Business Ethics
Dissertation: Attitudes of the Management Students towards Corporate Social Responsibility in ‘Royal Holloway, University of London’ (Part 2/5)

Chapter 2: Literature Review

Corporate Social Responsibilities (CSR) is a common and the politically correct phrase to be mentioned in business meetings and discussions today. A review of the journals in the business management field found that researchers have been using different terms to discuss about the concepts of CSR. As discussed by Mittal et. al., 2008, phrases such as corporate citizenship, sustainable and responsible business development, corporate conscience or even social or community responsible business is all concepts similar to Corporate Social responsibilities. In the recent years, it is found that people have been demanding that CSR to be incorporated into the decision making process, value offering and corporate growth and development of companies around the world.

2.1 Defining CSR

As discussed by Enderle (2010), CSR is the concept whereby corporations are expected to exercise ethical decision making, and to proactively deploying self regulating measures to conduct the business activities not only in compliance to the rules and regulation set forth by the authorities, but also to exercise corporate conscience and ensuring the actions and activities of the corporations are beneficial to the community and society. Under such concepts, CSR is indeed a broad concept to take various parties, that is, the stakeholders that are affected by the corporations into considerations. As discussed by Treviño et. al. (2006), CSR is about corporations acting responsibly towards the stakeholders. Apart from that, CSR is also about taking care of the environment. The objectives of CSR are to ensure that corporations have the public interest in mind, and to ensure sustainable development and growth of the corporations in the competitive business environment. This is not something frequently argued or accepted in the last century, whereby people at the time intuitively believe in the shareholder theory. As discussed by Cartwright et. al., 2006, CSR is required in the new economy because corporations should not only cater for the interests of the shareholders, but also the other stakeholders such as customers, employees, competitors, government, community, suppliers and other parties affected by the business operations of the company. It is argued that CSR is increasingly important because the corporations are becoming more powerful and their actions are found to have long lasting impacts to the society, environment and the future generations. Many negative impacts from these corporations are discovered, and some of the serious issues include global warming, exploitation of people in the third world country, damages of natural environment, pollution issues and wastages of resources (Brewer, 2007).

2.2 Importance and Benefits of CSR to Corporations

A somewhat controversial topic in literature regarding Corporate Social Responsibilities is about whether CSR is truly beneficial to the corporations. Many of the researchers found that there are some empirical evidences suggesting that adoption of CSR by corporations often able to benefit the corporations from various ways. The benefits may not be direct financial gains or increase in financial performance, but there can have long term benefits such as an increase of corporate reputation and more sustainable branding effects towards the corporations adopting CSR (Bihari et. al., 2011). For example, as asserted by Lamberti et. al. (2009), CSR can contribute positively towards the human resources management in a company. There are many ways in which CSR may be benefiting the company. Firstly, by adoption of CSR activities and contribute to the community, the company will become more famous and respectable by the community. It is then pointed out that as the reputation of the company is good, more people are willing to join the company whenever there are vacancies in the company. As such, the company can have access to larger pool of human talents in the employees’ selection and recruitment process. Secondly, the adoption of CSR principles in running the business will also enhance employees’ positive perceptions on the company itself. It is argued that employees are more willing to stay in the company to work in a more motivated and committed manner as people perceive that they are part of the team doing good for the community. Next, it is also argued that adoption of CSR will likely to enhance ethical conducts in the corporations. This is because when a firm adopts the philosophy of CSR in the conducts of its business, ethical standards are emphasized and practices. In the long run, a corporate culture of ethical decision making and conducts can be formed. Indirectly, the risks faced by the corporation due to fraudulent activities can be reduced. Lastly, adoption of CSR is also likely to enhance the brand equity or reputation of a company. When a company is well known for doing good to the community, people will develop better feelings and perceptions on the company. Customers may feel good when buying goods or services provided by these companies, and a better brand name of the company can be developed. In the long run, customers loyalty can be further enhanced, and people will trust the corporations more – believing that the corporations is sincere in serving the best interests of the community. Very often, as suggested by Polonsky et. al. (2009), the enhanced customers’ loyalty level can enhance the financial performance of the company adopting CSR philosophy in the current business environment, when trustworthiness of corporations by the public is at a low level.

2.3 Empirical Evidences of CSR towards Corporate Performance

There are voluminous literatures concerning the benefits yielded by businesses practicing CSR philosophy in the conduct of their daily business. In this section, the several literatures Firstly, it is found by Bihar & Pradhan et. al. (2010) that those banks that adopt CSR philosophy in the conduct of their business operations tend to achieve better performance that their counterparts that do not adopt CSR philosophy in the businesses. Not only is that, in another separate study by Higgins & Debroux (2009), it is found that, in similar vein, high performing companies in Asia tend to adopt CSR philosophy in the conduct of their business. Both of the studies show that there are linkages or statistically significant relationships between adoptions of CSR philosophy by companies to the financial performance of that company. These studies implicitly suggest that perhaps adoption of CSR is contributing to the above average financial performance of these firms. Their findings are somewhat consistent with the academic theory and assertions outlined in business textbook – whereby adoption of CSR is beneficial to the performance of the company. For example, in the business ethics textbook (i.e., Business and Society: Stakeholders, Ethics, and Public Policy) authored by Lawrence and Weber (2008), it is argued that businesses should proactively practice CSR activities because that will be beneficial to the financial performance of the company.

From another perspective, there are also evidences suggesting that adoption of CSR activities will likely to enhance the corporate governance of the company. From this viewpoint, the adoption of CSR is found to able to mitigate the risks faced by the corporations adopting CSR activities. For example, Arora et. al. (2011) found that the adoption of the philosophy of CSR will able to enhance the corporate governance of a firm. The researchers pointed out that this is primarily and probably due to the adoption of CSR framework in corporations suggest that higher ethical standards are uphold by the corporations. It is further argued that adoption of CSR philosophy is more important to larger international firms, because these firms are larger and can be managed and governed more effectively through corporate culture and the corporate values uphold by these firms. When a firm proactively adopt CSR philosophy, the workforce tend to exercise more ethical conscience in performing their tasks daily, and to act in ethical manners are more politically acceptable in these firms. Thus, people simply built up implicit assumptions that ethical conducts are important in the corporations, and thus, more likely to act in a responsible and socially acceptable manner.

Apart from enhancing financial performance or mitigating the risks faced by a corporation, there are also empirical evidences suggesting that adoption of CSR philosophy by corporations able to enhance the brand presence and reputation of the corporations. As found by Cruz et. al. (2010), in a research on the benefits of adoption of CSR by multinational companies (MNCs), the adoption of CSR philosophy by the multinational corporations often able to enhance their brand equity around the globe. It is further pin point that this is particularly true as many of the multinational corporations originated from the west, and as these corporations involve heavily in helping the community in those emerging countries, people from the foreign country (for example, from poor countries in the east) will likely to change their perceptions and trust towards these western multinational corporations. The adoption of CSR philosophy, and exhibiting sincere efforts to help the local community in which these multinational corporations conduct their business, often enhance the acceptability of their culture, product offerings and value delivery by these multinational companies.

Last but not least, there are also findings suggesting that CSR is crucial to strategic management of a business in the ever challenging and demanding business landscape. Some literatures related to this context include arguments presented by Lamberti et. al. (2009), whereby adoption of CSR can indeed contribute to the attainment of competitive advantage of a firm. Adoption of CSR philosophy will bring positive impacts to not only the customers, but also towards the employees working in the firm. It enhances trust from the community and customers; while at the same time, it will also instill good values among the workforce. Similarly, as argued by Trapero et. al. (2010), the adoption of CSR philosophy in a firm often able to give more meanings to the workforce. The workforces are likely to feel that they are indeed contributing to the society, instead of working or motivated by financial rewards (which is, perceived as a weaker source of motivation to lead the employees). As such, it can be seen that adoption of CSR indeed is so important, as researchers are suggesting, and offer evidences that adoption of CSR philosophy will indeed contribute to the strategic management and attainment of competitive advantage in the competitive business world today.

2.4 People Perceptions on CSR

As the concepts of Corporate Social Responsibilities (CSR) gain popularity in the recent years, scholars have been getting more interested to investigate the people perceptions on CSR. Various types of researches had been conducted for this purpose. Among them include: Kim et. al. (2010), Alcaniz, Caceres and Perez (2010), Chiu and Hsu (2010), and Sharma and Sharma (2011). In this section, several journals written by scholars will be reviewed. The types of questions designed to investigate people perception towards CSR will be discussed. By reviewing several different methods or questions used by the various researchers to investigate people perceptions towards CSR, a comprehensive set of questionnaires can be formulated, and be used to investigate management students perceptions’ towards CSR in this dissertation.

In a study conducted by Kim et. al. (2010), the perceptions of workforce towards a particular company that had adopted CSR initiatives, to the degree of employee-company identification is being studied. It is found by them that a firm’s CSR initiatives are likely to enhance employee-company identification, which in turn will likely to influence employee’s commitment towards their firms. Employees’ perceptions on company CSR initiatives are divided into two categories, namely: (a) CSR associations, and (b) CSR participation. In order to investigate employees’ perceptions on the firm’s CSR associations, three questions are asked to research participants, specifically: (a) my company is committed to using a portion of its profits to help nonprofits; (b) my company gives profits back to the communities where it does business; and (c) my company integrates charitable contributions into its business activities. On the other hand, in order to investigate employees’ perceptions on the firm’s CSR participation, two questions are asked to research participants, specifically: (a) my colleagues and I work together as a team on CSR activities, and (b) my colleagues and I have ample opportunity to suggest CSR activities. Although the questions used in this study is indeed easily understood, it is too simple to be used for the purpose of this dissertation.

From another perspective, Alcaniz, Caceres and Perez (2010) conducted a study to investigate the relationships between a particular company’s brands to the adoption of CSR initiatives. According to the authors, the CSR image of a particular brand (of a company) can be investigated through six questions. The six questions (asked to the customers/ consumers) are as follow: (a) the company is aware of environmental matters; (b) the company fulfills its social responsibilities; (c) the company put something back to the community; (d) I believe that the company has the community interest in mind; (e) the company has been acting in a socially responsible manner; and (f) the company incorporate philanthropic activities into its business operations. Generally, it can be observed that the CSR images of a company are surveyed through questions asking the research participants perceptions if the company has been doing good to the environment and community.

Yet, from another study performed by Chiu and Hsu (2010), the relationships between CSR initiatives by telecommunication companies to the firm’s corporate images are studied. In order to conduct the research, a set of 8 questions are used to study people perceptions on a company’s CSR images. The questions are: (a) the firm has good social responsibility; (b) the company has been carrying out environmental protection activities; (c) the firm has been contributing to the society; (d) the company has been paying attention to its influences on the society; (e) the company is found to sponsor educational and cultural activities frequently; (f) the company has been emphasizing on environmental protection; and (g) the firm focus a lot on charitable activities. In short, it can be seen that the questions used to investigate CSR images of the corporations are roughly similar, and concentrating on the subject if the business really contributing to the environment, society and people in their conducts of business activities.

Last but not least, Sharma and Sharma (2011) had developed a comprehensive set of questionnaires to investigate the youth attitudes towards corporate social responsibilities in India. In the research, CSR is characterized by a set of 46 queries relevant in characterizing the adoption of CSR by a company. By employing quantitative methods of factor analysis, the many queries relevant to describing CSR adoption by companies were summarized into a minimum number of factors (that is perceived by the youth that should be incorporated into the business daily activities by corporations). The set of questions used by the authors are shown in the Appendix section at the end of this dissertation. The result findings from the authors indicate that the 46 queries can be reduced into a total of twelve factors, namely: (a) responsibilities towards various segments, (b) corporate governance, (c) ethical values and practices, (d) fair dealing and transparency, (e) environmental protection and sustainable development, (f) public welfare, (g) global standards, (h) social responsibilities, (i) labour welfare, (j) innovative technologies, (k) responsibilities towards competitors, and (l) healthy towards public relations. Overall, the authors argued that the twelve factors, collectively able to explain 83.95% of the variance in the data collected in their studies. This means that the twelve factors, if implemented, can fulfill 83.95% of the expectations of the youth in India from the businesses. This indicates that the twelve factors are not something should be neglected by corporations in India in formulation and execution of their CSR plan. The authors also further pointed out that the youth has become more aware and vigilant in the topic of CSR and no companies can neglect the importance of CSR towards youth perceptions ion the country.

2.5 Concluding Remark

Overall, it can be seen that Corporate Social responsibilities is an increasing hot topics being discussed in literature, business management textbook and business related magazine. This is not surprising because people are recurrently being shocked by the corporate frauds and unethical behaviors by executives and management of big and small corporations in the new economy today. Due to the competitive business environment and the short term orientation of some self-fish management and executives, many serious damages to the society and the environment are done in the past decades. In the competitive business environment, and perhaps more importantly, driven by the greed of the top executives in the corporate world today, fraudulent and unethical behaviors can be spotted.

The adoption of CSR philosophy has never been so timely and urgent today, considering the deterioration of ethical values among people and businesses today. This can be seen from the increasing frequency of the words such as ‘Corporate Social Responsibilities’ being used in literature, business management textbook and business related magazines. There are many studies conducted in this context. Many of the literatures seek to investigate the impacts of adoption of CSR philosophy to the corporations. There are many positive findings suggesting that there exist statistical significant relationships between CSR adoptions to corporate performance. As discussed above, corporations that adopt CSR philosophy is found to tend to exhibit better financial performance. This is consistent to the academic theory. Then, there are also some evidences that adoption of CSR philosophy able to reduce the risks faced by the corporations. Not only are these, it is also found by researchers that firms that adopted CSR philosophy tend to enjoy better brand presence good reputation and higher trustworthiness from the community where it conduct businesses. Then, some other scholars even asserted that adoption of CSR is necessary as it serve strategic purposes in managing a company.

Later, it is also discussed that there are also literature investigating people perceptions on CSR. This is not surprising because the public perceptions on CSR will likely to affect the value offering and proposition by companies, in the customer oriented economy today. Secondly, the stakeholders’ perceptions and expectations on adoption of CSR philosophy by a firm are crucial in effective management of a company, in an era where ethics, trust and sustainable development of corporations are highly emphasized and demanded by public. In this context, several types of researchers are performed. Employees, customers, students and youth perceptions on CSR related issues are investigated. Generally, it is found that people tend to have positive and encouraging feelings on companies exhibiting CSR behaviors. Nonetheless, the studies of such kind are relatively less when compared to the studies concerning CSR and firm performance. In different context and from different stakeholders’ perspectives, their expectations, view points and demands on firm’s CSR behaviors should be investigated in greater depth. This is the reasons that the dissertation is designed to study the students’ attitudes towards CSR in the university, to cover the knowledge gap in the existing literature.

 

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