Ethics and Governance

itical discussions. It is often said that the organizations are keen on increasing their long term profits with then help of CSR. It is also said that it distracts the organization from fulfilling its economic role. It is also argued that CSR has a neutral effect on the financial impact of the organization.

The primary purpose of CSR is to improve the brand image of the organizations (Lee Park and Lee 2013). The consumers are most likely to make purchases from a company that is supportive towards society and contributes towards its betterment. This leads the company to engage in CSR activities, however, their intention still focusses on profit making (Lee Park and Lee 2013). The society also expects that the companies would operate in a fair manner and not engage in dishonest means. They also expect the organizations to produce goods as per the customer requirements and present them at an affordable price. The organizations often fail to fulfil these requirements. They are often seen to demonstrate socially irresponsible behaviours.

The CSR activity relates to business ethics, however, are not synonymous with it. It is concerned with the judgments, moral behaviours, honest policies and responsible behaviours of the companies (Preuss 2012). The ethical responsibilities are a subset of the CSR activities and can be regarded as a characteristic of it. There are numerous attempts that tend to establish the relationship between ethics and CSR. The distinction between the real benefits of CSR and the motives of the company needs to be determined (Preuss 2012). It is believed that there would be improved outcomes if sufficient transparency is maintained by the companies. They usually underline the reasons for engaging in CSR in order to maintain the goodwill of the organization.

The ethics is concerned with the correct and wrong perspective of the corporate activities. It is concerned with the assessment of the moral activities of a firm . The ethical responsibilities of an organization are spread across several levels such as the teams, individuals and the organizational level (Homburg Stierl and Bornemann 2013). The ethical behaviour of the company comprises of several parameters such as respect, trustworthiness, responsibility, caring attitude and fairness (Homburg Stierl and Bornemann 2013). The increased globalization of the company has also encouraged the companies to adopt a lenient approach towards business ethics (Homburg Stierl and Bornemann 2013). The organizations, either intentionally or unintentionally, focus more on the generation of revenues, rather than adhering to the moral obligations of the society. This does not mean that the companies are engaging in criminal offences, but the fine line of difference between ethics and profit has ceased to exist.

The CSR is considered to be a win-win situation. The organizations are eager to make profits under the frame of societal benefits. There have been instances when there are no significant gains to the society except the advantage of the organization. The company is able to make profit by making maximum enforcement of the societal responsibilities. The studies have shown that the CSR activities present a positive image of the brand among the masses (Huang et al. 2014). It gives a good impression among the people that the company is concerned about the society. It also enhances the customer retention of the company as the customers are delighted by the initiatives of the company towards the betterment of the society. The CSR activities is responsible for the development and the enhancement of the relationships of the employee with the suppliers, customers and the suppliers (Bartkus and Morris 2015). The company gets better opportunity to recruit, retain and sustain a satisfied workforce. It is also possible to receive the tagline of “Employer of Choice” and enhance the brand value of the company (Bartkus and Morris 2015). The business reputation is enhanced and there is a subsequent increase in the revenues of the company. This is because of the creation of the positive image of the brand. This also gives more opportunities to the organizations for searching suitable investors. There is positive publicity of the company which attracts the potential investors (Saeed and Arshad 2012). The increased CSR activities also draws the attention of the media houses. They also help the organization in transferring the organization’s message to the audiences. The CSR aids  in the enhancement of the strategic philanthropy of the firm. This implies the linking of the employee activities to the human resource strategies (Saeed and Arshad 2012). It also implies the inter connection between the charitable activities with the marketing strategies of the company. It also fosters cross sector partnerships with the major community segments.

The CSR activities play a strategic role in the improvement of the organizational performance which in turn leads to greater profitability of the firm. This is achieved by the development of the organizational resources that may be tangible or intangible. The intangible resources consist of the reputational capital and social capital, which can be developed by the organizations over a period of time (Lins Servaes and Tamayo 2015). The social capital refers to the initiatives of the organizations in the creation of mutual benefits and coordination. It can be defined as an asset that is embedded in the social networks and the social relations. There can be two forms of social capital such as relational and structured (Lins Servaes and Tamayo 2015). The social capital is often compared with the organizational advantage through the creation of the trust (Laursen Masciarelli and Prencipe 2012). It can also aid in the creation of the intellectual capital and promote innovation in the organization. This can be achieved in the operational level by understanding the concepts of networking and other social tools. The external and internal networks provide great opportunities for the organizations for creating reliable social networks. These kind of corporate activities are beneficial for the community as there is an increase in social participation (Lins Servaes and Tamayo 2015). It also helps to create positive attitudes within the community which can be an important component in the sustainable development of the organization with the help of economic prosperity (Walter 2013). The social capital can be accumulated through the human interactions that fosters collective action. The social cohesion helps the company to build profitability. The reputational capital consists of the value creation in the stakeholder’s mind when they are interacting with the organization (Hond et al. 2014). The reputational capital can be used to bring in positive outcomes for the firms. The CSR is an excellent tool for the creation of reputation (Hond et al. 2014). It also provides incremental gains as the corporate image is enhanced. The increased reputational capital would also help in the recruitment  of talented employees who would be willing to be a part of the organization. They would provide their best performance and would lead to satisfied customers. This would ultimately enhance the revenues of the organization that would lead to higher profitability.

The CSR activity is also used as a tool for increasing the corporate domination. The CSR has the tendency to divert the attention from the real issues of the social causes and focus on the superficial issues. It cannot be denied that the corporate entities believe in the philanthropic approach (Hack Kenyon and Wood 2014). The finances they are allocating to the charities or the social activities actually belong to their shareholders. They cannot distribute the finances of the shareholders into some activities where they can perceive no potential profits. This is the reason that they want to improve their brand image. They can be looking for easy advertisement mediums, balance the pressure groups or genuinely addressing social causes, but there is always an underlying financial motive attached with it (Hack Kenyon and Wood 2014). The CSR activities enable the organizations to gain entry into the niche market segments and opt for the privatization of the social functions. This is done through proposing solutions for the environmental and social causes.

The organizations understand the fact that CSR has a Unique Selling Proposition and it would appeal to the desires of the consumers. The CSR is considered as an effective “Public Relation (PR)” tool these days. It is believed that CSR is accredited to cover up the negative images of the organization and replacing them with the positive impacts of the credentials of the organization (Perks et al. 2013). CSR is often equivalent to a PR strategy, according to the researchers.  This has often landed the company into legal battles. This was exactly the case with Nike when it faced criticism in the US Supreme Court regarding its CSR movements (Wood 2013). The activists took an attempt to sue the organizations on account of a misleading “public relations” campaign. There were debates regarding the legal approvals of the organization’s publicity as well as public relations tools. This case poses a serious question to the corporations that if they are really concerned about the accountability and transparency of their CSR activities, then they would not be involved in serious legal actions (Crane Matten and Spence 2013).  The issues arise when there is a mismatch of the words of the company in public and with the NGOs. The legal ruling poses difficult situation for the companies as they often come up with misleading statements in order to preserve their brand image.

Conclusion

The debate regarding the actual motive of CSR is continuing since a long time. Certain groups believe that the companies are engaging in ethical acts through CSR, while others believe that the only intention of CSR is concerned with the profit. It is true that the organizations, especially the multinational companies are not running for the purpose of charity. In fact, there are no business entities that do not work for profits, except the NGO, charitable trusts and similar entities. This essay gives a fair idea regarding the various aspects of the CSR and its close correlation with profits as well as ethics. The CSR activities are scanned from both these viewpoints and it is concluded that CSR is concerned more with the generation of revenues. The underlying principles of the organizations that drive them towards generation of profits are discussed. The effects of the profit making motive of the organizations along with the role of CSR are also discussed. This paper would give a better understanding of the concepts of CSR in a real life scenario.

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