critical essay

2 0 1 0 - 2 0 1 1

MASSEY UNIVERSITYHonesty Declaration

School o f Management (A lbany)

L e c t u r e r ’ s N a m e

Dr Ralph Bathurst

P a p e r N a m e

Organisations and Management

P a p e r N u m b e r

152.700

Honesty Declaration I/we declare that this is an original assignment and is entirely my/our own work. Where I/we have made use of the ideas of other writers, I/we have acknowledged (referenced) the source

in every instance. Where I/we have used any diagrams or visuals produced by others, I/we have acknowledged (referenced)

the source in every instance. This assignment has been prepared exclusively by me/us for this paper and has not been and will

not be submitted as assessed work in any other academic paper. I /we have read the Code of Student Conduct on the Massey University web site

http://calendar.massey.ac.nz/2007/statutes/dr.htm, clause (f), wherein it states [Students shall] “act with honesty and integrity in submitting material or imparting information to the university”. Assessment & Examination Regulations clause (7) clarifies further that “dishonesty” is a breach of the Code of Student Conduct and will be dealt with accordingly.

Family Name Given Name(s) ID number Student Signature Date

JOY JACKSON 13088772 16-09-2013

Group Name or number

For Office Only

Marker’s Name: Mark:…………………………….

Marker’s Signature: Date:……………………………..

Date Assignment due16-09-2013

152.700 Organisations and Management

Semester 02, 2013

Assignment 3

Critical Essay

Lecturer: Dr. Ralph Bathurst

Due Date: 16 September 2013

Submitted Date: 16 September 2013

Word Count: 1665

Student Name: Jackson Joy

Student ID: 13088772

Email Address: [email protected]

Address: 38B Manuka Road

Glenfield, Auckland-0629

Ph: 027 953 6058

mailto:[email protected]

JOY Jackson 13088772 Assignment 3 Critical Essay

Critical Essay Assignment topic

Explore the notion of Corporate Social Responsibility and discuss some of the

contestations of this phenomenon in contemporary organisations.

Purpose of the study

Business is considered as the wealth-creating establishment of the society with its

primary social role being producing goods and services that satisfy the daily needs

of the people. Business also creates job opportunities and generates investment

returns to the people including the ones preparing for retirement. Thus, they turn

out to be demanding and valuable social role. Corporate social responsibility

(CSR), also known as corporate citizenship is a kind of corporate self-regulation

combined into a business model. The CSR policy behaves as a self-regulating and

a built-in mechanism by which a business observes and assures its complaisance

with the ethic standard, spirit of law and the international norms. The term CSR or

“corporate social responsibility” came into use in the late 1960s and 1970s after a

lot of multinational organisations coined the term stakeholder, which means those

impacted by the organisational activities. Freeman (1984) claims that CSR is used

to describe the corporate owners beyond shareholders which include the

employees, environment, consumers, stakeholders, communities and other

members of the public sphere. Proponents argue that the organisations tend to

make long term profits while operating with this perspective but the critics like

McWilliams and Siegel (2000) demonstrated in their journal article that the CSR

has a neutral impact on the financial outcomes of the organisation. Some even

suggest that is just a window-dressing and an attempt to anticipate the role of the

1


governments as a watchdog over powerful companies. Henderson (2001, p. 171)

claimed and illustrated the way in which CSR deviated from the traditional value-

setting of the corporate. The purpose of this study is to highlight some of the

issues concerning with the social responsibilities of the business and the false

notions of CSR.

Discussion

Professor Barry (1999) pointed out that, in general the business operates with

respect to a set of code that imparts respect on sanctity of contract, property and

the rule of law along with ethical standards like honesty and fair dealing. He

mentioned that imposing of additional sets of social responsibilities would be

costly as well as burdensome for the business, the shareholders and eventually the

society. Still there arises a need for business to treat the customers, employees and

suppliers well, so that they become environmentally responsible and keen to the

values and interests of communities in which the business operates. According to

Henderson (2001), the so called sustainable development and social justice are

neither free from controversy nor well defined. The doctrines of CSR are often

associated with many issues and distorted events; in particular, it is said to offer a

deceptive account of the aftermath of globalization. The adoption of CSR by

business, with the support of the government would undermine the market

economy and reduce the community well-being. Thus it can turn out to be real

potential harm. In order to prevent the weakening of the vital role of CSR (wealth

creation), it is necessary to rigorously define and understand the social roles and

responsibilities of the business. Some of the wrong notions adopted by the

supporters of CSR will be discussed below.

2


It is believed that the CSR assumes a role in creating the world a better place and

thus they need to demonstrate corporate citizenship and eventually sustainable

development. Their supporters mistakenly presume that this notion of sustainable

development is universally agreed and well defined (Henderson, 2001). CSR

tends to impair the performance of the corporation, with effect to both short-term

and long-term, cost and revenue as it involves the voluntary adoption by business.

This effect is mostly neglected by the supporters. Another wrong notion as

interpreted by the advocates of CSR is that it believed to maintain and increase the

company profit, and if not adopted would bring loss to the reputation of the

company in the society. If this is true then it means that profitability depends on

the so called society expectations which mean that most of the people expect that

the company has to embrace the concept of sustainable development which in-fact

is doubtful. The greatest potential harm by such a concept is when attempts are

made by the business or the government in the name of CSR to regulate the whole

world. Imposing such universal standards knowing that the circumstances vary

across countries, restrict the scope of the beneficial trade and investment flow

(Schwartz and Gibbs, 1999).

The Triple bottom line

The triple bottom line is which includes three aspects namely people, planet and

profit that needs to be practiced along with each and every move a corporation

makes. People refer to the beneficial and fair practices of business towards labour

and community where the corporation conducts the business. Planet relates to

sustainable environmental strategies. Profit is the so called economic value

produced by the organisation after including the cost of capital tied up and also

3


after reducing the cost of inputs. Thus it is different from the traditional definition

of profit (Elkington, 2004).

Even though the notion about the triple bottom line is universally being accepted

and gaining ground, there is likely to be varied differences in the way in which it

is being interpreted and also since this approach is new and experimental, the

different organisations are facing many problems and circumstances. The basic

idea about the triple bottom line can be either interpreted metaphorically and

loosely or more strictly (Lal, 2000). Lal (2000) also claims that, on a loose type of

interpretation, an organisation clearly acknowledges an obligation to meet the

certain goals that have been already identified as ‘environmental’, ‘economic’ or

‘social’ and eventually transforms them into commitments or targets that need to

be met. Some large companies like Shell and Dow chemical have made

commitments to keenly translate triple bottom line into a set of corporate

objectives into the newly expanded system of reporting and accounting

(Sustainability Report, 1998, p. 50). However, how far the other organisations

may join for a similar undertaking is quite unclear and this has therefore opened

up a new era of business for the management consultants.

Cost and risk

One of the highly probable effects of CSR is to raise the cost of doing business

and to impair the performance of the firm. The adoption of wider goals makes it

more difficult and complex task to manage the organisation. ‘Implementing the

triple bottom line’ and 'Stakeholder could both prove to be costly exercises. Apart

from this, those institution with more restrictive operation rules and adopting self-

4


chosen social and environment standards that are more demanding than those that

are required, will eventually push up the costs and thereby reduce the revenue and

point towards lower-yielding investments. The proponents of CSR argue that

failing in adopting it may be fatal or damaging for the organisation’s stand and

reputation and taking the route of CSR would prove to be balancing a paying

proposition (Henderson, 2001, p. 64). Even if this is considered to be true, the

antagonistic effects on performance still remain and this makes the people in

general worse off, even if the firm’s profitability is increased or maintained.

Both the 'social' and the 'environmental' goals which constitute the CSR bear with

them dangers of many kinds .One among such a danger is the tendency to identify

better performance with the attainment of 'higher' standards defined relating to the

physical indicators. A leading instance in terms of ‘environment’ is the quest of

'eco-efficiency' (OECD Report, 1997, p. 9)

Eroding the economic freedom

In relation to the terms and conditions of the employment along with the policies

of human recourses, CSR has utmost potentiality to harm the organisation by

inducing the adoption of irrelevant policies and standards. Whether the code and

regulations be enforced by the public authorities or by the big firm itself, it

eventually reduces the economic freedom and seizes the people’s opportunities

(Henderson, 2000). The unions and the larger firms in an industry together

negotiate the minimum wages and then extend it to small companies in the same

industry. This imposes an entry barrier for small start-up businesses (The

Economist, 29 July, 2000). A major and fundamental concern is that such a

5


system is anti-liberal, because it violates the principle of freedom of contract

including the principle that allows people to freely enter into non-forcible

arrangements and bargains for mutual gain. It is not just the regulations by the

government that can produce such effects but also the ones by business and the

trade unions. The same effect is created at enterprise level, through policies that

are designed in the name of CSR, to enforce 'fair employment', 'equal

opportunity', ‘diversity’, ''social justice' or ‘human rights’.

All the managers down the line, in the quest of such goals, are made accountable

to the firm’s specialised instructions on hiring, promotion, selecting and

dismissals and the chartered terms and conditions of employment along with the

freedom of contract is bound to be slashed. The fact remains that the policies in

this area that are considered to be a part of CSR may worsen enterprise

performance and also erode economic freedom and thereby reduce the welfare by

narrowing the scope of markets (Henderson and Robertson, 1999).

Conclusion

The entire study critiquing the CSR hinges on one’s view about the corporation. Is

the corporation responsible to its shareholders to generate a profit? Should the

corporation get engaged in activities that do not maximize the shareholder wealth?

The organisation should not go out of their way to benefit the stakeholder interests

if it does not increase the shareholder wealth. It is understood that an organisation

cannot meet all the needs of the stakeholders and still remain profitable. This

concept includes a high cost and incorporates high end risks to the firm. The

shareholders may personally donate money for the benefit of the society but their

6


investment in the firm should not be used to support unprofitable causes. Even

though some organisations have included CSR into their business model, still

there exist many organisations that do not incorporate CSR as they look into the

darker side of it.

References

Barry, N. (1999). Anglo-American capitalism and the ethics of business. New Zealand Business Roundtable, Wellington.

Edward, F. R. (1984). Strategic Management: a stakeholder approach. Boston: Pitman, 46.

Elkington, J. (2004). Enter the triple bottom line. The triple bottom line: Does it all add up, 1–16.

Henderson, D. (2000). Anti-Liberalism 2000: the Rise of New Millennium Collectivism. Institute of Economic Affairs.

Henderson, D. (2001). Misguided virtue: False Notions of Corporate Social Responsibility. IEA Hobart Paper, (142).

Henderson, D., & Robertson, D. (1999). The MAI affair: A story and its lessons. Royal Institute of International Affairs, International Economic Programme.

Lal, D. (2000). The new cultural imperialism: The Greens and economic development. Liberty Institute, Delhi.

McWilliams, A., & Siegel, D. (2000). Corporate social responsibility and financial performance: correlation or misspecification?. Strategic management journal, 21(5), 603–609.

Organisation for Economic Cooperation and Development, Guiding the Transition to Sustainable Development: A Critical Role for the OECD, Report of the High-Level Advisory Group on the Environment, Paris, OECD, 1997.

Schwartz, P., & Gibb, B. (1999). When good companies do bad things: responsibility and risk in an age of globalization. New York: John Wiley.

7

critical essay

Documents