SOCIAL ACCOUNTING OR CORPORATE SOCIAL RESPONSIBILITY - Literature review Example

? SOCIAL ACCOUNTING OR CORPORATE SOCIAL RESPONSIBILITY Contents Contents 2 Introduction 3 Literature Review 3 Instrumental and Normative Debate 4 Corporate Responsibility and Stakeholder Management 6 Role of Manager 6 Why should the companies practice CSR? 8 Corporate Social Responsibility and Financial Implication 10 Conclusion 12 Reference 14 15 15 15 Introduction Accountants have made an important contribution in the debate of corporate social responsibility also known as social accounting or CSR. The major element that the accountants have contributed is the ability to provide mechanism for the holding corporations are accountable for their work. Ryan (2002) has described the Corporate Social Responsibility or CSR as motherhood issue, the hot topic of the noughties by Blyth (2005) and finally Mees and Bonham (2004) have defined CRS as the talk of the town. There are various definitions provided by the authors and which are simple and some complex and a range of ideas and terms are used interchangeably which includes the corporate sustainability, citizenship, social investment and also corporate governance (Thomas, 2006, p. 3). CRS is considered as a strategy to create, sustains a positive reputation and brand image for the company. Corporate Social responsibility has become an important part in the success of the corporate. Studies on the effects of CSR on the organisation have shown a diverse outcome. Many studies conducted on the effect of CSR have showed a negative result or relationship between the CSR activities and the performance of the organisation. But there are authors who have proved in showing a positive relationship between the CSR and the performance of the organisation. McWilliams and Siegel have defined the CSR as actions which tends to appear to further few social goods which are beyond the interest of the organisation and which is actually required by the law. Literature Review The analysis over the corporate social accounting literature has suggested that the concept of social accounting has emerged from various different disciplines, concepts and also directions. This is one of the reasons behind different opinions regarding the meaning of CSR (Gupta, 1995, p.22). Instrumental and Normative Debate A great amount of Corporate Social Responsibility is mainly concerned with the dichotomy of instrumental and m\normative approaches. Much of the literature tends to promote the business for its CSR claiming the ethics are good for business. The instrumental approach states that the CSR needs to be reconstructed in an instrumental manner in order to be meaningful to the managers in their day to day activities to pursue the organisational goals and objectives. According to Beesley & Evans the government needs to promote the CSR in terms of taxation and also regulation in order to ensure profitability for the corporation and pursue CSR. But the normative approach states that the instrumental approach tends to diminish the ethical principles of the Corporate Social Responsibility. The normative and the instrumental approaches believes in different notion as to what would be the bottom line of any business should be and what. As per Reinhardt, the normative and also the instrumental arguments are mostly used simultaneously. There have been noticed an interplay in between the two approaches like with normative approach an understanding of the ethical business is acquired also by informing the instrumental approach. The instrumental approach does not act ethically unless and until it is profitable for the firm to do so and whereas the normative approach applies a more consistent ethical performance. According to research, driving forces for the organisations to adopt the CSR practises is catalysed in different events (Friedman & Miles, 2006, p.31). Influence on the practise of Corporate Social Responsibility tends to interact or overlap in many different and complex ways such as when the investment firms spends a huge amount of dollar in order to educate the potential financial consumers to make them loyal to the investment funds. Six set of influence has been identified which aims to promote the social responsibility within the organisation and they include internal pressure on the mangers, from the competitors, consumers and investors, and also the regulatory pressure from the government and also from the nongovernmental organisation. According to the normative arguments the need for CSR are mostly based on ethical rationales and those which are against are mainly based on institutional function. The most common argument with respect to CSR is based on the calculation of CSR whether it would benefit the organisation overtime. Such type of arguments mostly relies on legitimating of the organisation. By appearing more responsible an organisation can anticipate and avoid all the unnecessary regulations from the government, exploit the opportunities which arises from an increased level of environmental, cultural and other factors, the firm is able to differentiate its product from its competitors and continue to gain the market share. In response to this the market orientation guarantees that no changes to the practise of CSR would take place. The business managers are to entertain the involvement of an NGO only if they are able to get any economic benefits. The instrumental factor argues that the firm tends to protect the CSR initiative. The factors which are against the social responsibility are based on institutional and property rights. It is argued that the non corporate like the governments, civic, labour unions are the vehicles which are required by the CSR to perform the activities. The business managers do not have the skills or time to implement the policies and the organisations would not be accountable for the actions. Allowing the business to expand its CSR activities can be quite dangerous as it has an authority but are not accountable to anyone (Haigh & Jones, n.d, p. 2). Corporate Responsibility and Stakeholder Management Scholars have contended that most of the CSR revolves around the stakeholder’s theory which is concerned only with self reporting. The discourse of CSR has been taken up due to discussion of implied as well as voluntary obligatory, the responsibility of the corporate to observe serious consideration to the environment and also to the society. The basic idea of CSR is that the society and the business are interrelated and are not distinct entities, thus a society has expectation from the corporate to show appropriate behaviour which is motivated by economic externalities. Business ethicists have borrowed from the some great scholars that the normative obligation on the organisation which is usually imposed by the social contract tends to require response according to the needs of the owner and also the non owners. CSR acts as one of the key aspect in responsibilities to the stakeholders. Authors have suggested that the notion of stakeholders usually enables personalisation of responsibilities. Some of the authors have founded the task of engaging and identifying stakeholders and balancing different claims as well as demands. Further issues such as dealing and applying and also implementing the different code of practice in various geographic as well as cultural context and the issues arise in dealing with such difficulties (Schwalbach, 2010, p. 2-4). Role of Manager The role of the management is of much concern for CSR literature. The core members are expected to face a complex task while implementing the CSR and sometimes lack the required skills which are needed for the CSR practise. Much of the literature often suggests that employee’s commitment and decision making are essential for the success of CSR. The managers are often looked as an important part of the organisation and are related to the status of a moral manager. Interaction between the culture of the organisation and the personal values of managers are significant in the process of CSR activities and values. CRS usually requires a high understanding of certain key issues to make ethical decisions. However it has been noted that one obstacle in the implementation of CSR is set of new words which are used in business languages. It is further said that there are many different types of mangers who are differentiated by orientation and are defined as immoral and the moral type influences the decision that are to be made for the betterment of the organisation. However Gellerman (1986) suggested that decisions are made by the mangers for many different reasons, it may due to difference in opinions which might evoke the moral orientation of the manager. Gellerman had suggested that the issues concerning the moral and ethical of the angers can be solved by increasing control and surveillance and also with the realisation of the senior managers of their responsibility and clarify the line between loyalty and morality. However other authors have argued that it is important for mangers to undergo training in ethics in order to enable the managers to make correct decisions and also increase the skill of ethics while taking any decision. Such types of training are necessary to help a majority of people in the organisation to appreciate and also understand the moral significance of events and response appropriately. It is also suggested by Herningway (2005) that reflexivity about the personal values is useful for managers but it has also be said that there are restrictions on the ability of the people to employ the skill of ethical practise. It is important to consider the form of ethical issues. For instance the environmental issues were not seen as ethical issues but today it is and it acquires the top most position in the CSR activities of any organisation. This suggests that the mangers should be aware of the new societal values and their priorities and be responsive to the changing needs (Chryssides & Kaler, 1993, p.66). Why should the companies practice CSR? In order to maintain it’s competitive in the global competitive market, many companies choose the option of CSR and its activities as a strategy to advertise the products and services with a spell of corporate social contribution. This form of advertising is termed as subconscious level of the ad agency and this is because it is through advertising that companies are able to earn the support of the public through philanthropic promotions (Fry, Keim and Meiners, 1982, p. 105). One of the globally renowned organisations, the American Express has successfully taken up the CSR by choosing the activities that it supports. The company contributed about $100,000 to the Art festival in San Francisco along with the usage of customer card in the year 1981 when it founded that the targets customers of the company also included those people who were interested in arts. As per Hunt (1986), the program conducted by the Amex as a huge success, usage of the card increased by 28%, the application for the card has increased by 45% and about $1.7million dollars were donated to the project. After two years, the organisation continued supporting the charitable activities which had reflected positively on the brand image of American Express (Stendardi, 1992, p. 24). The main goal of any business is to earn a maximum of profit keeping the cost of operation at minimum. The stakeholder’s theory also suggests that a company cannot maximise the long term success if the organisation ignored the demands of the stakeholders. Many other scholars have derived a positive relationship between the financial performance of the company and the CSR activities. Besides ensuring cost savings on the sustainable activities and build a positive brand image. The CSR activities also help companies to prevent themselves from being reliable for illegal practices or unethical behaviour. The theory of social impact suggests that business image have proved to influence the decision of the stakeholders in many different ways like customers sensitivity towards price for a particular product or services and other such factors. A company may be able to reduce the cost on training, recruitment if it efficiently utilises the strategy of CSR and enhance the commitments of the employees. The concept of green hotel is an example in the trend of CSR in order to increase the awareness of sustainable business concepts. Environmental issues are the major concerning factors and the practise of the hotels affects the customers. The hotels have began to adopt new marketing strategies which involves the use of green programs and other practises of corporate social responsibility in order to target the customers. The Marriott Corporation has created the green program in order to encourage the consumers and also the hotel operators. The employees usually evaluate the performance of the company and they response on issues with regards to the public to verify conflicts with the employers as they have similar values which ultimately leads to a better attitude and greater productivity. The motivational level of the employees may drop if they find out that the company they work for focuses mainly on earning profits and do not follow a legal and ethical standard. According to Locke, employee motivation acts as stimuli that insist the employees to deliver the best performance. Thus in order to successfully motivate the employees and achieve the company’s goal, objectives the management should ensure strong commitment of the organisation which would help it to achieve the desired goal and objectives. Studies have proved that organisation with corporate social responsibility has a strong positive influence on the employees. Also the behaviour and the work performance are influenced by the work culture and thus it would prove to be beneficial for organisation to promote the external CSR activities such as charitable events and so on. Hancock (2005) has suggested that organisation should promote the CSR as a culture of the organisation which would encourage activities and policies in order to earn the internal support and reputation from the co workers and employees. Instead of focusing only in achieving profit, the cultures of the organisation with CSR activities may actually led the organisation to a more secured and comprehensive direction which in turn would improve the training, operating and recruiting process and also improve business relations. Therefore companies involvement with the CSR activities is said to bring about a positive impact on both the internal as well as external stakeholders as with the practise of CSR the company would portray itself to be an ethical organisation, improve its brand image, cost reduction, financial performance and employee’s commitment towards the organisation. The external programs of CSR generate a stronger commitment of the organisation and this motivates the employees to perform better and enhance productivity and job satisfaction. Thus it is essential for organisation to perform CSR activities and choose the programs which are appropriate to the organisations business model and goals (Chiang, 2010, p.9-13). Corporate Social Responsibility and Financial Implication The CSR issue and its effects on the financial performance continued to take place in the literature. According to reports, among the top 500 largest public corporations, about 27%approximately have showed in the annual report that ethical behaviour towards the stakeholders or organisation which complied with the code of conduct have reported to have a higher financial performance as compared to other firms which do not practice CSR activities. But in this perspective, the activities of CSR have been measured narrowly for a fact that companies such as Enron which can get engaged into philanthropy while being guilty of misconduct. Windsor (2001) suggested that the collapse of Enron reminds that the deviation between wealth and responsibility is not far from the competitive landscape of business on the global ground. But Orlitzky argues that there has been a positive relation between the corporate social activities and their financial performance. The corporate social performance tends to reduce the financial risk and the organisation might benefit from the CSR activities. In a discussion Hopkins suggested that since it’s difficult to prove a link between the CSR actions and the financial indicators thus a benefit cost analysis of the corporate social responsibilities of the cooperative bank have declared that nearly about 15% to 18% of the pre tax profits are directly attributed to the ethical activities performed by the organisation Hopkins have undergone a study of the top UK organisation to examine the relation between social responsibility and the financial performance. It was concluded that the share price was not greatly affected by the organisations level of social responsibility but the CSR also do not affect the share price. With respect to corporate financial investment in the corporate social responsibility, there are levels of CSR activities that maximize profits while in a way satisfying the demand of CSR from different stakeholders. Therefore the ideal level of CSR is determined by the cost benefit analysis. Another important aspect of CSR with respect to financial implication the strategy of risk management which aims to reduce the financial loss which may be caused by adverse reaction of the stakeholders which may lead to negative events. According to Brammer & Pavelin (2005) social investment would tend to establish a good and positive reputation in the eyes of the stakeholders which would help to mitigate the impact of the negative events (Thomas, 2006, p.12). Conclusion CSR is still an emerging both as concept and practice. Companies are beginning to determine which form of corporate social responsibility would be adopted by the organisation and which would work in the most effective manner in executing the initiatives. Multinational businesses should know and learn about the internal and external practices and determine how they would engage in the corporate social responsibility. But it has been cleared across multiple industries that corporate profit and well being are not mutually exclusive (Idowu & Filho, 2008, p.305). The brief overview of CSR points out the need which are required to establish in order to judge ethical arguments and on the way of balancing commitments to diverse the stakeholders. It is clear that the task which is needed for implementing the corporate social responsibility is complex and the nature of the concept usually raises few complex and difficult questions. Not only the business needs to act and be responsive about the current concerns but the organisations should know how to balance the present requirements with that of the demands and issues that may pop up in the future and in addition balancing the local and global concerns. In the discussion with respect to the stakeholders approach, sustainability and CSR, Wheeler gave opinion that the theory of stakeholders does not only talks about social issues and sustainability is not only about issues on environment. Conversely Van Marrewijk suggested that if CSR is defined broadly it would become vague to be used in any academic or even in corporate implementation. Thus according to Blyth, there is not a proper definition which would define responsible corporate thus the key is to have a process which would identify the responsibility and thus fulfil them (Thomas, 2006, p.17). Reference Chiang, C. C. S., 2010, How corporate social responsibility influences employee job satisfaction in the hotel industry. [Online]. Available at: http://digitalcommons.library.unlv.edu/cgi/viewcontent.cgi?article=1599&context=thesesdissertations. [Accessed 6 March 2012]. Chryssides, G. D. & Kaler, J. H., 1993, An introduction to business ethics. Cengage Learning EMEA. Friedman, A. L. & Miles, S., 2006, Stakeholders: Theory and Practice. Oxford University Press. Fry, L. W., Keim, G. D., and Meiners, R. E., 1982, Corporate contributions: Altruistic or for Profit? Academy of Management Journal, 25(1), 94–106. Gupta, D., 1995, Corporate social accountability: disclosures and practices. Mittal Publications. Haigh, M. & Jones, M. T., No Date, THE DRIVERS OF CORPORATE SOCIAL RESPONSIBILITY: A CRITICAL REVIEW. [Online]. Available at: http://www.acbas.org/website/IC.nsf/wFARATT/The%20Drivers%20of%20Corporate%20Social%20Responsibility:%20A%20Critical%20Review/$file/TheDriversOfCorporateSocialResponsibility.pdf. [Accessed 6 March 2012]. Idowu, S. O. & Filho, W. L., 2008, Global practices of corporate social responsibility. Springer. Schwalbach, J., 2010, Corporate Social Responsibility and Stakeholder Dynamics. Europe: Gabler Wissenschaftsverlage. Stendardi, E., 1992, corporate philanthropy: The redefinition of enlightened self-interest. [Online]. Available at: http://www.sciencedirect.com/science/article/pii/0362331992900149. [Accessed 6 March 2012]. Thomas, G., 2006, Corporate Social Responsibility: A definition. [Pdf]. Available at: http://www.business.curtin.edu/files/GSB_Working_Paper_No._62_Corp_Social_Resp_A_definition_Thomas___Nowak.pdf. [Accessed 6 March 2012]. Read More