Managment Essay 2 - Corporate Social responsibility

Managment Essay 2 - Corporate Social responsibility

©Wilson Gan, Management, U of Auckland, May 2009

Bierce, an American columnist, suggested the definition of a corporation is “an ingenious device for obtaining profit without individual responsibility.” (Birece, 1911, as cited in West, 1993). This could not be further from the truth. I disagree with Bierce’s statement against corporations. Corporations can be compared to as a living organism, living and interacting with its environment and are responsible for those interactions. A corporation does not live in a pit; nor could it stand without interactions from other sources. It lives in a socially interactive environment, where organizations interact with other groups in society and are socially responsible for their actions. Social responsibility is a business’ obligation to make decisions and take actions that serves the best interest and welfare of society and the organization itself (Samson and Daft, 2009). Corporations are responsible towards the groups of people it deals business with, towards the environment, being ethically responsible and being proactive in its responsibilities.

A corporation does not stand alone when conducting business. It interacts with people, groups, businesses and government during the normal running of the business. These groups are called stakeholders. Stakeholders are persons or groups with legitimate interest in the company (Williams. C, 2005). Management has a responsibility to ensure the long-term survival of the company and it can achieve that by trying to best satisfy the interest of the multiple interest groups that are present in the company. Addressing the needs and concerns of the stakeholders is important because, when a stakeholder group is dissatisfied, they may terminate the relationship with the company or will go against the company in the form of protest or other negative activities to show their concerns. These actions could seriously harm a business or even cause the company go out of business (Williams. C, 2005). A recent example is the dispute between Air New Zealand and the air crew hired by Zeal that is contracted to work in Air New Zealand. The crews that are working under Zeal feel that they are under paid and mistreated. The union representing the crew went into negotiation but ended up in a standstill, which eventually led to an aggressive campaign with full page newspaper advertisements and a four-day strike. Air New Zealand had arranged management staff to fill in for cabin crew on short-haul flight, therefore not affecting the airline’s operations (Vass, 2009). Although this strike has not cost much in terms of lost of immediate airline operations and sales, it has definitely affected the reputation of the company. The company is now under public scrutiny on their employment policies and the treatment of their staff. Again, we can see that, this case is contradicting with Bierce’s comment. The economic position of Air New Zealand may not be severely compromised by the strike but the reputation has been damaged caused by the lack of consideration towards their employee.

Special interest groups are beginning to play a major role in the decision company makes. Although they are not directly trading or in a relationship with a company, the actions that these special interest group make will influence the outcome of a company’s decision; may affect the public perceptions on what social responsibility is (Williams. C, 2005). In 2000, Los Angeles-based Kaufman & Broad Home Corp and Dallas-based Centex Homes, two of America’s largest home builders, announced that they will start phasing out the use of wood from old-growth forests in their new-home construction. This is due to the protest campaign by environmental groups concerning the sustainability of forest used to creating wood based products (Wedner, 2000). This shows that external pressures can and will affect the decision and strategy of a company. Corporations cannot live in a hole where they are only concern about the profit; which is what Bierce comment is based upon. Special interest groups can change the course of a company and will inveterately cause a paradigm shift among the members of the public; which are customers to the company. Therefore companies need to always take into consideration on these groups and their issues during their planning and decision making.

Increasingly, corporations are more and more aware of its responsibility towards the environment. Environmental issues are among the hot topics that business leaders and corporations are targeting their marketing efforts (Samson and Daft, 2009). Corporations are starting to move towards sustainable production because they seen the need to be sustainable in order to keep the environment healthy for the future generations (Bebbington, 2007).. FedEx Office (use to be called FedEx Kinko),has numerous paper and packaging materials containing post-consumer recycled (PCR) fiber, which helps create a market for recycle materials and recycling programs. FedEx Office is also dedicated to forest protection and conservation. In 2003, the company adopted a forest based product policy, which includes requirements surrounding vendors source of materials for paper making as well as recycled-content standards (FedEx, 2009). This shows that companies not only concentrate on their core business activities and obtaining profit. They take steps, make policies and go the extra mile to help protect the environment.

ISO14001 and Eco-Management and Audit Scheme (EMAS) are set level and standards for environmental management system; aim to promote sustainability amongst corporations. Although we can foresee many advantages in adopting these principles of sustainability, few firms have actually attempt or have these management standards (Marcus and Wiling, 1997). BMW is an exception. The BMW plant in Munich has EMAS and ISO14001 environmental management system put in place, with environmental experts documenting and ensuring the implementation of these requirements. Cars are being painted using water-based paint, minimizing the effects on the environment. Almost 50% of the cars assembled in this plant are delivered by rail transport, which saves energy (BMW, 2009). BMW has made a lot of effort in complying with these standards, even when the company may not directly gain from their actions. Bierce statement on corporation is only for obtaining profit is being challenged with BMW’s efforts towards sustainability.

The topic of organisational ethics, in recent years, has evolved into a significant theory based and a specialised are of study with well-documented cases (Vardi and Weitz, 2004). Ethics includes conducts that are not in the rule books or coded into law, may not serve a direct economical interest but may have an effect to the society (Samson and Daft, 2009). Ethical issues have risen up time and time again in recent years. This has caused damages or bad publicity to certain companies; such as WorldCom, Adelphia, Ford and Firestone (in the automobile safety controversy) etc . Conflicts of interest, is one of the ethical issues faced by corporations. One well used case is Enron and its fall from being one of the top 5 largest companies is United States to filing for Chapter 11 bankruptcy. Top executives of the company made a series of off-the-books partnerships to hide the company’s dept and help inflate stock prices. These actions are a clear conflict of interest as the executives stood to benefit financially from the deals. This issue extend as far as investment banks such as Credit Suisse First Boston, Citigroup and JP Morgan Chase, that helped Enron to structure such partnership. These banks, on top of receiving fees for their service, also profited from investment in Enron stock. Enron also used aggressive accounting practices to boost the bottom line of their financial statements. Enron employees lost their 401(k) plans as their stock price plummeted, wiping out their retirement funds (Trevino and Nelson, 2004). The executives of Enron and the investment banks, was clearly looking at profiting their own companies and themselves when they enter into these questionable and unethical deals and partnership. This is what Bierce mention, when he stated that corporation is only for profit without individual responsibility. However, the decisions of these executives, when only profit is in mind, have cause the fall of a great company, and cause personal and finical loses to their employees. These unethical behaviours also caused the reputation of investment bankers, audit committee other traditional gate keepers to be damaged. We can see that when money is the primary force in pushing a decision and ethical consideration is being pushed aside, even normal system that has been put in place to prevent such undesired behaviour to occur failed to prevent it. (Levitt. A, 2005)

At times, corporations may take actions on responsibilities that are not economically viable but are socially desirable. This includes discretionary responsibilities; which means corporations desire to make contribution to society for the common good. These activities include philanthropically contribution or relief efforts in times of a national disaster (Samson and Daft, 2009). In May 12 2008, an earthquake shook the nation of China, causing death and displacing many lives. Mc Donald, in responds to this crisis, mobilized and helped with the relief efforts by providing food to the earthquake victims, relief workers, military personnel, hospitals and police and fire department officers. In addition to that, Mc Donald set up several food and beverage station, adjacent to blood donation centers, and gave a free sandwich and an orange juice to anyone who donated blood. (Mc Donald, 2009). Mc Donald took action in times of need, even though it will suffer financial loss from these efforts. This shows that Mc Donald is committed to its social responsibly and takes actions in helping the community. Mc Donald clearly shows that does not only concern about profit but also put efforts into other social responsibilities.

Corporation may use proactive response to tackle social responsibilities. The proactive response simply means that the company is taking the lead in social issue, without being pressured by stakeholders; to serve the public interest (Samson and Daft, 2009). The company anticipates and act upon that anticipation before it needs to, and more likely than not, will not have a direct financial benefit from it. Mc Donald has been in the forefront of being environmentally friendly. Over 30 years ago, Mc Donald initiated energy conservation measures, which is 1990, was formally established as Global Environmental Commitment. In the 1990s alone, the company have redesigned packaging items and reduced materials used to making them. Mc Donald’s commitment goes beyond just material and recycling, even the equipment that are used are made environmentally friendly. In January 2003, Mc Donald opened its first hydrofluorocarbon (HFC)-free restaurant in Denmark (Mc Donald, 2009). We can clearly see that Mc Donald has been proactive in response to social responsibilities. They are always trying to keep on step ahead in leading the way to environmentally friendly production and running of business. One of the biggest fast food restaurants in the world does not only keep economic responsibilities but also up holds and are corporate leaders in being a ‘green’ company. Bierce claim of corporations only serving as a device for obtaining profit is clearly not supported by Mc Donald.

In conclusion, Bierce’s statement is not consistent with what we see amongst the corporations that are alive and well today. Stakeholders are among the main groups of people that corporations are responsible to, and the actions that both the stakeholder and corporations make, will have an effect on them both. Corporations are making an effort to be environmentally friendly and moving towards sustainability with adopting management standards such as ISO 41000 or EMAS, even when corporations may not be directly in contact or involved in the natural environment. Ethical issues, although at times may not be of any economical significance, is very important in keeping a business running smoothly. We also see that, having unethical practices can and will cause damages and even the fall of a corporation. Discretionary responsibilities are an active part of a corporation, especially in a disaster situation. Corporations may use tools such as proactive responsibilities to react to social issues and leading the industry in that area. I conclude that Bierce’s statement of corporations only focusing on profit without personal responsibilities is incorrect and we can see that statement being challenged everyday in the corporations around us today.
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Reference
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