Introduction
Corporate social responsibility is a self-regulated idea that was introduced in business models in early 1960s. Its major aim was to ensure that businesses were behaving ethically as well as contributing to the economic development, but at the same time the business is improving life quality of its employees, their families, as well as the nearby community and the society as a whole (Crane, et al, 2008).
This has been considered being a positive way through which companies and organizations can impact communities in the name of ensuring that its brand has a positive perception in the eyes of their clients. This has been aiding company mission and guiding stands towards its customers (Garriga & Mele, 2004).
Stakeholders
Going with the definition from Post James (2002), the term stakeholder means “an individual, group of individuals, or even organizations who are either directly or indirectly can affect or be affected by the practices, goals and policies of the organization (Post, 2002).
Stakeholders vary depending on their interests in the company’s practices as well as their power of influencing the company’s decision making processes. In general, stakeholders include:
Shareholders aim at getting profits, dividends as well as the growth of share prices. They always have the powers of electing company directors. Creditors and lenders like bank, forms another group of stakeholders. This groups aims at getting interests on the amount borrowed and maintaining credit rates. On their part, they enforce covenants of loans and provision of banking facilities.
Managers, directors and employees on their part aim at getting salaries as well as satisfaction of jobs. This group makes the company decisions. They can also affect product or service quality as well as staff turnover. Suppliers aim at getting long- term contracts as well as prompt payments. This group has the powers of controlling the availability of products and pricing.
Customers on their part are interested in quality reliability, money value and. product availability. Customers control sales and company revenue. The community targets employment opportunities, environmental and other impacts. Though their influence is indirect, they usually influence planning and opinions.
The government forms another stakeholders group. This group aims at maintaining legal operation, getting revenue through taxes and provision of jobs to its people. This group maintains regulations, subsidizing and even planning.
Managers’ Challenges when dealing with Stakeholders
Stakeholders’ Precedence
Those bestowed with the responsibility of managing any organization opt to be keener on what they do pertaining managing the organization. The various stakeholders ranging from shareholders to the local community have certain specific expectations from the managers. It is thus very challenging to accommodate all of them.
For instance; the issue of understanding factors that are valued by employees is one of the most important factors in management. This is based on the fact that there are many integrated business gains that can be as a result of employee commitment. This might include things like increased productivity, satisfied and loyal customers as well as increased retention rates in the organization.
On the other hand, shareholders prioritize profit maximization. Shareholders will always be willing to invest more in the organization that creates wealth for them, and the reverse is true. As a result, they prioritize more on profit maximization. In contrast to profit maximization, customers prioritize on product/service quality and at competitive prices.
In addition, local communities might be at the same time demanding for cleaner environment. As a result, stakeholders’ priorities differ from one stakeholder to the other. According to Branco & Rodrigues (2007), the responsibility of managers to stakeholders should be an inclusion process involving all groups. However the problem faced by many managers is that every group has its own priorities.
Managers are faced with the issue of ensuring that all collaborations are accepted positively by stakeholders, apart from ensuring that such collaborations have no detrimental effects on the company. As a result, managers are faced with the issue of ensuring that all sides acknowledge network complexities occurring in cross sector relationships.
Politics and Government Legislations
There have been transitions to democratic as well as decentralized political systems which has ended up empowering societies and allowing them to protest against any company management that is not keeping its responsibilities to them. Generally, this is because the managers have no protection from the central government (Waddell, 2011).
In addition, decentralization and democracy has placed most of business teams’ negotiation powers in the hands of local communities as well as local governments, who in one way or the other are demanding from organizations and companies to do more as a payback for the natural resources and cheap labor accessed by such organizations.
This in particular happened in Indonesia in early 2000, where political decentralization along with democratic systems of governance raised corporate social responsibilities in the country (Arthaud-Day, 2005).
On the other hand, there are situations where “Decentralization of power to local governments, combined with corruption and weak law enforcement results to additional administrative costs and bureaucracy” (Waddell, 2000). This implies that, after decentralization corruption shifts from a version that is centralized to a bribe system that is most fragmented.
This is proved by issues like environmental regulation compliance, employment opportunities and license leading to corruption and rent seeking activities. As a result, managers responsible to stakeholders in such scenarios have ended up being confused on which way to follow.
Community and Customer Issues
Managers operate their companies in areas inhabited by different cultures (cultural diversity). For them to learn and adapt to these diversified cultures, more time and effort is required. There are times when stakeholders particularly local communities demands more from the company, hence over depending on the company.
Additionally such diverse communities have diversified perceptions to the company, like in terms of the type of the product produced, as well as its quality. As a result, the new managers might not be in a position to understand their diversified perceptions and attitudes Branco & Buchholtz, 2003).
Costs
In most cases managers are faced with the issue of financial problems. This is based on the fact that, most of them work under tighter budgets as a result of raising material costs, energy costs as well as raising wages. As a result, they are not in a position to fully implement their responsibilities to the company stakeholders (Arthaud-Day, 2005).
Socially Responsibility Behavior by Organizations
Integrity and honesty; enhancing integrity and honesty in all aspects of the organization’s work can be achieved by ensuring that their actions are in good faith, for instance by using assets belonging to the organization only in ways that promote the organization’s policies, other than personal gains by abusing their status in the organization.
Returns; the organization should ensure that it is providing fair returns to their suppliers of both goods and services. This can be achieved by ensuring that the company buys their materials at a fair price, not at a price that will make the company to get more profits, while their suppliers are languishing in poverty due to poor prices of their products (Arthaud-Day, 2005).
Client satisfaction; the organization should be in a position to satisfy both internal and external clients. This can be done by ensuring timely provision of goods and services or even both, at very high quality. As suggested by Waddell, 2011 poor social behaviors will be experienced when organizations don’t care about its clients other than making profits (Crane, et al, 2008).
Environmental observation; the organization should be in a position to respect social environment of the communities in which it operates. This can be done by ensuring that it has maintained an active partnership with neighboring communities. Apart from social environment, “the organization should also be in a position to show respect for the physical environment” (Sullivan & Schiafo, 2005).
This implies that the organization should not engage in activities that pollute the physical environment in any way. This can be achieved if the company can adhere to local, national and international standards of pollution control. In case an organization finds itself violating this concept then, it should be in the forefront to help affected communities to mitigate such hazards.
For instance an oil company that is responsible will not in any way drill at sites that have been reported as being catastrophic as a result of drilling. In addition, due to green technology, responsible companies change ways of packaging their products; for instance, food companies can alter their bags’ composition to ensure that they are biodegradable (Sullivan & Schiafo, 2005).
Acknowledging people; organizations should recognize that the most valuable resources they have are the people. In achieving this, the organization should be in a position to “respect human diversity, provide equal opportunity, and reward job performance” (Waddell, 2011). Organizations lacking gender equity, paying low salaries to their employees and providing harsh working conditions, are termed as poor social behaviors.
Cultural values; companies that have enhanced good social responsibility underlay organization cultures that promote strong values. Such organizations don’t punish their people for coming forward to report a particular problem. This is because punishing them is a bad social responsible behavior. Good ones have gone a step higher by even allowing their people to air their problems anonymously.
Such organizations have even set up suggestion box or phone numbers to report any incident. On the other hand, organizations that have enhanced poor social responsibility behaviors don’t allow their employees to report any ethical concern to their seniors (Griffin, 1993).
Social Responsibility Approaches
There have been arguments supporting while others opposing corporate social responsibilities. As a result depending on managers’ belief, organizations have approached social responsibility issues differently.
Arguments Against
Economic; some managers particularly American managers like Allegheny Technologies and Ford are of the view that the main responsibility of any business is to create wealth for its shareholders, provided that it is adhering to the laws and regulations. Going with this perception many participants undertaking self-interested actions in the free market, starting with utility principles lead to positive results for communities.
Such companies have argued that, in case free market operations are not in a position of solving social problems then it is the duty of governments to deal with such issues, but not businesses. Such businesses enjoy lots of profits, pay taxes and pressurize governments to play their role in solving social responsibilities like building schools and hospitals (Post, et al, 2002).
Competitive argument; it has been argued that carrying out corporate social responsibilities come with a fee, hence increasing business costs. These costs can even go to an extent that companies internalize the expenses from social responsibility practices. For instance, Intel has argued that their CSR in developing countries have hurt their competitive advantage position as compared to other organizations.
“Since CSR is increasingly becoming a global concern, the differences in societal expectations around the world can be expected to lessen in the coming years” (Arthaud-Day, 2005). As a result, this point has been very strong in the global competitive surrounding. This is because there are some organizations in some countries using their assets to deal with social responsibilities.
However their competitors are not doing the same in other countries; as a result there are higher chances that these organization practicing social responsibilities are disadvantaged; since they will have to sell their products at higher prices as compared to others.
Managerial capabilities; there are organizations which are just ill-equipped in addressing social issues. There are managers who are well trained on matters dealing with financial issues, marketing and selling, processes and operations; however, such managers have no idea on issues dealing with social issues.
As a result such managers have no idea, experience or even skills required in dealing with social responsibilities. They believe that such involvement might end up making things worse. Most managers who have such minds have ended up failing.
On the other hand, there are those who have just specialized in areas they think they can do better; for instance provision of quality services and goods, and selling them at cheaper prices to individuals needing them. Such organizations have gained lots of profits due to customer loyalty (Carroll & Buchholtz, 2003).
Arguments For
Solving social problems; companies like Coca Cola and Nokia thinks that, since their organizations have created social problems, then it is their responsibility to solve them.
This view has criticized “production, marketing, accounting, and environmental practices of corporations,” (Carroll & Buchholtz, 2003) because, they believe that this are some of the processes and operations that creates social problems. This view has resulted to quality and safe products as well as from operating in open and honest environment (Waddell, 2000).
Self-interest; BMW believes that it is their responsibility to undertake social responsibilities to ensure that in future they have conducive environment to operate in. they have not only concentrate on short term gains, but realized the importance of investing in communities and societies.
In addition engaging in social responsible activities can be advantageous to any organization as it might prevent government interventions in terms of new laws that might ultimately prove to be deleterious to the organization (Carroll & Buchholtz, 2003).
Resource availability; there are those who have argued that private entities should engage in social responsible activities because they have resources to do so. As a result, some organizations have ended up utilizing their financial and human resources to make the world a better place (Sullivan & Schiafo, 2005).
Conclusion
Social corporate responsibility is an issue which has received mixed reactions. In achieving their responsibilities towards organizations’ stakeholders, managers are faced with various issues, some encouraging them to go on, while others hindering their operations.
As a result the perception of organizations towards being socially responsible varies from one organization to the other depending on whom the manager want to serve first. However it is good for managers to avoid unethical behaviors which might tarnish the organization’s brand name.
References
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