Corporate Social Responsibility is the duty of the management of the company to ensure that the welfare of the society is brought about along with promoting the development and wellbeing of the company. It is the duty of the manager to ensure that both the social interests and the organizational interests are maintained and developed (Cresto, 2006). However, at the moment, the opinion regarding corporate involvement in social responsibilities is differing. The arguments for and against social responsibility activities by the corporate could be considered.
Positive outcomes for the business by performing social responsibility activities:-
The good name and the reputation of the company would be promoted as they would perform their duty of maintaining and developing the interests of the society. As the interests of the society are improved, the social system would improve and this could also be beneficial for the corporate. The management of the corporate would be more interested in maintaining the interests of the society along with the organization. Hence, the Human resources that would be a part of the corporate would be of high quality.
As the organization would mutually benefit with the society, the ability of the company to grow and survive in that particular society would be higher. Hence, the corporate could move into identifying and organizing certain long-term plans. On a long-term basis, the chances of developing sustained profits would be higher if social interests are maintained. The unemployment rates in the society and the job satisfaction in the company would improve due to the economic growth felt by the corporate presence. If the consumers are a part of the society, the chances of developing and maintaining relationships with them would be higher.]
Negative outcomes for the business by performing social responsibility activities:- According to Friedman, the chances of the management to indulge in unethical practices are higher so as to make profits that would ensure performance of social responsibilities.They could be a conflict within the management or outside the management for maintaining the goals of the organization or the goals of the society.
The corporate would be spending the money of the consumers on maintaining and developing the interests of the society. This could raise the prices of the goods or services produced by the company. Consumers may prefer to purchase a product or services from a company that does not have a social benefit policy than a company that does, as the price is more likely to be less.
The stakeholders of the corporate and the potential investors may not want to invest in that particular company, as they fear that they would be losing their money on social beneficial activities.
The company would be using fewer resources on production (as the financial resources are spending on social interests). The production would decrease and the chances of having higher amounts of profit would be lowered. The company’s ability to develop a stronger long-term plan would be less likely.
A Multinational corporation (MNC’s) is a company that has its presence felt in more than one nation across the World or does business at the global level. The term MNC’s was utilized in the 1970’s in the US. MNC’s usually do not consider national barriers that would restrict business. Recently, the foreign investment in the US has improved drastically, and the chances of it improving further in the future are realistically high. The process of a company becoming a multinational occurs in stages.
In the first stage, the company merely exports products to foreign nations. In the second stage, the company develops sales units in the foreign nations. In the third stage, the company would permit foreign-based companies to make and sell their products and services under the main company’s name. In the fourth stage, manufacturing units are set up by the company in the foreign nation. In the fifth step, the management of the company is multi-nationalized in such a way that a corporate decision in the parent company would be affected in the foreign nations. In the last stage, the ownership of the company is multi-nationalized.
Two companies that are US-based MNC’s include General Electric and IBM. General Electric had sales of $ 129, 853 million in the year 2001 (Listed by Forbes Global). The portion of foreign sales was about 33 % and the net profits were about $ 12, 735 million. It has $ 437, 006 million as assets and it market value is about 406, 525 million $. The enterprise value of the company is about 613, 268 million $. IBM has sales of about $ 88, 396 million in the year, and its foreign sales is about 58 % of the total sales. Its net profit of about $ 8, 093 million, and its total assets is about 88, 349 million $. It has a market value of about 167, 206 million dollars and the enterprise value is about 194, 097 million $ (Cresto, 2006).
Two foreign investors MNC’s that have invested in the US include Daimler Chrysler AG (from Germany) which is an automobile company and ING Group (from Netherlands) which offers financial services. Daimler Chrysler AG had a total revenue of 86, 071 million $ in the year 2001 in the US, and its total assets in the US was more than 82, 000 million $ in the US. The ING Group had revenue of about 14, 997 million $ in the year 2001 in the US and its net income was about 442 million US $ (Cresto, 2006).
Cresto, S. C. and Cresto, S. T. (2006). Chapter 3: Corporate Social Responsibility and Business Ethics, Modern Management, (10th ed), New Jersey: Upper Saddle River, pp. 50-76.
Cresto, S. C. and Cresto, S. T. (2006). Chapter 2: Modern Management Challenges, Modern Management, (10th ed), New Jersey: Upper Saddle River, pp. 80-102.
Cresto, S. C. and Cresto, S. T. (2006). Chapter 2: Modern Management Challenges, Modern Management, (10th ed), New Jersey: Upper Saddle River, pp. 106-111.
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