Navigating corporate social responsibility components and strategic options: the IHR perspective.

Author:Yang, Nini
Position:International human resource management
 
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INTRODUCTION

In the era of globalization, business and society have become increasingly interwoven. As many firms continue to expand their businesses across borders, scholars and managers have devoted greater attention to cross-cultural business ethics and the strategic implications of corporate social responsibility (CSR). International business mandates that companies manage their worldwide operations efficiently and effectively on the basis of openness, corporate integrity, moral obligation to the larger society, and accountability. A rich literature on business ethics and CSR has emerged in the form of institutional theory, stakeholder theory, political behavior theory, cultural relativism, ethical universalism, moral obligations, utilitarianism, and efficiency perspectives. A prominent idea is the notion of sustainability arguing that organizations can do well by doing good and secure long-term economic performance by avoiding short-term behaviors that are socially detrimental or environmentally wasteful. The focus on integrating CSR into competitive sustainability in a specific sector, however, with companies as the unit of analysis, has been minimal (Rana, Platts & Gregory, 2009). Critics argue that CSR efforts are oftentimes counterproductive for two reasons (Porter & Kramer, 2006). First, they pit business against society, when in reality the two are interdependent. Second, they pressure companies to think of corporate social responsibility in generic ways instead of in the way most appropriate to their individual strategies. The prevailing approaches to CSR are so disconnected from corporate strategy as to obscure many great opportunities for companies to benefit society.

Porter and Kramer (2002) draw attention to the decline of corporate philanthropy to the extent that corporate giving by U.S. companies as a percentage of profits dropped by 50% in 15 years. The current economic downturn has further impelled some to put CSR ideas on the backburner (Strandberg, 2009). Meanwhile, the pressure on businesses to play a role in social issues is growing in the wake of corporate scandal and scams involving MNCs and financial institutions like the fall of Enron, WorldCom and Lehman Brothers, PB oil spill, and numerous foreclosures as a group effect of real estate agencies, bankers and financial institutions such as Fannie Mae and Freddie Mac, AIG, GMAC (Citigroup), BAC (Bank of America), WFC (Wells Fargo), JPM (JPMorgan), etc.

Critics increasingly expect corporations to behave more socially responsible and adhere to moral standards beyond minimal compliance, whereas many executives feel relentlessly pressured to maximize short-term profits in economic hard times. MNCs that have outsourced or shifted their operations from developed to developing or emerging economies to gain a cost-efficiency advantage over production factors and supply chains are often caught in the spotlight for perpetuating sweatshop working conditions, child labor practice, environmental pollution, and lack of welfare programs for workers and their families.

Many ethical and CSR issues have a direct link to the human side of business. Although companies increasingly feel compelled to engage in CSR, most have not figured out how to do it well. CSR is approached more as a form of public relations or promoting a company's image and brand, with an emphasis "on publicity rather than social impact" or "truly strategic philanthropy" (Porter & Kramer, 2002: 6). Consequently there are genuine doubts about whether such approaches actually work or just breed public cynicism about company motives. Some scholars observe that certain CSR programs lack altruism and serve as a sign of submission to institutional pressures (Bies, Bartunek, Fort & Zald, 2007). CSR, however, includes a broad spectrum of actions and strategies that can open infinite opportunities that benefit both business and society.

The present study builds linkages between cross-cultural ethical issues and potential CSR strategic options in a company's specific competitive environment to achieve a proper balance between a firm's global strategy and its local responsiveness in the context of international human resource management (IHR). We propose that strategic human resource management across borders plays a key role in helping the firm identify, prioritize and achieve CSR goals, thereby improving firm-industry specific social and environmental conditions locally and globally. Effective IHR leadership of CSR integration into global business strategy and local responsiveness requires organizational commitment and support from the headquarters, Board, CEO and executives, and therefore, business ethics and CSR values will be fostered and embedded in "the way we do business around here".

THE CONSTRUCT OF CSR AND STRATEGIC OPTIONS

Both scholars and business practitioners recognize the difficulties in globalizing the existing CSR concepts (e.g., McWilliams, Siegel & Wright, 2006). It is particularly challenging to align CSR with a firm's global strategy; however, addressing economic and social goals simultaneously benefits both the firm and society because the firm brings unique assets and expertise to improve the competitive context of the business environment including the quality of life in the local community. Consistent with the Society for Human Resource Management (SHRM, 2007: vii), we define CSR as "the commitment by organizations to balance financial performance with contributions to the quality of life of their employees, the local community and society at large".

The Construct of CSR

One concern regarding CSR research is the lack of clarity with respect to the definition and dimensionality of the construct (Rowley & Berman, 2000; McWilliams et al., 2006). Carroll (1979) identified four components of CSR: economic, legal, ethical, and discretionary or philanthropic. The point was that "CSR, to be accepted as legitimate, had to address the entire spectrum of obligations business has to society, including the most fundamental--economic" (Carroll, 1991: 40). The economic component is business's fundamental responsibility to make a profit and grow, which parallels the shareholder perspective (Friedman, 1970), and also includes providing economic benefits to other stakeholders such as fair paying jobs for employees and good quality, fair priced products for consumers. The legal component refers to firms' duty to obey the law and to play by the rules of the game that at least meet minimal legal requirement. The ethical component addresses firms' responsibility to respect the rights of others and to meet the obligations placed on them by society to secure these rights. This component is consistent with the idea of corporate citizenship and stakeholder theory (e.g., Freeman, 1984; Donaldson & Preston, 1995; Dawkins & Lewis, 2003) and requires corporate integrity and ethical behavior beyond mere compliance with laws and regulations. The discretion component involves philanthropic activities that firms perform in a manner consistent with charitable expectations of society and that help enhance a community's quality of life, such as to assist the fine and performing arts, private and public educational institutions, and humanitarian programs. The discretionary component is rooted in the belief that firms have a wide scope of discretionary judgment and choice in terms of deciding on specific activities or philanthropic contributions that are aimed at giving back to society. The four-component conceptualization of CSR is constructed as a pyramid towards an improved ethical organizational climate: be profitable, obey the law, be ethical, and be a good corporate citizen (Carroll, 1991; 1999).

Some scholars contend that there is no absolute hierarchy of duties (e.g., Ross, 2000; Lantos, 2002; Waldman, de Luque, Washburn & House, 2006), and instead suggest that the ranking of CSR components depends on the situation. For example, from the stakeholder perspective, the pyramid of CSR would envision stakeholders as existing at four levels, from broad and less immediate to the firm to narrow with close ties to the firm. In the case of corporate giving, for example, making a monetary donation to a charity organization could be a philanthropic action at the expense of interests of others closer to the firm, such as workers, who might then receive lower pay, or consumers who might then pay higher prices. In this situation, the four-component pyramid offers little strategic guidance for organizations facing a dilemma.

Lantos (2001) distinguished between ethical and altruistic CSR as mandatory (ethical) vs. voluntary (social). Ethical CSR is morally mandatory and goes beyond fulfilling a firm's economic and legal obligations to its ethical responsibilities to avoid harms or social injuries, even if the firm might not appear to benefit from this. Actions are taken because they are right, not because they are mandated by law or are profitable, such as money spent on workplace safety or pollution control. Here, ethical CSR incorporates the first three components in the CSR pyramid (Carroll, 1991) discussed above. In contrast, altruistic CSR is voluntary, equivalent to philanthropic responsibilities, and involves contributions to the greater good of various stakeholders, regardless whether or not this will benefit the business itself. Firms practicing altruistic CSR help to alleviate various social ills within a community or society, such as poverty, illiteracy, child labor, drug and alcohol problems, among others. The justification of corporate altruism lies in the fact that modern corporations have been entrusted with massive economic and human resources and therefore have an implicit social contract between business and society whereby firms agree to be good stewards of society's resources. However, Lantos (2001) contends that altruistic CSR, although noble and virtuous, could conflict with...

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