Contemporary Issues in Management - Essay Example

Contemporary Issue in Management Introduction We live in a world where large corporations and powerful multinational companies have annual budgets that surpass many developing countries of the world. In such a world, the idea of corporate social responsibility has become one that holds a lot of value for the company as well as the stakeholders of the company. It can be said that the only real responsibility a company has is to the shareholders is profit, therefore profit is the only motivation for a company. However, that assumption can no longer be taken as granted. Government pressure, regulatory bodies and the guidelines given by social watchdogs are only a part of the process that makes corporations recognize their social responsibility since it seems that the bulk of socially responsible actions come from the need to keep a positive public image. Maintaining that image and being socially responsible is a very important contemporary issue in the management of any company. Colvin (2006) reports that companies such as GE, BP, Starbucks, Dell, Pfizer, and Apple may be loved and hated by many people for various reasons but none of these companies can afford to have their brand name or corporate image to be tarnished in any way. In fact, certain companies may use their image to create customer loyalty and brand recognition more than other methods. Others may even go to court in order to save the image of the company (Alleyne, 2005). Undoubtedly, we are living in the information age and even false rumors about a company’s suppliers maltreating their employees in China, or the company’s employees facing racial, sexual or even gender based discrimination can have really negative effects on the bottom line of the company. Even though it could be possible for a company to be respected and appreciated based on just the financial performance (Forbes, 2005), greater appreciation comes when the company displays a healthy level of social responsibility along with financial performance (Natural Health, 2005). Corporate Social Responsibility Social responsibility is not simply a stance taken by the company for exceeding the given ethical responsibility of a company. In fact, it is actually a business opportunity to seek out an image that has remained for a long time exclusively in the domain of NGOs and social organizations i.e. being a ‘green’ company. While this idea sometimes implies being environmentally friendly, the total environment in which a company operates includes a lot more than making sure that the smokestacks of industry do not create more than an manageable level of pollution. Under the banner of social responsibility, the environment also includes the business position and the value chain of the company including where they get their supplies from and who become their end users. The basic reason for this issue becoming important for companies is the coming of the ethical consumer into the market. Such consumers are a new breed since they link their buying decisions to their own responsibility of helping society. Such a consumer might make his/her purchase decisions which are influenced to some extent by knowing the workings of the company with which s/he is doing business. For this consumer, being ethical is likely to have quite a few meanings but in a broad sense, the consumer could reluctant to buy goods or services from a company which does not make sure that its products as well as its operations do not exploit human resources, animals or cause extensive damage to the global environment (Ethical Consumer, 2006). Seeking Ethical Consumers This is a critical issue for companies operating in the western world because such decisions are very easy to make for the majority of ethical consumers. The simple reason for this is that the accessibility and availability of information is relatively easy as compared to the situation a few years ago. The ethical consumer feeds on information since it is the basis of ethical buying decisions made by him/her (Ethical Consumer, 2006). All information about various companies, their public actions, even their private deeds and their use of money is very easily accessed, shared and distributed on the World Wide Web. The use of the internet certainly makes getting information about companies much easier and anyone with even a remote interest in a famous company can know as much about they would like to. For example, just a little research on GE shows that the company had been rated as the most admired company in America (Fisher, 2006) as well as the most admired company in world (Demos, 2006) yet it has only put out two corporate responsibility reports in all its existence. GE and Other Companies The first report was printed in 2005 and the second one was published in 2006 (GE, 2006). On the other hand, some companies have been publishing such reports for a decade or more. This does beg the question of why GE felt the need to publish the report and why have they only started to publish their social responsibility reports in recent times. Adams (2004) suggests that not publishing any such report means a lack of social responsibility but it is also true that such reports are the requirements of the times we live in. With accounting scandals and class action lawsuits hurting corporate profits, the idea of being socially responsible is seen as an important one even for companies who are admired by all others in the business world. A company can certainly use information sources as the internet to her own advantage and GE is one such company. The social responsibility report for GE is published online for the public. Being open about its operations and not trying to hide much from its stakeholders adds to the positive image of GE since it makes the stakeholders a part of the process of social responsibility than many other companies (Colvin, 2006). While this position taken by GE makes access to information easier, it also positively ensures that the company makes their information the primary source for those seeking to know more about the company (Chwastiak & Young, 2003). On the other hand, a person looking for some negative information about GE would have to go through a lot more than simply use the internet for a few sessions. In fact, negative information about GE is often harder to come by than other companies such as Starbucks. As negative information goes, Starbucks is a company which has earned the scorn of many environmentalist groups for the use of its Styrofoam cups (Dineen, 2005). It must be noted that many of the operations and unique business practices used by a company can be considered proprietary information and be trade secrets that they may not disclose. For those seeking evidence of corporate social responsibility, this may be required information needed for the explanation of the company’s operations to their consumers. When information is not available, an ethical consumer may have to take an educated guess about the situation. Given the situation that a company creates advertisements and banners claiming that their employees in distant countries and offshore locations are treated fairly while other company remains silent on the issue, it can be easily assessed which company treats their employees better. By being vocal about their idea of social responsibility, GE hammers the point that they are a socially responsible company (GE, 2006). It seems that this is the sole reason for their online publication of the corporate social responsibility report since it makes the document available for the world to see. When it comes to the social responsibility of a company, consumers may also be about the moral aspect for decisions of buying from one company or another. In case of interested parties, information could be flowing at a very rapid pace which means that any given customer may be well informed or ill informed about the social position of the company but s/he will always have some information. In situations where the buyer is well informed about the lack of social responsibility of a company, protection against the allegations can be sought through good public relations management. On the other hand, discrediting information becomes difficult if the consumers are simply ill informed or have started to believe in a rumour. Information sources such as the internet and the collective minds of the public are full of stories, rumours, half-truths and even jokes about the practices of various companies and it can become a nightmare for managers to fight against an idea which has become popular culture. For example, given that a story is started by someone who can be anyone regarding the power generators which are produced by a company like Siemens that their products contain lead and mercury which are harmful for the people who are around them. A piece of information could also be distributed amongst the public concerning the medical equipment made by GE suggesting that the images given by their MRI machines contain errors. Even worse, that an air craft engine made by Rolls Royce is known to fail and explode on occasion and all these instances would certainly affect the companies mentioned above quite negatively. The image of the company as well as its drive to show that it is a socially responsible company would be deeply hurt. Information about the company becomes the primary weapon which managers have to use to protect the company. With information, a company can also use ethical marketing principles to help buyers in making responsible decisions. The laws which are presently in place certainly complicate the situation for the seller who has to give disclaimers and disclosures for the sale of the product. This applies heavily in the highly regulated finance markets where products such as credit cards, mutual funds, stocks and securities have to be marketed with information disclaimers which declare and outline the legal positions for the seller and the buyer. As regulation and governmental controls come to other markets where buyers may need to be protected from some unethical sellers, future companies might come to a position where they choose who they should sell their products to as much as buyers today have used corporate social responsibility in some cases to select sellers. However, as long as there are buyers who look at the social responsibility of a company and watchdog organisations who seek out companies that are being irresponsible, social responsibility of an organisation is likely to remain an important issue. An examination of the corporate social responsibility report of GE shows us that GE as a company is interested on three central points which are (GE, 2006): 1. Improving value for shareholders of the company through financial means 2. Using ethical guidelines that go above government requirements 3. Focusing on accounting laws and compliance issues It is clear from the report that GE looking for a much wider audience for the report than just stockholders or buyers. For example, the report devotes a lot of space to energy and environment related issues which have been quite prominent in the popular media in recent times. GE focuses on these topics by highlighting their own involvement in the development of renewable as the first section of the report for social responsibility. The ethics and compliance section allows GE to show that accounting audits are handled by independent contractors (GE, 2006). The criticisms made by Adams (2004) as well as Chwastiak & Young (2003) are countered in the report by citing material from FT/PricewaterhouseCoopers annual global survey of CEOs that puts GE at the number one spot for commitment to governance and ethical conduct (GE, 2006). Respected outside sources are used within the report as suggested by Medawar (1976) to show that the company is in full compliance with government regulations. GE also shows its concern with human rights across the globe in places like Mexico where it was a common practice to test female employees for being pregnant and refuse them employment based on that condition (GE, 2006). GE halted this policy at their Mexican operations and made any inquiries regarding pregnancy to be illegal in all their operations across the world. For example, in China, the laws are silent on discrimination against employment based on age therefore GE declared age based discrimination to be against their company tenets (GE, 2006). The responsibility and drive for being socially responsible comes from the very top of the company as the CEO becomes the driving force for ethics in the company (Welch, 2005). Given that GE behaves and projects itself as an ethical company, it is not surprising to see that the company has got more nearly two hundred awards for that aspect of their business. Employee surveys (conducted anonymously) show that more than eighty percent of the employees are pleased with the way GE operates (GE, 2006). Supported by the words of Fisher (2006) GE is certainly one of the best companies in the world to work for. The social responsibility shown by GE includes outreach programs for employees with AIDS to pension funds management which exceed the offer of any rivalling company (GE, 2006). The ethics and social responsibility of GE extends to its partners since GE imposes ethical codes of conduct for those who do business with the company GE will not do operate in countries which have a poor record of respecting human rights e.g. Burma and will not work with suppliers who have workers under the minimum age requirements or use forced, imprisoned or indentured labourers (GE, 2006). The company also requires suppliers to have reasonable hours of service and overtime wages as well as comply with laws that protect the environment. Companies and business giants such as GE may be able to force their business partners around the world to come to agreements which have social responsibility as a part of the deal. However, smaller companies can also show their own social responsibility by dealing with those organisations which have a proven track record and this will allow them to claim themselves as socially responsible as well (GE, 2006). Conclusion After reading about companies such as GE which have won awards for their corporate social responsibility as well as others that have been accused of destroying social responsibility rules e.g. Starbucks (USA Today, 2005), I feel that ethical companies can be happy about their situation just as GE is (Morris & Colvin, 2006). I also believe that the position taken by Medawar (1976) is getting antiquated for the consumers today who are more aware of social issues and know that some level of corporate responsibility can be forced upon sellers. For the business giants of tomorrow, it means that simply telling a buyer about the advantages of buying a certain product or technology is no longer enough for a marketing campaign. They might also have to show the buyer that the company is socially responsible and follows ethical practices. The companies who have done it in the past or can do it in the future will certainly benefit from the situation while the rest will feel it come up as an issue again and again. Word Count: 2,757 Works Cited Adams, C. 2004, ‘The ethical, social and environmental reporting-portrayal gap’, Accounting, Auditing and Accountability Journal, vol. 17, no. 5, pp.731-757 Alleyne, S. 2005, ‘But Can You Walk the Walk’, Journal of Black Enterprise, vol. 36, no. 2, pp. 100-105. Chwastiak M. & Young J. 2003, ‘Silences in Annual Reports’, Critical Perspectives on Accounting, vol. 14, no. 1, pp. 533-552. Colvin, G. 2006, ‘What Makes GE Great?’, Fortune, vol. 153, no. 4, pp. 90-96. Demos, T. 2006, ‘The World’s Most Admired Companies’ Fortune, vol. 153, no. 4, pp. 72. Dineen, S. 2005, ‘The Throwaway Generation: 25 Billion Styrofoam Cups a Year’, The Environmental Magazine, vol. 16, no. 6, pp. 35-36. 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