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Business Ethics Laws in Saudi Arabia and the US Research Paper

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Updated: May 6th, 2021

Introduction

During the 19th Century, businesses were formed to maximize profits, and there was no concern for customers. The specified scenario is not the case in the world today because customer satisfaction is the business priority as the tool for making big profits. With many organizations targeting the same customers for the same line of products, things had to change. Marketing strategies appeared and had to change from profit maximization to customer satisfaction. Among the new approaches, corporate social responsibility was introduced and adopted globally, becoming a requirement in the business world. Defining the concept of CSR is, however, rather difficult due to a large number of aspects that it incorporates. A recent study explains that CSR can be viewed from legal, ethical, and economic aspects, to name just a few:

Reaching a single working definition for CSR is nearly impossible. The most logical and applicable definitions arise from a conglomeration of the numerous working definitions of the term. Carroll and Shabana (2010) view CSR as the intertwining of economic, legal, ethical, and discretionary responsibilities that a firm has to its stakeholders.1

Therefore, CSR is concerned with helping to improve society through infrastructure changes, increase in employment rates, charitable deeds, and creating green business for sustainability. In return, the company gains publicity, a good name, and an image.

Aim

The goal of the paper is to explore the legal aspects of following the principles of CSR in the context of Saudi Arabia (SA) and the United States (US). The rapid increase in the globalization process that can be witnessed currently allows creating a generalized CSR framework that can be very flexible when applied to the environment of a specific state. The pliable structure of CSR makes it possible to adjust it to the regulations of any state. As a result, the legal aspects of CSR in SA are very different from those of the US. This research will focus on identifying how the CSR framework is changed when being adjusted to the laws and regulations of SA and the US. In other words, the differences between CSR in SA and the US will be identified. Afterward, the possible avenues for CSR development, as well as suggestions regarding the improvement thereof, will be provided for both states. It should be noted, though, that the recommendations concerning the alterations to be made to the CSR frameworks will not only be customer-oriented but also focus on the needs of other stakeholders, including companies, local markets, global markets, local communities, and the global society. As a result, a significant improvement in the economic relationships and social interactions between the representatives of both states can be expected, and the number of conflicts appearing in the process is likely to be reduced significantly.2

Research Questions

As stressed above, the paper will have to answer numerous questions since the very concept of CSR is comprised of a variety of notions and refers to a range of domains in the economic, social, and financial life of companies and individuals. Furthermore, it will be necessary to explore the nature of CSR and the legal frameworks of two different states. Thus, the paper will seek to find the answers to the questions listed below.

  1. What are the legal aspects of CSR in SA?
  2. What are the legal aspects of CSR in the US?
  3. How do the specifics of SA legislation affect the development of CSR, and what is the current course of its development?
  4. How do the specifics of the US legislation affect the development of CSR, and what is the current course of its development?
  5. In what way are the legal aspects of CSR in SA different from those of CSR in the US?
  6. How can the development of CSR be improved in SA and the US?

It is expected that, by answering the questions listed above, the current study will shed light on the possible avenues for improving the current CSR frameworks. As a result, the strategies for enhancing the progress of public and private businesses in SA and the US can be designed. Moreover, the results of the study may shed light on the opportunities for the future enhancement of economic interactions between SA and the US.

Literature Review

The significance of CSR has increased significantly over the past few years. For instance, the subject matter has assumed vital importance for the developing countries that strive to build powerful economies that will remain sustainable in the demanding environment of the global market.3 Although SA has been at the top of the global economy for quite a while due to the number of resources and their reasonable usage, the SA companies must comply with the CSR principles to retain their position in the target market.

The same can be said about the US organizations and the promotion of CSR ideas in the American market. Most US companies are no strangers to the idea of focusing on the reinforcement of an ethical and responsible approach as the basis for decision-making in the corporate environment. Nevertheless, the recent focus on the ideas of sustainability and rational use of resources, including the emphasis on the need for Lean Management and waste reduction, compels US firms to develop an especially elaborate CSR-based approach in management.4

However, the introduction of the CSR principles into the corporate environment also implies that the identified ideas align with the current legislation, particularly, trade regulations and corporate law. Furthermore, there is always a threat that some of the legal frameworks may become an impediment to promoting CSR ideas in the corporate environment. Furthermore, the lack of awareness about the specifics of the legal issues may lead to missing some of the opportunities for reinforcing the CSR principles. Herein lies the need to consider the legal aspects of introducing CSR to the context of SA and the US economic environment.5

Saudi Arabia: Law and CSR

At present, the Arab Forum for Environment and Development (AFED) defines the course that CSR promotion should take.6 Environmental issues have been the area of primary concern over the past few years, which is understandable given the recent global focus on environmentalism, especially regarding the sustainable use of resources.7 Therefore, the Saudi Arabian National Environmental Legislation currently is the source of changes happening to the application of CSR in the business environment.8 Given the fact that SA’s most profitable organizations operate in the oil and gas industry, the significance of complying with the primary environmental principles is quite understandable.

Moreover, the state environmental regulations were updated in 2000 when the General Environmental Regulation, Council of Ministers Resolution No. 193 was issued. The identified law sets the environment protection standards that allow controlling the level of pollution. Particularly, the regulation prohibits organizations to engage in any activities that contaminate water, including groundwater, pollute the air, etc.9. The specified law can be viewed as a powerful force behind the development and redesign of the CSR principles as they are applied in the SA business environment.

United States: Law and CSR

In the US, it is a legal requirement to report CSR issues and the associated concerns to the US Securities and Exchange Commission (SEC).10 The identified regulation defines the course of the CSR principles application in the context of the business environment. On December 16, 2016, the US Government issued the National Action Plan on Responsible Business Conduct, which made it obligatory to make sure that no business activities should infringe human rights.11 Therefore, it can be assumed that the First Amendment and the Bill of Rights, in general, currently serve as the foundation for the promotion of CSR in the US business environment. Indeed, the nature of the First Amendment is linked directly to advocating human rights.12

Research Methodology

Seeing that the questions asked in the current study focus on the analysis of qualitative relationships between the study variables, it will be reasonable to choose the qualitative design as the method of studying the issue. Furthermore, seeing that the nature of the phenomenon of CSR in the context of two different cultural settings will have to be studied, it will be reasonable to consider a case study approach as the primary tool for inspecting the issue. By definition, the case study framework implies that the specifics of culture-sharing activities should be analyzed by considering a specific group. Creswell, for instance, points to the fact that ethnography allows one to get a “detailed description of the setting or individuals”.13 As a result, one may develop a deep understanding of the subject matter, thus, understanding what exactly makes the CSR strategies used in the US and SA unique. Consequently, the possibility for determining the benefits and disadvantages of both approaches with the following recommendations concerning the improvements and, ultimately, the creation of a comprehensive approach that will apply to any setting will appear.

By definition, the use of a case study as the research method does not imply that the sample size should be defined. Particularly, the sample size can be limited to the amount of time in which the study has to be conducted. Therefore, four interviews conducted among the SA and US organizations in which the principles of CSR have been implemented lately can be viewed as a sufficient amount of data required for a comprehensive analysis. Therefore, the sample size will include four organizations.

As far as the strategy for the data collection and its further analysis is concerned, the use of observations and the following deductive approach with the use of the coding framework will be adopted. Particularly, the observations will be recorded, and the recurrent themes will be identified with the help of the coding system. The evaluation of the frequency with which the identified codes will appear in the text will become the foundation for determining the changes in the CSR fabric as it is applied to the realm of the US and SA workplace environment.

Limitations

Needless to say, the chosen research design has its disadvantages, the possibility of retrieving subjective data being the primary one. Indeed, by focusing on the experiences and impressions of only a comparatively small number of people, one is likely to overlook a range of opinions on the subject matter. While a detailed study of the workplace environments of four companies as suggested above may help identify the patterns in the behavioral changes and, therefore, comment on the general process of promoting the CSR principles in the target environment, a range of unique issues that could be located when analyzing the workplace setting of a larger number of organizations will be discarded.

Research

Table 1. Themes and Their Frequency in SA and the US.

Theme Description Number of times it appeared in the SA setting Number of times it appeared in the US setting
Environmentalism The necessity to comply with the current environment-oriented legislation 36 25
Sustainability Need to promote a careful allocation of the available resources to reduce waste 35 38
Networking Addressing the issue of data management security and prevention of cybercrime in the corporate environment 29
Empowerment The propensity toward empowerment by the recent laws that are lenient toward the US and European standards 5 22
Social entrepreneurship Failure to meet the culture-related human rights due to the current laws 21 35
Monetizing CSR The necessity to meet the current regulations while converting CSR principles to corporate profit 16 2
Social engagement The tendency to alienate the representatives of different social groups from one another due to different regulation systems 14 29
Education and employment Identification of the problems in the current legal standards for education 14 23
Economic stability Choice of lawful tools for furthering the company’s progress 11 6
Cascading knowledge Search for the means of arranging the data management system to prevent legal issues 2 15

As Table 1 shows quite explicitly, the research results point to the fact that both the US and SA legal frameworks for introducing the principles of sustainability to the setting of the corporate environment focus on the issue of environmentalism and sustainability greatly. The identified phenomenon is quite understandable given the fact that the recent update of the SA environmental regulations suggests a rather rigid set of rules for organizations to follow, and the US companies also need to meet the highest quality standards to gain popularity in the global market.

Furthermore, the need for the introduction of sustainable principles into the companies’ design that is evident in the SA setting can be explained by the fact that most of the state’s GDP hinges on the success of its oil and gas industry, which is known to pollute the environment, especially as far as water and groundwater contamination is concerned. However, there are also significant differences between the legal aspects of the process of promoting CSR in the target settings. For instance, unlike the United States, where the significance of empowerment has been stressed over the past few decades and remains an issue, SA organizations pay little to no attention to the subject matter. The identified phenomenon can be explained by the fact that female empowerment is not viewed as a priority in SA because of the cultural specifics and the fact that the legal framework of the state is based on the religious principles that the residents of the state follow (i.e., Islam).

Furthermore, the education and employment issues need to be listed among the problems that cause concern among the SA residents, as well as the US ones. The outcomes of the current study align with the data provided in recent research: “some of the employees in Saudi Arabia have very poor status. Their rights are only limited to papers laws and in reality, they have no access to it”.14 Thus, there is an urgent need to provide people with more opportunities and make sure that their basic human rights are met.

The significance of monetizing CSR, which is nearly not as important for the US as it is for residents and the members of SA organizations should also be listed among the primary factors defining the uniqueness of the SA CSR promotion process. The difference between the two approaches toward introducing the CSR principles to the business environment by making it compatible with the current legal standards seems to revolve around the idea of monetization, which is crucial for the SA profit-driven companies, and the issue of environmentalism, which the SA regulations focus on extensively. The US strategy of implementing the ideas of CSR in the context of corporations and SMEs, in its turn, seems to concern the issue of information security and the associated regulations. Therefore, a comprehensive system for addressing the specified issues could be created based on the approaches designed by the US and SA companies.

Conclusion

This paper is about the differences between the principles of CSR in the US and SA environment. The paper aims to explore the effects that the legal requirements set for the companies operating in the target areas. This paper research has found that there is a heavy emphasis on the environmental issues in the SA setting, which aligns with the recent update of the environment-oriented regulations of the state. The US organizations, in their turn, have to address the data management processes and the associated issues to make sure that the actions carried out by their staff members meet the existing standards.

Despite the differences in the approaches adopted by the leaders of the US and SA companies, there is a possibility to create the framework that could meet the highest standards and facilitate impeccable management of the corporate operations with CSR-based decision-making. For this purpose, the environmentalist ideas promoted in the SA business setting need to be coupled with the technological ones that are currently viewed as the source of concern among US companies. The combination of the two elements will serve as the foundation for creating a sustainable approach toward managing corporate resources and reducing waste levels. Thus, a framework that can meet the most rigid requirements can be built. The identified approach will satisfy the needs of all stakeholders involved, at the same time contributing to the development of the US and SA companies.

Reference List

Abbas El-Zein, Samer Jabbour, Belgin Tekce, Huda Zurayk, Iman Nuwayhid, Marwan Khawaja, Tariq Tell, Yusuf Al Mooji, Jocelyn De-Jong, Nasser Yassin, & Dennis Hogan. ‘Health and ecological sustainability in the Arab world: a matter of survival’ (2014) 383 9915 Lancet 458–476.

Bureau of Experts at the Council of Ministers (SA), ‘Environmental Law’, Web.

Daniel Brown, , Web.

John W Creswell, Research Design: Qualitative, Quantitative, and Mixed Methods Approaches (SAGE, Thousand Oaks, CA, 2014).

Mesfer Alsubaie, ‘The Effectiveness of Corporate Social Responsibility in Saudi Arabia’ (2016) 16 4 GJHSS 1-5.

Mohammed Alshareef, & Kamaljeet Sadhu, ‘The Effect of Board Monitoring Role on the Integration of Corporate Social Responsibility into Corporate Governance: A Qualitative Investigation’ (2015) 1 133 IRGFE 7.

Popoli, Paolo, ‘Reinforcing Intangible Assets Through CSR in a Globalized World’ (2015) 3 1 JMPP 23-30.

Ross, Brent, Pandey, Vivek, & Ross, Kara ‘Sustainability and Strategy in U.S. Agri-Food Firms: An Assessment of Current Practices’ (2015) 18 1 IFAMR 17-48.

Samia MacBool, ‘An overview of CSR programs in Saudi Arabia with reference to select organizations’, (2015) 5 2 IJHRS 282-289.

The Office of Policy Planning and Public Diplomacy, ‘Chronology of Human Rights in the U.S.’ Web.

The Office of Policy Planning and Public Diplomacy, ‘U.S. National Action Plan for Responsible Business Conduct’ Web.

US Securities and Exchange Commission (SEC), Web.

Footnotes

  1. Daniel Brown, ‘Corporate Social Responsibility’, Web.
  2. Mesfer Alsubaie, ‘The Effectiveness of Corporate Social Responsibility in Saudi Arabia’ (2016) 16 4 GJHSS 1.
  3. Paolo Popoli, ‘Reinforcing Intangible Assets Through CSR in a Globalized World’ (2015) 3 1 JMPP 24.
  4. Brent Ross, Vivek, Pandey, & Kara Ross, ‘Sustainability and strategy in U.S. agri-food firms: an assessment of current practices’ (2015) 18 1 IFAMR 18.
  5. Mesfer Alsubaie, ‘The Effectiveness of Corporate Social Responsibility in Saudi Arabia’ (2016) 16 4 GJHSS 2.
  6. Samia MacBool, ‘An overview of CSR programs in Saudi Arabia concerning select organizations’, (2015) 5 2 IJHRS 286.
  7. Abbas El-Zein, Samer Jabbour, Belgin Tekce, Huda Zurayk, Iman Nuwayhid, Marwan Khawaja, Tariq Tell, Yusuf Al Mooji, Jocelyn De-Jong, Nasser Yassin, & Dennis Hogan, ‘Health and ecological sustainability in the Arab world: a matter of survival (2014) 383 9915 Lancet 462.
  8. Mohammed Alshareef & Kamaljeet Sadhu, 2015, ‘The Effect of Board Monitoring Role on the Integration of Corporate Social Responsibility into Corporate Governance: A Qualitative Investigation’ (2015) 1 133 IRGFE.7.
  9. Bureau of Experts at the Council of Ministers (SA), ‘Environmental Law’, Web.
  10. US Securities and Exchange Commission (SEC), ‘Looking at Corporate Governance from the Investor’s Perspective’ Web.
  11. The Office of Policy Planning and Public Diplomacy, ‘Chronology of Human Rights in the U.S.’ Web.
  12. The Office of Policy Planning and Public Diplomacy, ‘U.S. National Action Plan for Responsible Business Conduct’ Web.
  13. John W Creswell, Research Design: Qualitative, Quantitative, and Mixed Methods Approaches (SAGE, Thousand Oaks, CA, 2014), p. 196.
  14. Mesfer Alsubaie, ‘The Effectiveness of Corporate Social Responsibility in Saudi Arabia’ (2016) 16 4 GJHSS 3.
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