Corporate Social Responsibility and Governance

Answer

Corporate social responsibility is highly regarded as a corporation-based concept with a base in law, largely concerned with preserving a corporation’s public face. However, in recent years, focus on corporate social responsibility has shifted to new areas, ranging from environmental protection and sustainable development on labor concerns. This is a concept which has become dominant in business reporting, given the high ethical standards that must accompany business accounting and reporting. Every corporation has a policy concerning corporate responsibility and produces a report annually detailing its activity.

 Due to the globalization of production processes and markets, in the recent years, an ever increasing number of entrepreneur, marketers and business manager usually have to face ethics and social responsibility issues from cross-cultural settings. According to Lasserre P (2003) Globalisation is a term that has seen diverse definitions considering that it is often regarded as an emerging trend.

This report discusses the intersection between globalization, the more legally robust corporate social responsibility. There are regimes being developed in relation to multinational corporate action.  In the first part we look deeply into the definition of corporate responsibility, the principles and its relations to ethics, its effect on organizational activity and the issues surrounding it. In part II of the report we look into the factors affecting  and the benefits of globalisation and corporate responsibility. Finally in the final part (part III) we look into merging of both globalization and corporate responsibility, and conducting a critical analysis on their relations and their areas of departure. We will seek to answer the question whether globalization is an opportunity or a threat to corporate responsibility.  Conclusion will be drawn from the observations.

DEFINITIONS

Corporate responsibility – Shows the relationship between a corporation and their local society; which it resides in or operates. It is also concerned with relationship between corporations and their stakeholders. There are other broader definitions and are concerned with what it is mainly ranging from what is the required relationship between global corporations, governments of countries and individual citizens.

Globalisation – It is in some quarters defined as the free movement of goods, services and capital. However this definition does not cover all the aspects of globalization. Because it is often viewed as a process which integrates world economies, culture, technology and governance. This is because it also involves the transfer of information, technology exchange skilled employee mobility, financial flow of funds and geographic arbitrage across developed and developing countries. Moreover it has religious, environmental and social dimensions.

INTRODUCTION

 Several historical schools of thought, especially from the famous philosophers helped shape the definition and understanding of what corporate responsibility entails. Philosophers like Bentham, Locke and J. S. Mill advocated that social contract implies some form of altruistic behavior.  Self-interest is central to the Utilitarian perspective. They advocated that it was morally right that the pursuit of the greatest happiness for the greatest number – although the Utilitarian philosophy is actually much more based on selfishness. Also Similarly Adam Smith’s free-market economics is predicated on competing self-interest. The above influential ideas put interest of the individual above interest of the collective. The central principle of social responsibility however is the social contract between the stakeholders to society, which forms an essential requirement of civil society. Balabanis, Phillips and Lyall (1998), in the modern times, companies and their managers are subjected to well publicize pressure to play an increasingly active role in the society.

According to Friedman (1966). There is only one social responsibility of business; use its resources and engage in activities that are designed to increase its profits so far as it stays within rules of the game, that is , it engages in open and free competition free of deception or fraud. However some contributors to the definition were thought to be cynical on their view on corporate responsibility. For example Drucker (1984) was of the opinion that; business turn social problems into economic opportunities and benefits, productive capacity, well – paid jobs, human competence and into wealth. Lassere (2003). In today’s business world, managers, politicians, journalists and academics commonly use “globalization”, “global industries”, “global competition”, “global strategies” and “global corporations”. In the modern day and era more and more companies are confronted with the need to globalize or die. While those concepts are widely used, where their meaning is often not well understood. For some people, globalization means to expand the company’s presence abroad, for others it means standardizing a product and selling it to the world, yet to others it used to denote an approach to management, in which decision making is centralized at the headquarters.

David Ricardo in his Theory of comparative advantage showed that it was beneficial to specialize and trade in goods in which they had a comparative advantage. This led to the laying of the foundation of trade theory, the underlying foundation of globalization – in a perfect global setting where goods, people, data and money flow freely, companies can adopt   integrated and coordinated approach to their operations and a competitive battlefield. However the concept of globalization is often regarded as a new concept, before 1970 almost no one talked about globalization. The most commonly used terminology for companies operating in various part of the world, was “multinational”. An example being corporations like; Unilever, Nestle and Proctor & Gamble. They were known as multinational companies, but nobody would have called them global. This global concept came up in the 1970’s and progressively but quickly   invaded boardrooms, editorial offices and classrooms. Globalization is a force that creates growth and opportunities. Opening markets, linked economies and cultures. It has empowered individuals and groups never like before, it also has led to greater attention to be paid to issues including human rights, labor standards and environmental protection - issues that form the core of the corporate responsibility agenda.