Nov 2017 Q3 a.
Different organisations take different stance on corporate social responsibility (CSR), which will be reflected in how they manage such responsibilities. The stance taken normally reflects the extent of inclusion of stakeholders’ interests.
Required:
Explain each of the following CSR stance: (8 marks)
i) Enlightened self-interest;
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This stance of CSR involves with recognition of the long-term financial benefit to the shareholder of well-managed relationships with other stakeholders. The justification for social action is that it makes good business sense. An organisation’s reputation is important to its long-term financial success. Given that employees see it as important that their employer acts in a socially responsible manner, a more proactive stance on social issues also helps in recruiting and retaining staff. So, like any other form of investment or promotion expenditure, corporate philanthropy or welfare provision might be regarded as sensible expenditure. The sponsorship of major sporting or arts events by companies is an example.
The avoidance of ‘shady’ marketing practices is also necessary to prevent the need for yet more legislation in that area. Managers here would take the view that organisations not only have responsibility to their shareholders, but also a responsibility for relationships with other stakeholders (as against responsibilities to other stakeholders). So communication with stakeholder groups is likely to be more interactive than for laissez-faire-type organisations. They may well also set up systems and policies to ensure compliance with best practice (for example, ISO 14000 certification, the protection of human rights in overseas operations, etc.) and begin to monitor their social responsibility performance. Top management may also play more of a part, at least insofar as they support the firm taking a more proactive social role.
ii) Multiple stakeholder obligation.
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This stance of CSR explicitly incorporates multiple stakeholder interests and expectations rather than just shareholders as influences on organisational purposes and strategies. Here the argument is that the performance of an organisation should be measured in a more pluralistic way than just through the financial bottom line. Companies in this category might retain uneconomic units to preserve jobs, avoid manufacturing or selling ‘anti-social’ products and be prepared to bear reductions in profitability for the social good. Some financial service organisations have also chosen to offer socially responsible investment ‘products’ to investors. These include only holdings in organisations that meet high standards of social responsibility in their activities.
In such organisations responsibility for CSR may be elevated to board-level appointments and structures may be set up for monitoring social performance across its global operations. Targets, often through balanced scorecards, may be built into operational aspects of business and issues of social responsibility managed proactively and in a coordinated fashion. The expectation is that such a corporate stance will, in turn, be reflected in the ethical behaviour of individuals within the firm. Organisations in this category inevitably take longer over the development of new strategies as they are committed to wide consultation with stakeholders and with managing the difficult political trade-offs between conflicting stakeholders’ expectations.
