Corporate Social Responsibility and Stakeholders effect
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Stakeholders play an important role in corporate social responsibility by using their influence and voting power to shape company goals and policies. Stakeholders have a social responsibility to act in the best interests of the entire company, its market and employees. This includes considering social impacts, pushing for ethical practices and transparency, and ensuring employee welfare. For a company to truly serve its stakeholders, it must integrate social and environmental responsibilities into its business model through practices of corporate social responsibility.
Corporate Social Responsibility and Stakeholders effect
- 1. Describe role of stakeholders in social responsibility. By: Muhammad Hanif Khan Corporate Social Responsibility Hanifka9@gmail.com
- 2. corporate social responsibility Definition: A company‟s sense of responsibility towards the community and environment (both ecological and social) in which it operates. Companies express this citizenship (1) through their waste and pollution reduction processes, (2) by contributing educational and social programs, and (3) by earning adequate returns on the employed resources. 2
- 3. Example Wateen offers summer internship programmes as part of its corporate citizenship. Students intern at Wateen to enrich their curriculum learning with corporate exposure and experience. We have partnered with The Universal Service Fund, established by the Government of Pakistan, to develop the telecommunications infrastructure and establish high speed internet providers and promote computer literacy with a special focus on underserved areas by offering subsidized Internet and Telephony services. Our collaboration and subsidized services are provided in Faisalabad Telecom Region, Hazara Telecom Region, Gujranwala Telecom Region and Central Telecom Region. Support and value addition is also provided with planned Education and Community Broadband Centers. Wateen mobile units and vans operate in these areas to educate and increase Internet and computer literacy. In recent months Pakistan was hit with one of the worst natural disasters to date. In this crisis, Wateen‟s employees donated their salary (on personal discretion ranging from 1 day salary and going up to 7 days) and carried out an aggressive drive to collect relief goods and personal donations. Some were directly affected by the floods and Wateen responded with priority attention to the respective employees. Even through its communication, Wateen reflected its obligations as a responsible corporate entity and initiated a „Go Green with Wateen‟ campaign aimed at helping people to adopt „greener‟ lifestyles. 3
- 7. Social Responsibility of Stakeholders Company stakeholders are not merely investors in a company -- stakeholders typically have voting power that can influence the social and financial impact of a company. With this voting power comes a social responsibility to the employees and customers. Stakeholders must consider more than just the company's bottom line when using their influence to shape company goals. 7
- 8. 1. Company Interests Company stakeholders have a social responsibility to act for the good of the entire company, not just their own self- interests. The policies for which stakeholders push must not be based purely on financial gain. For example, stakeholders may have the opportunity to increase their own wealth if they push to merge the company's subsidiaries into the parent company. This merger, however, could limit the company's ability to serve multiple markets, hinder its product diversification or create other problems. Stakeholders must push for a strategy that focuses on long- term gain and growth for their company. 8
- 9. 2. Market Interests Stakeholders must consider the interests of their market when implementing company policy or new business strategies. The needs and desires of stakeholders may not align with those of the consumers for which the company produces products. For example, a company that produces high-optioned vehicles for low prices might be able to squeeze more profit out of customers by charging for the options, but it would alienate its customers. Stakeholders must consider the social impact of their segmentation, targeting and positioning (STP) in the marketplace. The company's STP is the type of customer to which it sells products (segment), the advertising method it uses to reach that customer (targeting) and the current marketing advantage it has among competitors in the industry (positioning). 9
- 10. 3. Company Monitoring Monitoring and auditing is critical to ensure that a company is socially responsible. Stakeholders must push for tight regulations and ethical practices within the company to avoid financial and legal problems. For instance, a company can significantly limit its tax burden by storing profits in off- shore bank accounts. However, this practice might put the company in a legal gray area that could shake the confidence of potential investors. Stakeholders have to insist on company transparency and adherence to industry norms to avoid breaking their "social contract" to consumers. 10
- 11. 4. Employee Relations The fate of employee pay, safety, health quality and job security might sometimes rest in the hands of stakeholders. It is the social responsibility of the stakeholder to ensure that the employees of the company work under the best possible conditions. A company could potentially increase its profits by working employees harder for less pay, but the effects on the employees would be negative. Stakeholders must push for profits and employee satisfaction, simultaneously. 11
- 12. Stakeholders and Corporate Social Responsibility • Let‟s begin this topic with quotation of Robert W. Lane, the Chairman and CEO of Deere & Company, “If you don‟t have honesty and integrity, you won‟t be able to develop effective relationships with any of your stakeholders.” • These stakeholder groups form the basis of success and failure of the business. Stakeholders are individuals or groups that have interests, rights, or ownership in an organization and its activities. Customers, suppliers, employees, and shareholders are example of primary stakeholder groups. Each has interest in how an organization performs or interacts with them. These stakeholder groups can benefit from a company‟s success and can be harmed by its mistakes. 12
- 13. Cont. • Secondary stakeholders are also important because they can take action that can damage or assist the organization. Secondary stakeholders include governments (especially through regulatory agencies), unions, nongovernmental organizations (NGOs), activities, political action groups, and the media. • In orders to serve their stakeholders in an ethical and social manner, more and more organizations are adapting the model of corporate social responsibility. The term Corporate Social Responsibility goes by many other terms such as corporate citizenship, responsible business or simply corporate responsibility. 13
- 15. Cont. When an organization builds ethical and social elements in its operating philosophy and integrate them in its business model, it is said to have possessed a self-regulating mechanism that guides, monitor and ensure its adherence to law, ethics, and norms in carrying out business activities that ensures the serving the interest of all external and internal stakeholders. In other words, the objective of being socially responsible business is achieved when its activities meet or exceed the expectations of all its stakeholders. 15
- 16. Cont. • Here is a model for evaluating an organization‟s social performance. The model indicates that total corporate social responsibility can be subdivided into four criteria-economic, legal, ethical and discretionary responsibilities. • These responsibilities are ordered from bottom to top in the following illustration. Let‟s discuss each one them briefly 16
- 17. Cont. Total Corporate Social Responsibility 17
- 18. 1. Economic responsibilities • The first criterion of social responsibility is economic responsibility. The business institution is, above all, the basic economic unit of society. Its responsibility is to produce goods and services that a society wants and to maximize profit for its owners and shareholders. Economic responsibilities, carried to the extreme, is called profit- maximizing view; it was advocated by Nobel economist Milton Friedman. This view argued that a company should be operated on a profit-oriented basis, with its sole mission to increase its profits so long as is stays within the rule of the game. • The purely profit-maximizing view is no longer considered an adequate criterion of performance in the world in general. Treating economic gain in the social as the only social responsibility can lead companies into trouble. 18
- 19. 2. Legal responsibilities All modern societies lay down ground rules, laws and regulations that businesses are expected to follow. Legal responsibility defines what society deems as important with respect to appropriate corporate behavior. Businesses are expected to fulfill their economic goals within the legal framework. Legal requirements are imposed by local councils, state and federal governments and their regulating agencies. Organizations that knowingly break the law are poor performers in this category. Intentionally manufacturing defective goods or billing a client for work not done is illegal. Legal sanctions may include embarrassing public apologies or corporate „confessions‟. 19
- 20. 3. Ethical responsibilities Ethical responsibility include behavior that is not necessarily codified into law and may not serve the organization‟s direct economic interests. To be ethical, organization‟s decision makers should act with equity, fairness and impartiality, respect the rights of individuals, and provide different treatments of individual only when differences between them are relevant to the organization‟s goals and tasks. Unethical behavior occurs when decisions enable an individual or organization to gain expense of society. 20
- 21. Discretionary responsibilities Discretionary responsibility is purely voluntary and guided by an organization‟s desire to make social contributions not mandated by economics, laws or ethics. Discretionary activities include generous philanthropic contributions that offer no payback to the organization and are not expected. Discretionary responsibility is the highest criterion of social responsibility, because it goes beyond societal expectations to contribute to the community‟s welfare. 21