Corporate Social Responsibility the Good,

Corporate Social Responsibility

The Good, the Bad and the Ugly

Corporations have been blamed for a variety of evils from global warming and the destruction of the rainforest to problems related to gross negligence of funds as well as abuse of employees. The past two decades have seen a host of ramifications from the 'anything for a buck' mentality that have left the public reeling with mistrust and even hatred for corporate entities. Business, more than any other force be it social, political, or religious, shapes and creates the foundations of government and society. It has only been fairly recently, however, that business has taken appropriate measures to ensure that its operations and its members behave in an ethical and socially responsible manner. Unfortunately the nature and legal identity of a corporation is such that it imbues its owners and stakeholders with certain indemnifications that up till now have relieved them from the oppressive burden of accountability. 'The corporation as a thing is not pathological. The problem lies with those who benefit from its structure and design. The corporation is where they hide.' (Glasbeek 2005: 23) in the past, this has created a corporate 'norm' of managed mendacity (Ferguson 2004) when it comes to taking responsibility for its consumers, the environment and even its working staff. This is the truly ugly side of this system, this norm of malaise regarding the damage done by thinking only of profits. This attitude has not only taken a toll on public opinion, but on the structure of many businesses as well. So much so, that now CSR (Corporate Social Responsibility) is becoming synonymous with corporate sustainability and many businesses, both large and small, realise that in order to sustain growth they must look at the long-term impact their practices have on the environment, both externally and internally.

But this is really nothing new. For centuries businesses have been called on to take social responsibility on their shoulders, since it is that very responsibility that engenders good business in the first place. Nowhere more poignantly noted than in that tale by Dickens where Scrooge, complimenting the ghost of Jacob Marley on his good business sense is met with this retort:

Business!' cried the Ghost, wringing its hands again. 'Mankind was my business. The common welfare was my business; charity, mercy, forbearance, and benevolence, were, all, my business. The dealings of my trade were but a drop of water in the comprehensive ocean of my business!' (Dickens 1912:36)

Has this cry fallen on deaf ears for centuries? Hopefully this is not the case. Yet, as in all things, there are many variables to consider when determining just what this responsibility entails. The World Bank offers one general definition:

Corporate Social Responsibility is a term describing a company's obligations to be accountable to all of its stakeholders in all its operations and activities. Socially responsible companies consider the full scope of their impact on communities and the environment when making decisions, balancing the needs of stakeholders with their need to make a profit. (Doane 2005: 215)

This definition tends to err on the side of profitability and considering the source this is not surprising. Yet this is the crux of the issue that any businesses face, the dilemma of CSR vs. profitability. There must be a bottom line that is relevant and sustainable to both. In the past this has often seemed a conflict of opposites that cannot be resolved, but only because of the normative effect that corporate culture placed on profits. Now there is some room to breathe and let in some air of reason. By devoting more time and profit to a CSR initiative, businesses are realising that less profit in the short-term may provide for sustainability and longevity down the road. Anver Versi gave a speech at the University of Illinois entitled 'CSR-First Principle of Survival' and had this to say:

believe that good corporate social responsibility is not only excellent for the bottom line for individual companies but because good CSR is an essential ingredient of civil social responsibility, particularly in the developing countries if the burgeoning cities and their slums are to be transformed into creative, productive conurbations. Let us make no mistake about it. The economies of the developed world will depend more heavily on the resources and labour in the developed world. (Versi 2007: 35)

However, the balance is often difficult to achieve between corporate profit and corporate responsibility. Companies are more used to pounds and pence bottom lines in their balance sheets than they are other less tangible outcomes:

One of the first challenges facing a company that wants to operate under the principles of CSR is determining how to balance its social and environmental responsibilities with its more clearly defined economic responsibility to earn a profit. It is important for promoters of CSR to acknowledge that at some point the cost of being socially and environmentally responsible outweighs the benefits. When this happens, most firms will cease to engage in new initiatives. In essence, CSR has a built-in social and environmental glass ceiling that is dictated by the dominance of the firm's economic commitment. (Berkhout 2005: 15)

Realistically, after all, if the company goes out of business, that in a sense also shows a lack of social responsibility to the public as well as the shareholders of the corporation. This is the sensibility that needs to be achieved; that the bottom-line for the company is the same as the bottom line for its social responsibility. They are not necessarily anathema to each other, but complimentary and mutually sustainable.

However, in the past the normative nature of profit for corporations became the rule and few companies would transgress that decree.

According to advocates of liberalization, such as Hayek, faith in market efficiency led to broad deregulation and less monitoring during the 1980s and 1990s. As a result, opportunities for the market process to engender its own spontaneous norms were enlarged. At the beginning of 2001, we realized that an increasing number of companies had been circumventing accounting rules to mislead investors, seemingly without fear of being convicted. These malpractices became so widespread that they can be considered a regularity of conduct. That is, they were norm-based behavior patterns brought about by liberalized markets. (Duran 2007: 222)

Slowly this norm-based behaviour is being replaced by a heightened consciousness in business and supported by markets and consumers that will no longer tolerate these self-serving actions for greed and gratification. However, to recreate this norm as an ethical business attitude will require us to look at the smaller indiscretions or activities and no longer minimise the impact of big business. This can be helped by understanding and providing assistance to institutions that support those businesses that operate on a sustainable platform and provide a social return on investment beyond only the financial gain of the corporation. The markets need to transform in such a way as to eradicate the larger corporate 'winner-takes-all' approach if there is ever going to be a change in this norm-based behaviour. (Doane 2005: 215)

Deborah Doane in her article, 'Beyond Corporate Social Responsibility: Minnows, Mammoths and Markets' Posits the following: 'There are four key drivers that would impel a company to adopt a CSR programme: managing risk and reputation; protecting human capital assets; responding to consumer demands; and avoiding regulation.' (Doane 2005: 228) These drivers are certainly the harbingers of change in the new age of social responsibility. In particular these four drivers not only address that social responsibility, but also the fiscal responsibility of the corporation in order that it may sustain itself and grow from here.

Buried in this winner-takes-all approach to business is the concern that too much is never enough. This is especially true considering the exorbitant rise in CEO's salaries and bonus packages that have been driven to astronomical highs seemingly out of sync with any actual benefit back towards the company and its shareholders. As Stelzer states, there is a need to instil in the new corporate awareness a sense of 'enoughness.' (2004) the corporation needs to adopt a sense of moderation when it comes to equating value and wages.

A executives create an organization's culture not by words but by actions. If those farther down in the ranks perceive that the chief executive officer and his senior executives condone virtually any behavior that will result in greater revenues and profits, a culture of 'succeed at any price' will quickly prevail. (Ferguson 2004: 29)

Another issue hearkens back to the very nature of the corporate veil, which protects the company's agents, but often keeps shareholders in the dark regarding the nature of the actions of these agents. This has been penned the principle-agent problem (Seltzer 2004), this situation is created when the shareholders who own the company do not or are not able to maintain adequate control over the agents who are managing their business. A situation that can be rife with corruption may go completely unnoticed by the shareholders and can be maintained long enough for the agents to gain financially while the company is wound down to a profitless lump of coal.

But the shareholders themselves need to be more aware and more involved in their company's business in order for any meaningful change to sustain itself:

Shareholders, the intended beneficiaries of the corporate vehicle, are the ultimate capitalists: avaricious accumulators with little fiscal risk and no legal responsibility for the way in which they pursue their imperative to accumulate. Shareholders, not corporations, show indifference to the needs and values of society. It is their behaviour that is most appropriately characterized as amoral indifference to the plight of others and their environment. Shareholders, not corporations, behave in a pathological manner. And shareholders should be the targets for the cure that we need for our ills. (Glasbeek 2005: 24)

There is also the problem of victimisation of other cultures in a global market. As Strike, Gao and Bansal (2006) point out in their article, 'Being Good While Being Bad: Social Responsibility and the International Diversification of U.S. Firms.' CSR is often used in the primary country to cover up the unethical treatment of a corporation's labour force in another world market. They illustrate the example of Nike who employ's over 23,000 people world-wide, but has created sweat shops in underdeveloped countries, either directly or indirectly, in order to produce greater profits, part of which they market as donations to help with the alleviation of poverty in those very same countries. Again the culture of deception and spin doctoring is in full ugly force in this example.

This type of behaviour not only impacts the citizens of these countries but can also have devastating effects on the natural ecosystem of the region as well. It is important to remember that any CSR initiative must keep a top priority when dealing with other countries.

With respect to the natural environment of host countries, the concept of 'sustainable strategic management' sets the standard high... this refers to strategic manage-merit processes that seek competitive advantages consistent with a core value of environmental sustainability. (Carroll 2005:132)

However, all is not lost, there are many corporations that are following and encouraging good CSR in their development and continued sustainability. One such example is the GAP. In fact they address CSR in their mission statement for the corporation:

At Gap Inc., social responsibility isn't just a catchphrase or a feel-good initiative. it's a reflection of who we are and how we operate as a company. To us, being socially responsible means striving to embed our values and ethics into everything we do -- from how we run our business, to how we treat our employees, to how we impact the communities where we do business. (Wright 2007: 47)

In an interview with Patrick Wright in the journal Human Resource Planning (2007), Eva Sage-Gavin Executive Vice President, Human Resources and Corporate Communications, of Gap Inc. had some very candid and compelling remarks:

We think of corporate social responsibility across Gap Inc. In four strategic ways. The first one is this whole idea of sustainable solutions in our supply chain. This consists of working on a four-part strategy to improve working conditions, monitor factories, integrate labor standards into our business practices, and collaborating with outside partners to drive industry-wide change....The second is with our employees and making Gap Inc. A place where people can flourish and build their careers in a positive work environment. The third is community involvement, including everything from our foundation to our volunteerism. The fourth key area in corporate social responsibility for us is environment, health, and safety. (Wright 2007: 46-47)

Wright has also noted that the GAP was one of the first retailers to release a social responsibility report that not only touted the company's strengths in this area, but its weaknesses as well, a SWOT report on corporate responsibility that allowed for complete transparency into the successes and failures of the company. This transparency is another key tool in the abandonment of the old school regime's hide and seeks policy of deception and malpractice.

Another component that has prompted many corporations to address social responsibility in a proactive fashion is the impact of negative publicity on the company. This can often have quite a detrimental effect on the bottom line of the corporation.

Negative publicity, in particular, has the potential to damage corporate image. This is due to its high credibility as well as the negativity effect, a tendency for negative information to be weighted more than positive information in the evaluation of people, objects, and ideas (Mizerski, 1982). Because the media has a preference for reporting bad news (Dennis & Merrill, 1996), companies are more likely to receive bad press rather than positive press. (Dean 2004: 193)

Quite often, with the depth of reporting and the ardour of the media, spin doctoring is no longer enough. It is often incumbent upon the leadership to extol the virtues of social responsibility and implement programs and initiatives that will be transparent to the public and engender a feeling of good will and responsible behaviour (Plummer 2005).

One such initiative, the Global Health Fellows program developed by the Pfizer Corporation in 2002, is an excellent example that combines a program of international corporate volunteering which at once attempts to integrate the pairing international partnerships in capacity building with the concept of employee volunteering and enrichment:

The Global Health Fellows Program was created in 2002 as a corporate philanthropy initiative to develop the capacity of local health organizations in developing countries. Pfizer managers also believed that employees would gain opportunities for professional growth through the challenge of working in multicultural and low-resource settings. (Vian, Mccoy, Richards, Connelly and Feeley 2007: 31)

Not only does this project aid in a world-wide program to improve healthcare, but also benefits the personal and professional lives of the employees who volunteer for the program.

CSR also depends on the correct perceptions of who the stakeholders are as regards the company's social responsibility. These involve persons or organisations that are both inside and outside the company. Internally, stockholders require appropriate returns on their investments; employees seek a wide range of job satisfactions; unions seek benefit for their members and so on. Externally, customers want value for their money; suppliers search for trustworthy buyers; governments demand adherence to legislation; competitors want a fair playing field; local communities need corporations to be responsible citizen; and the general public has the overall optimistic expectation that the business must improve their quality of life, just to name a few. (Sims 2003)

In order to accomplish this task of addressing concerns for the involved parties Ronald Sims, the author of the book, Ethics and Corporate Social Responsibility: Why Giants Fall

Gives companies a checklist to start their search for a socially responsible corporate ethic:

1. Identification of the stakeholders

2. Understanding the stakeholders' specific claims vis-a-vis the company

3. Reconciliation of these claims and assignments of priorities to them 4. Coordination of the claims with other elements of the company (2003:40)

It also must be remembered that corporate responsibility is not a new idea, but began life as the need for ethical owners of businesses to give charitably to those in need and create the aura of stewardship rather than ownership as regards a corporation. Most recently the concept of CSR was nurtured by criticism and an increased distress over the social environment as well as the changing social contract between the corporation and the world. (Sims 2003) Now, several of these organisations have responded with a renewed commitment to social responsibility that has led to an increased corporate empathy toward stakeholders and improved internal and external ethically responsible performance.

There are certainly different perceptions by companies as to the importance of a CSR initiative. These are often conflicting and diametrically opposed views ranging from CSR as being of vital importance in order to achieve the corporation's financial objectives as well as the previously discussed advantages of risk management. Still other companies see CSR as strategic in and of itself as a moral responsibility and not simply a financial outcome. Yet, still others do not place any importance at all on CSR inside the framework of the overall mission of the business. (Husted and Allen 2006) Different cultures also have different takes on CSR, for instance:

U.K. And U.S. firms mentioned ethics codes more often than their Dutch and French counterparts. With regard to the U.S., this observation may reflect the strong U.S. Protestant background (Vogel, 1992) and of the American tendency to codify social relations with rules (Weaver, 2001). Given that Europeans have long been skeptical of the moral role of businesses, it is understandable that European firms are not eager to highlight the moral standards by which they should live (Maignan and Ralston 2002: 498-99)