REVIEW OF CORPORATE SOCIAL RESPONSIBILITY AND SOCIAL REPORTING

This chapter addresses the central questions of (1) whether there exists a social responsibility of business and, if so (2) how firms can meet and evidence their fulfillment of this responsibility. There are some theorists about the responsibility of business who believe that firms owe something back to the society that supports it, and that this debt is greater than the debt of the individual members of society.

A. IS THERE A SOCIAL RESPONSIBILITY OF BUSINESS?
The first article in this section by Milton Friedman is perhaps the best known argument for a purely profit-based social responsibility of business (though Adam Smith was probably among the first to articulate this concept). Friedman is not ignoring ethical responsibility in his analysis; he is merely suggesting that decision makers are acting ethically if they follow their firm’s self-interest. Primeaux expands on Friedman analysis in order to find a corporate social responsibility within a profit-maximizing framework. Consider the qualities of a successful firms-it meet the needs of its market. If the market demands socially responsible behavior, a firm may only be successful by demonstrating this behavior. Professor James Wilson explains that, “While free markets will ruthlessly eliminate inefficient firms, the moral sentiments of man will only gradually and uncertainly penalize immoral ones. But, while the quick destruction of inefficient corporations threatens capitalism, and thus freedom itself.”
In fact, this is not an argument in favor of social responsibility for society’s sake but instead an argument for the sustainability of an organization through meeting the needs of its supporting constituencies. The general public seems to disagree with Fredman’s underlying presumption. A Business Week / Harris poll of over 1000 Americans found that 95% reject the notion that a corporation’s role is limited to profit maximization. Further, there may be other arguments for a socially responsible firm. Employees who are well-treated in their work environment may prove more loyal, and more effective and productive in their work.
To whom does the firm owe this responsibility? To the employees? The community? The Customer? All stakeholders? It may not be possible to satisfy the needs of each and every stakeholder in a situation. Therefore, what is the prioritization of this social responsibility? The answer is found only in your personal prioritization scheme.

B. WHAT IS THE NATURE OF CORPORATE SOCIAL RESPONSIBILITY?
Is profit for the firm the only guiding principle of socially responsible activities, or should the impact of its decision on others be considered, even where the law allow the decision? Perhaps the answer to the quandary of the nature of social responsibility lies somewhere in the middle of all of these arguments. Philosopher Ayn Rand contends that our one and only social responsibility is to us, but that this concern does not act as a barrier to helping others: The moral purpose of one’s life is the achievement of happiness.
“This does not mean that he is indifferent t all men, that human life is of no value to him and that he has no reason to help others in an emergency-but it does mean that he does not subordinate his life to the welfare of others, that he does not sacrifice himself to their needs, that the relief of his suffering is not his primary concern, that any help he gives is an act of generosity not of moral duty”.

C. IN THE END, DOES GOOD ETHICS MEAN GOOD BUSINESS?
Corporate social responsibility–translates into fiscal responsibility is not yet completely settled. A landmark study by Professors Stephen Erfle and Michael frantantuono found that were ranked highest in terms of their records on a variety of social issues had greater financial performance as well. Financial performance was better in terms of operating income growth, sales-to-assets ratio, sales growth, return on equity, earnings-to-assets growth, return on investment, return on assets, and assets growth. Professor Ullman summarizes the results of previous empirical studies on the relationship between social and financial performance as follow:
• Seven showed a positive relationship between social and financial performance.
• Three showed a negative relationship between social and financial performance.
• One showed a positive relationship between the promotion of women and financial performance and a negative relationship between charitable contribution and financial performance.
• One showed a U-shaped relationship, meaning that extreme social performance (good or bad) was negatively related to financial performance.
• Two found not effect.

D. IF THERE IS A CORPORATE SOCIAL RESPONSIBILITY, HOW DOES A FIRM EVIDENCE ITS SATISFACTION OF THAT RESPONSIBILITY?
Even in focusing on social reporting, there is no one structure of group of topic for a corporate social report. Through some element are mandatory pursuant to other regulations, such as corporate charitable contributions, pension fund adequacy, employee share ownership scheme and employment data, other information is not otherwise required to be disclosed. This additional information may conclude energy savings, consumers protection efforts, product safety, health and safety efforts beyond OSHA, employee training, vendor agreements or codes of conduct, mission statements and/or statements of social responsibility. Formal effort at standardized corporate responsibility reporting began in early 1990s. In, 1991 seven companies had published sustainability report, at that time, however much of the report focus was on the environment. The reporting trend has since transformed itself, addressing not only environmental issues, but also economic and social performance. A broad compendium of global initiatives principles and standards designed to stimulate change and to promote good corporate citizenship and encourage innovative solutions and partnership has emerged. Several organizations have created processes or standardized reporting structures to assist organizations in quantifying their social reporting as well as in creating benchmark data against which they can gauge their activities and decisions. The organizations include:
• Global Reporting Initiative
• Global Sullivan Principles
• Social Accountability 8000
• UN Global Compact
• OECD Guidelines for Multinational Enterprises
• ILO Conventions
• AA 1000
• ISO 14000
These voluntary initiatives are considered credible and authentic because of their association with reputable international organizations and agencies. Despite the absence of formal regulatory schemes. Each of the following initiatives shares a common mission to promote an economic environment where smart, sustainable development and good corporate citizenship coexist.
E. THE SOCIAL RESPONSIBILITY OF BUSINESS IS TO INCREASE ITS PROFITS
The discussions of the “social responsibility” are notable for their analytical looseness and lack of rigor. What does it mean to say that “business” has responsibilities ? Only people can have responsibilities. A corporation is an artificial person and in this sense may have artificial responsibilities, but “business” as a whole cannot be said to have responsibilities, even in this vague sense. The first step toward clarity in examining the doctrine of the social responsibility of business is to ask precisely what it implies for whom.

F. MAXIMIZING ETHICS AND PROFIT
Patrick Primeaux offers a practical rejoinder to critics of Friedman, arguing for the possibility of a balance between money and ethics that is based on a theory of profit maximization. Everyone knows that men and women in business are interested in one thing: money. And, as everyone also knows, men and women in business will do anything that has to be done to make money.
Milton Fredman claims that the ethical mandate of business is to increase shareholder profit, he is talking about money and he is talking about ethics. Connecting the two, he probably did more than any other theorist to advance business ethics. Now we hear executives of major corporations giving commencement speeches about ethics.
The problem for business and for business ethics is the equation of business with money, specifically bottom-line accounting profits, and pressure to increase those profits quarterly or annually. That motivating objective is itself reflective of an ethical code. It consists of an ethical principle and demands a certain kind of behavior consistent with that principle. The organization is structured, people are hired, jobs are described, managers are held accountable, raw materials are acquired and technology engaged to increase that bottom-line. Everything and everybody within the company is directed by that profit maximizing principle and expected to conform to its demands.
What are opportunity costs? Opportunity costs are usually defined as the forgone goods and services that could have been produced from a given set of scarce resources that was used to produce some other goods and services. Opportunity cost decision making leads to profit-maximization insofar as it recognizes the scarcity of all of its resources and uses those resources as efficiently as possible. To evaluate whether a company is profit-maximizing, then one needs to look beyond bottom-line accounting profits to identify what those profit represent. This perspective commends itself for good business and good business ethics because it originates directly within business theory and practice. It also commend itself because it encourages business to move beyond bottom-line accounting profits to consider people and things not only as valuable for production, but also as valuable in themselves –as scarce resources having value and dignity. It also commends itself because we could then equate good business and good business ethics.

G. THE DIVINE RIGHT OF CAPITAL, Is Maximizing Returns to shareholders a legitimate Mandate?
In response to what she sees as the problems of capitalism -bloated CEO pay, sweatshops, speculative excess to stagnant wages, corporate welfare and environmental indifference- Marjorie Kelly explores the question of whether maximizing shareholder wealth is an appropriate mandate for business. This mandate, she contends, arises from the unconscious belief that property owners matter more than others resulting in an economic aristocracy.
Where does wealth come from? More precisely, where does the wealth of major public corporations come from? Who creates it?
To judge by the current arrangement in corporate America, one might suppose capital creates wealth –which is odd, because a pile of capital sitting there creates nothing. Yet capital -provides (stockholders) lay claim to most wealth that public corporations managed on their behalf. Corporation are believed to exist for one purpose alone : to maximize return to shareholders. The oddity of it all is veiled by the incantation of a single, magical word: ownership.” Because we say stockholders “own” corporation, they are permitted to contributed very little, and take quite a lot.

H. GLOBAL CORPORATE CITIZENSHIP, The Leadership Challenge for CEOs and Boards
The following is a join statement by a task force of the World Economic Forum CEOs. The task force recommends a framework for action that chief executives, chairmen, board direction and executive management teams can use to develop a strategy for managing their company’s impact on society and its relationships with stakeholders. The framework produces a template for a leadership process within the company and is intended to be complementary to the various voluntary corporate citizenship principles and guidelines that have been developed in specific issues areas. Although the statement uses the language of corporate citizenship. The aim of the following efforts was not to focus on specific definitions but instead to emphasize the point that these issues are not add-ons but fundamental to core business operations and to identify some key leadership actions that can be adapted by most business leaders to their own circumstances.
 FRAMEWORK FOR ACTION
1. Provide Leadership
Set the strategic direction for corporate citizenship in your company and engage in the wider debate on globalization and the role of business in development.
I. Articulate purpose
II. Promote the “business Case” internally
III. Engage the financial sector
IV. Enter the debate on globalization and the role of business in development

2. Define What it Means for Your Company
Define the key issues, stakeholders and spheres of influence which are relevant for corporate citizenship in your company and industry.
i. Define the issues
ii. Agree on Company’s spheres of influence
iii. Identify key stakeholders

3. Make it Happen
i. Put Corporate Citizenship on Board Agenda
ii. Establish Internal Performance, Communication, Incentive and Measurement Systems
iii. Engage in dialogue and partnership
iv. Encourage Innovation and Creativity
v. Built the Next Generation of Business Leaders


4. Be Transparent About it
Build confidence by communicating consistently with different stakeholders about the company’s principles, policies and practices in a transparent manner, within the bounds of commercial confidentiality.
i. Agree what and how to measure
ii. Develop a graduated program for external reporting
iii. Be realistic
I. REPUTATION QUOTIENT (RQ)
The Reputation Quotient is designed to help identify the relative placement of your company’s reputation among competitors in the market place. The Reputation Quotient developed by Harris Interactive and Professor Charles Fombrun of New York University’s Stern School of Business and Executive Director of the Reputation Institute. The Reputation Quotient to leverage your reputation‘s advantage based on six dimension that are:
1. Emotional Appeal
How much the company is liked, admired and respected.
2. Products and Services
Perception of the quality, innovation, value and reliability of the company’s product and services.
3. Financial Performance
Perception of the company’s competitiveness, profitability, growth, prospects, and risk.
4. Vision and Leadership
How much the company demonstrates a clear vision, strong, and an ability to recognize and capitalize on market opportunity.
5. Workplace Environment
Perceptions of how well the company is managed, what it’s like to work there and the quality of its employees.
6. Social Responsibility
Perceptions of the company as having high standards in its dealing with people, good causes and the environment.
The Reputation Quotient was tempted through two phases during July 1999 and August 1999. In phase 1, Data conducted by online and telephone interviews with 4500 respondents throughout the U.S. Respondents were asked to nominate the companies they believed to have the best and worth reputations. In phase 2, another 10830 respondents provided detailed ratings of the 30 best regarded companies and a control group of 10 other companies. The Reputation Quotient scores for each company based on respondent ratings comprising the six dimension of reputation. In comparing any two scores, a difference of 1.96 would be considered significantly different at the 90% confidence level.
J. MARKETING GOOD CORPORATE CONDUCT
Marketing products may not be particularly harmful so long as individuals are aware of such practices and able to make well-reasoned decisions concerning the effects of such campaign upon their purchasing decisions. But such practices are much more serious when used to promote purported good corporate conduct. So, important that companies which engage in the marketing of good corporate conduct make every effort to ensure that consumers are granted access to relevant information and that outside audits with respect to the good corporate conduct marketed are available. This is likely one of the only ways to ensure that the benefits of moral praise garnered by making moral praiseworthiness of corporate actions more widely known through marketing strategies are in fact justly deserved.
K. TITHING PROGRAM
According to Charles Stoddard, the chairman and CEO of the Grand Rapids, if the company used Tithing program so would be get three advantages he called “triple win” that are : The charity received an unsolicited donation, the stockholders received recognition for designating the donation, and the bank received a tax-deduction.

L. REPORTING INITIATIVE
Potential benefits of reporting in the business community :
1. Reporting and measuring both past and anticipated performance is a critical management tool in today’s high speed to be effective management.
2. Reporting is a key ingredient to building, sustaining, and continually refining stakeholder engagement. Reports can help communicate an organization’s economic, environmental, and social opportunities and challenges in a way far superior to simply responding to stakeholder information requests.
3. Transparency and open dialogue about performance, priorities, and future sustainability plans help to strengthen these partnerships and to build trust.
4. Sustainability reporting is a vehicle for linking typically discrete and insular functions of the corporation in a more strategic manner.
5. Reporting helps management evaluate potentially damaging developments before they develop into unwelcome surprises.
6. Sustainability reporting helps sharpen management’s ability to assess the organization’s contribution to natural, human and social capital. Reporting helps highlight the societal and ecological contributions of the organization and the “sustainability value proposition” of its products and services.
7. Sustainability reporting may reduce volatility and uncertainty in share price for publicly traded enterprises, as well as reducing the cost of capital.
The Global Reporting Initiative comprise of three sections contain the reporting elements and performance indicators for the Global Reporting Initiative Guideline, That are :
1. Vision and Strategy
This section encompasses a statement of the reporting organization’s sustainability vision and strategy, as well as a statement from the CEO. Statement of the organization’s vision and strategy regarding its contribution to sustainable development. Present overall vision of the reporting organization for its future, particularly with regard to managing the challenges associated with economic, environmental and social performance. Statement from CEO sets the tone of the report and establishes credibility with internal and external users.
2. Profile
This section provides an overview of the reporting organization and describes the scope of the report. Thus, it provides readers with a context for outstanding and evaluating information in the rest of the report. This section also includes organizational contact information.
3. Governance Structure and Management Systems
This section provides an overview of the governance structure, overarching policies ands management systems in place to implement the reporting organization’s vision for sustainable development and to manage its performance. The global reporting initiative is sensitive to the need to avoid unnecessary duplication of effort. However, for the sake of ensuring full and complete contextual information for users of sustainability reports, it is important to cover the items listed below in combination with other information on the organization’s economic, environmental and social performance.