Corporate Governance and Social Responsibility Case Study

  • Length: 10 pages
  • Sources: 4
  • Subject: Business
  • Type: Case Study
  • Paper: #92564365

Excerpt from Case Study :

Both proposals were consequently amended and eventually accepted by the SEC.

The audit committee makes sure that the books aren't being cooked and that shareholders are properly informed of the financial status of the firm. Characteristically, the audit committee advocates the CPA firm that will audit the company's books, appraises the activities of the company's independent accountants and internal auditors, and reviews the company's internal control systems and its accounting and financial reporting requirements and practices. The compensation committee usually does the following: (1) recommends the selection of the CEO, (2) reviews and approves the appointment of officers who report directly to the CEO, (3) reviews and approves the compensation of the CEO and the managers reporting to the CEO, and (4) administers the stock compensation and other incentive plans. The suggested committee establishes experience for potential directors (Lunnie, 2007; pg. 90). It also puts collectively a list of candidates for board membership for the shareholders to vote on. In all these cases, the point of having only external directors is to prevent management from concealing information, coming to a conclusion on its own pay, and gaining effectual control of the company by controlling the board election process. Diversity should be a momentous factor in constructing a board. The members should all be competent persons, but there should be a diversity of experience, gender, race, and age.

Chapter Three -- Adoption of Corporate Social Responsibility Initiatives

Analysis & Recommendations

Corporate Social Responsibility Initiatives

Corporate social responsibility is likely to mean different things in different business settings and periods. As an idea, it emerged initially in the 1960s among multinational companies from America and those involved in past colonial states in Africa and Asia. U.S. corporations such as IBM, and Xerox in its former day, with marketing companies throughout the world, created concepts of stakeholder relations to justify their positions as foreign companies engaged in new markets (Carroll, 2001; pg. 65). It also grew as a response to the American civil rights movement in the 1960s and 1970s and declared for economic justice in the troubled U.S. cities and later in the conflicts in UK inner cities.

Those multinational enterprises engaged in commodities and natural resource expansion evolved the concept in the face of continued threats to post-colonial investors, nationalization and an all the time more negative environment for business. Several, in any case, had a long tradition of first-rate business standards and active, if paternalistic, community support. The weight was on companies to validate their presence, and the little interest taken in business at that time by the UN system was essentially negative in its approach to multinational enterprises, some of whom had been vindicated in engaging in 'political interference'. A few of the first social impact studies come into view at this time, focusing on economic, social, and human development contributions and far less on environment which had not yet materialized as a significant concern.

In the mainstream, corporate social responsibility was seen as a self-protective shield at times when business and its property were under risk. It surfaced in a similar form at the time of rigorous anti-apartheid campaigning against South African investment in the 1970s, with calls for pulling out of the investments and a burden on demonstrating the contribution(s) that could be made by a sustained presence (Lunnie, 2007; pg. 167).

Throughout these years, corporate responsibility, sometimes used interchangeably with 'corporate citizenship', was often equated with corporate philanthropy as there were a large measure of community support and charitable donations involved in action, whether in the regeneration of U.S. cities, the building of schools and health centers or the funding of scholarships (Carroll, 2001; pg. 11). To this day, U.S. corporate and foundation behavior, habituated to major roles as a donor in U.S. society, sees corporate responsibility largely as a philanthropic strategy, whereas a European model is up-and-coming with far greater emphasis on non-philanthropic activity. Japanese major company behavior has often followed in the footsteps of the American model, even though it gives considerable emphasis to its supply chain contributions (Guerra, 2004; pg. 3).

According to the view of social responsibility as social responsiveness, socially responsible behavior is preventive rather than restorative. The term social responsiveness has become widely used in recent years to refer to actions that go beyond social obligation and social reaction. The qualities of socially responsive behavior include taking stands on public issues; expect future needs of society and moving toward pleasing them, and communicating with the government on the subject of existing and anticipated socially desirable legislation (Drucker, 1984; pg. 67). Corporate managers, according to some analyst's views, use their skills and resources in resolving an existing or anticipated problem. This view as a result, places managers and their corporations in a spot of social responsibility, very distant from the customary one that was worried only with economic means and ends.

Events during the 1980s toughened the attitude that corporations must act in response to problems created by their own proceedings. More importantly, the 1970 crisis kicked off the idea that corporations have to be practical and should be responsive to a wide range of social problems since they have the expertise and power to do so. The present debate on the social accountability of business is not worried about obligatory behavior but with socially receptive behavior.

The proliferation of product certification schemes touches many of the issues. A broad government-backed mechanism emerged to certify that international trade would be free of "conflict diamonds" associated with human rights violations in Africa. Exports of soccer balls and rugs from South Asia feature certification processes to assure the goods were not produced using child labor. "Green" labels tout the environment-friendly record of many products, from recycled paper or plastic products to energy-saving devices to "dolphin-safe" tuna (Guerra, 2004; pg. 5). Remarkable variety exists in the types of issues addressed and certification measures employed. The constellation of certifying and supporting organizations can also mix public agencies, business organizations and civil society groups.

Fair Trade initiatives represent a particular application of product certification schemes, usually but not exclusively applied to products based on agricultural commodities. The basic concept seeks to establish a dependable, long-term relationship with commodity growers in developing countries, offering them a higher price for their products by eliminating middlemen traders. Many schemes also provide an additional premium to growers for using environmentally friendly methods and/or for community social development projects. The general approach reportedly stems from efforts begun in 1986 by the Max Havelaar Foundation in the Netherlands to respond to desires for development projects that emphasize trade rather than aid. Starting with coffee and expanding to honey, bananas, tea and orange juice, the Foundation supported Fair Trade products sold primarily in Europe. During the 1990s fourteen other Fair Trade organizations were established, reaching over $200 million in sales by the end of the decade (Guerra, 2004; pg. 11), still largely concentrated in European markets. Some approaches expect consumers to pay a somewhat higher price for certified Fair Trade products while other efforts try to remain price-competitive, using cost savings in the distribution chain to redistribute profits toward developing country growers (Lunnie, 2007; pg. 19).

An important extension of the Fair Trade mechanism to the U.S. market occurred in 2000 when Starbucks announced the introduction of a blend of Fair Trade coffee certified by the non-profit TransFair organization that encourages farmer co-operatives in developing countries to sell direct to coffee roasters or retailers. The breakthrough with Starbucks came after some of its coffee houses were vandalized during anti-globalization protests at a World Trade Organization meeting hosted in the company's hometown of Seattle, Washington. This initiative complemented Starbucks' broader social responsibility programs and helped expand Fair Trade coverage in the United States beyond craft shops and a few grocery stores. Subsequent discussions between Starbucks and Oxfam also led to cooperation on a project to aid coffee growers in poverty-stricken areas of Ethiopia.

Wage standards represent one of the most problematic labor issues in code of conduct debates. The wage debate revolves around the question of where to set an ethical minimum wage rate. Traditional choices involved either the local legal minimum wage or the local industry market wage (that may fall below the legal minimum where laws are not well enforced). In many developing countries, neither choice appears ethically acceptable to civil society groups. Governments over and over again set legal minimum wage rates low as a motivation to attract foreign investment and encourage labor-based exports. In these countries, surplus labor acts as a spirited economic factor donation, meaning market forces of supply and demand also contain wage rates. Under these conditions, either standard can leave workers with inadequate money to live, even significantly the local poverty line.

The concept of a living wage attempts to address this issue by setting an ethical minimum wage rate based on a worker's survival needs rather than other possible distributive justice standards…

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