The Grey Chronicles

2009.October.8

Corporate Social Responsibility, A Myth? Part IV



The Future of Corporate Social Responsibility

Seward Montgomery Cooper, the Chief Counsel for Good Governance of the African Development Bank, reiterates the events in the past (2007):

“Global recognition of the impact of corporate social irresponsibility; of the Asian financial crises; of corporate scandals in Enron and WorldCom in the United States of America; of Parmalat and Siemens in Europe; and of crises in financial circles in several major African countries over the last decade; in each instance, negatively affected the wellbeing and lives of thousands including employees, pensioners, depositors and ancillary enterprises. These raised alarms for effective regulation of corporations and led to panic in marketplaces, fall in stock prices, run on financial institutions, and quick-fix remedial actions.

Maybe the future of CSR is in the offing. Bryan Horrigan (2007 : 85) also agrees:

“The story of CSR in the 21st century is a story of progressive business sensitization to systems and dynamics of governance beyond government, regulation beyond law, and responsiveness beyond responsibility. It is a story of a rapidly growing alignment across many individual businesses, industry sectors, and geopolitical regions between those systems and dynamics of governance, regulation, and responsibility, on one hand, and a company’s business model, strategy, and impact, on the other.” [Emphasis added.]

Noeleen Heyzer, Executive Secretary of the UNESCAP, in a speech (2008) delivered during 7th Asian Forum on Corporate Social Responsibility, remarked:

“It is the principle of conducting business in an economically, socially and environmentally responsible manner, and weaving this principle into the intrinsic fabric of every company. If every company and business refused to pay bribes, implemented fair labour practices and adopted environmentally, economically and socially responsible practices then our world could be transformed to be more balanced, more just and more sustainable. … Amidst the pain and suffering ensuing from the crisis, let us seize the opportunity to make corporate social responsibility a cornerstone of the business environment … For in our globalized world, the long-term value and success of businesses are inextricably linked to the integration of economic, social, environmental and governance issues into corporate management and operations. The sooner that this is realized, then the better our chances will be for achieving common prosperity, social progress and stability…” [Emphasis added.]

The same principle of business conduct is not only applicable to Asia and the Pacific, but equally to the global scenario. Furthermore, Alizon (Jeffrey) Azer observes:

“At times, CSR presents itself as a credible tool for balancing the pursuit of profit with respect for people and the planet. At other times, CSR appears to be the latest corporate strategy designed to convince the public that capitalism can be compassionate.” [Emphasis added.] (2002: 15)

Incidentally, Aguilera, Rupp, Williams, & Ganapathi’s model (2009) integrates theories of organizational justice, corporate governance, and varieties of capitalism to argue that organizations are pressured to engage in CSR by many different actors, each driven by instrumental (self-interest driven), relational (relationships among group members), and moral (ethical standards and moral principles) motives. They elaborate (2009 841—842):

“Instrumental models (Tyler, 1987) posit that we are motivated to seek control because control can serve to maximize the favorability of our outcomes. This ego-based or self-serving concern for justice stems from the psychological need for control. That is, fair processes allow individuals to more accurately foretell an organization’s actions.

“Relational models (Tyler & Lind, 1992) show that justice conveys information about the quality of employees’ relationships with management and that these relationships have a strong impact on employees’ sense of identity and self-worth. The relational need for justice is inextricably linked to the psychological need for belongingness.

“A third major psychological need is the need for meaningful existence. Most individuals share a basic respect for human dignity and worth—and this morality-based concern for justice drives our attraction to, dealings with, and reactions to organizations.

The new Triad Power: Key Players in the promise of global CSRJeffrey Henderson (2008) clarifies these actors include: Trans National Corporations [TNC], Non Governmental Organizations [NGO] and Supra-National Unions [SNU].

“[I]mplicit in most of the negative history and many of the problems presently facing the global community are the very players that must be included within the solution. … These players acting creatively and collaboratively as a Triad are able to satisfy the underlying needs of the larger stakeholder community and move society into a transformational direction where heretofore self-serving actions are replaced with more society-centric trust building actions.”

Alizon (Jeffrey) Azer predicts:

“If public pressure continues to mount against corporations who act with impunity and if governments are granted a role in the monitoring and regulation of corporate activity, CSR could become a progressive and sustainable movement. If the status quo continues, however, corporate social responsibility will likely be dismissed as a management strategy that secures work for public relations consultants and social auditors but not much more.” [Emphasis added.] (2002: 17)

Timothy S. Clark (2008) posits:

“CSR is not a passing fad. … If CSR seems a murky concept, it can be helpful to think of the acronymn as standing for corporate social relationship. All business activity occurs within an ongoing, inter-dependent relationship between firms and their many stakeholders.”

Furthermore, Jem Bendell & Jonathan Cohen (2006) write:

“When considering the phrase ‘corporate social responsibility’ (CSR), the inverse, or corporate social irresponsibility, helps illuminate its meaning. … Five years after the introduction of the signature US reaction to loss of trust in the market—the Sarbanes—Oxley legislation to strengthen transparency, accountability and improved corporate governance—it remains unpopular with business in terms of its cost and the quality of auditing. … Three areas are important in solving this credibility riddle: the type of information self-declared by companies, the type of auditors involved, and information gathered from other sources.”

Alternatively, Stefan Stern’s article (2009) in The Financial Times offers:

Corporate reputation is clearly important, and highly vulnerable in the age of the internet. But is there really always a straight-line connection between reputation and the bottom line? … [A] new strategy of «public engagement» is needed to restore the public’s trust in business. … ‘For most managers the biggest responsibility of all will be to make a profit and stay in business’ … The truly responsible thing to do is to run a good business competently. As the wise CSR practitioners know, it is how you do business that counts. All the rest is just hot air.” [Emphasis added.]


Notes:

Aguilera, Ruth V.; Deborah E. Rupp, Cynthia A. Williams, Jyoti Ganapathi (2007). Putting the S Back in Corporate Social Responsibility: A Multilevel Theory of Social Change in Organizations, Academy of Management Review 32:3. July 2007. pp. 836—863. back to text.

Azer, Alizon (Jeffrey) (2002). The Ethics of Corporate Social Responsibility: Management Trend of the New Millennium?. Sheldon Chumir Foundation for Ethics in Leadership, June 2002. pp. 15, 17. back to text.

Clark, Timothy S. (2008). IROs and CSR: Making Sense of the Corporate Social Relationship, Investor Relations update. Vienna, VA: National Investor Relations Institute, June 2008. pp. 17-20. back to text.

Cooper, Seward Montgomery (2009). Corporate Governance in Developing Countries: Shortcomings, Challenges & Impact on Credit, Proceedings of 40th Annual Session of UNCITRAL Modern Law for Global Commerce, Vienna. 9-12 July 2007. Vienna: UNCITRAL. back to text.

Henderson, Jeffrey (2008). The new Triad Power: Key Players in the promise of global CSR. SMC Working Paper No. 07/2008 Place: Swiss Management Center, 2008. pp. 4, 25. back to text.

Heyzer, Noeleen (2008). Corporate Social Responsibility in the Midst of Financial Turmoil, Proceedings of the 7th Asian Forum on Corporate Social Responsibility, Singapore, November 2008. United Nations Economic and Social Commission for Asia and the Pacific [UNESCAP]. back to text.

Horrigan, Bryan (2007). 21st Century Corporate Social Responsibility Trends — An Emerging Comparative Body of Law and Regulation on Corporate Responsibility, Governance, and Sustainability, Macquarie Journal of Business Law. Vol. 4. Place: Macquarie University, 2007. pp. 85-122. back to text.

Stern, Stefan (2009). The hot air of CSR. London: The Financial Times, 02 February 2009. back to text.

Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 LicenseDisclaimer: The posts herein do not necessarily represent any organization’s positions, strategies or opinions. Read the full version of self-imposed rules for this blog: A New Year; New Rules. Unless otherwise expressly stated, the posts are licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.
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