Corporate Social Responsibility and Business Law Essay Example for Free

Corporate loving Responsibility and Business Law look forIntroductionOur assigned topic deals with a phenomenon that has interpreted the in corporeal world by storm alternatively recently, fussyly in Pakistan. It entails the dilemma that every corporation faces when they be possessed of to discharge decisions regarding the buckrams profitability and their corporations favorable certificate of indebtedness. The term corporate neighborly righteousness came into common use in the late 1960s and early 1970s after many multinational corporations formed the term stakeholder, pith those on whom an organizations activities bring on an impact. It was used to describe corporate owners beyond sh arholders.The field of corporate social responsibility (CSR) has developed exp intially in the last decade. Nevertheless, in that respect remains a lingering debate round the legitimacy and value of corporate reaction to CSR concerns. in that respect be different views of the fu nction of the firm in society and disagreement as to whether wealth maximization should be the sole goal of a corporation.An escalating make sense of sh arholders, analysts, regulators, activists, bray unions, employees, set forthicipation organizations, and news media be asking companies to be accountable for an ever-changing set of CSR issues. There is rising demand for transp arncy and growing expectations that corporations handbill, report, and unceasingly improve their social, environmental, and economic performance.According to Business for mixer Responsibility (BSR), corporate social responsibility is defined as achieving commercial success in shipway that honor ethical values and respect people, communities, and the natural environment.Each troupe is at variance in how it implements corporate social responsibility, if it does so at all. The differences depend on such factors as any particular caller-ups size, the particular industry involved, the firms calling cul ture, stakeholder demands, and how historically progressive the company is in engaging CSR. whatever companies accent on a single bea, which is regarded as the most master(prenominal) for them or where they have the highest impact or vulnerabilityhuman rights or the environment, for examplewhile there are others who endeavor to incorporate CSR in each and every one facet of their operations. For successful execution, it is extreme that the CSR principles are part of the corporations values and strategic planning, and that the management and employees, both are committed to them. Further more(prenominal), it is important that the CSR dodge is aligned with the companys specific corporate objectives and core competencies.As CSR comes into contact with many of the problems conventionally addressed by regime, like human rights and community investing, there is strong c escort that societal problems are surmount solved by freely elected government bodies as the resources of a corp oration are poorly teammateed for addressing those social problems, and therefore, it is argued, they should not be misallocated.According to Friedman (1970), in a free society, there is one and only one social responsibility of businessto use its resources and engage in activities designed to gain its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud. The idea is that the state should address social problems, supported by the argument that an executive, by taking money and resources that would otherwise go to owners, employees, and costumers, and allocating them according to the will of the minority, and will fail to serve the interests of her or his principal. In this way, the executive imposes a tax and spends the proceeds for social purposes, which is insupportable, since she or he has neither the skills nor the healthy power to do so.On the other hand, there are many demands by others f or corporate adoption of the CSR principles. Although the government is chiefly responsible for addressing those issues, the contri notwithstandingion of private firms mint be substantial. There is also the argument of the duty period balance of power. According to the Organization of Economic Co-operation and growth (OECD), of the 100 largest global economies, as indicated by their various(prenominal) GDP, 51 of them are US corporations, and only 49 are nation states. So economic success has shifted to the corporations they, therefore, should have an increasing role in and accountability for addressing social problems.For example, the government sets the regulations and the minimum standards for the startplace, but a company canister further improve the work environment and the prize of living of its employees. A firm cannot stay oblivious to the problems of the environment in which it functions. The poverty of a nation states citizens, semipolitical unrest, and the exhaus tion of natural resources can have destructive effects for a corporation. For example, resources that are inputs in the issue process and which, at the foundation of the industrial revolution, were plentiful are now scarce, polluted, or diminishing in many regions of the entire planet.As one would expect, this imposes an extra cost to the corporations and may force them to reposition or to cease operations. From one perspective, companies may be poorly equipped to address some of the social or environmental problems, but from another perspective, no matter how poorly equipped, companies may still be best positioned to improve the problems. Undoubtedly, adopting the CSR principles involves costs. These costs might be short term in nature or continuous outflows.They may involve the purchase of new environmentally friendly equipment, the change of management structures, or the performance of stricter quality controls. Since being socially responsible involves incurring costs, it shou ld generate benefits as well in pronounce to be a sustainable business practice. A corporation could not continue a constitution that constantly generates invalidating cash flows. The shareholders invest their money in a corporation, expecting the highest possible risk adjust return. Therefore, being socially responsible should have bottom-line benefits in order to be sustainable.Socially responsible corporate performance can be associated with a series of benefits with the final outcome. But in a push-down stack of cases, it seems that the time frame of the costs and benefits can be out of alignmentthe costs are in the near afterlife, whereas the benefits are not often realized until long periods of time have lapsed. Nevertheless, many benefits can be identified. Firstly, socially responsible companies have enhanced brand image and reputation. Consumers are often attracted towards brands and companies with exhaustively reputations in CSR related issues.Therefore, a corporati ons brand equity is automatically enhanced. A company regarded as socially responsible can also benefit from its reputation within the business community by having increased ability to attract capital and trading partners. However, reputation is hard to quantify and barroom it is even harder to measure how much it increases a companys value. But since companies have developed methods to measure the benefits of their advertisement campaigns, similar methods can and should be able to be applied in the case of corporate reputation. Socially responsible companies also have less risk of negative rare events.Furthermore, companies that adopt the CSR principles are more transparent and have less risk of bribery and corruption. In addition, they may execute stricter and, thus, more costly quality and environmental controls, but they run less risk of having to bear in look defective product lines and pay heavy fines for excessive polluting. They also have less risk of negative social event s which damage their reputation and cost millions of dollars in information and advertising campaigns. The scandals about childlabor and sweatshops that affect the clothing industry are two fine examples. Thus, socially responsible businesses should have more stable earnings growth and less downside volatility. Since companies that adopt the CSR principles carry less risk, when valuing those companies, a lower brush off rate should be used. In the company valuation this lower tail risk should be taken into account.There are also other cases in which doing what is good and responsible converges with doing the best for the particular business. Some CSR initiatives can dramatically reduce operating costs. For example, reducing packaging material or planning the optimum route for delivery trucks not only reduces the environmental impact of a companys operation, but it also reduces the cost. The process of adopting the CSR principles induces executives to reconsider their business pract ices and to seek more efficient ways of operating.Companies perceived to have a strong CSR commitment often have an improved ability to attract and to retain employees (Turban greening 1997), which leads to reduced turnover, recruitment, and training costs. Employees, too, often evaluate their companies CSR performance to determine if their personal values conflict with those of the businesses at which they work. There are many known cases in which employees were asked, under pressure of their supervisors, to overlook written or moral impartialitys in order to achieve higher profits. These practices create a culture of fear in the workplace and harm the employees trust, loyalty, and commitment to the company.Companies that improve functional conditions and labor practices also experience increased productiveness and reduced error rates. Regular controls in the production facilities throughout the world ensure that all the employees work under good conditions and earn living wages . These practices are costly, but the increased productivity of the workers and improved quality of the products generate positive cash flows that cover the associated costs. Thus, firms may actually benefit from socially responsible actions in terms of employee morale and productivity (Moskowitz, 1972).Literature reviewCSP is a global concept that encompasses those of Corporate Social Responsibility and Corporate Social Responsiveness. It provides a coherent framework to explore business-society relationships by looking at the social impact of corporations with business criteria of performance measurement, such as quality, efficacy, effectiveness, innovation (Carroll, 1991 Wood, 1991). The challenge for corporate social responsibility (CSR) in developing countries is framed by a vision that was distilled in 2000 into the Millennium Development Goalsa world with less poverty, hunger and disease, greater survival prospects for mothers and their infants, better educated children, equa l opportunities for women, and a healthier environment (UN, 2006 3). The penetration of the social realm into corporate strategy has gathered momentum in the last years. The movement for CSR has won the battle of ideas (Crook 2005). By now, most well managed companies have adopted the practices and certifications obligatory in their industries, having gone through what Zadek (2004) calls the defensive and the compliance stages of CSR.Managing the social and environmental footprint of economic legal action is generally accepted as part of the cost of doing business. But much remains to be done. If companies are to move their CSR activities from satisfying behavior and take their commitment to society and the environment to the next level, they will study to rethink their current approaches to CSR, tapping into the creativity of every individual. CSE, like all entrepreneurship, is not about managing existing operations or CSR programs it is about creating disruptive change in the p ursuit of new opportunities. It combines the willingness and desire to create pin economic and social value with the entrepreneurial redesign, systems development, and action necessary to carry it out. Accelerated organizational teddy faces a host of obstacles well-documented in the change management literature. Some people argue that media pressures the corporate managers and directors to lead in ways that are socially acceptable. Sometimes this coincides with shareholders value maximization, others not (Zinagales, 2002).Although there are several contested notions of what CSR should be and how it should work, there is some agreement upon what it broadly entails. A number of concepts and issues are subsumed under the heading of CSR, including human rights, environmental responsibility, diversity management, sustainability, and philanthropy (Amaeshi Adi, 2006), meaning that it is a complex plain with an interdisciplinary focus. It is generally agreed that CSR involves corporati ons voluntarily exceeding their legal duties to take account of social, economic and environmental impacts of their operations. Consideration of the social, economic and political context demonstrates how CSR forms part of a wider strategic direction being taken internationally with regard to market relations and the pursuit of a range of objectives and goals.The context is in part provided by concerns about the numerous examples of imperative behavior on the part of corporations, ranging from colluding with oppressive regimes and in the overthrowing of governments (Alston, 2005) to issues relating to working conditions and the impact of unethical marketing practices (Richter, 2001). Such examples have demonstrated the need for the worst excesses of business to be curbed. The globalised economy is understood to raise important issues for businesses and governments due to changes in patterns of production and consumption. In particular it is say that the manufacturing of goods is h ighly mobile (Cassell, 2001263) and that supply chains are often dispersed in various countries, creating difficulties in terms of legislation and regulation. Moreover, economic globalization presents challenges to the ability of states to protect peoples rights (Cassell, 2001).The notion of corporate social responsibility is part of the third way (Gond Matten, 2007), where the role of the state is now to provide steering for the promotion of social development and social justice (Giddens, 2001 6). There is increased involvement of the private sector in traditionally statutory provision through privatization and public/private partnerships (Meehan, 2003). Economic policies have created a need for markets and business to self-regulate in order to continue to pursue an international free market economy, but also to ensure sustainability of economic, human and other resources, and of the environment. CSR is seen as a solution to these problems of regulation. The private sector is incr easingly seen as a key player in the achievement of many national and international strategic objectives for governments, which is also enabled by CSR.MethodologyTo gather information, we used secondary research as our main source of information. Various donnish journals and internet sources were pursued to cater to the important aspects of the given topic. Moreover, since we thoroughly researched this topic, personal opinions were formed and using those and logic, we confirm our opinions accordingly.How can business persons act in an ethically and socially responsible manner and at the like time make profits?Suppose clearedting is profitable and legal, but is nonetheless regarded as environmentally irresponsible under prevailing social norms. Can management of a timber corporation decline to clear-cut its timberland even though that sacrifices profits? One might be tempted to evade the question by claiming that being environmentally responsible is profitable in the long run, ei ther because it preserves the forest for future harvesting or because it maintains a public goodwill that aids future sales. But suppose, in an impulsive moment, management admits that the present value of those future profits from not clear cutting cannot hope to match the large current profits that clear-cutting would produce. Or, more realistically, suppose a takeover bid by a firm known to clear-cut establishes precisely that proposition by offering far more than the stocktaking price that reflects the current stream of profits.Can management reject the profitable takeover bid on the grounds that it will lead to socially undesirable clear-cutting? The answers to these questions will challenge the canonical law and economics account on corporate social responsibility, which goes something like this. Unless modified by statute, traditional fiduciary duties hire corporate managers to further the interests of shareholders, and thus require them to increase corporate profits sub ject to the obligation to pursue with independent legal constraints. Ethics and social responsibility are very important values in business ventures.This is particularly essential in decision making process. Ethical conscience reminds business persons to make trustworthy and profitable business decisions. Likewise, the social responsibility component requires business persons to make entrepreneurial decisions that can enhance benefits and repelling harms to the stakeholders. The canonical law and economics view holds that corporate managers do and should have a duty to profit-maximize because such breeding is socially efficient given that general legal sanctions do or can redress any harm that corporate or non-corporate businesses inflict on others.If certain conduct imposes excessive harm on others or merits taxation, then an independent law should regulate and impose obligation or taxes whether or not the actor is a corporation, and if the conduct does not impose any taboo har m or merit taxation, then the most socially desirable thing for corporations to do is maximize profits. Other stakeholders could either legally protect themselves by contract with the corporation or have their legal protection provided by judicial gap-filling of such contracts. Part of what makes this account canonical is that it helps define the boundaries of the corporate law field. It leaves corporate law scholars free to ignore issues about any effects the corporation may have on the external world as topics best addressed by other legal fields, and to focus on more tractable models about which corporate rules would maximize shareholder value.