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In risk management terms, critically

evaluate the arguments for and against an
international business adopting a policy of
corporate social responsibility

Module: Global perspectives on risk

Assessment: Portfolio (weighting 50%)

Session: 2008/2009 Semester B

Student Name: Zhang Dijing

Matric Number: 200818835

Content

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….....…………….…..…..viii Solutions..…xiii Introduction 2 . iv Negative Business Impacts of corporate social responsibility….x Conclusion………………………………………………………...………………………………………..iii Positive Business Impacts of corporate social responsibility….Introduction…………………………………………………………. xi Reference…………………………………………………………..……….

However. and the investors which are reflected in the performance and policies of organisation and CSR is also the firm responsibility which use their own resources in order to benefit the society. Hay and Gray. Such as if the MNC runs only in the European Union exceeds/obey all the individual countries laws of environmental and employment in the EU as well as has strict policies on the matters as graft and corruptness which was considered not exposed to any risk of CSR. In the environment of global business. 1974) As Hill (2007) presented. Therefore. it may difficult for companies to evaluate and identify the risk whose activities seems do not impinge on the arenas of environment/ ethics of society. the ethical dilemmas nature -the conditions where have no suitable alternatives which can be accepted by the ethics are not easy to be answered and the question -what are the risks may complex. Therefore. the a multinational corporation ethical responsibilities about human rights. and the employment conditions are not always clear-cut.related and may a dangerous hypothesis in many cases. power use. environment pollution. independently develop the direct gains benefit from the classical sense of economic of shareholder wealth which was rising to corporate good philanthropy and citizenship (Friedman. the risk evaluation and identification 3 . corruption. According to Smith (2002). as well as employees.Corporate social responsibility (CSR) as the term can be defined in many different ways. 1970. and through devoted contribution as the society member. Managers often face very real dilemmas of ethics in which the appropriate action course is not clear. customers. corporate social responsibility (CSR) was defined as the values and business operations incorporation which based on the all stakeholders’ interests. environment. consider the society at large. the greatest asset of MNCs may be the reputation and the brands’ reputation.

industry-specific to control groups. return to obsess them. According to Schiebel (2003) firstly. (Schiebel.national companies (MNCs). Though some communities of investment and business have debated whether there has a real correlation between the positive financial performance and responsible business practices of society for a long time. It is found that the corporate assets’ average age is to be highly interdependency with the ranking of social responsibility. 2007) Due to the risks issues for multi. CSR can improve the financial performance (FP). Positive Business Impacts of corporate social responsibility There are many positive business impacts of corporate social responsibility. this essay will focus on the positive and negative business impact of corporate social responsibility to evaluate the arguments for and against an international business adopting a policy of CSR and provide some solutions for MNCs to avoid the negative business impacts of CSR. The expectation of society requires MNCs do responsibly whether they like or not.of CSR is based on the potential damage for reputation which seems has developed for a long time and has been high. McDonalds. and developed the technique. As Cochran and Wood (1984) mentioned. g. it is inevitably of failure to do so which given the communication and modern media’s complexity and speed. 2003) 4 . Nike. a large number of academic studies have represented that such a connection is exist between them. (e. the interrelation between financial performance and corporate social responsibility is using the new methodological analysis to reexamined. There also have another relationship between financial performance and corporate social responsibility after operating for this factor. once the reputation which was damaged becomes the perception of society it will be difficult to turn it around as a whole. Shell Oil) (Hill.

contextual. Thirdly. help to attract potential employees.the scope to which employees can reflect that of organization. CSR also can enhance the customer loyalty (CL).Secondly. Schiebel (2003) pointed out that there have a growing number of consumers are factoring the perceived value in the buying decisions and business practices of the company. The existing research found that there are two main factors which affect the obligation and motivation of employee to CSR buy in. motivate the staff. It seems as Schiebel (2003) represented that the commitment of corporation which demonstrated and stated certain business values and goals can assist employees find their own work’s purpose and meaning. perceptual.the behaviours and attitudes of employee are influenced by whether policies of CSR are understood according to the compliance and values. care for the company is doing. Secondly. and help rise reservations will be adopt. inspiring commitment beliefs. A large number of companies are usually connected with business practices which are values-based and consumer credit in the media's commercial success. the fairness and justice awareness of both in terms of or in general how the performance of CSR is rewarded. and whether the policies just an add-on that as window-dressing to provide or are included into the processes of business. Firstly. support personal characteristics and. CSR can make employee commitment and motivation greater (ECM). as well as link to their personal efforts of the company altogether. the climate and culture of organization. in large measure on the brand loyalty of customers who hold the value or task of the company. and the impersonations which concern the top management feelings to CSR performance and issues will also affect the commitment and motivation. Collier and Esteban (2007) pointed out that studies show that in order to help organize and view the performance of the shared values. A survey which has 5 .

and profitability. Therefore. 2003) Fifthly.be done by The Wall Street Journal International Edition. brand image. to make self- determining decisions in their day-to-day business with the fundamental values of company thus to minimize the risk. stakeholders may be involved in the court of public opinion in the little or the company did not say that (Kytle. is through two ways . corporate social responsibility can reduce the operating costs (OC). Emphasize here is relate to the savings of the operation (reduce waste. when integrated into the organizational communications of company. (Luetkenhorst. and efficient use of resources) that arise during the environmental improvement of the eco-efficiency point of view. the companies through reduce the damage and weakness to the misconduct of this can be done to management. material inputs. provide their employees with the necessary theoretical framework and tools. Fourthly. compared to nine particularly important performance and the general category of corporate citizenship. especially for an international company. Bozell Worldwide as well as Japanese business newspaper Nihon Keizai Shimbun represented that. Ruggie. Well-defined values. (Schiebel. and Japan in third place in 1996. CSR. 2004) A number of 6 . CSR can minimize the risk (R). 2005) The institutionalization of the values of the company based on the decision-making process can positively deal with a wide range of legal and ethical problems.providing an effective means to address these related to enterprise risk management and offering the intelligence which relate to what those risks are in order to managing the relationships of stakeholder more effectively which is important for international companies due to the reason if they can not manage the relationships effectively. morality and values ranked the highest in the consumers in the Europe and United States. less energy.

the corporate social responsibility-related fields. Argenti and Druckenmiller (2004) pointed out that corporate social responsibility (CSR) has become one of the factors that affect the reputation of the enterprise into a more regular brand strategy. In addition. 2001 and the issues which about globalization have lead to the awareness of companies which require basing on the responsibilities of society to examine the roles. 2004) Finally. some initiatives of CSR can reduce the operating costs considerably. For instance. active 7 . to do what is responsible and good with the best convergence of the particular business. but at the same time reduce costs. investors. Socially responsible has been considered by the company which can benefit both from the business community reputation and the improved reputation with the public. employees. (Tsoutsoura. raising the ability of companies to attract the partners of capital and trading. The events of September 11th. planning the best route or reducing the materials of packaging for the delivery truck can not only reduce the company’s operation of affect on the environment. There are other circumstances. It is necessary to encourage companies to expand and adopt CSR efforts in order to pressure from communities. customers. A major event under the brand is the customers of social responsibility who are often to draw to consider the brand and the company has a good reputation. CSR also can enhance the brand image and reputation (BIR). The process of adoption of the principles of corporate social responsibility executive’s incentive to reconsider the practices of business as well as to find more effective ways of doing business. Wally Olins has pointed out that brands will signal the future of the company behind some useful brand. especially the environment and workplace-oriented initiatives can greatly reduce costs throng reducing waste and low efficiency or to improve production efficiency.initiatives of corporate social responsibility.

organizations. If this is true. it has collected significant impetus. former World Bank economist. corporate social responsibility (CSR) has many positive business impacts. the 8 . Another recent chain. (Schiebel. 2001) According to Misguided Virtue (2001). The problem of the free market is clear. this argument seems to be only derived from the social responsibility misunderstandings which stand for/ incorrect views of the economy of the modern. over the last years. In particular for the companies which have a retail brand with high value. (Virtue. the positive CSR image influences will be a important actor for the development of future market. include the momentums in the world of business and the community of investment. compound who argued that these social problems about governments and enterprises of all countries should follow the business. This is indisputable. advanced active David Henderson. there are a wide range of needs for the company to show greater social responsibility. In this regard the corporate social responsibility is the pressure on the market. However. but also raised questions about the legitimacy of non-governmental organizations in the field of business. suppliers as well as other stakeholders. few people trusts that the interruption of CSR will hindered the efficiency of business. There is also a factor to the purpose of philosophy which related to the listed companies. the major criticism is the old free-market economists who represented that corporate social responsibility get in the ways with the efficiency of the enterprise sector and the normal operation of the market share. 2003) Negative Business Impacts of corporate social responsibility Though as mentioned above.

CSR has also criticized the introduction of a number of objectives can only be incorporated into the body to work with a single.company's social responsibility is a way to reduce the risks and the opportunities opening up. such as additional monitoring and reporting. This is not only practical to focus on shareholder value without taking into account the objectives. (Association of British Insurers. all agencies are in practice the pursuit of multiple objectives. but only in the search for a strategy that in order to strengthen the long-term value. When the company began to take the actions of society or environment. if the company paid little attention to CSR will have the tendency to face greater risk of income volatility. In addition. and any other costs which may appear. In the other words. Investors usually pay a premium for the shares to provide more stable income. it could destroy the corporate social responsibility on shareholder value is the anti-profit-making as well as anti-market. However. It also has the requirement to manage and identify other relations as the primary objective of constraints. 2001) As Association of British Insurers (2001) mentioned. and then it must increase shareholder value. even if the earnings trend of long-term is similar to the volatility of the stock. employees. from all sides may have additional costs. 9 . Furthermore. First.the pursuit of profit. corporate social responsibility is not to remove the overriding of directors fiduciary duties of shareholders. customers and other stakeholders. overriding goal . There have the possibility that CSR may be lead to the company to give up short-term profits. There are two reactions to this. the risk management and corporate social responsibility of companies should be better protected from the impact of greater volatility of revenue streams. It is undoubtedly none of the investors’ purpose who would like to follow the ABI criteria for the company.

management of uncertainty.Solutions Due to corporate social responsibility have some weakness and limitations in the international business. the market will be satisfied on two counts- investors can look forward to even greater long-term value creation and income should be higher than the quality of the company's total revenue of the same record. it is wrong to describe the two areas completely different. it may have greater volatility which due to the cyclic shocks of the impact. the fact is that the request of the government all over the world business community to participate more actively in. 2001) 10 . Association of British Insurers (2001) has pointed out the suggestion that the social problems may be more powerful governments. It involves the issues that will be the establishment and the protection of shareholder value – it is important to cultivate relationships. construction and maintenance of reputation. It is as well worth stressing that corporate social responsibility as described is based on the business. (Association of British Insurers. Similarly. as a result. However. the quality of earnings should be strengthened. on the other hand. organizations of business and companies to lobby the government has been heavily involved in a wide range of issues which have been seen relevant. It would be a mistake of the company in deeply inhaled into the field of non-business and business does not have the expertise or advice. In addition. some solutions would be adopted to avoid or reduce the negative impact. and social policies. so it is rarely the choice of standing aloof. Firstly. thus. If companies which can manage the issues of CSR well.

through the use of global standards. there have several evidence that have different point of view about critically evaluate the arguments for and against an international business adopting a policy of corporate social responsibility. the corporate social responsibility have many positive business impact such as improve the financial performance. Undoubted. in fact. investment and divestment of the will. CSR should better reproduce the political norms. it can be said that the rights to the enterprise.Finally. including capital and private property. MacLean (1999) represented that companies need to have it clear known and the required responsibility. it also unquestionable that there also have some limitation and negative impacts of corporate social responsibility which include that corporate social responsibility get in the ways with the efficiency of the enterprise sector and the normal operation of the market share. corporate social responsibility. social structure and values system. and CSR has attractive industries’ activities. reduce the operating costs as well as enhance the brand image and reputation. However. ethical and social rooted in the globalization hegemonic form. economic. to accept the free movement of capital rights. make employee commitment and motivation greater. commercial. the CSR’s introduction of a number of objectives can only be incorporated into the body to work 11 . Conclusion In conclusion. and the supremacy of the determinants of market prices. These rights are not clear. it is clear through the review of CSR more than ignore it recognizes. The rights may difficult when there have the restrictions on the developing countries where have a wide range of economic. have additional costs such as additional monitoring and reporting. enhance the customer loyalty. as mentioned above. However. Their rights. minimize the risk of international business.

6. corporate social responsibility can be better used in the international business. (e. P. management of uncertainty. As a result. Argenti. to reduce or avoid the weakness of corporate social responsibility. 7 pgs 12 . such as well worth stressing that corporate social responsibility which based on the business and involves the issues that will be the establishment and the protection of shareholder value.the pursuit of profit. pg. B (2004) Reputation and the Corporate Brand Corporate Reputation Review. overriding goal . A and Druckenmiller. 368. Iss. 4. London: Winter 2004.with a single. not to remove the overriding of directors fiduciary duties of shareholders and may face the tendency to face greater risk of income volatility.g. some solutions are suggested. cultivate relationships. Word count: 2756 Reference 1. Therefore. construction and maintenance of reputation) strengthen the quality of earnings and the companies should better have it clear known and the required responsibility. Vol.

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