Communication in Business

Topics: HSBC, Environmental impact assessment Pages: 6 (1918 words) Published: December 11, 2012
Communication in Business 100

Critical Essay

Company: HSBC

Essay Title: Relationships between Modern Business and Society

Name: Super Chicken

Student Number: 16157866


Semester: One, 2012

Curtin University (Bentley Campus)

Tutor and Tutorial Group Number: Simon Teoh (ST 50)

Word Count: 1579 words

Relationships between Modern Business and Society
The relationship between business and society is an important part of business in the Modern era. The inclusion of social issues has quickly become a fundamental part of business strategies, as large companies realise the impact that positive relationships with society can help with their overall motive, which is profit (Davis 2005, 105). HSBC has proven that its focus on environmental impacts, for example, being the first bank to become carbon neutral in 2005 (HSBC Global Site 2012), has allowed a positive relationship between it and society to occur. In contrast, its involvement with NHFA Limited through its provision of inappropriate investment advice to elderly customers (FSA Dec 2011), has also shown the impact that human rights and values play in societies view of corporations. This essay will examine and critique the above situations that have occurred within HSBC, as well as examining and discussing the impacts that these aspects have had on society and HSBC’s stakeholders. Argument ‘against’ HSBC’s involvement in society

HSBC’s involvement with the scam regarding elderly customers is an example of how business can lose touch with society. This situation in particular was found to be especially unacceptable to society as it involved the securing of large sums of money from 2485 customers (on average being £115000 per customer), where 87% of these customers had a lower life expectancy than the investment period, which meant that their needs were not taken into consideration by NHFA. As a result of this, the elderly customers whose life expectancy was shorter than the expected five year long investment period withdrew their money to find that the investment had resulted in losses of capital (FSA Dec 2011). This loss of capital was extremely damaging to the elderly customers as many relied on these investment decisions to fund their care costs (FSA Final Notice Dec 2011). This situation involved HSBC due to its ownership of NHFA, which began in 2005 (HSBC PFN 2011). Ownership of the company meant that due to the press, an appropriate action by the bank must be taken in order to protect the stakeholders of the company. This goes back to the theory of the Iron Law of Responsibility (Watkins 2012). HSBC held the power over NHFA and was therefore responsible to society and its stakeholders in regards to this situation. The original fine imposed on HSBC by the FSA was £15million but due to the quick response by HSBC, in taking the blame, this fine was decreased to £10.5million. This quick action reduced the effect the situation had on the company’s shareholders, employees and suppliers as it resulted in a 30% lesser fine by the FSA (FSA Final Notice Dec 2011). This action affected these particular stakeholders as the amount of money kept within a company helps to pay for and accommodate them, so HSBC was in fact trying to keep as much money within the business as possible. This helps to prove the theory that business has a profit motive (Davis 2005, 105). The other main group of stakeholders that were affected by the situation were the company’s customers. This relationship between the two was harshly damaged as the trust that society placed on HSBC and NHFA with their money was severed. Trust between society and business is regarded as one of the most prominent values in the modern world (Kaplan, 1998). Therefore HSBC had to do something in order to gain back their clients trust. NHFA was promptly closed down in July 2011 (FSA Final Notice Dec 2011); this was HSBC’s first step in solving the problem. This...
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