Corporate Governance and Social Responsibility Research Paper
- Length: 16 pages
- Sources: 7
- Subject: Business
- Type: Research Paper
- Paper: #12778445
Excerpt from Research Paper :
Additionally, it has been observed that whenever companies implement strategies of CSR, they do this not out of individual choice and desire, but as a result of imposed legislations. "All of these decisions are made under the mandatory legal rules embodied in employment and labor law, workplace safety law, environmental law, consumer protection law, and pension law. Such rules, because they often apply to all businesses, are not susceptible to easy evasion through choice of form. As a result, those charged with governing a corporation find their decision tree considerably trimmed and their discretion decidedly diminished by mandatory legal rules enacted in the name of protecting stakeholders" (Winkler, 2005). In other words, the modern day evolutions of corporate social responsibility "caution against a rush to declare the ultimate triumph of shareholder primacy" (Winkler, 2005).
As a direct result of this changing legislation, more companies have commenced corporate social responsibility programs. In essence, it is even argued that companies -- for profit entities to be more precise -- only implement adequate corporate social responsibility agendas when they are obliged to do so by their governments; and when the governments follow through the implementation. But in spite of these statements, a significant growth is observed relative to CSR programs developed and implemented by the economic agents. This trend virtually implies that the acts of corporate social responsibility are in a continuous process of development and that they seek organizational involvement in society well-being. "As new governance theorists have suggested, CSR shifts the emphasis from traditional government regulation of corporate conduct to the promotion of disclosure by corporations and their engagement with civil society. The world of CSR is, precisely as predicted by new governance theory, a complex communication network among public and private actors" (Conley and Williams, 2005).
Aside the actual regulators, an important role in the propagation of corporate social responsibility has been played by the not for profit, non-governmental organizations, which have intensely militated and pressured the governmental institutions into better regulating the actions of economic agents. The non-governmental institutions have focused primarily on the implementation of corporate social responsibility to regulate the actions of large entities, specifically those of multinational corporations (MNCs). The motivation behind these pressures of the NGOs (non governmental organizations) has been constituted by the following:
1. A perceived shift in the balance of power from nation states of multinational corporations and international institutions, such as the World Bank or the International Monetary Fund
2. The absence of corporate responsibility on the part of the multinational organizations under the law at the time of the protests
3. The increasing popularity of the anti-globalization and anti-corporation movement
4. "A conclusion on the part of large, international human rights organizations that they have been too focused on traditional categories of civil and political rights while neglecting economic, social, and cultural rights; and
5. A desire on the part of some people in the NGO world to enlist MNCs and business executives as allies and as potential levers for promoting human rights globally" (Winston, 2002).
4. The case of Wal-Mart
The literature review, as it has been expected, is a generic introduction to the field of corporate governance and corporate social responsibility and it offers a solid starting point in the proposed analysis. Yet, in order to answer the pre-posed questions, it is necessary to assess a real life situation. The company selected to serve this purpose is Wal-Mart, the largest retailer within the United States, and the reason as to why this entity has been selected refers to the years of sorrow the company has endured due to its stigmata of low prices at any cost.
Wal-Mart was founded in 1962 in Rogers, Arkansas by Samuel Moore Walton, a former United States soldier who had a vision of creating a store that sold a vast array of products at affordable prices. Due to the success enjoyed, Walton opened one store after the other and soon expanded throughout the entire country. Throughout the past recent years, the company has intensified its efforts of penetrating the international market, but it has only been able to register successes in Canada and South America. In Europe and Asia, the competition was fierce and the company was even forced to close its stores and declare defeated.
Wal-Mart's motto is that of "Save money. Live better" (Website of the Wal-Mart Stores, 2010), and the business agenda was that of implementing the lowest possible price. While the initial response was positive and people reacted to the low price, the consumers eventually became more pretentious and commenced to accuse the retailer of poor quality of the services and products sold. The vendor found itself in a situation in which most of its operations, actions and decisions were being criticized. Some of the notable accusations brought to the retail monolith include:
(a) it imported products from cost efficient regions outside the United States and the respective items suffered damages during the transportation process
(b) it sold poor quality products which did not satisfy the needs of customers or which broke immediately after purchase to only materialize in financial losses for the customers
(c) They offered poor quality assistance and services
(d) They paid the employees minimum wage and asked them to put in extra hours, often unpaid
(e) They discriminated against women and racial minorities and only the while males were promoted to managerial positions
(f) They did not invest in the security of the customers and employees. While the security inside the stores was intense, people would easily get mugged or even killed in the parking lots outside the stores as these were never guarded (Greenwald, 2005).
All these accusations made the company realize the necessity for a comprehensive change processes through which it would create more value for the various categories of stakeholders. The current corporate governance and corporate social responsibility program of Wal-Mart integrates the following elements:
(a) the involvement in several programs to support the well-being of Americans, such as the offering of educational scholarships, the sponsoring of local sports events or the fighting of hunger throughout the entire United States
(b) the offering of support for local farms both for the development of the community as well as for the offering of fresh produce in stores
(c) the creation of a workplace which stimulates and rewards the employees and presents them with various benefits
(d) the raising of funds for charitable causes
(e) the support in the research of alternative sources of energy
(f) the recognition and integration of diversity in terms of all employees, suppliers, customers, products and so on (g) the following of three sustainability goals: "to be supplied 100% by renewable energy; to create zero waste [and] to sell products that sustain people and the environment" (Website of the Wal-Mart Stores, 2010).
4.1. Importance of corporate social responsibility
Given this major change in the relationship of Wal-Mart with its various categories of stakeholders, a question is being posed relative to the factors which have driven this change as well as the realization of the importance of corporate governance and corporate social responsibility. These factors are integrated and briefly explained in the table below:
Table 1: Factors determining the importance of corporate governance and corporate social responsibility
Explanation of the factor
Sarbanes-Oxley Act, SEC fillings, annual reports, sustainability reports
Consideration of financial loses
Contemporaneous industry-wide necessity; improved supply chain operations and organizational efficiency
Changing demands of the consumers and the employees
Incremental pressures due to the threat of human activity on the environment
1. Legal -- as it has been mentioned in the Literature Review section, the governments have developed and implemented new laws by which they forced economic agents to increase their responsibility in the relationship with the stakeholders. According to the Sarbanes-Oxley Act of 2002, companies are required to develop and forward a written code of ethics (Meisling, 2004). The company is also required to ensure transparency through the construction of public reports, such as fillings for the Securities of Exchange Commission, annual reports, or sustainability reports.
2. Economic -- Wal-Mart targets primarily the price sensitive consumers, but even these were complaining of the poor quality of the products sold in store. As complaints increased, the volume of the purchases -- and subsequently the sales revenues -- decreased as well. In terms of the relationship with the employees, Wal-Mart strived to reduce expenditures by offering low wages and limited benefits, but this ended up costing them money in the form of high employee turnover rates. These situations materialized in financial loses which subsequently translated into an impending necessity to implement the programs of corporate governance and corporate social responsibility.
3. Social -- Wal-Mart bares the stigmata of the big corporation which enters a community and destroys the local mom and pop stores. In order to increase the acceptance of the communities, it was…