1

CORPORATE SOCIAL RESPONSIBILITY AS STRATEGY Business can succeed only if they maintain good relationship with their stakeholders. These relationships can be strengthened, if organizations fulfill their obligations towards the stakeholders. Stakeholders- an overview (i)The stakeholders of an organization are all those who participate in some way in the activities of an organization. (ii)According to Freeman and Reed, stakeholders may be: Any group of people who have a stake in business Those who are vital to the survival and success of the organization Any group that is affected by the activities of the organization (iii) Earlier, the objective of most business was to enhance the shareholders value, but now the focus is on satisfying all stakeholders by allowing them to share in the profits of the corporation. (iv) Based on their relationship with the organization, stakeholders can be categorized as: Internal stakeholders External stakeholders (v) Internal stakeholders include shareholders, employees and management. Any decision taken by the management has a direct impact on them. (vi) External stakeholders are individuals and groups, who have some claim on the company. These include consumers, suppliers, creditors, competitors and community. Internal stakeholders I. Shareholders Many argue that shareholders are the only stakeholder group that is important to the business. To a certain extent, this argument is justified, as shareholders have primary stake in the business. They are considered to be the owners of the organization. Most organizations owe their primary responsibility to their shareholders. Most organizations aim at maximizing shareholders value. To achieve this, organizations lay more emphasis on the meaning of ownership. Ownership implies shareholders rights and responsibilities with respect to specific property. Shareholders are considered members of the company who help to achieve the companys goals by investing in the business. They are entitled to a share in the profits of the company. This share of the profit is given to the shareholders in return to their investments in the form of shares. Shareholders are entitled to not only good return on their investment, but also up-to-date information about the companys performance. Of course, while protecting the interest of shareholders, the company should not overlook the interest of other stakeholders.

2 Shareholders should maintain good relationship with top management and should exercise voting rights. Company should be responsible to the shareholders for (i) Managing the company efficiently in order to secure a fair and competitive return on the owners investment. (ii) Disclosing relevant information to the shareholders, subject only to legal requirements and competitive constraints. (iii) Conserving, protecting and increasing the shareholders assets (iv) Respecting the shareholders requests, suggestions, complaints and formal resolutions. 2. Employees A legal contract of employment governs the relationship between the organizations and the employee. This relationship is considered to be important by the society, because employees contribute their efforts and time towards the development of the organization, which in turn improves society. The employment contract places certain responsibilities towards their employees. In return for their work employees expect wages, benefits and security. And it is the responsibility of the organization to meet their expectations. Some specific responsibilities of the organizations towards their employees are:(i) To provide adequate compensation (ii) To provide working conditions that respect each employees health and dignity. (iii) To be honest in communications with employees and open in sharing information (iv) To listen to, and, where possible, act on employee suggestions, ideas, requests and complaints. (v) To protect employees from avoidable injury and illness in the workplace (vi) To encourage and assist employees in developing skills and knowledge those are required for accomplishing tasks and roles. In an information and knowledge driven world, it is the people who work in the organization and their skills and knowledge really count. Therefore, treating employees badly will inevitably hurt the organization in the long run. Management Any decision taken by the management has an impact on stake holders. Management is interested with the duty of safe guarding the welfare of the organization.

3 The role of the management involves in balancing the multiple claims of different stakeholders. The owners want higher financial returns; the customer wants more money spent on research and development so that they can get quality products at a cheaper rate; the employees want higher wages and better benefits while the community wants environmental friendly equipments.

External Stakeholders Consumers Consumers / customers exchange resources for the products of the firms and in returns received the benefits of the products. They provide the life blood of the firm in form of revenue. Since organizations reinvest these earnings, customers can be said to be paying indirectly for the development of new products and services. By paying attention to customer needs, management automatically addresses the needs of the suppliers and owners. The responsibilities of organization towards their customers are (i) the right quality, (ii) right quantity, (iii) right time,(iv) right place and,(v) right price . A few of the specific responsibilities are :(i) Producing goods according to the specific needs of consumers, their purchasing powers etc. (ii) Offering quality goods at reasonable prices (iii) Improving the standard of living by producing goods and services of high quality (iv) Providing prompt and adequate services to the customers (v) Treating customers fairly in all aspects of business transactions (vi) Ensuring the health and safety of customers Customers satisfaction is essential for the success of organization. Customers increase sales of the product of an organization. Therefore organizations must make all out efforts to satisfy the customers for long time survival and prosperity of the organizations.

Suppliers: Suppliers are included in the list of organizations stakeholders. But suppliers play pivotal role in success of any business since raw materials they supply will determine the final products , quality and price

4 In this era of global competition, ability to control cost is as important as the ability to increase sales in order to make organization competitive and profitable. Good relationships with suppliers and the capability of the management to negotiate successfully can reduce cost A companys relationship with suppliers and sub contractors must be based on mutual respect. When dealing with the suppliers , organizations must :(i) Seek fairness and truthfulness in all activities, including pricing and licensing (ii) Ensure that business activities are free from coercion and unnecessary litigation (iii) Foster long term stability in the supplier relationship in return for value , quality competitiveness and reliability (iv) Pay supplier on time and in accordance with agreed terms of trade (v) Seek, encourage and prefer supplier and sub contractors whose employment practices respect human dignity. Creditors Creditors play an important role in organization. Usually organizations buy goods on credit from suppliers or from banks. Therefore suppliers/banks have important stakes in a business.

Competitors Business entities are equally obliged to other business firms as theirtowards stakeholders. In the era of global competition, organizations compete with each other to grab a major share on all possible fronts. Fair economy competition is one of the basic requirements for increasing the wealth of nations. The responsibilities of organization towards the competitors are (i) Foster open markets for trade and investment (ii) Promote competitive behavior that is socially and environmentally beneficial and

5 demonstrate mutual respect amongst competitors Refrain from either seeking or participating in questionable payments or favors to secure competitive advantage

(iii)

Community The community gives the business to the organization to build or rent facilities, benefits from the tax revenues, infrastructure etc. In return for their services, the organizations should act in a responsible way. The organization cannot expose the community to unreasonable hazards in the form of pollution and toxic waste An organizations responsibility towards the society includes :(i) respect human rights and democratic institutions (ii) supporting public policies and practices that promote human development through harmonious relations between business and other segments of societies (iii) Collaborating with such activities that aim at improving the standards of health, education, work place safety and economic well being. (iv) Promoting and stimulating sustainable development and paying a leading role in preserving and enhancing the physical environment and conserving the earths resources. (v) Supporting peace, security, diversity and social integration; respecting the integrity and local cultures. (vi) Encouraging charitable donation, educational and cultural contributions and employee participation in community affairs. Promoted by various NGOs, the Triple Bottom Line (TBL) concept emerged from the recognition that firms are becoming accountable for

6 social and environmental effects on society, in addition to generating profits.. TBL is an expanded CSR concept which suggests that social and environmental indicators should become as important as conventional profit indicators. TBL states that companies should simultaneously be held accountable for their social, environmental, and financial performances.