Words: 1890
In 1 970, Friedman stated that Corporate Social Responsibility (CARS) “hypocritical window-dressing”. Friedman (1970) stated that “there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud”.
He believes that business aim is to maximize profits to remain competitive and its social responsibility is to maximize shareholders’ value. Any other aim will drive the business out of the market. Most companies want to make quick profit. Their hunger for profit forced them to cut corners by exploiting both resources and people. Sometimes, they are bound to meet their legal obligations in terms of minimum wages, environmental protection and health and safety at work. But, they would not go beyond this parameter. The presence of regulatory bodies compelled them to be legally right, however they remain ethically irresponsible.
They offer some services to society for building brand image and reputation. These companies are not good corporate citizens but use CARS as a marketing treated to change the perception of customers and the public at large. Some scandals which have created much media buzz are the Shell exploration in Artic region, Nikkei exploiting workers, Johnson ‘s Ethylene issues, Midpoint Hospital, Enron and World. Philanthropist is not the favored term of businessmen as profit became an obsession. In fact the logical goal for undertaking business is to make profit.
The aim of profit maximizing companies is to create as much profit, as possible with the resources and market share currently at their disposal. The company will sometimes have to adjust influential factors such as cost of reduction, sales, and output to earn profit. Moreover, profit maximizing is necessary for the survival and growth of the business. But in its strive to make more profit, Enron Corporation has gone bankrupt as it was engaged in unethical and fraudulent practices. Another flagrant case of wrongdoing was the Infinity Business Process Outsourcing “saga” in Mauritius.
Both the chief executive officer and the chief executive were accused of fraud; they have to pay an amount of RSI 44 million and RSI 8 million respectively. The employees of the company were the most affected as they were deprived from their salaries for months. Had the company be ethical, such fraud would have never happen, the workers would not have been kicked out of their work place and the company would still be under operation. A company that focuses solely on maximizing profit may fail to take advantage of opportunities which don’t provide an immediate financial return but offer long-term benefit.
Profit mastication can be a bad thing for consumers. If the latter decide to provide poor quality product or simply increase its price, then consumers will suffer. However, times have changed. Some companies aim at a reasonable profit and they prefer to reinvest their excess profits in creating more value for their stakeholders, namely customers, employees, and society. If the company decides to increase its employees’ salary, they will be more loyal and less likely to swap jobs.
I will also help the company as it will reduce training costs in the long run. By increasing customer satisfaction; by providing quality product and service, it will also increase revenue. As the company grows, it will be able to create more long- term shareholder value. With value mastication, the shift towards corporate social responsibility (CARS) was imminent. Corporate social responsibility and value mastication are found to be complementary activities as they belong to the virtuous circle of “doing good”.
Corporate Social Responsibility can add value to a company by developing and maintaining its reputation We are in an era of corporate philanthropy where many companies have made Corporate Social Responsibility a priority. Organizations around the world have been using the united Nation Global Compact’s 10 principles to become more socially responsible. Corporate Social Responsibility is regulated by the ISO 26000; which is internationally recognized. Corporate Social Responsibility is rooted in the values of the company. Businesses now plan for long term strategies and investments in the regions or countries where they operate.
Ethics and morality have made them go beyond minimum legal requirements to protect the environment and society. Businesses are willingly attempting to eliminate social ills and environmental degradation which affect the society, even though they did not cause them. In Mauritius, in 2009, the Corporate Social Responsibility Fund was created due to lack of corporate citizenship. Since 2012 the Government has established a policy whereby each registered impasses has to pay 2% of their book profit towards programmed that contribute to socio-economic development, health, education, environment and eradication of poverty.
The diagram below shows the change in management’s perception of doing business: Corporate Social Responsibility is a good means to increase a business’ competitive advantage and brand awareness, build customer relationship and increase employees commitment to the company. It is also beneficial In terms of cost savings, access to capital and innovation capacity. However, its role is much broader as it helps in making important decision. CARS is essential or the long-term sustainability of a firm.
The Corporate Social Responsibility also focuses on the triple bottom line; economic, environmental and social which is also known as the up’s: Profit, Planet and People. CORPORATE SOCIAL RESPONSIBILITIES AND THE STAKEHOLDERS Corporate Social Responsibility requires engagement of both internal and external stakeholders to enable the company to better take advantage of fast changing expectations in society and identifying growth opportunities. It also encourages more social and environmental responsibility from the corporate sector at a time when the crisis has damaged consumer confidence and the bevels of trust in business.
Companies have different ways of satisfying its stakeholders: (a)Responsibility towards the shareholders: The shareholders are those who invest their money in the business. The business duty towards them is to ensure that they are provided with a fair return on investment in terms of dividend. Besides dividends, the shareholders also expect an appreciation in the value of shares. The company has to maintain its performance to be able to meet its shareholders’ expectations. (b)Responsibility towards the Employees: A business must pay a minimum salary to the workers based on the nature Of work.
The working conditions must be good in respect of safety, medical facilities, and retirement schemes. They should also be paid a fair bonus. The British American Insurance (ABA) duty towards employees goes beyond that. It provides the latter with a pleasant working environment. The culture of the company encourages workers to take their own initiatives but it also promotes team work. (c)Responsibility towards the Consumers: A business must supply quality goods and services to the consumers at reasonable prices.
It should avoid adulteration, poor packaging, misleading advertising, and ensure proper arrangement for attending to customer implants. (d)Responsibility towards the Government: A business must follow the guidelines of the government while setting up the business. It should conduct the business in lawful manner; pay taxes and abiding to existing laws and regulations. It should not indulge in any corrupt practices or unlawful activities. Ireland Belly Limited (BILL) has increased its CARS Fund budget by 1% higher than the legal requirement to show its commitment. E)Responsibility towards the Community and environment: Every business is a part of a community. So it should contribute towards the welfare of that community. The State Bank of Mauritius (USB) works in collaboration with the National Empowerment Foundation (NEFF) to eradicate poverty by providing social housing schemes. It should contribute to the community development programs like public health care, sports, cultural programs. It should preserve and promote social and cultural values, generate employment opportunity and protect the environment.
The Mauritius Commercial Bank, under ‘initiatives 1 75’, has contributed largely to protect the environment through its various green loan schemes, distribution of plants and the CEO TV” programmed. However, there exist conflicts of interest between the different stakeholders. By lowering its price, the company is favoring the customers but at the detriment of its shareholders. Similarly, by recruiting employees to reduce unemployment in the locality or region, the company is neglecting existing employees who could have earned a promotion.
Moreover, by placing part of its profit in a CARS Fund, a company becomes less competitive as this money could have been used for other purposes. Ethics can provide guidance for addressing different issues which cannot be jugulate by law. Ethics and corporate social responsibility can act as alternative to areas where law and regulation fail but also help in making strategic decision. It is company’s responsibility to serve the public interest. Novak believes that business is a form of social community and the role of managers is to create a moral community.
Corporate social responsibility and ethical considerations influence purchase decisions of consumers, employee decisions of where to work, and investor decisions. Corporate Social Responsibilities can be studied from three different ethical angles; the utilitarianism, the deontological approach and the virtue based approach. Utilitarian approach consider all the impact that a decision might cause, identify the possible alternatives and select one that provide the greatest level of satisfaction to a larger number of people.
Utilitarianism focuses on consequences of actions not on duties or moral character. Moreover, the problem with utilitarianism is that it focuses only on the majority group. So, the minority will always suffer and very often those who will suffer are those who have been mostly affected. On the other hand, demonology focuses on susceptibilities and actions rather than consequences. If an action does not fulfill one’s responsibilities then it is not ethically correct. Businesses have responsibilities to help solve social problems they created or to prevent social harms they could potentially cause.
They also have moral obligations towards the different stakeholders. Stakeholders should be treated as the “ends” and not the “means” to satisfy other “ends” like profits (Rae and Wong, 1996). However, it is difficult to priorities responsibilities. Moreover, it is found that very often the duties towards the different stakeholders are in conflict with ACH other. Virtue ethics goes beyond the conventional rules of the society. It does not emphasis on consequences of actions or on duties but it is mostly based on moral values.
Virtue ethics is independent of society rule as it focuses on personal integrity, faith and honesty. Corporate Social Responsibility, from a moral point of view, will be when the company takes decision and action only in favor of its stakeholders. Being ethical does not require only moral awareness and judgment but also moral character, as one’s should gather enough guts to take actions consistent with his ethical decisions. For many years, companies were only concerned with making profits. That Was the ultimate aim.
Corporate Social Responsibility can also improve profits by helping the company to take the appropriate decision from a broader perspective; this mean using other ethical means to increase sales of products and commitment of workers by remaining environmentally conscious.