Narrow and Broader Views of Corporate Social Responsibility and Ethics
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This report analyses the narrow and broader views of corporate social responsibility and ethics, and the fine line between corporate social responsibility and virtue signalling. It also discusses the statement made by Tony Abbott and the importance of ethical business practices and corporate governance.
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EXECUTIVE SUMMARY The report below is emphasising on the contrast lying between the narrow and broad views of corporate social responsibility. The fine line existing between corporate social responsibility and virtue signalling is explained. The viewpoint of Australia’s former Prime Minister Tony Abbott is analysed. The primary section of the report describes the different views of corporate social responsibility. The approaches are enlightened on the basis of the focus area of both the views. The statement made by Tony Abbott is supported in the final sections of report. The reasons of the same are also mentioned and corporate governance and ethics have also been analyzed in effective manner. 1
Table of Contents EXECUTIVE SUMMARY........................................................................................................3 INTRODUCTION......................................................................................................................3 LITERATURE REVIEW...........................................................................................................3 NARROW VIEW OF CORPORATE SOCIAL RESPONSIBILITY.......................................3 BROADER VIEW OF CORPORATE SOCIAL RESPONSIBILITY......................................4 COMPARINGNARROWANDBROADERVIEWSOFCORPORATESOCIAL RESPONSIBILITY....................................................................................................................4 RESPONSE ON STATEMENT BY TONY ABBOTT.............................................................4 CONCLUSION..........................................................................................................................5 REFERENCES...........................................................................................................................5 2
INTRODUCTION Organization is associated with the complex set of actions and activities which are implemented to achieve the objectives and goals in determined approach. Every organisation works as a part of the society. Each and every organization needs to establish the relation between the economic and social benefits with the organization development.The society provides the entity with all the resources that it require and face all the negative impacts laid by business houses. As a return, the business is also required to encourage those activities that benefit the society. Corporate social responsibility (CSR) deals with this obligation of the organisations.AsperCSR,theorganisationsarerequiredtomanagebusinessinan environment friendly and sustainable manner. Along with the society, activities related to the welfare of the employees and their families also form a part of CSR. It is the responsibility of businesses to improve the quality of life of workforce (Schwartz, 2017). Every organization should endeavour towards delivering the best possible outcomes to society in return of what it has taken from the society while operating the business. There are several ways which could be used by organization such as corporate social responsibilities, sustainable business practice and strengthen corporate governance program in determined approach. Contributing towards social responsibility helps the business houses in innumerable ways. However many business houses nowadays are doing virtue signalling in the name of corporate social responsibility. However, the two are different concepts and should not be mixed. LITERATURE REVIEW NARROW VIEW OF CORPORATE SOCIAL RESPONSIBILITY As per the perception of Mason & Simmons, 2014 it is reflected that the narrow view of corporate responsibility states the only objective of business houses as maximisation of profits. As per this view, the business houses need to focus on conducting the business with the basic standards. This is to be done by them to increase the level of profits. It is not their duty to care for social well-being. The most important feature so business houses is that they are artificial persons, and hence their responsibilities are also artificial. They need not to have emotions of social upbringing and social benefit. Their only goal is to make as much money as they can (Tai, & Chuang, 2014). 3
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This theory argues that the business is responsible only for the owners. The reason is that their money is invested in the business activities. So the business is bound to accomplish the goals laid for the success. The whole accountability of managers is for the owners. As per this view, the only corporate responsibility of the business is the payment of tax. The tax is to be paid on the profits made by the business. The tax then can be used by the government to do social welfare. By this way the community service is also done by the organisation (Filatotchev & Nakajima, 2014). This social responsibility includes carrying of business by the organisations in a lawfully acceptable manner. The policies should be such that increase the profits. Conduct of business should be transparent and ethical. There should be no deception and fraud in the carrying on of business. In this theory, company set up strong CSR program based on the triple bottom line in the business process which is based on the people, plant and profit. It is analyzed that company gives proper supporting system and output for the best benefits of society at large. The transparent business and ethical business practice should be undertaken to establish nexus between the organization’s goal and society development (Reverte, (2009). BROADER VIEW OF CORPORATE SOCIAL RESPONSIBILITY The broader view of CSR focuses more on the long term goals, than just the immediate goal of profit making. This view highlights the need of the business houses to maintainhealthyrelationshipwiththesocietytoproveitslegitimacy.Onlyprofit maximisation should not be the goal of the entity. There is another important objective that the entity must focus on. The same is believed to be their responsibility towards the benefit of society. The entity needs to resolve all the negative impacts that the business leaves on the environment (Suliman, Al-Khatib, & Thomas, 2016). With the rise in the power of the business houses, their responsibility is also increased. The business uses the resources and the place that society has given it to operate successfully. So undoubtedly, the business is required to think for the sustainability of those resources that society has bestowed. It is for the self-benefit of the business only that it thinks for the longer run. When socially acceptable activities are done by the entity it itself become acceptable and gain huge support. The broader view is also promoted by the stakeholder theory (Dhaliwal, et al. 2012).As per this theory; every business is responsible to the society, employees, general public, environment, etc. along with the shareholders. Apart from profit, 4
this view focuses on the protection of environment, moral duties towards the stakeholders, and maintaining sustainability (Schultz, Castelló & Morsing).The main duty of company is to keep the business more transparent towards the stakeholders and strengthen the overall outcomes and efficiency in long run (Steenkamp, 2017). COMPARINGNARROWANDBROADERVIEWSOFCORPORATESOCIAL RESPONSIBILITY There are people supporting both the views of the corporate social responsibility. The narrow view is supported on the account that the successful organisations are way more authoritative than the society or the government. So the business shall succeed even if it does nothing for society and just strive to earn profits. The other argument put in favour of the narrow view is the responsibility of government to entertain social well welfare. Further, it is believed by these supporters that the enterprises are not experienced well to support the society. Finally it is said that if the business houses shall enter in social activities, then they shall make the societies materialistic and profit minded too (Du, Swaen, Lindgreen & Sen, 2013). However, the broader view of the corporate social responsibility is prompted on account, that this covers a broader sphere of society than just the immediate shareholders.A binding contract naturally is signed between the society and the organisations to support each other. The business shall gain higher reputation and acceptance if it thinks for all the stakeholders and not just for the profit making goal. The main purpose of CSR activities is to deliver the best social interest towards its society and increasing the overall output to stakeholders (Weber, & Wasieleski, 2018). RESPONSE ON STATEMENT BY TONY ABBOTT Tony Abbott, the former Prime Minister of Australia had given a statement for banks on the basisoffindingsofHayneRoyalCommission.Thestatementsaysthat,““I’mvery disappointed in the banks and you wonder how much better the banks would have been if they had been focused on doing their core business honestly and ethically rather than running around the place virtue signalling on any number of politically correct subjects”. This case focuses on the ethical and transparent business practices which could increase the overall outcomes in determined approach (Cowen, Ferreri, & Parker, 2017). 5
As far as a personal opinion is concerned, the statement of Tony Abbott is supported. Corporate responsibility is not just about expressing virtues by commenting on some politically hot topic, i.e. virtue signalling. Corporate social responsibility is more about being responsible for one’s actions. It has nothing to do with commentating on what others have done or are intended to do. Ethically conducting business is also a part of corporate social responsibility only. This is laid as per the narrow view of corporate social responsibility. Ethical business practice and strengthen corporate governance program have resulted to increased business outcomes of the banks (Suliman, Al-Khatib, & Thomas, 2016). Undoubtedly, the banks need to work for profit earning but at the same time they should think for other aspects i.e. society betterment also. By conducting their business ethically, all the money that they will make will be free from any deception or fraud. This will not only make its business more transparent but also strengthen the overall outcomes to society at large. Certain part of this money however should be used for social benefit. No business can performsuccessfullywithoutincorporatingcorporatesocialresponsibility.Itiseven mandated by law now. Certain specified companies are mandatorily required to invest certain percentage of the money made by them for social causes. This could be in any form. The activity may include, opening of schools; employee welfare; water shed management; rain water harvesting; free food to school going children and conducting health camps, (Orlitzky, Schmidt, & Rynes, 2013). Certain benefits are accrued to business entities when they indulge themselves in corporate socialresponsibilityactivities.Thesearebelowpointswhichcouldbeundertakento determine the certain benefits.There are several other benefits which will be taken by the business Organizaiton if they undertake proper CSR activities. When entities come forward to help the society, they get it returned in form of increased sales and larger customer base. This is like adding value to the surrounding to make the foundation of business strong and sustained. When steps are taken to reduce the problems that the society is facing, a competitive edge is gained. The business entities earn more fame than the other leading organisations. This helps in creating a strong brand reputation and healthy image. When an entity offers attractive incentives to the employees, it is able to retain them for longer time period. This helps in reducing the recruitment and training costs. Further, new workforce is also attracted to join the organisations (Tai & Chuang, 2014). 6
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Hence, the statement of Tony Abbott is totally correct. It is just required to draw the fine line that exists between corporate social responsibility and virtue signalling. The banks need to understand that actual actions are required to be taken. Only compelling about doing things shall not make a difference. CSR activities focus on delivering the best possible output to society and while on the other and, virtue signalling is accompanied with the code of conduct ethical business practice and conspicuous expression of moral values. CONCLUSION In a crux, to get the business set for infinite years, every business needs to broaden its thought process. Profit making must be the objective. But it should not be the only objective. The primary stakeholders being the shareholders must be benefitted. But the secondary shareholders who include society, government, public, law authorities etc. must also be taken care of. Virtue signalling in the name of corporate social responsibility must be stopped right away. A justice must be made while using the resources that society has provided. They should be judicially used to promote sustainability. After analysing all the facts and details of the CSR program, it could be inferred that each and every organization needs to manage the business operations in the best interest of society. It is done with a view to pay back to society what company has taken while operating its business. REFERENCES Cowen, S. S., Ferreri, L. B., & Parker, L. D. (2017). The impact of corporate characteristics onsocialresponsibilitydisclosure:Atypologyandfrequency-based analysis.Accounting, Organizations and society,12(2), 111-122. Dhaliwal,D. S., Radhakrishnan, S., Tsang, A., & Yang, Y. G. (2012). Nonfinancial disclosure and analyst forecast accuracy: International evidence on corporate social responsibility disclosure.The Accounting Review,87(3), 723-759. Du, S., Swaen, V., Lindgreen, A., & Sen, S. (2013). The roles of leadership styles in corporate social responsibility.Journal of business ethics,114(1), 155-169. Filatotchev,I., & Nakajima,C. (2014). Corporategovernance,responsiblemanagerial behavior,andcorporatesocialresponsibility:Organizationalefficiencyversus organizational legitimacy?.Academy of Management Perspectives,28(3), 289-306. 7
Mason, C., & Simmons, J. (2014). Embedding corporate social responsibility in corporate governance: A stakeholder systems approach.Journal of Business Ethics,119(1), 77- 86. Orlitzky,M., Schmidt,F. L., & Rynes, S. L. (2013). Corporate social and financial performance: A meta-analysis.Organization studies,24(3), 403-441. Reverte, C. (2009). Determinants of corporate social responsibility disclosure ratings by Spanish listed firms.Journal of Business Ethics,88(2), 351-366. Schultz, F., CastellĂł, I., & Morsing, M. (2013). The construction of corporate social responsibility in network societies: A communication view.Journal of business ethics,115(4), 681-692. Schwartz, M. S. (2017).Corporate social responsibility. Routledge.19(1), 17-26. Steenkamp, J. B. (2017). Corporate Social Responsibility. InGlobal Brand Strategy(pp. 209- 238). Palgrave Macmillan, London. Suliman,A.M.,Al-Khatib,H.T.,&Thomas,S.E.(2016).Corporatesocial responsibility.Corporate Social Performance: Reflecting on the Past and Investing in the Future, 15. Tai, F. M., & Chuang, S. H. (2014). Corporate social responsibility.Ibusiness,6(03), 117. Weber, J., & Wasieleski, D. M. (Eds.). (2018).Corporate social responsibility. Emerald Group Publishing. 8