Characteristics of CEOs and Boards Leading Socially Responsible Companies

This essay discusses the characteristics of CEOs and Boards that help lead to more socially responsible companies. It explores the impact of corporate social responsibility on corporate image and the role of CEOs in incorporating CSR strategies. The essay also examines the theories of agency, stewardship, and stakeholder in relation to CSR.

Corporate Social
Responsibility (CSR)

TABLE OF CONTENTS
TOPIC:.............................................................................................................................................3
REFERENCES..............................................................................................................................11

TOPIC:
Identify and discuss the characteristics of CEOs and Boards that help lead to more socially
responsible companies.
Introduction
Business organisations function with a motive to earn more profits and market share
without sharing any returns or benefits with society. If this aspect is inculcated in strategies by
companies, then such business practises are considered as corporate social responsibility.
Corporate image of a company is developed according to the response provided by different
stakeholder groups. Often company heads perceive that there is no big difference made on the
performance if CSR is adopted (Muller, 2014). They consider it as a draining situation in which
benefits are shared and profits are decreased at the owners' and shareholder's end. Despite of this
fact, there are some CEOs and Boards that have been leading their firms with incorporation of
corporate social responsibility.
This essay presents the characteristics of CEOs and Boards who lead socially more
responsible companies. The analytical views concerning this issue will be presented ahead which
shall help in developing an understanding whether majority of business organisations can lead
the markets with CSR approach (Servaes and Tamayo, 2013). Furthermore, there are some
theoretical concepts which figured out to enhance the understanding. These include agency
theory, stewardship theory and stakeholder theory. Companies like Thomas Cook Group, EE
Limited, ASDA have been working with an objective to develop their approaches and strategies
with an orientation to achieve sustainability. The reason behind this strategic thinking is growing
environmental concerns and increasing ecological disturbances.
Every action and decision taken by business organisation has some sort of effect on the
environment and society (Hopkins, 2016). The nature of impact helps in determining whether the
action was beneficial or not. In the long run every organisation, irrespective of their working
style should adapt to corporate social responsibility principles and dedicate some resources for
upliftment of society (Christensen, Mackey and Whetten, 2014). A literature review regarding
above stated fact and other analytical findings has been presented in this essay. It will help in
strengthening the thought process regarding characteristic features of CSR.
Critical analysis of CSR

When a company seeks resources from the society for personal benefits and profits, then
it becomes an unsaid responsibility of the particular organisation to return back these resources
in some form or the other (Saeidi and et. al., 2015). This is the basic essence of corporate social
responsibility. The CEO of Thomas Cook had developed CSR strategies in company's current
functioning because he wanted to set an example for other organisations of this industry to work
for the betterment of nature and society. Travel and tourism is all about the ecological beauty of
the respective destinations (Mousavi and et. al., 2013). But this beauty is being damaged by
unethical practises like littering waste or hurting culture and traditions of the local markets.
Thomas Cook Group has developed strict guidelines for its customers which need to be
followed.
This serious effort for conserving the ecological balance has helped the enterprise to gain
positive corporate image and customer share (Dam and Scholtens, 2015). Moreover, individual
perception towards this organisation has changed. Social awareness and sense of responsibility is
one important characteristic feature of CEOs who lead companies towards CSR. They do not
neglect the harsh realities that come along side business activities. For instance, product
manufacturing units especially the ones where plastic or chemicals are involved might be
emitting dangerous effluents which are contributing to global warming and green house effects.
In such cases, if CEOs consider their responsibility of modifying production methods then they
are leading with CSR.
Apart from environmental impact, society is another aspect which is to be considered as a
part of CSR. Businesses with philanthropic approach have genuine CEOs and Boards behind
their leading back (Cavico, 2013). Pedigree the leading company for producing dog food is not
only focused on its products but has developed a unique approach towards welfare of society.
The organisation funds and sponsors national adoption drives which run for homeless dogs.
About 1000 shelters and breed rescue operations have been conducted by the company. This
implies, organisation holds a strategic CSR approach towards the society. On the contrary, the
Boards of Body Shop developed a unique CSR strategy that focuses on animal rights,
environment protection and builds self-esteem for those deprived of human rights.
Such activities in the business processing can be initiated only when leaders are
concerned regarding the subjects. If a company doesn't care to make any efforts regarding
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society welfare, then there will not be as such any deep impact over its functioning (Moon,
2014). CSR is a technique through which brand value is enhanced. In countries were factors like
poverty or ecological disturbances are prominent, business organisations must consider
developing strategies which shall help in improving the status of individuals in the society.
CEOs and Board members are considered significant for incorporating corporate social
responsibility in their governing structure because they are mainly the decision makers for every
situation of the organisation (Mousavi and et. al., 2013). This implies the level of authority or
power with these people is quite high. There is a probability that company might enhance its
strategic position if they are led towards sustainability. The major characteristic trait that
influences CEOs for making decisions with regards to welfare of society is ability to visualise or
establish a vision. This vision or aim is just not limited to business operations but extended to
external environment and the markets and society where operations are taking place. Hence, it is
important for organisations to recruit leaders who are competent and thoughtful towards
developing a better place in terms of both businesses and the society as a whole (Strandberg,
2015). It shall not only help in enhancing brand value but will also encourage economic growth
of operational country.
Agency theory
Corporate social governance is an attribute which can be implemented in the current
functioning of the company when CEOs and Board members agree to on these aspects. Agency
theory helps in understanding the relationships which are shared by principals and agents in the
business. This relationship can experience certain setbacks or problems because of lack of
relevance or alignment with goals and objectives. This implies that the basic aspect of corporate
social governance is not fulfilled in such a scenario. The CEOs and Board of a company should
evaluate the stakeholder requirements and impact of decisions which are to be made with this
respect. The basic essence of agency theory is completely based on the difference that is created
between goals and objectives of agent and principal.
In case of business organisations, the company is considered as principal while the
shareholders and other valuable stakeholders are considered as agents. CEO aims to incorporate
corporate social responsibility as the key opportunity for development. For this aspect, the
respective company has to compromise with current profits so that future growth is guaranteed.
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Then there are chances that the shareholders might not like the decision and they will depict a
clash or disagreement with the strategy. Agency theory depicts this problem or issues that occur
due to difference in goals and objectives of agent and principal.
Stewardship theory
Stewardship is based on ownership and the trust which is maintained by an individual in
a company. There may be certain situations in the company where growth and development
would be difficult to visualise and employees will start dropping their interest in the company.
Stewardship is all about holding trust in the organisation without actually concerning much about
profits. There is a deep interrelation of corporate social responsibility and stewardship. CEOs
and transformational leaders have a quality of implementing strategies and decisions which are
for the benefit and welfare of everyone (Stewardship Theory of Corporate Governance, 2017).
They do not concern much about their personal benefits but work selflessly for organisation and
its people.
Stewardship theory is based on this concept and it is actually linked with the motivation
of employees. If staff members are more concerned about the company rather than their personal
attributes then during critical situations, the organisation heads share immense support
(Stewardship Theory of Corporate Governance, 2017). Corporate social responsibility is one
such quality of CEOs and Board members that helps in bringing such qualities amongst the
human resource. The Stewardship theory helps linking business organisations with human
responsibilities.
Stakeholder theory
Business organisations have certain type of responsibility or duty towards each and every
stakeholder and shareholder that is in some way a part of the company. Be it employees,
suppliers, shareholders, customers or the investors; the company has certain accountability
towards these groups and individuals. Stakeholder theory focuses on management of the
organisation with relevance to business ethics (Slack, Corlett and Morris, 2015). The morals and
values which are depicted by company while arranging the business processes so that no
negative impact is addressed by stakeholders are considered as business ethics.
The decision making power relies in hands of CEO and board members. They are the
highest authorities in power. This implies their decisions define the morals and ethics which have
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to be followed by other members of company and respective impact shall be assessed by
stakeholders (Hofman, Moon and Wu 2015). Corporate social responsibility and corporate social
governance is interlinked with stakeholder theory in such a way that organisation develops a
sense of responsibility towards the stakeholders. According to the stakeholder theory, individuals
with higher authority of making decisions should take ethical steps so that stakeholder groups are
not affected adversely. The ways through which such corporate governance can be initiated
include using standardised pricing strategies, reducing excessive taxes on the goods and services,
etc.
Literature Review
Corporate social governance is an attribute which means that rules and regulations
developed by the company are ethically controlled. This also depicts that strict monitoring and
supervising is provided on unethical or unfair practises. Dam and Scholtens (2015) stated that
every individual who is involved or interested in the functioning of business organisation should
be considered before formulating any decision. For example, TESCO the renowned retailer
decided to transform its internal pay structure. This implies the income of employees and
shareholder incomes are affected. If the higher authorities like CEO or the Board members are
totally thinking about company profits then the organisation doesn't follow corporate social
governance. On the contrary, if benefits and impact of decisions on stakeholders and
shareholders is assessed by these individuals then it is referred as corporate social governance or
governing with corporate social responsibility (Mousavi and et. al., 2013).
The entire framework is depended on thoughts and concerns which influence the decision
making. According to Guthey and Morsing (2014), the boards are most powerful if there is no
biasness or favouritism in decision making. Corporate social responsibility can only be instigated
in the organisation if composition of board members is appropriate. Institutional influences are
often witnessed in formulating the board of directors. However, CEO is considered to be more
influential in these aspects because he/she are solely responsible for a decision. Doh, Littell and
Quigley (2015) stated that legal environments industrial regulations are also some of the factors
that highly impact or control thought processes of CEO and Board members. For instance, the
legal structure of the company doesn't allow employees to take company benefits unless an
emergency or critical situation is being addressed. In such instances, the CEO has to formulate
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either a new decision or influence other Board members to implement a new rule regarding
flexibility towards employees.
Emergence of corporate social responsibility can be dated back in the late 20th century
when growing industrialisation and increasing globalisation had caused increase in negative
impact over environment. Several campaigns were conducted for creating awareness regarding
human activities and their impact and are still going on a large scale for achieving sustainability.
Kim and Scullion (2013) stated that collaborative efforts of stakeholders and the business
organisations can help in refilling the gaps which have caused severe environmental damage. All
the responsibility is totally on the shoulders of CEO and the Board members. The use of
corporate governance is one technique which can make every action of organisations legitimate
enough in contributing to environmental balance and welfare of society.
The use of CSR in building businesses is quite contradictory. According to Strandberg
(2015), there have been significant growth in terms of positive corporate image of companies
that are led with corporate social responsibility. The CEOs that deal with ethical governance
have different perspective towards CSR. On the contrary, Board members visualise this
technique as growth limiter and less profit bearing (Jamali and et. Al., 2017). Additionally, it has
been realised that businesses that are not oriented with CSR tend to develop with a greater speed
because their ultimate aim is to gain profits and make their market share wider. On the other
hand, when functioning with corporate governance, the brand value of company in eyes of
customers is enhanced (Kim and Scullion, 2013). The employees being an integral part of
company also generate motivation and positivity towards company when ethical activities are
promoted.
Doh, Littell and Quigley (2015) stated that politicians and influential people who are
involved as the board members of company have a deep routed impact over functioning of
business. Corrupt officials and politicians will always seek their own benefit rather than welfare
of other individuals. This implies they will try to limit the organisation from opting towards
corporate social governance and function with corporate social responsibility. According to
O’Riordan and Fairbrass (2014), the selection of Board of Directors and CEO of the company
must be completely pure and legitimate. The use of references and external influence should be
prohibited. This will not only ensure better growth in the internal environment but also enhance
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strengthening of structure of company. Internal stakeholders shall develop trust towards
organisation that decision making is not biased.
The significant rise in responsible citizens and simultaneous developments in technology
have helped individuals in being more aware about global concerns. Moreover, people can now
gauge different business activities which are initiated or strategies that are applied by
multinationals for selling their products and services (Painter-Morland and Deslandes, 2016).
Consumers are more inclined towards those groups which are responsible and are providing
more support to betterment of society. Colleoni (2013) confessed that there has to be a return
cycle activated every time an organisation takes something from nature. The resources on Earth
are becoming scarce day by day. This implies there has to be some technique through which a
major threat to extinction of future generations is reduced. It can only be achieved through
corporate social responsibility. If corporate social governance is considered as the single most
important approach of business operations, then there will not be any unethical practise initiated
in company (Visser, 2014). This also enlightens that customers will not be cheated or taken
advantage by organisation for the money they are investing in terms of products and services.
Increasing demands of customers towards development of authenticity and ethical
business practises have raised global concerns on corporate social governance. Guthey and
Morsing (2014) states that modern day civilisation aims to achieve quality of life rather than
wasting it on earning monetary benefits. Sustainability is the most talked about principle in
current scenario. According to Guthey and Morsing, (2014), there is significant role of profits
with people and productivity when sustainability is concerned. The only factor which limits
business organisations from achieving this aspect is their nature of practises. The more
destructive a business activity is for environment, farer they are to move from sustainability
(Voegtlin and Pless, 2014). The company Thomas Cook is renowned in travel and tourism
sector. It has earned this global value because of the shift they have inculcated in businesses. The
main objective of this organisation is to reach a sustainable position in international markets by
adopting to corporate social governance.
Company has been spreading awareness various environmental concerns and global
activities. Outline of CSR is not just limited to environment or resources but it extends towards
humanity (Slack, Corlett and Morris, 2015). When individual efforts for welfare of society are
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made then standard of living amongst people is changed. For example, if a company donates
atleast 1% of its profits towards the upliftment of poor and needy then there will be a stage
wherein no nation will be economically backward or no human being would be in the below
poverty line range. According to Hofman, Moon and Wu (2015), educating women brings in
prosperity for country. Various business organisations have transformed their principles from a
completely male oriented enterprise to a multi-talented to institution. Accenture PLC is one such
company which believes in women empowerment. Henceforth, the organisation has been
considered as one functioning with corporate social responsibility.
CEOs that incorporate such principles consider some facts regarding CSR. They have the
capability to evaluate and measure the actions company has taken in a particular time period.
This evaluation is then compared with those of competitors (Guthey and Morsing, 2014). The
difference in corporate images and profit margins make them realise the major loop holes which
had been affecting functioning of concerned company significantly. Hence, they are also
encouraged to inculcate corporate social responsibility as one of the key elements of strategic
planning and decision making process.
Conclusion
This essay helped in gaining an understanding towards the characteristics of CEOs and
Board members when considering the corporate social governance and leading their respective
organisations towards corporate social responsibility. Moreover, it can be inferred that despite of
having so many benefits with application, CSR still is considered as a non-beneficial option
when it comes to growth and development of business. Companies can excel to large extent with
this approach because it not only helps in reducing the global impact of different business
activities but also strengthens corporate image in customers’ perception. Hence, it is concluded
that every decision which is taken with regards to corporate social responsibility is completely
dependent on the organisational heads and board of directors. Their thinking process and
perception towards stakeholders and society leads to either profit oriented business functioning
or one with corporate social responsibility principles.
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REFERENCES
Books and Journals
Cavico, F. J. (2013). Corporate Social Responsibility. ILEAD Academy.
Christensen, L. J., Mackey, A., & Whetten, D. (2014). Taking responsibility for corporate social
responsibility: The role of leaders in creating, implementing, sustaining, or avoiding
socially responsible firm behaviors. The Academy of Management Perspectives. 28(2).
164-178.
Colleoni, E., (2013). CSR communication strategies for organizational legitimacy in social
media. Corporate Communications: an international journal. 18(2). pp.228-248.
Dam, L., & Scholtens, B. (2015). Toward a theory of responsible investing: On the economic
foundations of corporate social responsibility. Resource and Energy Economics. 41. 103-
121.
Doh, J.P., Littell, B. and Quigley, N.R., (2015). CSR and sustainability in emerging markets:
Societal, institutional, and organizational influences. Organizational Dynamics. 44(2).
pp.112-120.
Guthey, E. and Morsing, M., (2014). CSR and the mediated emergence of strategic
ambiguity. Journal of Business Ethics. 120(4). pp.555-569.
Hofman, P. S., Moon, J. and Wu, B., (2015). Corporate social responsibility under authoritarian
capitalism dynamics and prospects of state-led and society-driven CSR. Business &
Society, p.0007650315623014.
Hopkins, M. (2016). The planetary bargain: corporate social responsibility comes of age.
Springer.
Jamali, D., Karam, C., Yin, J. and Soundararajan, V., (2017). CSR logics in developing
countries: Translation, adaptation and stalled development. Journal of World Business.
Kim, C.H. and Scullion, H., (2013). The effect of Corporate Social Responsibility (CSR) on
employee motivation: A cross-national study. The Poznan University of Economics
Review. 13(2). p.5.
Moon, J. (2014). Corporate social responsibility: A very short introduction. OUP Oxford.
Mousavi, Z. & et. al. (2013). Corporate Social Responsibility. Life Sci J. 10(6s). 8-10.
Muller, A. (2014). Corporate social responsibility. Wiley Encyclopedia of Management.
O’Riordan, L. and Fairbrass, J., (2014). Managing CSR stakeholder engagement: A new
conceptual framework. Journal of Business Ethics. 125(1). pp.121-145.
Painter-Morland, M. and Deslandes, G., (2016). Reconceptualizing CSR in the media industry as
relational accountability. Journal of Business Ethics. pp.1-15.
Saeidi, S. P., Sofian, S., Saeidi, P., Saeidi, S. P., & Saaeidi, S. A. (2015). How does corporate
social responsibility contribute to firm financial performance? The mediating role of
competitive advantage, reputation, and customer satisfaction. Journal of Business
Research. 68(2). 341-350.
Servaes, H., & Tamayo, A. (2013). The impact of corporate social responsibility on firm value:
The role of customer awareness. Management Science. 59(5). 1045-1061.
Slack, R. E., Corlett, S. and Morris, R., (2015). Exploring employee engagement with
(corporate) social responsibility: A social exchange perspective on organisational
participation. Journal of Business Ethics. 127(3). pp.537-548.
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Visser, W., (2014). CSR 2.0: Transforming corporate sustainability and responsibility.
Heidelberg^ eBerlin Berlin: Springer.
Voegtlin, C. and Pless, N. M., (2014). Global governance: CSR and the role of the UN Global
Compact. Journal of Business Ethics. 122(2). pp.179-191.
Online
Stewardship Theory of Corporate Governance (2017). [Online]. Available
Through:<http://smallbusiness.chron.com/stewardship-theory-corporate-governance-
74073.html>. [Accessed on 29th March, 2017].
Strandberg, C. (2015). How businesses need to recruit CSR-competent leaders. [Online].
Available Through:<https://www.greenbiz.com/article/6-criteria-recruiting-csr-competent-
leaders>. [Accessed on 29th March, 2017].
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