A corporation is entitled to the same moral and political rights as individuals. So, it should be that corporations bear the same moral and political rights as individuals: such as accountability and the capacity for moral decision making. Seeing this leads us to the discussion of corporate responsibility. Responsibility is merely being accountable to someone for an action or the successful carrying out of duty. (Carroll, 89-92) Therefore, the question lies wherein what are the responsibilities of a corporation. There are two major views of corporate responsibility: the narrow view and the broad view. These views consider issues based on mere profit maximization and community service.
Ethical thinking is essential to strategic planning for any business. Businesses have to consider themselves a part of the business community and society. The matter of ethical thinking should be a fundamental practice and a way of life. Making money is not unethical, but money can not provide the source of ethical thinking in a business. (Imperato, 11-18)
A company’s reputation, together with the trust and confidence of all those with whom the company interacts, is a vital asset, and protection is critically important. Commercial responsibilities involve running a business successfully, generating a profit and satisfying shareholder expectations. On the other hand, social responsibility is being aware of the issues being presented in the community and the working environment.
Corporate responsibility requires us to look at ethics, stakeholder accountability, and our own value systems (Aaronson, 46-47). A stakeholder is anyone who has a stake in the organization’s performance. Stakeholders can affect or be affected by the company. Stakeholders are very important to keep in mind when a company makes decisions. Demands from consumers, employees, suppliers, and other stakeholders, such as the government, are some other groups businesses keep in mind when making decisions.
Commercial responsibilities involve running a business successfully, generating a profit and satisfying shareholder expectations. On the other hand, social responsibility is being aware of the issues being presented in the community and the working environment. Corporate responsibility is not a new concept. Some companies have always acknowledged a wider responsibility towards the community. Such activities in the past have tended to come under paternalism and philanthropy. (Hannon, 28-29)
Corporate responsibility builds a management framework that is virtually impossible to copy. This means that a company can have a sustainable competitive advantage, but it also has its disadvantage. Unlike the balance sheet, a social performance report is much harder to compare among companies. Does a company have better social performance if it adopted Corporate Responsibility from the beginning than a company that just recently took it up? Is the Body Shop better than Exxon when it comes to social responsibility? You do not need a ranking list to tell you if Corporate Responsibility is working for your company. The effect of Corporate Responsibility can be seen through the satisfaction from workers, consumers, shareholders and other stakeholders.
The Sarbanes-Oxley Act 2002 (US) encourages Corporate Responsibility with four objectives, which are as follows, firstly it increases accountability of corporate executives and board members for their actions through the introduction of a checks and balances system, and increases penalties for misconduct; secondly, it encourages truth-less through complete disclosure; it eliminates internal and external conflicts of interest, and encourages an ethical climate in which all employees from all levels are encouraged to report unethical or questionable behaviour.
Aaronson, S, “Broadening Corporate Responsibility”, International Economy, (2002), Vol. 16, Issue 4, pp. 46-47
Carroll, Archie B. and Ann K. Buchholtz, 2006, Business and Society: Ethic and Stakeholder Management, 6th Edition, USA: South-Western, Thomson Corporation. 89-92.
Hannon, M., “Corporate responsibility: Gilbert and Tobin’s pro bono practice”, Alternative Law Journal, (2002), pp. 28-29.
Imperato, G., “Corporate Crime, Responsibility, and Compliance and Governance”, Journal of Health Care Compliance, (2005), Vol. 7, Issue 3, pp. 11-18.