besides, company's overall performance including financial performance can have a multiplier effect. However, to discuss the topic in detail, the various stakeholders are benefited out of CSR in the following ways: Comply with legal requirements Good reputation and Brand Increased return to shareholders, thereby improved firm's value Easy Employee recruitment and retention Highly motivated and productive employees Further research on new and viable business opportunities Low risk of damage on account of competition Relationship between Corporate Financial Performance and CSR The closeness of corporate economic performance and CSR has been a topic of debate among the scholars and practitioners for years. Many studies have been conducted across the globe since the inception of the concept CSR to find whether any relationship exists between financial performance and CSR. Perhaps, all might have come out with positive results, though a very few responded in the negative. Majority of the studies argue that there is positive correlation between corporate financial performance and CSR. When companies become CSR conscious, they are offered a plenty of benefits (discussed above) that eventually contribute to augmented profit. Apart from this, many Studies have been done to analyze whether there is any relationship between the stock price and the economic performance. "The Business and Society Review's Reputational survey has found a negative relationship between social performance and stock price changes. The majority of other studies have not supported these findings. In fact Moskowitz's (1972) own study, over a much shorter 6 months time frame, reveals a positive correlation between social performance and stock price." (Blackburn V.L., M.Doran & C.B.Shrader, 1994, p.no. 195+). And now corporates the world over have accepted the fact that "Corporate Social Responsibility Can Be the Strategic Engine for Long-Term Corporate Profits and Responsible Social Development" (Berkhout 2005, p.no.15) Association between Social Justice and Corporate Social Responsibility The terms "social justice" and 'CSR" are closely associated. When the former asserts the equality and equity that every body in a society must enjoy, the latter is on what a business organisation can do better for maintaining social justice by solving the problems of the society. Social justice is more and more advocated because of the reason that business is also a part and parcel of the society and it must act just like an individual or government is doing. For example, global warming is a rising issue around the world and business also a role in this regard. "The CSIRO conference on International Climate Change, held in November 2005, included information on Australian conditions and mixed the expertise of businesses, government and science to respond to these issues. However, to overcome climate change incurs a social cost." (Jean, 2005). The argument for Social Justice in the organisation is for equality distribution in the organisation validates people's feelings, can foster employee motivation. Business organizations increasingly know about the significance of discharging social duties. This is the reason why Bill Gate has decided to devote his remaining life to helping people of no means as a duty towards the society. Conclusion Being a good Corporate Citizen is increasingly a crucial task among the corporates to achieve sustainability. Achieving sustainability is not as easy as many think. It is a tough task and includes all the efforts to balance the social and environmental responsibilities with the firm's conventional economic responsibility. Over the years the necessity of being CSR conscious is increasingly felt owing to high expectations of key opinion formers, customers and the public on company's compliance with CSR guidelines. Many succeeded, a few fallen and the rest could find a balance between the cost of CSR and the economic benefits. Successful companies like Google and Johnson and Johnson always support the CSR dimension of business. Reference List A Business Contribution to Sustainable Development: Corporate Social Development, (n.d). Retrieved on 17 November 2008 from http://europa.eu/scadplus/leg/en/lvb/n26034.htm Carson L. Thomas. (2003). Self Interest and Business Ethics: Some Lessons of the Recent Corporate Scandal. Journal of Business Ethics. Netherlands. Kluwer Academic Publishers. Richardson John (2008). What makes a Company Responsible The Global Investment Watch. Retrieved on 17 November, 2008 from http://globalinvestmentwatch.com/2008/09/08/what-makes-a-company-socially-responsible/ Sims. R. Ronald (2003). Ethics and Corporate Social Responsibility: Why Giants Fall. Westport Praeger Corporate Social Responsibility- Companies in the News (2007). Retrieved on 18 November 2008 from http://www.mallenbaker.net/csr/CSRfiles/enron.html. Google, Campbell Soup, J&J Tops in CSR. (2008) Retrieved on 18 November 2008 from http://www.marketingvox.com/google-campbell-soup-jj-tops-in-csr-041898/ Corporate Social Responsibility. (n.d.) Retrieved on 18 November 2008 from http://www.businesslink.gov.uk/bdotg/action/detailtype=RESOURCES&itemId=1075408491 Blackburn V.L., M.Doran & C.B.Shrader.(1994) Investigating the Dimensions of Social Responsibility and the Consequences for Corporate Financial Performance.(p.no. 195+) Berkhout Tom. (2005) Corporate Gains: Corporate Social Responsibility Can Be the Strategic Engine for Long-Term Corporate Profits and Responsible Social Development. (p.no. 15) Jean, Raar (2005). Corporate Responsibility: moral or mandatory Retrieved 19 November 2008, from http://www.allbusiness.com/management-companies-enterprises/848475-1.html Read More