Corporations practicing stakeholder management will be more sustainable. Discuss.
The perceptivity of sustainability is both in the sense of achieving long-term success and as survivability of a corporation (Zink, Steimle & Fischer 2008). Dunphy, Griffiths and Benn (2003) conceive corporations as channels of social purpose, constructed within society to attain useful social objectives. Henceforth, corporate social responsibility commits a significant role towards the sustainability of corporations. Both corporate social responsibilities and sustainability, and its related concepts influence all aspects of business. Chandler and Werther (2010) acknowledge the understanding of corporate social responsibilities as an aim to define the future of our society.
However, the apprehension of corporate social responsibility determines the corporate governances. As the question arises, does practicing stakeholder management aid corporations to be more sustainable? In this essay, classical and contemporary view of governance on corporate social responsibilities will be put into discussion before coming to a conclusion under strategic sustainability. In addition, theoretical frameworks and real world corporate cases will be reason about in the respective governances.
Classical View on Corporate Social Responsibilities
“The only social responsibility of business is to maximise profits” - Friedman’s frequent saying.
In reference to Friedman’s classical view, the purposes for business to exist are for distributing products and services to society, and thereafter, for creating economic value which subsequently generate profits for shareholders. Keinert (2008) trusts that the mangers are in control to maximise these revenue for shareholders, obligate by the employment contracts as agents for the shareholders of the firm, the principals. It is also emphasised by Zu (2008) that for classical governance, corporation has no interest in looking beyond profit maximization, with the exception of profit benefit activity. In another words, the primary goal of business is profit, while corporate social responsibilities and ethical custom deem secondary. Nestle, Walmart, FordMotor, and Microsoft, are some of the companies that adapt to the mentioned theory.
Walmart, one of the biggest and well-known companies worldwide, has a record of relentless violated the right of its US workers and exploited the weak US labour laws thwarts union formation, child slave labour and even broken the environmental laws.
Funds were invested to prevent employees from protesting their right due to the reduction of insignificant take-home pay and working overtime for zero pay. Employees and managers were brainwashed to oppose union from the moment they were employed. Surveillance, rapid response team and undercover spy were funded to monitor any union formation. [Appendix 1] Suppliers of Walmart were pushed to neck up on their wholesale prices. Child slave labour was happening in its manufacturing facilities abroad. [Appendix 2] The environment friendly campaigns involved were all a fraud. [Appendix 3] In 2008, Walwart admitted as much but provided limited responses however continued its public relation effort.
With the underlying of agency theory, principal-agent framework is popularly used in many corporations including Walmart. The principal usually offers incentives to the agent to stimulate them to act upon principal’s best interest. The practice of agency theory is constructive as many big companies have successfully climbed up the rank worldwide. The problem with principal-agent framework is that agent sometimes practice discretion to maximize their own advantage rather than of the principal. However, usually, agency cost motivates the agent upon acting on behalf for the principal such as monitoring costs, bonding cost and...
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