Four issues of corporate social responsibility

Nowadays worldwide market has changed along with the development of humanity. With the fast changes of society and the finance problems arise, corporations among companies to ensure their benefits has become more essential. Corporation, then has greater importance as well as responsibility in the future of the company. Consequently, Corporate Responsibility (CR) is gradually becoming a major activity in global community (The Economist Intelligent Unit, 2005) . In order to provide more information about this term, the writer decides to make a further research about issues in this area. Because of limitations of time and human resources, the study mainly focuses on Corporate Social Responsibility (CSR), a subcomponent of CR. The research then provides a basic information about CSR, stakeholders and international multilateral organizations. The paper also discusses more deeply about issues of CSR. They are considered as Business Ethics, Human Rights, Corporate Governance, and Socially Responsible Investing.

Table of Contents

Table of Contents 1

List of Figure

Figure 1: Corporate Social Responsibility Pyramid

Figure 2: Mizuho's Stakeholders

Figure 3: Relationship between Stakeholders and CSR

Figure 4: Human Rights facts in 2012

Figure 5: Corporate Governance Structure

1 EXECUTIVE SUMMARY

Nowadays worldwide market has changed along with the development of humanity With the fast changes of society and the finance problems arise, corporations among companies to ensure their benefits has become more essential Corporation, then has greater importance as well as responsibility in the future of the company Consequently, Corporate Responsibility (CR) is gradually becoming a major activity in global community (The Economist Intelligent Unit, 2005)

In order to provide more information about this term, the writer decides to make a further research about issues in this area Because of limitations of time and human resources, the study mainly focuses on Corporate Social Responsibility (CSR), a sub-component of CR The research then provides a basic information about CSR, stakeholders and international multilateral organizations The paper also discusses more deeply about issues of CSR They are considered as Business Ethics, Human Rights, Corporate Governance, and Socially Responsible Investing

2 Corporate social Responsibility

2.1 Overview of Corporate Social Responsibility.

Corporate Social Responsibility (CSR) can be understood in various ways by individual enterprise Generally, CSR is the ideal that an enterprise has responsibility to serve society, especially the economic interests of stockholders Normally, business has financial role in the development of society, in addition, it has wider duty of making a better world The responsibility of business involves area of ethics, legislation, relations between company and community, etc (Carroll and Buchholtz 2003, p 36) Meanwhile, Lance Moir (2001) claims that CSR plays an important role in the future of areas such as environment, human rights, community, employee workplace, relations with customers and suppliers, and of course ethics Therefore, CSR could be identified as a useful tool for business to conduct its duty toward society CSR then is the responsibility of business to strength its good impacts and improve quality of society through policies, decisions, and activities

of the company It is undeniable that to conduct a CSR program effectively is uneasy and take a long period of time and effort, but the achievements received after that is definitely enormous For instance, HSBC bank, one of largest banking and financial organization, has success in conducting CSR That is definitely the result of its huge effort in accomplishing the company's citizenship mission

CSR concepts includes many parts of responsibilities in different levels In 1991, Carroll A.B constructed a pyramid of corporate social responsibilities (See Figure 1) The pyramid showed the relationships of the four main responsibilities in CSR, for example, without economic and legal responsibilities, an organization could not accomplish its legal responsibilities

Figure 1: Corporate Social Responsibility Pyramid.

(Source: Carroll A.B., 1991)

CSR is specifically connected with ethical matters (Review in Strategic Direction, 2008) such as human rights, business ethics, health and safety, and so on Joe Scibilia of CSRwire states in Warren Strugatch (2011) that roles of CSR in global market is continually raised which allows people to have more meaningful judgment about companies based on their own values At first sight, it seems that the role of CSR is not much significant, but in fact, CSR keeps key value to stakeholders as well as corporations Dra Belén Fernández-Feijóo Souto (2009) identified some of key benefits of CSR as following:

1 Help identify impacts of the company's decisions and action on management of decision making

in long term

2 Assist in the improvement of relationship of the company, consumers and investors based on trust and right things

3 Enhance living condition of employees, thereby create motivation and loyalty, and improves productivity and behaviors of the employees

4 Assist in solving problems related to legislation and other legal matters so that a transparent culture in the organization is created

5 Create competitive advantages and reduce disadvantages by attracting and retaining the selection

of consumers and investors,

6 Build a reputation and positive image of trustworthy organization and maintain key personnel and direct investors' confidence towards CSR

2.2 CSR and Stakeholders

To verify the importance of CSR toward stakeholders, it provides opportunities to have a good workplace for employees, high-quality products and services for consumers, huge benefits for investors, and better contributions for environment around the enterprise Such things define the significance of CSR to stakeholders, and then make the role of stakeholders to the development of society more specific In fact, stakeholders are considered as one of the main implementers of CSR

in society In nowadays society, each person directly or indirectly becomes a stake holder and the enterprise realizes the importance of CSR since matters in each sector of the world is linked A public by Kerr M (2006) identifies stakeholders as People or organizations that are influenced or influence the decisions, objectives, policies, or activities of a business Basically, according to Fred Robins, (2008) main stakeholders of any enterprise can include shareholders, sponsors, employees and customers, government agencies and competitors, and so on For example, below chart shows the main stakeholders of Mizuho Financial Group

Figure 2: Mizuho's stakeholders

(Source: Mizuho Financial Group, 2012)

Summarily, stakeholders are classified into various categories which is discussed in later researches Stakeholders, then play an important role in the implementation of CSR A stakeholder have responsibility for positive or negative outcomes of the company since they can affect the decisions

of the heads of that company For example, as stakeholders of the company, they want high profits, great value for the shares, good compensation in return to their investment If the company could not fulfill their needs, they put pressure in the managers, decided the promotion of the staff, or even sold their shares Nobuyuki Tokoro (2007) shows the figure of relationship between stakeholders and CSR

Figure 3: Relationship between stakeholders and CSR

Source: Nobuyuki Tokoro (2007)

According to the figure, both stakeholder and CSR are creating the value for each other, dealing with all matters around resources of the company, the stakeholders put a very restrict requirement for the CSR of the company

2.3 CSR and International multi-lateral organizations

CSR affect organizations, especially all the global multilateral organizations in the process of managing the reputation, attracting and remaining talent, making brand competitive advantages, and comforting relation with government (Argenti, P A., 2009) In return, international multilateral organizations affect the success of implementing CSR in nowadays worldwide market

Multilateral organization refers to group of more than three countries formed to solve issues related

to all member nations in the group Normally, these organizations are non-profit and no governmental (NGOs) The international multilateral organizations responsible for promoting CSR and developing standards include United Nations Educational, Scientific, and Cultural Organization (UNESCO), World Health Organization (WHO), United Nations (UN), International Labor Organization (ILO), Food and Agriculture Organization of the United Nations (FAO), etc They are active in wide areas from economic issues, social problems to environmental concerns For examples, matters relevant to discrimination, pollution, health and working condition, human rights, and so on are taken by these NGOs Nirav Rajpara (2006) claims that international multilateral organizations have biggest effects to the development of CSR policies because of their size and spread over the world

3 Corporate Social Responsibility Issues

3.1 Business ethics.

Business ethics are considered as principles that a company must follow In facts, Ferrell and Fraedrich (cited in Zoe S Dimitriades, 2007) defines business ethics as moral rules and standards decide which behaviors in business are allowed while CSR is the obligation of an enterprise to bring advantages and reduce disadvantages to the enterprise in nowadays society Both these terms seem familiar, however, they are used in different business cases CSR is considered when people mention positive things that a company are implementing, in contrast to business ethics or lack of business ethics when negative things are mentioned

Business ethics have several roles in both local and international levels The prior role of business ethics is behavior management Such things keep managers and staff understand the impacts of their behaviors so that they would think carefully before making a decision or action By having a code

of conduct, a business is able to control its behavior in appropriate way Another important role of business ethics is to build trust about the organization Following ethic principles in business, a company would gain trust of the customers and then attract and remain more customers and suppliers for the company Act honestly, and the customers would come Charles Holme (2008) confirms in page 252 that relationship with the consumers and other corporate firms will be better if

a company is more trustworthy, which is helpful in cases of problems occur

3.2 Human Rights

Human Rights supports the ideas that all human beings are born free and equal in social position , and they have undeniable entitlement as the right to life and liberty, freedom of thought and expression, and equality before the law Human rights refers to aspects in business, environmental, and social areas In today corporate society, human rights are influenced by various factors in economics, politics, and society Since corporations among companies appeared in decades, its impacts on human rights are also increased which tightens the links between human right and corporations

Although some believes that human rights have four generations, most people agree there are three main generations of Human rights as Civil and political rights, Economic and social rights, and Environmental, cultural and developmental rights (Shikyil, Sylvester, 1998) These rights ensures the common development of a person in nowadays society Human rights and CSR are once considered to have some similarities, however, they are different concepts While a CSR refers responsibilities to society that the company must follow, human rights relates to all legal entitlements that a person deserve to have in an enterprise Previously, the rule-setters of many

companies have not taken human rights into consideration when researching CSR, but now human rights are generally adopted in CSR framework (Avery C., 2006) The following figure shows the numbers of companies accepted human rights in their financial statements

Figure 4: Human rights facts in 2012

(Source: Mary Robinson, 2012)

According to the figure, in 2012, there were 300 companies in the world initiated human rights policies It is a positive numbers, but still not equal to the huge amounts of companies around the world Human rights in workplace are very important with staff, so they must be considered more seriously In contrast to the wide spread of CSR, area of human rights is still narrowed For example, human rights are not paid attention in the domain of business In fact, there are various areas in business sector that need this kind of concept Otieno Mbare (2007) stated the key areas of human rights in business include child labor, forced labor, discrimination, harassment, living wages, health and safety, freedom of association, compensations for working overtime John F Kerry (2012) mentioned in Country Reports on Human Rights Practices for 2012 that every business as well as nation must adopt polices about human rights concerning genders, ages, religions, ethnicity

or disability in order to create a spacious customer base for the global marketplace

3.3 Corporate Governance

Business Governance relates to policies used to manage and implement the duties of stockholders, CEOs, or managers to sponsors and other stockholders It can be principles, rules, systems that are relevant to relationships among stakeholders and management of the company The definition of

Corporate Governance is also mention in Cadbury Report (1992) as a set of principle by which company activities are governed

Figure 5: Corporate Governance Structure

(Source: Zafar & Associates-LLP, 2012)

The figure shows the relation among missions, objective, goals, strategy, and vision of corporate governance in a business The purpose of Corporate Governance is to control the internal factors of the company to promote transparency and accountability within the structure of the company The boards of directors, whose responsibility to set the corporate governance to the company ensures these principles are conducted appropriately

Corporate Governance have significance roles in business sector As mentioned above about the goals of Corporate Governance, company with good governance make its policies and activities transparent to all members, and that results in the efficiency of that company Enterprise with well-governed structure usually has better operation and is more attractive to investors (Eveline Van de Velde et al., 2005) Moreover, good governance would help prevent business-related problems such as fraud or abuse since the company has fixed system requires exactly activities With well-governed structure, a company requires each employee to have positive behaviors and awareness of their responsibility as well as benefits of good implementations Corporate Governance also

improves goodwill and reputation of companies (Lipman and Lipman, 2006) Corporate Governance is helpful in building relationship with customers and sponsors which and creating loyalty

3.4 Socially Responsible Investing

Socially responsible investing (SRI) is considered as policies and activities related to environmental and social objectives Mansley (2000) has described it as a investing strategy considering ethical, social, and environmental results of investment process Moreover, SRI is considered by the Social Investment Forum (2010) as disciplines in area of investment that take social and environmental, corporate governance in to account researching impacts and returns of investment

Previously, both CSR and SRI are used because of their relevant meanings, but they are now separated While CSR reminds overall responsibility of an enterprise toward society, SRI is more specific and as one of sub-parts of CSR, which considers more about social and environmental factors to the development of the company

SRI, as other components of CSR have definite roles in different level of corporations A good SRI

is responsible for the success of process of attracting and retaining consumers, staff, and investors

of an enterprise Through it, organization's future strategy is transparent to investors, so they can easily research whether the future of the firm is ensured or not, and illustrate a bright belief of the firm's future development This would be a great help in enhancing the credibility of the organization Further, company with well-organized SRI program would bring a great improvement

of its employees as well as workplace conditions, so that becomes a driving force to employees By motivating employee with better living condition, company continues promoting loyalty and satisfactions of its human resources, which would create efficiency and increase productivity SRI is also a key factor in making competitive advantages of the company Since the SRI program contributes greatly to the stabilization of economic and social environment inside and outside the company, it assists to creating more new positive ideas and inquiries about operation process of the business, thereby improves its corporate images and increases returns in investment The result, then become a significant advantage of the company in today's corporate and competitive market Finally, SRI gives a great assistance in alignment of the business with other industrial disciplines such as Social Responsibility Index and Global Reporting Index

4 Conclusions

Corporations provide opportunities to develop the future of a company in today's marketplace However, the success of the process of developing a company depends on whether the company realizes its responsibilities toward society economics and environment or not The paper, therefore provides an overview of Corporate Social Responsibility (CSR) in today's marketplace The

importance of stakeholders and international multilateral organizations is also mentioned The research then discusses some issues of CSR including business ethics, human rights, corporate governance, and socially responsible investing in term of their relations with CSR and their role in business sector CSR, in conclude, captures the decisive concerns about relation between economics and society (Archie B Carroll, 1999)