corporation and csr-11 12 & 13

8/8/2019 Corporation and CSR-11 12 & 13

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Corporation and CSR


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What is a Corporation?


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Corporation

A corporation is defined in terms of legal status and the

ownership of assets.

Legally, corporations are typically regarded as

independent from those who work in them, managethem, invest in them or receives products or services

from them.

For this reason, corporations are regarded as having

perpetual succession.

perpetual succession: As an entity they can survive the

death of any individual investors, employees, or

customers- they simply need to find new one.


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Corporation This legal status leads onto the second key defining feature of

corporation.

Rather than shareholders or managers owning the assetsassociated with a corporation, the corporation itself usually ownsthe assets.

Thus, the factories, offices, computers, machines and other

assets operated by, say, the Anglo-Dutch consumer productsgiant Unilever, are the property of Unilever, not of itsshareholders.

Shareholders simply own a share in the company that entitlesthem to a dividend and some say in certain decisions affecting thecompany.

They could not for instance, arrive at Unilevers HQ and try toremove a computer or a desk and take it home, because it isUnilever that owns that computer or desk, not the shareholder.

Similarly, employees, customers, suppliers etc. deal with, andagree contracts with, the corporation, not with shareholders.


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Corporation

The corporations are typically regarded as

artificial person in the eyes of law: They havecertain rights and responsibilities in society, just as an

individual citizen might.

Corporations are notionally owned by

shareholders, but exist independently of

them: The corporation holds its own assets and

shareholders are not responsible for the debts ordamages caused by the corporation (they have limited

liability).


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Corporation

Managers and directors have a fiduciary

responsibility to protect the investment of

shareholders :

This means that senior management is

expected to hold shareholders investment

in trust and act in their best interests.


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Can a corporation have Social

Responsibility?

Around 1970, Nobel prize winning

economist Milton Friedman published anarticle under the provocative title The

social responsibility of business is to

increase its profits.


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Milton Friedman line of Arguments

1.Only human being have a moralresponsibility for their actions.

Corporations are not human beings andtherefore cannot assume true moralresponsibility for their actions. Sincecorporations are set up by individual human

beings, it is those human beings who are thenindividually responsible for the action of thecorporation.


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.Milton Friedman line of

Arguments It is managers responsibility to act

solely in the interests of shareholders:

As long as a corporation abides by the

legal framework society has setup for

business, the only responsibility of the

managers is to make profit, because it is

for this task that the firm has been set upand the managers have been employed.


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Milton Friedman line of Arguments

Social Issues and problems are theproper province of the state rather thancorporate managers.: Friedmans third

main point was that managers should notand cannot decide what is in societys bestinterests. This is the job of government.Corporate managers are neither trained toset and achieve social goals, nor (unlikepoliticians are they democratically electedto do so.


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In fact Bakans (2004) basic premise is

that the legal designation of the

corporation makes it unable to act except

in thoroughly self-interested ways.


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Case 1:Scope of Corporate

Governance Talks about economic growth with equity

as the task of corporate governance.

Maruti did it successfully notwithstandingthe regulation of a public sector company.


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Case 2: Lends direction to the

Solution Offers sound justification for revisiting the process andregulations of corporate governance with a view to makethe business enterprise trustworthy, transparent,accountable and faithful.

Thus, Corporate governance is not about complying withsome regulatory provisions on paper, but about fulfillingfair economic obligations to direct stakeholders, andethical and environmental obligations to the society forsustained growth and wellbeing.

Promoters and directors should not take advantage ofshortcomings of the financial system or in regulations forpersonal gains and cause hardship in lives of many inthe society.


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Case 3

This case is a strong reminder to the basics of business.

Sustainable development is possible only with

sustainable ethics.

It illustrates how, business when in a partying mood ingood times, are oblivious to their duties and

responsibilities towards society and stakeholders.

It also warns of crises that are engulfing the world,

because of the absence of equities and presence of a

selfish approach in business.


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Altogether, the three cases

span th

e scope and concerns ofethical corporate governance;

clarifying the social

responsibility that businessenterprise must fulfill for

sustained development of thebusiness and inclusive growth

of the society,15


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Corporate Social Responsibility

: Business Reasons Corporation perceived as being socially

responsible might be rewarded with extra

and/or more satisfied customers, whilst

perceived irresponsibility may result in

boycotts or other undesirable consumer

actions.

For e.g. , oil giant ExxonMobil.

ExxonMobil has experienced an

international consumer boycott throughout

the 2000s, coordinated by Greenpeace. 16


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..Corporate Social Responsibility

: Business Reasons Employees might be attracted to work for, and

even be more committed to, corporations

perceived as being socially responsible. Making a positive contribution to society might

be regarded as a long-term investment in a

safer, better-educated and more equitable

community. This subsequently benefits the corporation by

creating an improved and stable context in

which to do business.17


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In arguing against CSR, Friedman (1970)in fact does not dispute the validity of such

actions, but rather says that when they are

carried out for reasons of self-interest, arenot CSR al all, but merely profit-

maximisation under the Cloak of social

responsibility.

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Moral Arguments for CSR

Corporation causes social problems (such

as pollution) and hence have a

responsibility to solve those they have

cause and to prevent further social

problem arising.

As powerful social actors, with recourse to

substantial resources, corporation shoulduse their power and resources responsibly

in the society.

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All corporate activities have social impacts

of one sort or another, whether through

the provision of products and services, the

employment of workers or some other

corporate activity. Hence, corporation

cannot escape responsibility for those

impacts, whether they are positive,negative, or neutral.

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Moral Arguments and CSR


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Moral Arguments and CSR

Corporations rely on the contribution of a

much wider set of constituencies, or

stakeholders in society (such as

consumers, suppliers, local communities),

rather than just shareholders, and hence

have a duty to take into account the

interests and goals of these stakeholdersas well as those of shareholders.

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Carrolls four part model of CSR

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Philanthropic

Responsibilities

Ethical Responsibilities

Legal

Responsibilities

Economic Responsibilities

Desired by the

Society

Expected by the

society

Required by the

Society

Required by the

Society


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Carrolls four part model and

Nature of CSR Economic Responsibility: Companies haveshareholders who demand a reasonable

returns on their investments, they have

employees who have safe and fairly paidjobs, they have customer who demand good

quality products at a fair price etc. This is by

definition the reason w

hy businesses are setup in the society and so the first responsibility

of business is to be a properly functioning

economc unit and to stay in business.23


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Carrolls four part model

and Nature of CSR

Legal Responsibility: The legalresponsibility of corporations demands

that business abide by the law and play

by the rules of the game

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and Nature of CSR Ethical Responsibility: Theseresponsibility oblige corporation to do what

is right and fair.

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and Nature of CSRPhilanthropic Responsibility: The

Greek word philanthropy means literally

the love of the fellow human. By using

this idea in a business context, the model

incorporates activities that are within the

corporations direction to improve the

quality of life of employees, localcommunities, and the ultimately society in

general.

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Thus, the CSR encompasses

the economic, legal, ethical, andphilanthropic expectations

placed on organisation by

society at a given point of time

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CSR and Strategy-Corporate

Social Responsiveness Corporate Social Responsiveness refersto the capacity of a corporation to respond

to social pressures.

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.CSR and Strategy-Corporate

Social ResponsivenessReaction- Denies any responsibility forsocial issues, for example by claiming that

they are the responsibility of the

government.

Defence-Admits responsibility but fights it,

by adpoting an approach based mainly on

superficial public relations rather thanpositive action.

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.CSR and Strategy-Corporate

Social Responsiveness

Accommodation: The corporation

accepts responsibility and does what isdemanded of it by relevant groups.

Proaction-The corporation seeks to go

beyond industry norms and anticipates

future expectations by doing more than is

expected.

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CSR

CSR is not the social service wing of a

company that undertakes some social

projects.

It is an integral part of the companys

governance that should identify and

undertake all such actions-including

environment protection-As wouldmaximise the probability of accomplishing

its stated mission and vision for long term

survival and sustained growth.31

corporation and csr-11 12 & 13

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