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CONTENTS

Abstract                                                                                                    2

Introduction                                                                                              3

Definitions                                                                                                3

Factors affecting globalisation and corporate responsibility                    5

Benefits of globalisation and corporate responsibility                             6

Relationship between globalization and corporate responsibility            8

Conclusion                                                                                                 10

Appendix                                                                                                  11

References                                                                                                 12

Abstract

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.

Factors affecting globalisation and corporate responsibility

Few years back environmental and social issues were for activists and there were a series of local states and countries and regional businesses. Today they are amongst the most critical factors shaping government policy and corporate strategy, and there is global interdependence. It is characterized by industrialization, internal divergence, trade growth take off and urbanization.

There are some push factors that highly contribute to corporate responsibility in a globalization aspect, they include:

1. Political factors – this mainly involves the liberalization of trade and investments. The main political factor has been the development of free trade among nations. Dower, N (2004) Resulting in  formation of two major organizations; the General Agreement on Tariffs and Trade (GATT) currently replaced by the World Trade Organization (WTO) and EEC, to which one may add the progressive opening of emerging nations to foreign investment. Third world countries have progressively adopted more positive attitudes towards foreign direct investments (FDI). Because initially investment laws were designed to attract foreign investors in order to induce them to produce locally, but over the years the legislation has evolved towards a more open stance, favoring cross – border investments.
2. Technological factors – these mainly involve logistical processes through transport, communication and economies of scale. Increased adoption of technology has lowered the cost of transport and communication and the unit cost of production through the localization of productive capacities and sourcing in low – cost. Progress in manufacturing technology gave a tremendous and impetus to the need to concentrate production in world – class factories benefiting from huge economies of scale.
3. Social factors – The diffusion of lifestyles through movies and television have increased the brand awareness by consumers worldwide. Example Sony, Nike and Coca Cola with their “share a coke with” movement. Convergence of customer behavour and needs is also facilitated by urbanization and industrialization of societies. The less cultural and more technical are product, the more likely it can be standardized and appeal to masses of consumers in all countries.
4. Competitive factors – The emergence of Japanese firms and latter Korean firms, they adopted a global approach at the very beginning of their international expansion, this was mainly due to the fact that they lacked many national subsidiaries and their expansion was occurring at the time of opening of trade Competitions had to adopt a similar strategic posture if they wished to survive. There was also globalization of clients or customers. Example in the 1970’s Citi bank created a global accounts management unit to service the corporate clients with international subsidiaries.

The benefits of globalization and corporate responsibility

 The following benefits accrue to an organization for  adopting a global strategy that also propagates corporate responsibility.

1. Cost benefits – Comes from economies of scale owing to product standardization as well as increased bargaining powers over suppliers of raw materials, equipments and services, components, ability to organize a logistic and source a network based on location factors. Example Otis was able to lower the cost of elevators in Europe by 30 per cent after introducing a pan European manufacturing system.
2. Timing benefits – These are due to coordinated approach in product launching in the early stages of production lifecycle. For a multinational setting, each subsidiary is more or less free to adopt products for its own market. This may sometimes be known as “the shopping caddy” approach to product adoption. Such an approach generates inefficiencies in the management of the product lifecycle since the optimal volume is obtained only after a lengthy process of product adoption by subsidiaries. A classical failure of the shopping caddy is the refusal of Philips America to adopt the video system, the v2000, developed by Philips Netherlands, its mother company.
3. Learning benefits – Accrue from the co – ordinate transfer of information, best practices and people across subsidiaries. Such transfer eliminates the costly” reinvention of the wheel” and facilitates accumulation of experiences and knowledge. Example in Thailand, Unilever formulated and implemented an innovative strategy to produce and market ice creams. This experience served as a template for other Asian countries.
4. Arbitrage benefits – Comes from advantages that a company managing globally can gain in using resources in a country for the benefit to another. The advantages can be direct competitive or indirect cost advantages. This can be done by engaging in global chess games which might include engaging in price wars in one country in order to mobilize the resources of competitors in that countries depriving them off the cash they could have used elsewhere. Example Michelin from France moved into North America. Goodyear the US tyre giant who also happened to have small market share in Europe, engaged in a price war that Michelin was obliged to counter by lowering its prices, and de facto reducing its financing scope for its American expansion.             
5. Sustainability  is regarded as the backbone of corporate responsibility There seems to be an endless battle concerning whether sustainability is merely a component of corporate responsibility or social responsibility is simply one among the so-called bottom lines of  sustainability’s triple bottom line. Aras, G and Crowther, D (2008) According to the British standard of sustainable development of 2006, sustainability an enduring, balanced approach to economic activity, social progress and environmental responsibility. Responsibility of an organization on the impacts on its decisions and activities on society and the environment through transparent and ethical behavior. It is viewed as a mechanism for entities to voluntarily integrate social and environmental concerns into their operations and interactions with their stakeholders, which would be over and above an entity’s legal responsibilities. is a term which has suddenly become
6. Accountability seeks to explore the ‘missing link’ between Corporate Responsibility and associated reporting initiatives; governance mechanisms which are capable of embracing a true stakeholder accountability. Wrighta On a global perspective using a range of case studies, drawing on experiences of both public- and private-sector initiatives in Europe, offer insightful analysis on the complex relationships between the market, the state and civil society in the development of Corporate Responsibility, globalisation, accountability and sustainable development.

Relationship between globalisation and corporate responsibility

 Corporate responsibility is associated with conduct of corporations and particularly whether corporations owe liability to stakeholders other than shareholders. The question as to whether corporations owe liability to broader stakeholders has always been debated at various quarters throughout the twentieth century. This has been largely prompted by the emergence of globalisation as a defining trend.

The Corporate Responsibility debate has largely evolved around the conduct of multinational corporations Marinov (2009) due to their size, they have the ability of significantly influencing international and domestic policy in the communities in which they operate. Central to the debate are the perceived deficiencies of national and international law solutions regarding corporate accountability, particularly the ability of available regulation to regulate a corporation’s conduct in the jurisdictions outside the corporation’s home state. Proponents of Corporate responsibility argue on the basis of the efficient functioning of global markets which depends on a socially responsible business conduct.

 There are a number of factors relevant to the current Corporate responsibility debate, Cramer, J (2014) including: globalisation and the propagation of cross‐border trade by MNEs leading to an increase in awareness of Corporate responsibility practices relating to  such as human rights, health, environmental protection, and safety; organizations, example the UN, the Organisation for Economic Co‐operation and Development(OECD) and International Labour Organisation (ILO), have developed compacts, declarations, principles, principles and other instruments which outline norms for acceptable corporate conduct.

Almadani, (2014) Access to information and media has enabled the public to be more informed and to easily monitor corporate activities; consumers and investors demonstrate how companies address risks and opportunities relating to social and environmental issues recent. High profile corporate collapses have greatly contributed to public mistrust and  demand for improved corporate governance, transparency and accountability; commonality of expectations by citizens of various countries with regard to minimum standards that corporations should achieve in relation to social and environmental issues and regardless of the jurisdiction in where the corporation operates; thus increasing awareness of the Inadequacy of current legislation and regulations  with regard to Corporate responsibility.

Corporate responsibility has notable relation with the not for profit organizations. Milstein, H et al (2003) Most of the organizations are global; they serve all over the world. It is often thought that is an organisation exists for a public or charitable purpose then it must be a socially responsible organisation. Is about how an organisation conducts operations and deals with its stakeholders. We can see that there is a different focus and it needs to consider in terms of CSR implications. For stakeholders the sources of conflict might be different and the actions taken in resolution of this might also be different. Accountability can be to donors, beneficiaries and a range of other stakeholders.

Corporate responsibility also has a relation with strategic management. Most of the multi -national companies are more concerned with strategic management; they need proper planning for their entry in to new markets.  In the course of performing his duties (planning, control, organizing and staffing) as a manager. It is important for him to uphold accountability, sustainability and transparency. Jacques R (1996) Good corporate governance will address creating sustainable value, ways of achieving the firm’s goals while increasing shareholders’ satisfaction and efficient and effective management alongside increasing credibility. Also ensures efficient risk management by providing an early warning system against all risk, thus ensuring a responsive and accountable corporation. It also describes the role of a firm’s units in developing control and internal auditing keeping a balance between economic and social benefit.

Conclusion

Corporate responsibility articulates the business ethics of the firm. It involves taking care of the surroundings of the corporate in regard to its continued smooth existence in future. However with the emergence of globalisation this has shifted to responsibility in a global perspective. The social responsibilities are usually in the line of the business, regarding the environment, employees, consumers, lenders investors among others.

In reference to the above report, we can deduce that they are both related. There are many factors as to why one solution addressing the issue of corporate accountability pertaining to Corporate responsibility, particularly with regard to directors duties, may not be feasible such as the sovereignty of the many nations who make up the global community, culture, diversity of legislation, regulation and business practices of the various jurisdictions where these  corporations operate and the significant uncertainty on how  to regulate conducts of corporations in foreign jurisdictions

Appendix

Globalisation and the significant growth and influence of the private sector have highlighted issues such as corporate responsibility and the regulation of Multi nationals. Considerable progress has been made in holding companies which are accountable for their environmental performance,  progress on social issues including  human rights,  corporate transparency corruption and labour standards have been more limited Although attempts to widen the scope of stakeholders  directors may consider, for most companies corporate consists of voluntary initiatives designed to enhance the social impact of their practices, with some of these initiative actively promoted by government.

Many corporations have incorporated corporate into their codes of conduct, sought to work closely   in formulating corporate policy in underdeveloped countries, that  subscribed to the Global Compact among other UN initiatives, and have to incorporate  guidelines for their financial reporting. Despite these there still remains a gap pertaining legal accountability related to corporate practices, particularly into multinationals operations in jurisdictions outside their home state..

There is no easy solution; however this does not mean a workable solution concerning these matters is not possible or feasible. It is increasingly apparent that in modern industrialized economies, profit maximization is by a demonstrated approach to corporate responsibility. Focusing solely on  traditional view on shareholder value may bring  negative impact on a given company’s ability to maximize shareholder value by placing too much emphasis on short term performance, whilst neglecting on long term opportunities and issues. To maximize the benefits of international investment corporations.

Globalisation of businesses is viewed by many as a provider of essential ingredients for success to entrepreneurs and corporations in developing countries. A multinational brings reliable energy source example electricity in a village in some region in Africa by building a hydroelectric dam. A Bulgarian manufacturing firm making hydraulic equipment expands business through exporting worldwide. Through world bank’s  corporate responsibility it supports a network of entrepreneurs in Eastern Europe and helps facilitation of upgrade of banking services in Latin America this will help change the tags on this countries from developing to developed.