Whta do you guys think? Does Corporate Social Responsibilty ultimately create wealth for the organization?
In this era of political correctness and trial lawyers, it seems as if most of the corporations are pressed to be “socially responsible”. More and more organizations are required to give back to the communities they do business in. Sometimes that causes finacnial drain, which does/can effect the bottom line?
Looking fro views from financial, economics gurus
Kaleem as a conservative from NY, I don;t think social resposibility and capitalism go hand in hand. But my liberal side will try to tackle this. Some might say, I am confused...chalo Theek hai...but I like to belilve I am a metrosexual.
Actuallyu no amounts of corporate altruism can be expected unless it can be monetized. The short of it is... like nations and individuals, corporate actions are based on self interest. I fthere is an economic value added to the company then they would do it.
I will give one example. My employer, the pargest private bank from India, embarked on a very interesting strategy for growth. We are a universal bank with multichannel, multiproduct retail strategy. but we do not have a brick and mortar reach of let;s say State Bank of india. We did something interesting. Since we are one of the world's most tech savvy bank, to reach rural India ( there is a lot of cash transactions done in rural india and farmers rely on a middleman to keep the books) we developed a kiosk strategy. We put up over 8000 kiosks and Atm's in two years across India there by bringing banking services to farmers directly, lowering their transaction costs and increasing our asset base. It was a win win...
One of the other companies that I know is pretty good is SAS. There was a case study at B school when I was there on what they were doing.
^ huh?
Matsui, thanks for your reply. I was leaning towards the same idea, that the coprorations will do it if they can find a benfit in it. However, what happens when they go against popular opinion? ala, Ford dragging its feet with Firestone debacle and Exxon not accepting responsibilty for valdes leak?
My opinion on this has been that Corporations only responsibilty is to its stockholders and stockholders only. There most important task is to create wealth for the organization. They do not need to go out of their way to appease the public, if the actions benefit the corp in some way then do it, otherwise, hire a good spindoctor.
I think it also is foolish for corporations to get into the social services game. It is not their core competency, leave it alone.
corporate social responsibility is not the same as appeasement of public. e.g. it does not have to support youth programs in the area or give to local charities, thats a diff thing in my mind.
but, environmentally responsible procurement, manufacturing etc, socially responsible supply chain requirements are a good thing.
Could it create wealth, sure. But is it all about creating wealth..or is it all about running a good business, bottom line numbers are important but how u get there is important in the long run as well. creating value is not just about revenue, but about the long term future of the company as well. socially irresponsible business practices have come to bite companies in the past too. Even if you look at it from a shareholder value/service the value is not limited to dividends or stock appreciation.
Social responsibility as it relates directly to the business a company is engaged in, and not charitable giving is critical in my view. If not anything the goodwill of a brand has value in itself.
ISO14001 comes to mind.
Farudia, there are three different theories. Stockholder, Stakeholder, and Social Contract. It does not surprise me at all knowing that your subscribe to the liberal views and support social contract theory. However, when a corporation is created/founded, its only responsibility is to the stockholders. Its primary concern is to grow the business, not to be socially responsible.
Give me an example of where a company suffered long term consequences because of scocial irresponsibilty. Mind you, emphasis is on long term. I can see the short term revenue loss, but in the long run...a business is there to create wealth for the stockholders and the company not for the communities.
i don't think it's just about volunteerism...it's about companies doing business in a way that supports the people who are helping that business run, it's about doing business that isn't looking just at short term profits but long term sustainability....
For example, their is a huge discussion regarding CSR and coffee growers in south america. Despite the rise in coffee drinking/popularity of star bucks coffee prices have been driven down so low that the farmers who would grow the coffeee beans, can't survive. Thus their farms close, they sell off everything and then move to the big cities, live in shanty towns, doing menial labor that ends up decreasing quality of life while increasing potentially crime,etc. THis also eventually would lead to the demise of the coffee industry because if there were no growers...there would be less coffee, increasing prices of the coffee bean, increase price of coffee which could decrease demand and/or force cmpanies to decrease their profit margin in order to maintain demand...
A socially responsible coffee company could choose to pay a rate that allows the farmers to live...for starbucks this only increases per coffee cup cost by a quarter of a penny, BUT this small increase is enough for many farming communities to continue, save money for more donkeys/machines to help increase their production or in one case described in my CSR class, they saved up money to provide scholorshihps to their children to attend highschool and in one village they had their first children in college! For the business this insures their growers will be around in the future...making more coffee bean, helping them get their product at cheap rates, which keeps the profit margin high.... which should make stockholders happy...
amelie, can I ask, what do you do? just curious..
amelie, did they talk about Friedman in your class also?..just curious.
While I understand why young girls like Juan valdez, I still don;t get why his burro gets no respect. :(
Kaleem it is also important to look at what some of the world gov't's are doing on the FDI related Tax relief basis. I have heard of a few projects in Andhra Pradesh where MNC's are given tax breaks for developing housing for the laborers who work on their infra projects, schools for kids etc. The gov't in addition has established re-training prorams for these folks so that the concept of migrant labor doesn;t take hold.
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*Originally posted by Kaleem: *
amelie, did they talk about Friedman in your class also?..just curious.
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it's been a few years and I don't remember his name...
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Originally posted by Kaleem: *
Farudia, there are three different theories. Stockholder, Stakeholder, and Social Contract. *
okay
*It does not surprise me at all knowing that your subscribe to the liberal views and support social contract theory. *
it does not surprise me that you read me all wrong :)
*However, when a corporation is created/founded, its only responsibility is to the stockholders. Its primary concern is to grow the business, not to be socially responsible. *
when social responsibility is tied to teh company's well being than it becomes a duty to stockholders as well, does it not.
*Give me an example of where a company suffered long term consequences because of scocial irresponsibilty. Mind you, emphasis is on long term. *
do short term losses not impact stock holders?
*I can see the short term revenue loss, but in the long run...a business is there to create wealth for the stockholders and the company not for the communities. *
your definition of social responsibility is very limited, please refer back to my post where i had plainly indicated that the social responsibility is not the same thing as charitable giving.
social responsibility is part of good business practices, kinda like treating employees well. If reputation and brand matter as well as brand equiet and good will, CSR would not hurt. would you buy from a company that you knew was engaged in irresponsible business practices versus one that was not. To some the bottom line price is the only thing that matters, but the impact on company financials after any story on socially irresponsible action has shown time and time again that people do care, and although the long term impact is not measured yet, it will not be surprsing that a company which fails to be a responsible business would have a loss of goodwill and severely impact its brand.
A Governance Metrics International analysis (which rates companies on their governance policies, labor practices, environmental activities etc)found that stocks of the top ranked firms did significantly better than the market and the low-ranked corporations were at the bottom of the indexes
Direct or indirect, short term or long term, CSR may or may not help, but it surely does not hurt.