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Corporate Governance & Social Responsibility - Coggle Diagram
Corporate Governance & Social Responsibility
Eg: Nauru - The case for social responsibility
70% if the land uninhabitable
97% of men & 93% of women are overweight
40% of population has Type II diabetes
90% of population are unemployed
Humans tends towards greed & lack of responsibility towards others
Government did not practice self-restraint/regulation from their pursuit of wealth & greed
CSR for Business
Economic Responsibility:
Obligation to seek out supplies of raw materials, Discover new resources & Improve current technologies
Legal Responsibility:
Manage assets of the corporation in the interests of shareholders & legally responsible to customers, suppliers & regulatory authorities
Examples of CSR
Operating on an ethical level higher than the minimum legal requirement (eg: Doesn't test on animals for their products)
Making contributions to civic & charitable/non-profit organizations (eg: donation)
Providing benefits for employees and improved quality of life beyond economic & legal requirements (eg: OCBC employee resources
Paying more for socially responsible alternative resource (eg: sustainable wood for furniture)
Using corporate resources to address a major social problem (eg: Banyan Tree Global Foundation create employment)
Advantage
Help balance corporate power & rights with responsibilities
Encourages more responsible self-regulation
Promotes long-term profits for businesses
Improve business value & reputation with trust and confidence building
Manages negative externalities caused by businesses
Disadvantage
Lower economic efficiency & short-term profits
Costs of CSR born by stakeholders & customers
Many businesses lack expertise, knowledge in dealings with social issue
Individuals & Governments may find little incentive to be involved in the business' CSR efforts (Company bears the risks while individuals & government enjoy the benefits)
Classical View of CSR
Primary criteria for business performance: Economic efficiency and growth in production of goods & services
Primary goal & motivating force for business is profit
Classical view suggest Ethical Egoism leads the invisible hand
Bottom line: Corporations should engage purely in economic activity and be judged solely in economic terms. Social issues should be left to the professionals
Issues Raised
Moral Minimum of the Market
Pro Classical:
Acknowledges that corporation must play by the rules & carry out business in honesty & good faith
Anti Classical:
Thinking is not enough to prevent corporations from "social injury" (harm to society). Good faith is not enough, active self-regulation is needed
Power & Responsibility
Pro Classical:
Resources companies diverted to CSR would control the outcome of the type of CSR corporations seek to influence in the market (may not be good for society)
Anti-Classical:
Powerful companies need to be restrained through active CSR methods
Helping the Government
Pro Classical View
Economic well-being best left to corporations
Social problems should be left to professionals (government & non-governmental organizations)
Handling economic side of things is seen as helping the government resolve the economy problem
Anti Classical View
Social problems are too big for government to handle alone
Company should help socially if possible (urgent, close proximity, can respond effectively, left unattended unless a corporations act)
Milton Friedman
No to CSR
No place for businessman
If corporation spends on CSR, they are diverting the money away from employees
Hire less qualified persons because of a social agenda (not in the interest of company's goals & targets)
Money spend taken away from employees & shareholders (taxing)
Yes to CSR
Corporation lobby (legally influence) the government daily on rules & regulations. No excuse to not take part in CSR (already playing a role in society)
Shortcomings of government: Government does not have all the resources to manage externalities. Companies are in a position to reduce these externalities (eg: applying pressure on suppliers to free trade)
Taxation argument: Instead of spending money on employees & shareholders, the use of money ultimately affects everyone positively
Business approach to CSR
Market for Virtue
CSR is profitable for corporations because the market rewards responsible behaviour & punishes lapses in corporations
Competitive Advantage
Makes socially responsible corporations standout from amongst the competition, offering a value proposition that others do not have
Choosing a social issue to address
No business can solve all of society’s problems or bear the cost of doing it.
Selection of issues must intersect with its business dealings and operations.
Generic social issues
Issues important to society but not significantly affected by the company’s activities in the course of business.
Value Chain social impact
Areas significantly affected by the company’s activities in the course of business
eg: DHL & carbon emissions
Social dimensions of competitive context
Factors in the external environment that significantly affect underlying drivers of competitiveness in places where company operates.