CORPORATE SOCIAL RESPONSIBILITY IN THE MARKET ECONOMY

BY:MARIA THERESA MAAN - BEŠIĆ
SARAJEVO, BOSNIA ND HERZEGOVINA
SEPTEMBER 06,2008

This paper offers insights into how the implementation of good corporate citizenship is facilitated by every stakeholders. Meaningful stakeholder engagement should be a genuine process of sharing views between the stakeholders and the management of an organization for the purpose of improving the social, ethical and environmental performance of the organization and for improving its accountability. This paper demonstrates how a good corporate citizen and corporate social responsibility must reach out to many different stakeholders. It has to listen and respond to the stakeholders that form part of its relationships, networks and interactions and it has particularly to avoid making assumptions. It is becoming dangerous even for experienced managers to make any assumption about what is best for stakeholders.

We can tell an economically coherent story about CSR, and use financial markets to validate it. The paper suggests that there is a resource allocation role for CSR programmes in cases of market failure through private social cost differentials, and also in cases where distributional disagreements are likely to be strong. In some sectors of the economy private and social costs are roughly in line and distributional debates are unusual, were CSR has little role to play. Such sectors are outnumbered by those where CSR can play a valuable role in ensuring that the invisible hand acts, as intended, to produce the social good. In addition, it seems clear that a CSR programme can be a profitable element of corporate strategy, contributing to risk management and to the maintenance of relationships that are important to long-term profitability.

CSR might be one of the key solutions to resolve our social and global problems. CSR also can play a valuable role in ensuring that the invisible hand acts, as intended, to produce the social good. It can also act to improve corporate profits and guard against reputational risks. Different definitions and views highlighted from different authors like the following:
•Adam Smith’s remarks, if companies make products that consumers value and price them affordably, making money in the process, what is the need for corporate social responsibility.
•Hopkins in an International Labor Organization discussion paper states that CSR is concerned with treating stakeholders of the firm ethically or in a responsible manner.
•OECD aim is to encourage the positive contributions that multinational enterprises can make to economics, environmental and social progress and to minimize the difficulties to which their various operations may give.
•Beltratti, A. Viewed CSR is an attempt to escape profit maximization in the recognition that agency problems and incomplete contracts undermine the basic idea of shareholders’ supremacy.
•Philippine Business for Social Progress, capture the essence of business-led investments by providing access to social services, support the development of communities and protect the environment.
•The European Union says that companies must integrate a voluntary based and operates a business in a manner consistently that meets or exceeds the ethical, legal, commercial and public expectations.

Hence, the figures 1 and 2, applied the impact and factors affecting the market economy and how CSR can be effective in some way. Thus, multi – billion corporations and business like Starbucks, Microsoft are really battling in the global field, that are building global brands, that are trying to take their product to all over the place, they have become extremely sensitive to their issues about their social role. The leading companies not only have a business strategy, how they're going to position their product, how they're going to sell it, they also have a social strategy because brands are built not just around good quality of a product, brands are built also around emotions, around values that people ascribe to those products.

However, CSR is not a fad. In fact, there are structural reasons why this is happening and this is happening so widely. It's actually some very fortunate reasons, at least some very fortunate effects the companies are reacting, and it makes this not only for the well-being of people and societies around the world, but it also makes good business sense in market economy. Corporate citizenship integrates in the market economy were the businesses and consumers decide of their own volition what they will purchase and produce. However, in theory this means that the producer gets to decide what to produce, how much to produce, what to charge customers for those goods, what to pay employees, etc., and not the government. These decisions in a market economy are influenced by the pressures of competition, supply, and demand. As United States there are more market economy traits than in Western European countries.

The earliest conceptualizations of corporate citizenship were developed in the 1950s in the research area of business responsibility. Maignan conceptualization of corporate citizenship comprised of four dimensions: economic; legal; ethical; and discretionary citizenship were serve as baseline for companies aimed to contributes to the well being of the communities in which they operate.

The Nike, Mosanto, and Australian Seniors Computer Clubs Association are some evidence of doing CSR doing great things and contribute to business responsibly. While on economic viewpoint from Adam Smith, explained, a better economic performance occurs where capital allocation for production and distribution of wealth operates under conditions of relatively free and competitive markets within minimalist public policy.

However, without any intervention of law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society among all the different employments carried on in it as nearly as possible in the proportion which is most agreeable to the interest of the whole society. It also means that corporate social responsibility should look toward relationship in growing market economy.

Hence, corporate culture as social commitment may guide managers in how they address different issues that their companies are facing. Also, Maignan argued that market oriented organizations integrate their social responsibilities into their activities more than less market-oriented organizations. The impact of corporate citizenship activities on stakeholders’ attitudes and behaviors toward the corporate citizen company are not well developed. Corporate citizenship initiatives may help establish a bond between employees, positive influence on consumers evaluation of product attributes and attitudes toward the firm, corporate reputation, and positive impact of corporate citizenship on customer loyalty. Hence, by encouranging and participation in voluteerism can contribute significant effort of business sector to thier owned community.

The driving forces of corporate citizenship applied the pressure for better social and environmental performance can then move along the value chain. However, top management orientation managers constitute a particular group of stakeholders with respect to corporate citizenship matters. Managers are then the group of stakeholders likely to have the biggest influence on the degree of a company’s involvement in corporate citizenship.

The values and ideals of managers seem to impact on the extent to which a company adopts a corporate citizenship strategy were managers with different backgrounds hold different values do not attribute the same importance to corporate citizenship as Thomas and Simerly explained. This could be part of the explanation why companies in the same industry exhibit different „social responsibilities to similar pressures.

Drumwright, highlighted the role of policy entrepreneurs „people who play a key role in bringing issues to the forefront in taking environmental issues as a core criterion in organizational buying decisions. In a specific company, the presence of policy entrepreneurs who are personally interested in putting social and environmental issues on the corporate agenda may thus influence the degree of corporate citizenship of that company.

The United Nations millennium development goals and NGOs answered and raised issues to solve some of the biggest problems in the world. Hence, none of those can be tackled without participation from the private sector. Most of the solutions are in the hands of the private sector. Now that doesn't explain that companies would actually take the lead. The fact that NGOs expect businesses to do something, that doesn't meant that businesses are going to go ahead and do it.

However, the importance of activism needs to presure stakeholders to be socially responsible and to really have strong principles of governance. In such situations, the governments can play a role in implementing and enforcing legislation to support the principles and practices of corporate social responsibility, which involves contributing to local community development in places where businesses operate. This can be encouraged through regulations, penalties and public sector institutions that control business investment or operations. Setting clear policy frameworks to guide business investment in corporate social responsibility and advising on issues such as the disclosure of information, tax incentives and encouraging dialogue with a company's stakeholders, is another way.