Perspectives about social responsibility from business community

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Perspectives about social responsibility from business community
-Review of CSR philosophy on the UN Global Compact Related ActivitiesProfessor Hyeon D. Yeo, Seoul School of Integrated Sciences & Technologies
Professor Young H. Ko, Seoul School of Integrated Sciences & Technologies Professor S.P. Park, Seoul School of Integrated Sciences & Technologies
1. Background
At the 1999 World Economic Forum in Davos, UN Secretary-General Kofi Annan supported the idea of the Global Compact and gave consequence even to state it opened a new chapter in the history of the United Nations.1 It bears great significance to both UN and business as well as the future prospect of global governance. This article basically supports the UN Global Compact, and develops discussions based on the positive outlook that it will infuse its spirit into business and achieve successful partnership, and on how to create positive outcomes eventually for the sustainable future of UN, business, and global governance. In fact, business community and the third world have long been in hostile relationship2. UN has kept its distance from business, but gradual changes have been made since the 1960s and the Global Compact has been the bottom line to form their partnership. The objectives to promote business activities that support UN goals to further encourage dialogue among business, labor, and NGO and provide with solutions have played critical roles in establishing partnership3. The Global Compact was introduced centered on the objective to encourage business to adopt UN values to "make global markets a more human face"4 under the name of 'global business citizen.' In only a few years after its establishment, the Global Compact has shown a great quantitative achievement by exceeding the number of nation (or government) partners of 192 nations which have been achieved over the past decades.5
1
Jean-Philippe Therien and Vincent Pouliot(2006), The Global Compact Shifting the Politics of International Development? Global Governance 12, p.55
2
Sandrine Tesner, Georg Kell(2000), The United Nations and Business : A Partnership Recovered (New York : St. Martin’s Press), p. 38
3 Georg Kell(2002), The UN Global Compact : Concept, Achievements, Future, The UN Global Compact Symposium(Geneva) 4 5
Kofi Annan(2002), “Address at Ceremony of Adherence to the Global Citizenship”, Madrid, 1 April In 2007, corporate members(3,209) among non-state members of Global Compact(4,230) were reached
Therefore, this article focuses on what business should do for the development of the UN Global Compact. It is construed that UN formed partnership with private and declared the Global Compact based on its hope and trust in corporate social responsibility. Based on this premise, this article goes over the characteristics, debate issues, and implication of Global Compact partnership, takes a look at philosophical basis of global corporate citizenship which is critical common ground and theoretical link that enabled partnership between the UN and business, and present proposals on CSR philosophy that business needs to adopt to consolidate the partnership.
2. The Implications and Controversial Issues on the Global Compact 1) Partnership of the Global Compact : Its Implications What implications and prospects does the partnership between the UN and the private sector have other than expanding the area of partnership? The controversial issues can be drawn as follows. First, the Global Compact is based on tripartite system and separation of powers that the UN, NGO, and business each has its own role, rights, and responsibility. [Figure 1]
[Figure 1] UN-Corporation-NGO The UN purports to realize its values for elimination of poverty and sustainable world; the NGOs pressure both the public and private sectors to follow justice and public ideology while forcing business to have stronger moral responsibility to complete its social duties; business
to 76%. Today, power of trans-nationals is not less than the state.
basically seeks after profit, but to carry on profit-making activities in a society (or a community and societies as an aggregate) it has to consider ways to contribute to sustainable future of the society. Undoubtedly, mutual cooperation and control operate at the same time among the three actors. Only with mutual cooperation and control business can put down the roots in civil society and start thinking about ways to become a true corporate citizen. In that context, it can be more correctly stated that the UN has formed partnership with 'corporate citizen' rather than a mere corporate. In other words, the partnership between the UN and business show that the corporate citizen agreed on the UN values for the sustainable future, and business here is not the traditional type which cares only about its profit, but the 'corporate citizen' who ultimately tries to realize public interest and universal ideologies as did the citizen in the modern revolutionary times. Second, the partnership with the UN gives potential and positive momentum for business to produce a new corporate image of 'trustworthy and respectable' global corporate citizen by completing its social duties.6 The core concept of the UN-business cooperative partnership is corporate citizenship activities, which can be restated as corporate activities that respect core UN values in the field of human rights, labor standard, environment, and anti-corruption.7 This is how business is able to implement its corporate social responsibility in the international community.
6
“Citizenship may include such behaviors as altruism, extra conscientiousness, and commitment in
performing tasks…Citizenship is empirically and theoretically linked to organizational fairness issues(p.130). Gary Weaver and Linda Trevino(2001), “The role of human resources in ethics/compliance management: A fairness perspective”, Human Resources Management Review 11, pp. 113-134; “Citizenship may include such behaviors as altruism, extra conscientiousness, and commitment in performing tasks…Citizenship is empirically and theoretically linked to organizational fairness issues(p.130). Gary Weaver and Linda Trevino(2001), “The role of human resources in ethics/compliance management: A fairness perspective”, Human Resources Management Review 11, pp. 113-134.
6
As seen above, there is positive aspect and at the same time there is critic one from many NGOs saying
that “UN is becoming a shelter to protect corporations from NGO’s critics”. Surya Deva(2008), Global Compact : A Critique of the UN’s “public-private” partnership for promoting Corporate Citizenship, Syracus J. Int’l L. & Com.
7
Global Compact Office(2004), The Global Compact: Corporate Citizenship in the World Economy (New York : United Nations), p.4
Other than the two views thus presented, there is another view that the UN Global Compact shows the limitation 8 of the current nation (or government as its actor)-centered global governance. The argument that the development policies, that is, distribution of wealth and elimination of poverty, which UN have tried to achieve for decades in cooperation with nations(or governments). What such efforts have failed9 basically criticizes the limitation of the UN-nation partnership, but a little closer look can convey further implications. In attempting the change in the UN leadership through more dynamic sectors of the civil society, which are business and NGOs, corporate citizen is a significant subject of discussion. Since the development of the Global Compact partnership can induce changes in the tripartite politics of UN-State(government)-business or the role of the nation in UN, the UN Global Compact partnership has its significance in discussing the new governance of the UN. This can role as a critical variable in forming the character of the UN partnership or more fundamentally the change of UN's own character. However, this article will not go into deep discussion on UN-nation partnership and the new governance but deal with the characteristics and prospect of business, an important player in opening the new chapter in the history of the UN, and especially the corporate citizen that completes its corporate social responsibility10.
2) The UN Global Compact Partnership: Advocates and Critics The arguments of the supporters11 are as follows. The UN Global Compact is based on the belief that it will enhance the moral value and thus bring change in business, and this belief sets its base on the vision that the moral goal operates not only in the course of creating wealth but
8
Jan Martin Witte & Wolfgang Reinicke(2005), Business Unusual: Facilitating United Nation Reform Through Partnerships ix.
9 Douglas Cassel(2001), “Human Rights and Business Responsibilities in the Global Market Place.” Business Ethics Quarterly 11(2): pp.261-74 9 How corporations belong to civil society? The reason why corporations belong to civil society is in two ways. One is to see ‘civil society’ that integrates the economy into human factors in capitalism. The other is that economy is the product of history to have won ‘civil rights’ in modern society. John Keane ed. (1988), Democracy and Civil Society(New York : Norton & Company)
10
It is often used that corporate citizenship is the same as CSR, but corporate citizenship is broader term than CSR in
its scope. Thomas A. Hemphill(2004), "Corporate Citizenship : The Case for a New Corporate Governance Model", Business and Society Review, 109 : 3, pp. 339-361
11
Oliver F. Williams(2004), The UN Global Compact : The Challenge and the Promise, Business Ethics Quarterly, Volume 14. ISSN 1052-150X, pp. 755-774.
also in distributing it and the Global Compact intends to revive the goal. Alasdair MacIntyre12 was one of those who believed in and developed the vision and intellectual underpinnings, and Kofi Annan, then UN Secretary-General, seems to have agreed with the vision that the UN Global Compact would help attain the moral purpose of business. The root of this vision is the idea of Adam Smith. Adam Smith believed in the Theory of Moral Sentiments that individual pursuit of economic gains will converge to public gains. The theory argues that people who intend to create economic wealth for 'individual gains' do not always lead to self-centered greed. Rather it believes that through creation of wealth by people of morality can the community of human face be maintained. It does not mean, however, that the Global Compact intends to build "MacIntyre's ideal fishing community." Instead, the Global Compact sees its mission to inspire human value and challenging mind to global community.13 The fact that the UN bound the two streams that have not been historically harmonious through the Global Compact is significant in itself, but in substance it realizes corporate citizen values and formally offers defense against the resistance to globalization. Refer to the following quote. It is precisely because a backlash to globalization would represent a historically unmatched threat to economic prosperity and peace that the Global Compact urges international business leaders to take reasonable steps to secure the emerging values of global civil society in exchange for a commitment on the part of the United Nations to market openness.14 As the quote signifies, the Global Compact worthwhile because moral value of global civil society operates based on the legal framework of global governance.15 In that sense, it is very important how to establish the substantial value of corporate citizenship. There can be more than one way for business to become corporate citizen and carry out corporate social responsibility16, and thus, it is necessary to develop deeper discussions on desirable ways to implement corporate social responsibility and become good corporate citizen.
12
Alasdair MacIntyre(1994), “A Partial Response to My Critics,” in After MacIntyre, ed. Charles
Taylor(Oxford : Oxford University Press), pp. 284-66.
13
Oliver F. Williams(2004), p. 760.
14 Sandrine Tester and George Kell(2000), The United Nations and Business : A Partnership Recovered (New York : St. Martin’s Press), p.51; Oliver F. Williams(2004), p. 760.
Oliver F. Williams(2004), The UN Global Compact : The Challenge and the Promise, Business Ethics Quarterly, Volume 14. ISSN 1052-150X, p. 760.
15 16
The term of CSR(Corporate Social Responsibility) has several definitions, but this paper adopts definition of ‘Commission of European Communities’. That’s to say, “Corporate is to integrate its economic activities with interests of social, environmental stakeholders(society, environment, partner, investors and consumers on) in value,
One clear fact here is that corporate social responsibility has now become the mainstream value among corporations. As of 2007, more than 50,000 corporations have mentioned 'triple bottom line' and manifested their wills to follow ten principles of the UN Global Compact on their websites.17 This clearly shows that the corporate values have moved from traditional finance-centered ones to social and environmental ones.18 For these reasons, it would be too narrow to view corporate social responsibility from management perspective as a mere marketing strategy or means to reduce transaction cost. The spirit of the Global Compact refuses traditional minimalist practice to embrace the integration of 'pursuit of social value' and 'business and social value.' The corporate social responsibility of today, therefore, includes corporate governance and ethics(e.g., personnel, safety, environment, labor, human rights, community service, respect for the minority, corporate charity, fair competition, anti-corruption and transparency, etc.)
19
. This is the very path to the goal of 'good corporate citizenship.'
Here are the arguments of the critics. Various critics20 have been arisen regarding the system or operation of the Global Compact. The major critics are 'blue washing theory' of corporations taking chance to improve their public image, 'free PR rider' of corporations through the UN, discrimination between business and NGOs by the UN, skeptical views on effects due to lack of monitoring. This article will only deal with issues related to NGO and corporate citizen activities. First, the opponents point out that the UN Global Compact does not have any instruments for critique or monitoring. Because it is of voluntary nature and lacks monitoring or enforcement
culture and decision-making etc. Marina Prieto-Carron, Peter Lund-Thomsen, Anita Chan, Ana Moro and Chandra Bhushan, International Affairs, 2006, 82 : 5, p. 978
17
Ida E. Berger, Peggy H. Cunningham, Minette E. Drumwright(2007), Mainstreaming Corporate Social
Responsibility : Developing Markets for Virtue, California Management Vol. 49, no.4 Summer. P.132 David Vogel(2005), The Markets for Virtue: The Potential Limits of Corporate Social Responsibility (Washington. D.C. : Brookings Institute Press)
18 19
Industry Canada(2007), “What is Corporate Social Responsibility?” April 2006; Ida E. Berger, Peggy H.
Cunningham, Minette E. Drumwright, p.133
20
Hazel Henderson(2004), “UN Global Compact should be spin off from UN”, InterPress Service, www.hazelhenderson.com(World Count, 1,149) What had begun as Kofi Annan’s exhortation and voluntary “engagement” (which many NGOs call “blue-washing) with little monitoring or accountability – was turning into a mutual peer-pressure association. Many CEOs supported implementation, greater performance and accountability – citing not only public relations motives, but also the business case for corporate social responsibility. Others cited the “free rider” problem: some early signatory companies had jumped on board and failed to address their shortcomings and were giving the more diligent businesses a bad name. An example is Goldman Sachs (whose Vice Chairman was invited onto the Compact Advisory Council) currently accused of “stock parking” by US and European regulators in its dealings with AOL and Bertelsmann.
provisions, there is no way to find out or apply sanctions even when corporations are not abiding by the ten principles of the Global Compact. These critics were officially submitted by the academic and NGO circles at the point of the launch of the Global Compact. In the letter to UN Secretary-General Kofi Annan written in July 20, 2000, the scholars expressed their concerns to partnership without monitoring opposed to corporate rhetoric saying "We are well aware that many corporations would like nothing better than to wrap themselves in the flag of the United Nations in order to "blue wash" their public image, while at the same time avoiding significant changes to their behavior..."
21
Second, the critic is not only about the lack of monitoring or enforcement provisions. As cooperation, check and balance among the UN, business, and NGO, the critics are pointing out that the Global Compact should provide fair treatments to its partners. As it becomes easier for business to become partners with the UN under the Global Compact and the exact opposite applies to NGO, the weakening of NGO while strengthening of business could eventually encourage corporations to weaken the monitoring power of labor, NGO, and civic groups under the UN shield. Especially without the system to back up NGOs' monitoring, violations by corporations could be neglected, placing the Global Compact at a crisis which will eventually harm the reputation of the UN. Third, as the Global Compact is cooperation between the UN and advanced corporations, unless corporations move on with more than voluntary strong good will, it will not at all benefit to solving world problems like human rights, labor, environment, poverty, diminishing gap between the rich and the poor. That is to say, philosophy of corporate citizenship will lead corporations to more sustainable and longer-lasting creation of wealth, which will help strengthen the impact of the Global Compact to ultimately contribute to faster attainment of the sustainable world. Then, what are the ways to overcome these critics and consolidate more desirable partnership? To simplify the issues on the UN Global Compact partnership, the question remains in two directions. Should UN adopt monitoring system and reinforce member qualifications and sanctions as NGO or academic circles argue? Or should UN come up with other measures? In other words, it is the question on whether to select negative or positive approach. The next part of the article will jump into substantial discussion on corporate citizenship and recognition and practice of corporate social responsibility.
3. Fundament of the UN Global Compact: Philosophy of Corporate Citizenship 1) CSR Philosophy that Corresponds with the Global Compact Spirit
21
Letter to Kofi Annan(July 2000), Secretary-General, United Nations, 20 July.
The core fundament of the Global Compact, the philosophy will be dealt in this part of the article. In brief, the basic belief is that the Global Compact, with its premise that business becomes a member of corporate citizenship to complete corporate social responsibility, is conducive for the UN to build sustainable world hand in hand with business. In other words, this means that it believes in the good wills that business does not only seek after profit but care for the society to which it belongs and wish to grow within the society. Thus, the success or failure of the Global Compact depends on the recognition of corporate citizenship and corporate social responsibility, working out and practice of philosophy. The concept and its discussion of Corporate Social Responsibility (CSR) have endured for decades in the U.S. and Europe. Though various efforts to have corporation respected is recently on the making, but genuine efforts on the basis of essential mind-setting and philosophy is still less in view of sustainable CSR. What is the way to respected for corporations? In order to achieve this concept, how to make it in the practices of CSR ? To make the agenda clear, let me divide the types of CSR in several types of philosophy. It can be classified into several ones. Some scholars divide into “the business case model, the social value-led model and syncretic stewardship model”22. Some other scholars divide into two schools such as “positivist CSR, post-positivist CSR”23. Firstly, the business case model is that the CSR will contribute to business profit on priority because they live in the short run in reality. This model pursues to become corporate citizen only with business case in profit--“no profit, no appetite”. Secondly, the social value-led model is that CSR will enhance social value and sustainability for the corporations embedded in its social value by CSR because they live in the long run. And syncretic stewardship model is that the CSR is to integrate many conflicting, competing and paradoxical factors in a flexible method.24. In other words, the business case model is economic actors(corporate)-centered within the legal framework and instrumental towards stakeholders. This model is regarded as a traditional
22
Ida E. Berger, Peggy H. Cunningham, Minette E. Drumwright(2007), Mainstreaming Corporate Social
Responsibility : Developing Markets for Virtue, California Management Vol. 49, no.4 Summer. pp.132-157
23
Andrea G. Scherer and Guido Palazzo(2007), "Toward A Political Conception of Corporate Responsibility : Business
and Society Seen From A Habermasian Perspective", Academy of Management Review, Vol. 32, No.4, pp. 1096-1120
24
Ida E. Berger, Peggy H. Cunningham, Minette E. Drumwright(2007), Mainstreaming Corporate Social
Responsibility : Developing Markets for Virtue, California Management Vol. 49, no.4 Summer. pp.132-157
and ‘positivist CSR’25. This school is well presented in A.B. Caroll’s literature26. Therefore, Carroll’s structure for CSR will be critically reviewed that is currently influencing to executives to conduct ethical practices. Caroll stressed the importance of economic motive and the pursuit of such an economic interest is the most instinctive and important one from entrepreneurship. Carroll described the development of economic motive through the four-stages which include economic, legal, ethical and philanthropic responsibilities. According to Carroll, the first and second stages are concentrated on the basic motivation to earn money. They obey the law and take responsibility to society at a minimal (legal) level. In the pyramid of the CSR model, these two stages focus on the economic aspects in terms of profitability and legal aspects in terms of compliance. The higher, second and third, stages are to help neighbors. The corporations perform good activities of corporate citizenship such as helping people in need or making donations to them. They in the last stage focus on becoming a “good corporate citizen”. Critics say that such a deed experimental and instrumental in the CSR perspectives. However, what is critical problem is that society should be always survived at any time without corporate economic motive. Accordingly, the corporate activities fundamentally follow the codified ethics of the society which the corporate belonged to. The corporations accept or reject the society’s needs. In history, there is always tension followed by revolution or contract between the corporate desire and social order. In a usual time, the corporate pursue economic activities for profit within its social contract. For this reason, “social contract” between corporations and society was necessary, and under this contract the corporations have pursued their economic activities. Though there is a comprehensive and explicit way of stating economic and legal responsibilities in the corporate ethical regulation, fairness and justice, actions and practices are not elucidated in the code of laws. In this context, CSR is composed of pyramidal steps in Carroll’s corporate ethics. And philanthropic responsibility in the last step is stressed to be the mission for good corporate citizens meeting social expectation. Going back to Carroll’s thought, corporations form the image of respect which creates a good cycle structure of sustainable value and development through CSR activities as a good corporate citizenship.
25
According to Andrea G. Scherer and Guido Palazzo, representative scholars are Carroll, Jones, Wood etc.
26 Carroll A.B.(1979), “A Three-Dimensional Model of Corporate Performance”. Academy of Management Review,vol4. pp. 497-505;Carroll(Archie B.), Carroll A.B.(1991), “The Pyramid of Corporate Responsibility : Toward the Model Management of Organizational Stakeholders”, Business Horizons, no. 34, July-August; Carroll A.B.(1999),“Corporate Social Responsibility”. Business and Society, vol. 38. no.3(pp.268-295); Carroll A. B.(2000), “Ethical Challenges for Business in the New Millennium : Corporate Social Responsibility and Models of Management Morality”Business; Ethics Carroll A. Quarterly,10[1] B.(2004), Managing Ethically With Global Stakeholders : A Present and Future Challenge. Academy of Management Executive, 18[2]
Ethical responsibilities encompass the full scope of norms, standards, and expectations that reflect a belie in what employees, consumers, shareholders, and the community regard as fair, just, and consistent with the respect for and protection of stakeholders’ moral rights.(Carroll, 2004, 117) Carroll’s step for ethical responsibilities can be understood as a way of solving self-problem and extending outwards the internal economic motives for realizing self-desire. This conception is associated to Maslow’s steps for human needs. According to Maslow, there are several needs, such as physiological, for safety, for social belonging, for self-respect, etc. As seen in the above diagram, Maslow’s structure is similar to the Carroll’s. As a consequence, the basic stage of Carroll’s model of CSR is the economic stage of survival of a corporation. After this, the legal stage of keeping the corporation’s security from regulative constraints, the ethical stage of practicing self-respect, and finally the philanthropic stage of meeting social expectations come. It seems to us that this structure of “stages” is similar to the Maslow’s theory of stages of self-realization.27 What is difference between Carroll and Maslow is that Carroll 28 is not on the linear development only, but sometimes jumping in a certain areas depending on situation. To extend the ethical responsibility to that of philanthropic responsibility as a expansion of economic responsibilities can be confined to a minimal make up in terms of corporate citizenship. This will not right way to be good corporate citizenship and also the spirit of Global Compact. Today, despite various CSR identified as ethical management practices, many corporations fail to gain social acknowledgement, trust, and love. Why is it, then? We think that it is because there is a gap between motivation and goal, and because firms manage ethical issues under the limitations on the basis of just business case or business expansion model. In other words, the presupposition of CSR steps, except for the last one, is towards the goal of fulfilling the corporate internal motivation for self-realization. This results in the logical leap which assumes that once the corporate solves self-problem or achieves self-realization it sharply changes its motivation into otherness or society in the 4th step.
27
Abraham H. Maslow(1968), Towards a Psychology of Being(New York: Van Nostrand Reinhold Company), p. 26.
28 Archie B. Carroll, “The Pyramid of Corporate Responsibility: Toward the Model Management of Organizational Stakeholders”, Business Horizons, no. 34, July-August, pp.39-48, 1991.
[Diagram 1] --- Carroll’s Pyramid of CSR
As seen in the [Diagram 1] designed by CarrollCarroll, 1991), the problem is that there is a big discrepancy coming from artificial connection between economic-legal steps and ethical-philanthropic steps. While the basic motive is different between the steps, there is logical gap and limit in this picture. Because economic motivation for profit as the most primitive and important one is fundamentally different from ethicalphilanthropic motivation. In other words, the different two steps have different starting points. One thing to point out is the gap between “a good citizen” i and “a good corporate citizen” in philanthropic responsibility. An individual as “a good citizen” is always being taught to do the “good and right thing”. According to this theory of stages, the step of ‘doing good’ appears only at the last stage of philanthropic responsibility. But an individual can do a good thing all the time without any stages. So why should a corporate citizen do a good thing at the last stage? If a corporate is willing to do a good thing, it can do it all the time regardless of its pyramidal steps, as an individual is able to do a good thing all the time regardless of its pyramidal steps. In the perspective of corporate ethics, the corporation is not separated from its people (executives and employees). It is not reasonable for us to speak of corporate ethics separated from human ethics. .
1) Goal of Corporate Citizenship : Toward Society as core of Stakeholders Model
In the previous chapter, we reviewed critics about ‘business case CSR’ and ‘instrumentalist CSR’. Now here, we will quickly review the ‘syncretic stewardship model’ that comprises and combines the conflicting factors from business and social value in order to overcome the two critics. This model took a broad and comprehensive view of CSR that encompassed a larger and more diverse set of stakeholders then either the business-case or the social value-led firms. The set of constituents encompassed those who could have a direct impact on the firm’s profitability but extended beyond them to include societal constituents (e.g. activists, NGO, minorities, and indigenous group). Accordingly, ‘syncretic stewardship model’ is appropriate in negotiating, balancing, and integrating the often competing claims of varied stakeholders. Though business case CSR model or social value-led CSR model is fixed on the narrow goal for stakeholders or shareholders, ‘syncretic stewardship CSR model’ were rife and robust with paradoxes and contradictions. “CSR was more than activities, programs, or initiatives ro syncretic stewards; it was a management philosophy, an overarching approach to business….CSR is a way to manage the business; there isn’t another to do it….CSR is the secret sauce of our culture. It’s what gives us that special family feeling.”29
In spite of many flexible explanation about ‘syncretic stewardship CSR model’ to integrate various factors, this model seems easy to make the essence of CSR vague. The importance of CSR is stressed on the ‘social’ responsibility being done corporate’ activities rooted on the society. The society stems from its ability of justification and trust coming from society not to mention the role of exchange between the society and the corporate. This is also the social function of business ethics.ii
30
Accordingly, the harmonious and best combination among the society and other stakeholders(like partners, investors, customers, employees) are being pursued fore
29
Ida E. Berger, Peggy H. Cunningham, Minette E. Drumwright(2007), Mainstreaming Corporate Social Responsibility : Developing Markets for Virtue, California Management Vol. 49, no.4 Summer. pp.144-145. Ronald Jeurissen(2000), “The Social Function of Business Ethics”, Business Ethics Quarterly, Volume
30
10, Issue 4, p. 823.
and utmost. However, it is somewhat opportunistic and chameleon-like31 approach if the
‘syncretic stewardship model’ is willing to comprise the two conflicting factors that are different from the two one in order to overcome the critics of instrumentalism from ‘business case CSR’ and civil society controlled one from ‘political CSR’. This is not CSR, but management in general. Such a CSR will be far away from CSR in nature and basic philosophy of CSR. What type of CSR can be reached to the best corporate citizenship? What is for best combination of CSR factors? As discussing the method of the best combination model, we need to review the essence of CSR in the theoretical analysis. For this, I propose here as two basic theoretical types of Stakeholders Models (SPICE and PICES)32. The more confused and complicated in situation, the more important we go back to the basic. The stakeholders can be changed upon the location in a certain society, but the nature of CSR can not be changed. The emphasis will put on corporate in society. What is society? The society is a total sum of various stakeholders, which is somewhat separated from the stakeholders. Therefore, CSR is directed toward the society in nature. That’s to say, stakeholders are described as SPICE (Society, Partner, Investor, Customer, Employee) 33 . The type of stakeholders in combination on priority is two in the following. As seen below [Figure 2] is that the corporate after satisfying PICE(Partner, Investor, Customer, and Employee) then consider ‘Society’(social responsibility) on second concern. We call this as the PICES model.
[Figure 2] Model of Corporate’ Direct Stakeholders on priority
31
Andrea G. Scherer and Guido Palazzo(2007), "Toward A Political Conception of Corporate Responsibility : Business
and Society Seen From A Habermasian Perspective", Academy of Management Review, Vol. 32, No.4, p. 1113 SPICE means by Society-centered combination model of stakeholders (Society, Partner, Investor, Customer, Employee) and PICES means by other stakeholders-centered combination model(Partner, Investor, Customer, Employee and Society).
32 33 Rajendras Sisodia, David Wolfe, Jagdish Sheth(2007), Firms of Endearment : How world-class companies profit from Passion and Purpose. Pearson Education, as Wharton School of publishing.
This model as above [Figure 2] is that the corporate, after satisfying corporate direct interested group (PICE : Partner, Investor, Customer, and Employee), then consider social responsibility on second concern. The opposite model called ‘SPICE’ model is that after setting up planning to satisfy society (social problems: poverty, environment and other community’s urgent things to be helped), the corporate will mobilize all energy from their direct stakeholders(PICE : Partner, Investor, Customer, Employee). Whether a model will be taken on one’s priority, the effect will be resulted in much difference. To review critically the PICES model, we need to review Archie B. Carroll’s logic and philosophy as we regard him as the traditional point of view as representative of business case CSR. Archie B. Carroll has much contributed to conceptualizing CSR since he first proposed it in 1979 34 . Despite the plethora of CSR definitions over the decades, Carroll’s four-part conceptualization has been the most durable and widely cited in the managerial literature.(Crane & Matten, 2004) However, there are still things to be clarified in the structure, logic and ontology of CSR. Today, business environment is pushing the corporate from the shareholders model to the stakeholder model. In the stakeholder model where the point of perspective in corporate ethics is getting critical, the society is being put as one of the most important accountability holders(Rubinstein, 2007, 616-632) As well as other stakeholders, society is becoming an ultimate stakeholder.(Sisodia, Wolfe and Sheth, 2007, ch. 6). The firms are regarded as one of the important social tools towards public good. Nevertheless, CSR as a corporate ethics may be a great progress in itself whether it is regarded as PR or strategy in its intention. However, the problem is that clever customers regard CSR activities as a part of elegant wrapping up for heightening the image of the corporate. In other words, that will be no problem as long as customers do not notice the intention (in the case of the lower level of civil society and market), but as long as the hidden secret of CSR was revealed, that is not CSR anymore. That’s only ‘packing’ wrapped by a beautiful gift bag. It would not be possible for such a corporate to sell the story, philosophy and trust. Then, how to turn the CSR into genuine one beyond such a limit?
Archie B. Carroll(1979), “A Three-Dimensional Model of Corporate Performance”. Academy of Management Review, vol 4. pp. 497-505; Carroll (1999), “Corporate Social Responsibility”, Business and Society, vol. 38, no.3.pp.268-295; Carroll(2000), “Ethical Challenges for Business in the New Millennium : Corporate Social Responsibility and Models of Management Morality”. Business Ethics Quarterly, vol. 10, no.1, pp.33-42; Carroll (2004), “Managing Ethically With Global Stakeholders: A Present and Future Challenge”, Academy of Management Executive, vol. 18, no.2, pp.114-120.
34
[Figure 3] Society value-led CSR model
When taking ethical action in management CSR, which model between [Figure 2] and [Figure 3] will get more respect and trust from society? If we have consensus that SPICE model35 embedded in the society towards other-realization is more trustable and desirable, the existing CSR model such as business-focused, instrumental and the Pyramid model(as a part of shareholders model) for CSR, should be revised. Or if the corporate decide one model in their choice, they will choose one model according to their goal of CSR. If they are eager to get more trust and respect towards social capital, they will choose SPICE model. This is not only for the success of UN Global Compact partnership, but for the good corporate citizenship.
[Figure 4] The integrated model for society and stakeholders
To divide the current CSR into three category, one is to join the community problem in need, the other is to make practices in a part of marketing and branding strategy, and the last is to work for heightening the corporate identity through ethical management. The CSR of many
35 The SPICE is combination of the abbreviated words from five stakeholders (Society, Partner, Investor, Customer, and Employee).
corporations has put an emphasis on strengthening their brand image as a vehicle of communication with customers. However, their customers noticed the intent of the corporate to be shown as elegant image from strategic CSR activities. In this context, CSR can not be elegant anymore, but clever. The corporations can not sell the story and philosophy though CSR anymore. Such a CSR can not bring about the effects of ethical respect, trust and social capital.36 Then, how to build social capital from this limit? In this chapter, we will discuss social capital building.
3) CSR towards Social Capital
Today, many corporations are pursuing to philosophy of corporate citizenship as looking for a new model of business beyond shareholder model that is focused on shareholders profit only. In this context, we will review the concept of business ethics and social capital from the basis. Yet, in order to win the heart of the internal and external constituencies, the best way for corporations is to secure social capital. This will help the corporations transform the suggestive capital into real capital. From the corporate ethics’ perspective, the society37 can be the most important concept among stakeholders such as society, partner, investor, customer, employees. The harmonious combination between the society and other stakeholders is the most important and must be an ultimate goal. The importance of the society lies in the ability of justification and trust from society not to mention the role exchange. Time ago, Karl Polyani had elucidated how the appearance of industrial capitalism shattered the fundamentals of society, and how society reacted to it by the strategies of self-defense to protect it. Today we are facing the pains of society caused by the ruin of financial capitalism. It is timely how corporations as partners of the UN global compact will have to change themselves reflecting on the context of social responsibility and ethical management. Because one of the basic driving forces of the current society is corporation, and the change of corporation is one of the critical points. We judge that the philosophy of nowadays shareholders-focused CSR or business case CSR model cannot solve these basic disaster and crisis.
36.
In this paper, the background of ethical management is that the society must ripen to understand the
age of “Dream Society” that may be able to sell the story rather than product only. See Rolf Jensen (2001), Dream Society: How the Coming Shift from Information to Imagination will Transform Your Business ( New York : McGraw-Hill).
37 Ronald Jeurissen(2000), “The Social Function of Business Ethics”, Business Ethics Quarterly, volume 10, issue 4, p.823.
To escape from such a limit, we’d better move to goal for ‘social capital’38 beyond ‘social contract’ mind set. If CSR traditionally, aimed to gain ‘reputation capital’39 from social contract framework, now it is time we should aim at social capital. Social Capital is the capital that can be switched into real capital in any case. Therefore, trust and respect will not be coming from corporate strategy for marketing and branding. In absence of trust and respect, corporates can not secure social capital. In contrast, social capital at least will be coming from taking care of otherness. Social capital at least will be coming from pursuing harmony between self and the other. In the age of corporate strategy, CSR itself will be regarded as progress for corporation40, but now in the crisis of corporate strategy, CSR will be differentiated. Such a crisis is said that it was delivered from corporation’s uncontrolled expansion of desire. When practicing CSR in essence, corporation will secure advantage of ‘recognition struggle’41 or ‘battle in people mind’. When gaining advantage in recognition struggle, the corporations can get advantage in positioning. If successful in human’s recognition, the corporations will enter trust and respect. In this context, the corporations should establish the goal to be trusted and respected rather than made up in image. The corporations should be liberated from the fixed mind of strategy in CSR. The corporations should not be washed in blue through CSR. Today’s ccustomers noticed the intent of marketing from the corporate in spite of strategic CSR activities. In this context, CSR management does not bring about the effects of ethical respect and trust. That will make it far away from the effect of the CSR. In the worst case, they
38
Lindon Robinson, Allan Schmid and Marcelo Siles(2002), “Is Social Capital Really Capital”, Review of
Social Economy : Vol.LX, no 1, March, p.19; Allan Schmid , “Sources of Social Capital,” Staff Paper no. 0001, Dept. of Agricultural Economics Action (Michigan State Univ. East Lansing, MI, April 20). In this paper, ‘Reputation capital’-as its portfolio of citizenship activities-is also helpful in negotiating the company’s relationships with suppliers, customers, and government. Thomas A. Hemphill(2004), “Corporate Citizenship: The Case for a New Corporate Governance Model”, Business and Society Review no. 109:3, p.341. However, it basically belongs to private capital, on the contrary, social capital is suggestive and public capital that brings real capital from social networks, trust and potential power in society. Paul Evans, Vladimir Pucik, Jean-Louis Barsoux(2002), pp.438-439; Lindon Robinson, Allan Schmid and Marcelo Siles(2002,) p.19 .
39
Thomas A. Hemphill (2004), Corporate Citizenship: The Case for a New Corporate Governance Model, Business and Society Review no. 109:3 , pp.348~349
40 41
George W. F. Hegel, Translated by A.V. Miller(1979), Hegel’s Phenomenology of Spirit, Oxford University Press.
might bring about the “paradox of profit”: “the more one focuses on profits the less likely one is to achieve them.”
42
4. Three Suggestions
As the member corporations gain respect and trust from the global society, the credibility for the UN Global Compact will increase accordingly, which will ultimately bring about the stronger stature of the UN. As we have seen above, however, CSR activities, not vested with true corporate citizen identity, but misled by motives for advertising and fulfilling obligations at each stage, may not bear fruits of ethical management. In other words, the companies may not gain social capital, but bring negative impact, because such activities may seem to be their cunning behaviors. Acquirement of Social Capital by a Corporation Our suggestion is, therefore, that the member corporations should commit to the CSR activities not only to observe the 10 principles of the UN Global Compact, but to solve the difficult problems of the society and the community which they belong to, so that their CSR activities will be found more effective. By doing so, the member corporations will meet the expectation of the community. It is our belief that the Global Compact, by gaining more trusts, will create a virtuous circle if the member corporations commit to the CSR being aware of the necessity of the CSR and the needs of the community, securing more profit for them on the more solid foundation, giving greater impression and sense of unity to the community. Problem solving should be on top priority, because the social capital is the public interest per se. It is the right path of business ethics and the true spirit of the UN Global Compact. We suggest, therefore, more than anything else, society-centered philosophy of business management should be deepened and strengthened. Self-centered business management has exposed problems in many places and they came out through the financial crisis in the US to the extreme. It is the time for corporations to gain real trust and respect, to avoid self-centered philosophy, and to accept other-centered philosophy of management. Ethical management does not have to be a form of social enterprise. The key is that a corporation which shifts its focus from self-realization to realization of others, by putting the
42
Scott J. Reynold and Norman E. Bowie( 2004), p. 278.
society and itself on the equal basis, will be loved, trusted, and respected.
43
The Purity of Intention in the CSR It has been clarified that CSR will be more effective when corporations possess philosophy of obtaining social capital through genuine ethical management, not when they commit to it only after they secure economic success at a specific stage of their development, or when they use it to enhance their corporate image. Thus, ‘the purity of intention’ mentioned by Kant needs to be adopted at each stage of the ethical management. Corporations will find it more effective to set a goal to be sustainable and respected ones, rather than to follow the one-sided stages. For example, Korean company Yuhan-Kimberly44 has been putting its own CSR philosophy, seeking harmony with others and avoiding self-centeredness, into practice. Such a philosophy of the company has been found to be fruitful in enhancing the corporate image and reputation as well as achieving incompatible success of the business through its active environmental CSR activities including tree planting in the regions such as lands owned by the government and places outside of the country, where the company has no business interests. We put our emphasis on the fact that Corporations which retain and exercise genuine purpose of CSR for a long time will ultimately be more respected and trusted (acquisition of social capital) than other companies. Over the Limitations of CSR Stereotypes and Stage Models The critical thing of CSR philosophy is that companies must be freed from its stereotypes. In other words, companies must be freed from stereotypes, disguising theories, and stage models, which assert that CSR is subordinate to the ordinary managerial activities and conducted to enhance their competences, and that CSR activities at specific stages will enhance corporate image and customers’ trust, so that the corporation will be better off. The stage models are not effective, however, because they have philosophical logic of CSR, whose utilities are enhancement of corporate image and tool for economic activities, that if a company earns some profits, then it must acquire good corporate image through philanthropy. Thus companies fall
43 Rajendras Sisodia, David Wolfe, Jagdish Sheth(2007), Firms of Endearment : How world-class companies profit from Passion and Purpose. Pearson Education, as Wharton School of publishing.
Yuhan-Kimberley is a Korean company which started environmental campaign (“Keep Korea Green”) in 1980s and devoted itself to the continuous and broad environmental and CSR activities. It can be said that this company has set a model of ethical management in Korea.
44
into a pit of ‘business-centered CSR logic’ or ‘instrumentalistic CSR logic’, because they perceive and exercise CSR on the extended line of their own desire with intention and purpose of strengthening corporate activities. Furthermore, such an approach misses the essence of CSR, because it put CSR at a specific stage after the company makes some profits. Then how can we enjoy the effects of genuine CSR? In conclusion, it is more practical to arrange various methods of CSR and ethical performances in a row, rather than to put the purpose of CSR on the stage of self-desire, so that the company can choose among the parallel items considering its actual circumstances. In that sense, the Good Corporate Citizenship must be the virtue practiced genuinely and diversely without regard to the stages, not the one practiced at the 4th stage of CSR (philanthropic stage) only. As individual citizens do voluntary social services and philanthropic works, corporate citizenship needs not operate separately from individual citizenship, since corporate constituencies are in fact individual citizens. Here citizenship means altruistic acts, overflowing conscience, observance of the promise to others, etc. which can be an element to increase organizational health.45 Therefore the limited frameworks of CSR stage models and expansionrealization models of self desire cannot lead us to the effective CSR, desirable destination, or corporate sustainability. So the most practical suggestion replacing the pyramid model is the necessity to introduce a Multi-dimensional CSR Practice Model to meet the needs of each corporation.
[Figure 5] Multi-dimensional CSR Practice Model Our suggestion through the conclusive assertions above is that the spirit of the UN Global Compact is not fixed to the mechanical responsibility to observe its 10 principles. The goal of CSR is that the member corporations should gain trust and respect as partners which practice the spirit of the UN. Trust and respect do not be come by when companies advertise for them or store reputation by disguising their expansion of self desire with the charity to others. This can
45 Gary R. Weaver, Linda K. Trevino(2001), The role of human resources in ethics/compliance management : A fairness perspective, Human Resource Management Review 11, P. 130
only be done when corporations see CSR as is and practice it, i.e., when corporations do away with the frame of self desire and accept the idea and philosophy that society and a corporation are the one. Then social capital comes in the long run.
5. Conclusion
People in the workplaces may think of this suggestion as “too ideal.” We put our emphasis, however, on coexistence and harmony of the society (self and others), genuine intent of CSR practice, and freedom from mechanical and fixed CSR stage models, to increase the effectiveness of CSR management we have been practicing so far. CSR is CSR, not public relations. CSR is CSR, not corporate strategy. So the suggestion that we have to practice CSR with genuine intent is quite practical, not ideal, because it will enhance the value of the company and corporate sustainability, so that it will be ultimately found most effective. We don’t have to borrow Hegel’s logic, “what is ideal is what is real.” In brief, establishment of fundamental idea and philosophy of CSR as above will be accompanied by natural success of the UN Global Compact. Therefore, for the successful development of the UN Global Compact, corporations must essentially possess the philosophy and the will of all corporate constituencies for the goal of most respected and truly sustainable company(Positive Approach), by preserving a healthy tension among the UN-NGOCorporations, by putting roots voluntarily down to the philosophy of corporate citizenship, and by accumulating social capital, not by introducing regulations, monitoring systems, or supervisory systems (Negative Approach). One of the positive approaches is, we suggest, that UN Global Compact Office should select and identify ‘the best good corporate citizenship’ every year so that NGOs, customers and people may create ‘10 million supporters campaign’ for the selectee.
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