The undertaking by corporate business organizations of measures intended to benefit society and environment as a whole, without any expectations of earning revenue on such activity, can be defined as Corporate Social Responsibility. Thus, some of the core elements of Corporate Social Responsibility (CSR) involve a large company spending money to create an overall benefit for societies and communities affected by its business, and such activity cannot bring any direct revenue earning.
Discuss the three elements of social responsibility.
The three main elements that influence social responsibility are value creation for the brand, corporate philanthropy, and risk management. Value creation refers to the positive image that is associated with companies that do thorough and successful CSR. Its impact is fundamentally strategic as well as operational, since public opinion about the company is usually positive. It also promotes a sustainable business model and develops human capital, which itself is hugely beneficial to a business. Companies that pursue value creation through these avenues usually have a long-term perspective.
Corporate philanthropy is pure social welfare and charity, which is a key social and moral virtue in individuals and entities. It bases itself on core human moral values as well as religious values. Charity and philanthropy aimed at helping desperate and unfortunate people is inherently good, it builds goodwill and also a more stable society. As such, corporate organizations are in the best position to undertake large-scale philanthropy due to the large assets and resources that they have, especially monetary resources, and due to their ability to influence public opinion and government institutions. It also supports external relationship-building with third-party stakeholders.
Risk management is also a part of social responsibility and it helps to mitigate the risks associated with negative public opinion and vigilante action by non-governmental organizations and militant activists. Having an excellent record about the environment helps to mitigate the risk of protests and action associated with environmentalists when certain projects may become controversial. It also mitigates the operational risks and impacts that arise out of production activities.
When discussing CSR there is always a cost associated. What is the relationship between CSR and financial performance?
CSR is essentially a non-financially rewarding endeavor. Short-term gains and monetary gains cannot by definition be expected to result from CSR activities. On the other hand, a lot of financial resources and money is used to conduct the CSR activities. Herein lies the steep and skewed cost and benefit associated with CSR and its impact on financial performance. As Steiner opines, it is best to conduct CSR from the excess financial reserves and excess profits. A company that already suffers from profitability issues and fails to meet its primary obligations – such as providing value to customers, dividends and value to shareholders, and salaries to employees, cannot be expected to spend money and financial resources on CSR. Thus, companies need always to undertake a cost-benefit analysis regarding CSR and its relationship to financial performance.
How Chouinard has implemented CSR in Patagonia
Chouinard, the founder-owner of the major clothing brand Patagonia, is known for his innovative and sustainable business model involving intensive CSR activities. Patagonia’s and Chounard’s CSR strategy depends upon an environment-intensive approach to production. The strategy is based on minimizing ecological damage caused b y the company while maintaining high production and profitability. The secret of success likes in having a loyal and large customer base that is well-calibrated into the production cycle. Patagonia depends upon smart and innovative manufacturing that minimizes leakage and usage of toxic material. A lot of this is due to Mr. Chouinard’s personal drive and initiative to make Patagonia a very sustainable, environmentally-friendly and CSR-oriented company. It depends to a large extent on his personal vision and his frugality and lack of greed. Thus, Chouinard’s strategy seems to be based more on the first two aspects of CSR – value creation and corporate philanthropy, with an intensive focus on the environment.
What are the factors that influence Managerial ethics?
Factors that influence ethical behaviour among managers in a company undoubtedly include the overall ethical orientation of the company, including the personal example set by the top corporate management and the major owners and shareholders. If the owners and company leaders send out the message that anything is acceptable as long as it brings a profit, then the managerial aspect in the organization will obviously be questionable. Not only will managers feel under pressure to bring in ever larger sales and profits, but they will get the impression that cutting corners and flouting basic ethical norms are acceptable. Furthermore, the company leaders themselves set the strongest example by living a frugal lifestyle, being ethical and moral in their personal transactions, and constantly stressing on the need for fairness. Company leaders who take lower salaries and profit shares for themselves during times of crisis undoubtedly influence a better managerial ethic.
Deontological ethics and David Geffen case
Deontological ethics refers to a normative system of understanding ethical behaviour by assuming that the morality or righteousness of an action is based on whether the action is on the right side of the law and is adhering to the existing laws and rules in society. It is thus a bit controversial, as it assumes that duty and obligation come before other commonly accepted but unwritten codes of conduct and ethics. Written rules, obligations, and laws take precedence over unwritten expectations and ethics of society. Thus if a person who is employed by an organization, and the duties of the job predict ate an action by him which may be slightly unethical, is still acting in an ethical manner according to deontological ethics. In this scenario, David Geffen’s actions regarding sealing off private property in California appear to be unethical, because it is in contradiction to the law. This is despot the fact that he is considered to be a very ethical businessman.
Practical suggestions for making ethical decisions and Lockheed Martin
Ethical decisions have to be taken on a case-by-case basis and after considering a composite analysis of costs and benefits. While blatantly unethical actions and decisions should always avoided, situations in which winning a certain business would not harm anybody but my imply such a possibility, can be considered. Lockheed Martin, which operates in the Defense and aeronautics industry, often goes by this principle. While it sells weapons systems to many countries, it operates on the principle that such weapons will be used for self-defense and will not violate human rights.
Works Cited
Steiner, J. Business, Government and Society: A Managerial Perspective. London: McGraw-Hill, 2011. Print.
Stevenson, S. "Patagonia's Founder is America's Most Unlikely Business Guru." Wall Street Journal 26 April 2012: 1-7. Web.
