Theories Of Corporate Social Responsibility Management Essay

Theories Of Corporate Social Responsibility Management Essay Introduction The field of corporate social responsibility (CSR) shows to have become more important around the world. The role of business and the way it is perceived by society has gone through several changes throughout the history. Over time, until today, an increased awareness of the impact of business and its interaction with social and environmental issues have emerged. Companies are today obliged to some certain responsibilities in the society where they are active. The most basic responsibilities are laws and rules that they have to supply under. Organizations today are forced to show that their business stands for something more than just profits, and that their activities add some value, or at least do not negatively affect the community around them (Ledwidge, 2007). What is Corporate Social Responsibility (CSR) CSR is a concept that has many different definitions and a concept that is growing in the corporate world today. Look in most journal articles and you can find the list. But do the people really understand what exactly means by corporate social responsibility? van Marrewijk, (2003) defined CSR is regarded as the panacea which will solve the global poverty gap, social exclusion and environmental degradation. Refer to a work by Abeysuriya et al, (2007), corporate social responsibility of CAR common purpose for facilitating the move towards a socially and ecologically sustainable future through voluntary business activities. Boyd et al, (2007) defined corporate social responsibility as general sense reflects obligations to society and stakeholders within societies impacted by the firm. Beckman et al, (2009) pointed out that CSR known as the organizations status and activities with respect to its perceived community responsibility. CSR is developing in the ethics, marketing, and management fields. The ethics consists of three types of issues i.e., macro-, meso- and micro-level based. The macro- and meso- refer to stakeholder engagement and micro- is center of specific such as code of ethics. van Marrewijk, (2003) defined CSR is regarded as the panacea which will solve the global poverty gap, social exclusion and environmental degradation. Ethical challenges Robinson et al, (2006) noted that one challenge entrepreneurs face is about how to define the ethical dilemma explicitly, so as to address it within the context of the entrepreneurial purpose. The ethical issues in business has to do with making the right choices and there is often no apparent single right way and may meet optimist expectations. Entrepreneurs are therefore frequently faced with choices in business that creates tensions between their need to be ethical and their desire to optimize profits. This tension may sometimes manifest as a fundamental choice between private gain and public good, though this is perhaps to simplistic a way to view the matter Robinson et al, (2006). The author noted that any decision where moral considerations are relevant may give rise to an ethical dilemma. In general, an ethical dilemma may result from a decision that: requires a choice between rules has no rule, precedent or example to follow morally requires two or more courses of action, which are practically incompatible should be taken (in self-interest), but which appears to violate a moral principle The process of Corporate Social Responsibility Figure 1: Phases and steps within the CSR process (Extracted from ORiordan and Fairbrass, 2008) ORiordan and Fairbrass, (2008) demonstrated the potential moves (CSR processes, phases, and steps diagram) in figure 1. According to the authors, there are two distinct stages can be identified i.e. strategy development and strategy implementation of CSR. The strategy development phase includes the following factors: Values which drive the strategy; Alternatives which encompass the various range of options available to decision makers (e.g. using an analogy from chess, the pieces on the board that are available to be moved); The strategy (or action) which is the ensuing results from the decisions taken in the two earlier steps of phase 1. The implementation phase marks stage two of the CSR process. It includes the factors: Implementation and control which involve the technical aspects of implementation at a more tactical level and the crucial step of control of the entire process (i.e. the feedback loop); Finally, the output step is included based on the rationale that a results-orientated approach is beneficial to ensure an effective and efficient use of managerial resources. Theoretical foundation Refer to Clark, (2000) CSR consists of four steps process i.e., awareness or recognition of an issue, analysis and planning, response intern of policy development and implementation. The process of CSR also includes environmental assessment, stakeholder management, and issues management. Becker-Olsen et al, (2006) mentioned that CSR a link between social initiatives and improved financial performance. According Besley and Ghatak, (2007) CSR is dependable with profit-maximization in competitive markets. In equilibrium firms sell ethical brands and neutral brands, and consumers self-select according to their valuation of the public good. According to Margolis et al, (2008) the relationship between corporate social responsibility (CSR) and corporate financial performance across eight categories of CSR and found that different initiatives have significantly different impacts on financial performance. Pies et al, (2009) documented that the ordonomic approach can be used in business ethics to foster effective leadership skills and encourage CSR. The ordonomic perspective is a valuable framework for discussing the meaning and role of ethics in effective leadership and CSR in the age of globalization. The authors explained that the ordonomic approach provides a three-tiered conceptual framework for analyzing society and social interaction (refer to figure 2). Figure 2: the three-tiered conceptual framework of the ordonomic perspective (extacted from Pies et al, 2009) This framework distinguishes between the basic games of antagonistic social cooperation, the meta-games of social rule setting, and the meta-meta games of rule-finding discourse. The authors stated that the basic game of social interaction refers as cooperation is only made possible by the existence of institutions, i.e., rules. for mutual advantage. The meta game is rule-setting processes that are geared toward creating a mutually advantageous social structure. Finally, the meta-meta game serves as a rule-finding discourse. Its discursive practices aim at critically discussing semantics and with the goal of developing shared perceptions as to the social interdependence of the players (Pies et al, 2009). Levels of Corporate Social Responsibility Carroll (1991) stated that CSR consists of four level basic responsibilities to society i.e., economic, legal, ethical and discretionary. From these four level responsibilities, Carroll uses to build his CSR model (refer to figure 3). Philantropic Responsibilities Ethical Responsibilities Legal Responsibilities Economic Responsibilities Be a good corporate citizen. Contribute resources to the community; improve quality of life Be ethical. Obligation to do what is right, just and fair. Avoid harm Be profitable. The foundation upon which all others rest Obey the law. Law is societys codification of right and wrong. Play by rules of the game Figure 3: The pyramid of corporate social responsibility (Extracted from Caroll 1991) Refer to the Carrolls model, economic responsibility is the foundation of the pyramid. The next level involves legal responsibilities, which is followed by ethical responsibilities. At the top of the pyramid is philanthropic responsibilities which is to be the highest level of corporate responsibility. Economic and Legal Responsibilities Economic responsibilities mean that the core activity of a business is to provide goods and services. The legal responsibilities refer to companies cannot only focus on the profit motive; simultaneously they are expected to act in accordance with current laws and regulations transmitted by federal, state and local communities as the ground rules under which business should operate (Carroll, 1991). Table 1: Economic and Legal components of Corporate Social Responsibility (extracted from Carroll, 1991) Economic Components (Responsibilities) Legal Components (Responsibilities) 1. Perform in a manner consistent with maximizing earnings per share. 1. Perform in a manner consistent with expectations of government and law. 2. Be committed to being as profitable as possible. 2. Comply with various federal, state and local regulations. 3. Maintain a high level of operating efficiency. 3. Be a law-enduring corporate citizen. 4. Maintain a strong competitive position. 4. It is important that a successful firm is defined as one that fulfils its obligations. 5. It is important that a successful firm is defined as one that is consistently profitable. 5. Provide goods and services that at least meet minimal legal requirements. Ethical Responsibilities Refer to Caroll, (1991) ethical responsibilities represent standards, norms and expectations that consumers, employees, shareholders and the community look upon as fair, even though they are not transferable into laws. The ethical responsibility is the voluntarily responsibility by the company to act in a manner that is fair and justice and to avoid or at least minimize the risk that the shareholders of the company is affected in any negative manner. In the latest years the ethical responsibility has created high expectations on corporate managers and social pressure forces the companies to act in a manner that is far beyond their legal responsibilities. Philanthropic Responsibilities Philanthropic responsibility is always voluntarily and could be implemented through both devote the employees time and the companys money for the best of the society and always try to strive for improving the world around them. The societal approach indicates that companies are responsible to the society as a whole, of which they can be seen as an integral part (Carroll, 1991). Table 2 Ethical and Philanthropic components of Corporate Social Responsibility (extracted from Carroll, 1991) Ethical Components (Responsibilities) Philanthropic Components (Responsibilities) 1. Perform in a manner consistent with expectations of societal mores and ethical norms. 1. Perform in a manner consistent with the philanthropic and charitable expectations of society. 2. Recognize and respect new or evolving ethical moral norms adopted by society. 2. Assist the fine and performing arts. 3. Prevent ethical norms from being compromised in order to achieve corporate goals. 3. That managers and employees participate in voluntary and charitable activities within their local communities. 4. It is important that good corporate citizenship be defined as doing what is expected morally or ethically. 4. Provide assistance to private and public educational institutions. 5. Recognize that corporate integrity and ethical behaviour go beyond mere compliance with laws and regulations. 5. Assist voluntarily those projects that enhance a communitys quality of life. Different approached had been used by van Marrewijk, (2003) i.e, three theories about different levels of CSR (refer to figure 4). Figure 4: General model of CS/CR and its dimensions. (van Extracted from Marrewijk, 2003) According to van Marrewijk, (2003) there the ultimate objective of CSR is to obtain Social Sustainability. This cannot be achieved without the different levels of CSR, in economy, social and environmental issues. In the shareholder approach it is clear that the central aim for a company is the pursuit of profit maximization and that the social responsible activities are not concerned with the corporate body but are a major task for the government and the public sector. In this process CSR is only interesting in the way that it contributes to achieve he objectives of the company, which in the long run is profitability for the owners. Theories of Corporate Social Responsibility The implementation theories correspond to the basis to create a model that describes a CSR implementation process According to Carol, (1991) business and politics communities have been influenced by the globalisation process and the displacement of values from material to immaterial values that has taken place. Refer to a work by Garriga and Melà ©, (2004) CSR theories associated with four groups i.e., (table 3) Instrumental theories The corporation is used strategic tool for wealth creation. There are three main groups of instrumental theories which depend on the economic objectives. The three groups are; Maximizing the shareholder value According to the authors, any investment social demands that contribute to maximizing the shareholder without deception and fraud are include in this group. It has been noted that the shareholder value maximization as the supreme reference for corporate decision-making. Strategies for achieving competitive advantages Garriga and Melà ©, (2004) noted that this group of theories are concentrated on long term social objectives by knowing how to allocate resource and create a competitive advantage. There are three approaches can be included within this strategies i.e., social investments in competitive context, natural resource-based view of the firm and its dynamic capabilities and strategies for the bottom of the economic pyramid. Cause-related marketing Cause-related marketing refers as the process of formulating and implementing marketing activities and the goal is to enhance company revenues, sales or customer relationship by building the brand through the acquisition of, and association with the ethical dimension or social responsibility dimension (Garriga and Melà ©, 2004). Political theories The authors pointed out that political theories focus on interactions and connections between business and society and on the power of business and its inherent responsibility. There are two major theories can be distinguished through Corporate Constitutionalism and Corporate Citizenship Corporate Constitutionalism The authors mentioned that the firm has power to influence the equilibrium of the market. Social powers of the firm are internally and externally without destroy power. They channel organizational power in a supportive way and protect against unreasonable organizational power. Corporate Citizenship Corporate citizenship refers as responsibilities and possible partnerships of business in society. It has been reported that some theories on corporate citizenship are based on a social contract theory. Corporate citizenship theories generally have a strong sense of business responsibility towards the local community, partnerships which are the specific ways of formalizing the willingness to improve the local community and for consideration for the environment. (Garriga and Melà ©, 2004). Integrative theories According to the authors, the integrative theories depend to social demands for its existence continuity and growth. Social demands means society interacts with business and gives it a certain legitimacy and prestige. In addition, the authors noted that the theories of this group are focused on the detection and scanning of, and response to, the social demands that achieve social legitimacy, greater social acceptance and prestige. Issues management The concept of social responsiveness broadens with the concept of issue management which refers as a process for making a corporate response to social issues. Issues management is a process of the corporation can identify, evaluate and respond to those social and political issues which may impact significantly upon it. The principle of public responsibility Public policy consists of law, regulation and broad pattern of social direction reflected to public opinion, emerging issues, formal legal requirements and enforcement or implementation practices. Garriga and Melà ©, (2004) noted that if business adhered to the standards of performance in law and the existing public policy process, then it would be judged acceptably responsive in terms of social expectations. Stakeholder management Stakeholder management focuses on the public responsibility principle and combines groups with a stake in the firm into managerial decision making (Garriga and Melà ©, 2004). Corporate social performance Refer to Garriga and Melà ©, (2004) the corporate social performance theories includes social legitimacy with process for giving appropriate responses. The corporate social performance also include the principles of CSR, expressed on institutional, organizational and individual levels, processes of corporate social responsiveness, such as environmental assessment, stakeholder management and issues management, and outcomes of corporate behavior including social impacts, social programs and social policies. Ethical theories Garriga and Melà ©, (2004) documented that ethical theories focus on the ethical requirements that strengthen the relationship between business and society which is based on principles that express the right thing to do or the necessity to achieve a good society. Normative stakeholder theory The authors noted that the normative stakeholder theory is a way to integrate social demands. Normative stakeholder theory has a normative core based on two major ideas stakeholders are persons or groups with legitimate interests in procedural and/or substantive aspects of corporate activity (stakeholders are identified by their interests in the corporation, whether or not the corporation has any corresponding functional interest in them) and The interests of all stakeholders are of intrinsic value (that is, each group of stakeholders merits consideration for its own sake and not merely because of its ability to further the interests of some other group, such as the shareowners). Universal rights Universal rights (human rights) UN Global Compact includes in the area of human rights, labor rights and the environment protection as a basis for CSR. Sustainable development Sustainable development requires the integration of social, environmental, and economic considerations to make balanced judgments for the long term. In order to maintain the sustainable developmenet there is a need for the organizations aims and intentions be aligned with the organization strategy, as an appropriate response to the circumstances in which the organization operates (Garriga and Melà ©, 2004). Table 3: Corporate Social Responsibility Theories and related approaches (extracted from Garriga and Male, 2004) The common good approach Refer to the authors, this approach maintains that business, as with any other social group or individual in society, has to contribute to the common good, because it is a part of society and it shouldnt be harmful to society. Morimoto and Hope, (2005) are using Grounded Theory approach to undertake the complex issues CSR auditing. According to the authors the grounded theory is grounded in the data; developed from it by the analysis process and tested in the existing data for verification. It is systematic rigor and thoroughness from initial design, through data collection and analysis. Chih et al, (2009) institutional theory on CSR comprising a series of propositions specifying the conditions under which corporations are more (or less) likely to behave in socially responsible ways such as financial performance and economic environment, competition, legal environment, private regulation and the presence of independent organizations, business education environment, and employer-employee relations Another study by Frederiksen, (2009), the author had chosen two kinds of teleological moral theories, i.e. egoism and utilitarianism, and two kinds of deontological moral theories, i.e. libertarianism and common-sense morality and moral theory, i.e. utilitarianism and common-sense morality. From the authors finding, the companies act in CSR is not according to their CSR policies on goal-orientated teleological moral theories, such as ethical egoism or utilitarianism, but they prefer on duty based common-sense morality. In addition, managers mainly perform with goal-oriented teleological moral the ethical guidelines, utilitarianism and this theory is in disagreement with deontologically oriented theories i.e., common-sense morality. Teleological moral theories Egoism According to Frederiksen, (2009), CSR concerned with benefiting the company such as employees, the local community and companys self-interest. Ethical egoist refers to any kind of social arrangement that would be rational for their own best-interest. Therefore, egoism in a company should to do good or refrain from doing harm only if it is good for the company, normally meaning if it helps to maximize profit. Utilitarianism It has been stated that the relationship between CSR and utilitarians is companies have a moral obligation to promote the best possible outcome, i.e. maximise happiness from an impartial perspective. Impartiality refers as the one is impartial in relation to who the benefactor is and who the beneficiary is such as those who closely related to the company, employees (Frederiksen, 2009). Deontological moral theories Libertarianism The author noted that the relation of CSR and libertarianism, it is believe that companies have no moral obligation to positively help anyone; they are only morally obligated not to violate anyones negative rights. Common-sense morality The relationship between CSR and the common-sense orientation believe that companies have a moral obligation not to violate anyones rights and that they also have positive duties towards certain groups, such as employees, the local community and others closely related to the company. The author mentioned that common-sense moral principles seem to be principles concerning special obligations; for example special obligations towards shareholders or other closely related groups. Hsieh, (2009) documented that there are two prominent theories of corporate purpose i.e., stakeholder theory and corporate citizenship theory. Stakeholder theory The corporation ought to be managed for the benefit of all its stakeholders Corporate citizenship theory It emphasize business enterprises in respecting and defending human rights and in contributing to social welfare and human development within society Refer to Padgett RC, Galan JI, (2009), resource-based view (RBV) theory related to CSR in the sense of they can generate competitive advantages; the firm is also affected by external factors. RBV in the study of CSR is explained by the emphasis it places on the importance of specific intangible resources, such as know-how, corporate culture and reputation for firms to obtain competitive advantages. Table 4: In summary of Corporate Social Responsibility Theories Theories Types of theories Authors CSR theories associated with four groups Instrumental theories- strategic tool for wealth creation Political theories- on interactions and connections between business and society and on the power of business and its inherent responsibility Integrative theories- social demands for its existence continuity and growth. Ethical theories- ethical requirements that strengthen the relationship between business and society Garriga and Melà ©, (2004) Undertake complex issues regarding CSR auditing Grounded theory It is systematic rigor and thoroughness from initial design, through data collection and analysis. Morimoto and Hope, (2005) Institutional theory CSR comprising a series of propositions specifying the conditions under which corporations are more (or less) likely to behave in socially responsible ways such as financial performance and economic environment, competition, legal environment, private regulation and the presence of independent organizations, business education environment, and employer-employee relations Chih et al, (2009) CSR associated with two kinds of teleological moral theories and two kinds of deontological moral theories. Teleological moral theories Egoism Any kind of social arrangement that would be rational for their own best-interest to help maximize company profits. Utilitarianism To promote the best possible outcome, i.e. maximise happiness to those who closely related to the company, employees. Deontological moral theories Libertarianism The companies have no moral obligation to positively help anyone; they are only morally obligated not to violate anyones negative rights. Common-sense morality and moral theory Principles concerning special obligations not to violate anyones rights and that they also have positive duties towards certain groups; for example special obligations towards shareholders or other closely related groups. Frederiksen, (2009) There are two prominent theories of corporate purpose Stakeholder theory the corporation ought to be managed for the benefit of all its stakeholders Corporate citizenship theory It emphasize business enterprises in respecting and defending human rights and in contributing to social welfare and human development within society. Hsieh, (2009) Resource-based view (RBV) RBV theory allows to analyse the effect of RD intensity on CSR Resource-based view (RBV) theory Importance of specific intangible resources, such as know-how, corporate culture and reputation for firms to obtain competitive advantages. Padgett and Galan, (2009) Corporate Social Responsibility Implementation Marimoto et al, (2005) there are six key elements to the achievement of successful CSR are perceived as good stakeholder management, good corporate leadership greater priority for CSR at board level, integration of CSR into corporate policy at all levels and in all divisions of business, regulation at the national and international level understood and demonstrated across all areas of business, active involvement of, and good coordination between, government business, NGOs and civil society. Raps (2005) noted that in order to achieve successful implementation of CSR, there is a need to understand a long-term process that requires creativity and careful planning. The author pointed out ten critical points to overcome and improve the difficulties in the CSR implementation context. Commitment of top management Refer to Raps, (2005), the importance of having top-managers working hard to achieve the purpose of the strategy is crucial for the implementation to succeed. Top-managers must influence middle managers in order to get their true message forward; they cannot relay on and believe that the middle-managers perception of the implementation is the same as theirs. Involve middle managers valuable knowledge The author pointed out that to make use of the knowledge that middle managers possess and make sure they are involved increases their motivation and make them feel like they are a part of the process. This motivation boost is important for everyones everyday day work since the middle managers engagement increases the awareness of the implementation throughout the organization. Communication is what implementation is all about Refer to Raps, (2005) illustrates in his communication-model how it is possible to provide appropriate information regarding implementation throughout the organization (Figure 5). Figure 5: Issues to be addresses in the communications plan (Extracted with Raps 2005). Integrate point of view It is essential to see the implementation as a method used integrated within all aspects of the company. Traditionally implementation often overemphasizes the structural aspects e.g. organizational structure and disregards other existing components such as cultural aspects and human resources perspective. All of these aspects need to be taken into consideration to create an integrated measure for implementing activities (Raps, 2005). Clear assignment of responsibilities To avoid power struggles between departments and within hierarchies, there should be a plan with clear assignments of responsibilities regarding detailed implementation activities. This is a preventive way of proceeding. Responsibilities are clear and potential problems are therefore avoided (Raps, 2005) Preventive measures against barriers Change is a common phenomenon for companies today and the companies that are capable of handling change has a great advantage. The ability to manage change has become a core competency. A great challenge within strategy implementation is to deal with potential change barriers. Therefore, it is important to prevent these barriers and by changing the way they view and practice strategy implementation, senior executives can effectively transform change barriers into gateways for a successful execution (Raps, 2005). Emphasize teamwork activities Teamwork is an important part when implementing a strategy. It is however often forgotten when it comes down to implementation process activities (Raps, 2005). Respect the individuals ´ different characteristics Human resources are valuable and intangible assets within a company. Latest studies indicate that HR is the key factor for successful implementation (Raps, 2005) Take advantage of supportive implementation instruments According to the author, there are two implementation instruments can be applied i.e., the balanced scorecard and the supportive software solution. The balanced scorecard provides a functionality to translate a companys strategic objectives into a coherent set of performance measures. In addition, it provides a framework to integrate the strategic planning and meets the requirements that the strategic planning system itself can display. The software solutions can be helpful to improve the quality of strategy implementation and provides clear assignments of responsibilities throughout the organizations implementation process. Calculate buffer time for unexpected incidents The author reported that the most important in strategy implementation is the exceeding of time restrictions. The important key is to find out the time-intense activities and harmonize with the time capac