Wakanda Ltd is a listed multinational company which manufactures and sells fruit juice. Last year, Wakanda Ltd received criticism in the national press in Ghana and in other countries as a lot of customers were hospitalized after purchasing some of its fruit juice which was contaminated. This resulted in low patronage in its products and a huge fine by the Government.
The Board of the company believes in improving the relationships with groups such as suppliers, customers and employees in order to regain its reputation. It has come out with the following corporate social responsibility (CSR) in order to correct the shortfall in sales:
- Paying all bills of hospitalized customers and reducing of prices of the products for customers.
- Sourcing high quality raw materials from suppliers and providing suppliers with capital to produce more.
- Using efficient processes and motivating staff for them to give their best.
- Maintaining the highest standard of hygiene and complying with the standards issued by Ghana Standards Board.
Required:
Assess the significance of the CSR stance taken by the Board. (10 marks)
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- The multiple stakeholder obligations stance is that many groups have a stake in what the organisation does.
- This is particularly important in the business context, where shareholders own the business but employees, customers and government also have particularly strong claims to having their interest considered. It is suggested that modern corporations are so powerful, socially, economically and politically, that unrestrained use of their power will inevitably damage other people’s rights.
- Under this approach, the exercise of corporate social responsibility constrains the corporation to act all times as good citizen. Particular emphasis is laid on the preservation of employment and protection of the environment.
- Stakeholder stance posits that the essence of business primarily lies in building relationships and creating value for all its stakeholders. Though the composition of stakeholders may differ depending on company’s industry and business model, the main stakeholders typically include employees, customers, communities, suppliers, and financiers (owners, investors). All these stakeholders are equally important for the company and any trade-off among the stakeholders should be avoided.
- Performance should not be measured simply through the financial bottom line. Long term survival is dependent on social and environmental performance as well as economic (financial) performance, and therefore it is important to take account of the views of stakeholders with interests relating to social and environmental matters.
NOTE: The following points can also be considered as significance of the CSR stance taken by the Board:. - Redeem company’s image through damage control.
- Reliable source of supply of inputs to ensure continuity of operations.
- Reduce labour turnover and improve service quality to customers.
- Avoid legal suits and associated costs.