Corporate Social in Emerging Economies

Reality and Illusion

Cosmina Lelia Voinea, Cosmin Fratostiteanu

• Publisher: Routledge
• Year: 2018
• eBook ISBN: 9781351621953
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Negocios en general

Over the last few decades, emerging markets have increased their share in world GDP and have come to play a prominent and growing role in global business. Their period of impressive growth was triggered by major global advances such as economic liberalization and governance reforms and deregulation.

As governments and policy makers have permitted global competition from the more advanced, developed world, the prospect of millions of consumers in developing countries not only encourages locals to start businesses, but also appeals to multinational enterprises overseas. The growing presence of emerging markets on the world stage has not been left unnoticed and many investors have contributed significant amounts of capital with the hope of receiving major financial gains. In this context, emerging markets are particularly facing sustainability challenges due to their fast growing pace and fuzzy or inexistent sustainability regulations.

Corporate Social Responsibility in Emerging Economies represents a realistic critical overview of the state of affairs of CSR in the context of an emerging economy. It is an accessible and comprehensive diagnostic point of reference for the academic world as well as for policy makers. The topic of CSR is highly relevant for the business world and a challenging subject for the theory and literature.

This is a unique book that offers new empirical insights for policy makers and scholars of the fields of CSR, Business Ethics, Organizational Studies and related disciplines

1 International Organizations Increasing Awareness on Social Responsibility

1. Introduction

Corporate social responsibility (CSR) is an outlook referring to the contributions that companies need to make toward the development of a modern society. As the states and international institutions became aware of adopting the CSR principles by companies and the sustainable development objectives, there also came the need for international standards to define a desirable corporate behavior.

The failure of some big corporations emphasized the importance of social responsibility and proved that an inadequate corporate administration, even in terms of a developed market economy, could seriously affect shareholders, creditors, state, investors, contractors, consumers (shareholders’ assembly), and people (welfare-employees, depositors, retirees). It is noteworthy that the emerging problems would have had less negative consequences if more efficient methods of control and survey instruments for corporate management responsibility and transparency of their activity had existed.

The social responsibility originated in the nineteenth century. At that time, some employers were already behaving in a socially responsible manner toward their employees, offering several benefits, such as taking the responsibility for their children’s education, social services, and so on. This responsible consciousness was far from being carried unanimously at that period. Only at the end of the twentieth century, the new concept of CSR started to develop and to be accepted.

Until the beginning of 1970s, the companies were concerned only with their economic performance, the satisfaction of shareholders being prioritized. CSR has its roots in an array of different factors such as the 1970s social movements, the Vietnam War, the political impact from South Africa, and the environmental disasters and climate phenomena which effects were felt in every country caused by environmental problems. In addition, the overall output gave birth to a thorough reflection regarding the social responsibility as well as for the environment, convincing some companies to adopt policies by the end of 1990 to become active in the direction of an increased social responsibility.

Not so long ago, only few were concerned about the social responsibility issue, which was perceived, generally speaking, as a major stage only for the companies listed on the stock exchange. On the other hand, the companies that are not listed on the stock exchange hesitate regarding the necessity of introducing the standards of social responsibility into their activity, justifying their reduced number of shareholders, and therefore, introducing the principles of social responsibility is expensive. Thus, it becomes clear why the developing countries don’t attach the importance to matters concerning social responsibility and why the implementation of the respective principles barely unrolls.

Although the financial crises pointed out convincingly to the necessity of promoting the social responsibility, only in few developing countries, this matter is brought to the attention of the decisive factors. It is to be mentioned that inefficient procedures of social responsibility present a great danger not only to companies, but also to the entire society.

The investors become more and more demanding with regard to the quality of social responsibility information, the manner of revealing it, and to the implementation of leadership standards in companies where they are interested to invest their capital.

The promoting of some efficient measures of social responsibility and the implementation of business principles constitute efficient measures to foreworn and struggle against the corruption acts; the business principles are meant to guide in practice the small, medium, and large companies facing the struggle against corruption and bribery, promoting the advantages of a continuous business.

At first, social responsibility embodied the relations between managers and shareholders. Meanwhile, other aspects related to social responsibility appeared—mutual relations between the company and its management and interest parties: employees, creditors, contractors, and civil society.

Promoting the social responsibility principles, as well as the efficient measures for corporative administration, became the basic problem of reforms and economies both for developed countries, and for those in development.

The countries in transition began to show their interest in social responsibility, because many companies emerged after privatization, and some of them own a quota from the state. To provide proper standards of social responsibility, public’s trust in the rightfulness of the privatization process grows in these domains, and it contributes to obtaining the maximum efficiency of national investments.

The international business environment is going through the process of a long-term structural change. Once with the appearance of highly qualified services industry, the companies that provide services and technology penetrated the international market. Large-scale companies are still responsible for the main part of international investments, and it is making an entry the tendency of wide range fusions. At the same time, the level of foreign investments made by medium- and small-size companies also increased, and these companies play a significant role on the international scene. Multinational corporations, as their equivalents, developed themselves to comprise a wide range of business arrangements and systematization. Strategic alliances and friendly relations with suppliers and contracting parties tend to erase the limits of a corporation.

The rapid evolution of the structures of multinational companies is mirrored also in the transactions displayed in the developing world, where the direct level of foreign investments has grown rapidly. In developing countries, the multinational corporations varied their production, exceeding the primary production phase and extractive industry by developing manufacture, assembly lines, markets, and autochthonous services.

The nature, goal, and speed of the economic change brought new strategic changes to corporations and their capital owners. Multinational corporations have the opportunity to implement the best practical politics and durable development that seek to ensure the coherence between social, economic, and environment goals. The ability of multinational companies to promote a durable development is achieved considerably when trade and investments are performed in open, adequately regulated competitive markets. Many multinational companies proved that showing respect for maintaining high standards in managing businesses can improve the economic growth. The existing competition is sharp, and multinational companies are confronted with staff variety. Within this context, some companies may be tempted to neglect their standards or principles, trying to achieve advantages, but not in a proper way.

2. International Organizations That Have Contributed to the Social and Governmental CSR Awareness

Many international organizations have contributed globally to the CSR development.

The United Nations (UN), the European Union, and the Organisation for Economic Co-operation and Development (OECD) are the three most important institutions involved in the elaboration of a frame to define and establish the indicators through which any social responsibility program can be transparently evaluated.

The United Nations Organization (UNO) is the most important international organization in the world. It has the mission to ensure the global peace, the compliance of human rights, international cooperation, and compliance of the international law UNO provides the food supply for 90 million people from 80 countries; co-operates with 193 countries to combat the climate change and support sustainable development; offers help for the improvement of health and lifestyle of millions of poor people from the rural areas; protects and promotes human rights; and uses diplomacy to prevent conflict.

During 2004–2005, Romania was a non-permanent member of the UN Security Council. From this position, it contributed to the application of the provisions of Carta UNO regarding the regional organizations, by promoting a resolution project concerning the UNO cooperation with regional organizations in maintaining peace and international security, a project that was adopted on October 17, 2005.

Through its presence in various UN bodies, Romania has the opportunity to participate in the decision-making process of global institutions, having international influence globally and in the neighboring geographical regions. In addition, its participation in the peace-keeping UNO operations highlighted the efficiency of Romanian army and its political availability to participate in multinational military activities to sustain the international stability.

The United Nations Development Programme (UNDP), as a subsidiary organ (specialized program) of the UN, was established in 1965. It represents a global UNO network in the development field, aiming to support the developing countries to attract and use appropriately the development assistance. The program has identified and is active in four main fields: poverty reduction and fulfilling of the Millennium Development Goals; democratic governance; preventing crises and helping reconstruction; and environment and sustainable development.

The UNDP office in Bucharest was opened in 1972. On February 1, 1972, it was already running six major projects, with a budget of 41.1 million USD. During this collaboration, the UNDP offered technical assistance and organized training programs for experts from different domains of activity.

The UNDP run a valued assistance and cooperation activity for development, with an inclusive impact on concrete sustainability of Romania joining the EU and the North Atlantic Treaty Organization (NATO). The UNDP was the main partner of the Govern at the elaboration of the National Strategy for Sustainable Development (2010–2030), an essential document for planning of sectorial politics, as well as in relation with the EU arrangements.

3. OECD Principles for Social Responsibility

To coordinate the actions of companies to achieve a sustainable development worldwide, in 1976, the OECD developed the Guidelines for Multinational Enterprises: a series of directives that need to be taken into consideration by any company regardless of their field of action having in sight the human rights, the protection of the environment, consumer interests, corruption, and competition.

Those who are engaged in politics in both economies, in the developed countries as well as those who tend to the market economy, direct their steps to ensure a good corporatist administration. The OECD principles of corporatist administration set the frame for favorable practices, approved by the governments of the 30 OECD member countries. They were conceived to assist the governments and regulation organisms both in the OECD countries and from other parts in outlining and applying the effective rules, regulations, and conduct policy. Simultaneously, they provide effective methods to follow for exchanging actions, investors, companies, or tertium quids, which play a role in the developing process of social responsibility. The OECD principles were used as reference points to accomplish national codes concerning management corporations.

The OECD principles of social responsibility include the following:

1) Shareholders’ rights. Social responsibility has to ensure the frame for shareholder’s right protection provided by the law and to verify its observance.

2) Impartial treatment of all shareholders. The frame of social responsibility has to ensure an impartial treatment of all shareholders, including those who are minority or foreign. All shareholders have to be effectively protected when their rights are not respected.

3) Disclosure and transparency of information and exchanges. The social responsibility frame has to ensure transparency, opportunity, and accuracy of all materials and documents related to company, including its financial condition, performances, patrimony, and management.

4) Responsibilities of the company’s board. As part of social responsibility, the board has to ensure the strategic orientation of the company, the effective survey of the management, and their responsibility concerning the society its and shareholders.

5) Interested Parties’ Role (Stakeholders—employees, clients, creditors, government, civil society) in promoting social responsibility. Hereby, social responsibility needs to acknowledge the interested parties’ rights, as stipulated by law, and to encourage active cooperation between the company and interested parties to create welfare and jobs and to ensure financial stability of the company.

The principles were revised to take into account recent developments and experiences of the OECD member or non-member states. Those who make politics are now more aware of the contributions of a good social responsibility, which leads to balance on the financial market, to investments, and further economic growth. The companies have a better understanding of how social responsibility contributes to their competitiveness.

The principles are a vivid instrument, offering non-obligatory standards and favorable practices as an implemented guide that can be adjusted according to specific circumstances in individual countries or regions. The OECD offers a forum for informal dialogue and exchanging experience between the member and non-member countries. To handle changing circumstances, the OECD will look up closely the social responsibility development, identifying tendencies and foreseen remedies for future challenges.

The OECD efforts will also increase the culture of value for an ethical and professional conduct, with trust and integrity playing an important role in economic life for a healthy business environment and future prosperity.

The principles are not obligatory because their implementation needs to be adjusted according to different legal, economic, and cultural circumstances. This is a significant key of principles, which makes them a useful tool for the entire world, on developed markets or those being in transition to market economy. The governments also need to find a balance between the rules and regulations on one side and flexibility on the other side.

Because multinational companies operate worldwide, the international cooperation in this field needs to be extended to all countries. The governments that adhere to the OECD principles encourage companies that operate on the territory of their states to respect the provisions, considering the specific context of every host country.

The governments have the right to set the terms of internal jurisdiction in which the multinational companies will function, under the influence of international legislation. The entities of multinational companies from different countries are liable to legislation in force from those countries. When the multinational companies face contradictory demands imposed by adhering countries, the governments will cooperate with good faith concerning the solution to the issues.

The use of adequate international mechanisms, including arbitration, is encouraged to solve the conflicts and to enable decision making in case of legal differences that appear between the national governments and companies.

The OECD will continue its analysis of investment political fields, including the measure of maximizing the benefits of liberating the investments, social dimensions, and environmental impact.

The role of principles is to assist the governments of OECD and other member countries in their effort to estimate and improve the legal, institutional, and regulatory frame of social responsibility, and to provide the right paths and suggestions for the stock markets and other participants who play a role in the process of developing an efficient social responsibility.

The principles represent a mutual base that OECD member countries consider essential to improve the beneficent practices of social responsibility. They don’t plan to serve as substitutes for government, semi-governmental initiatives, or the private sector to develop a more elaborate model of “the best practices” in social responsibility.

Social responsibility is the key element in improving efficiency and economic development, and also in increasing investors’ trust. Social responsibility implies a set of relations between the company management and the board council, their shareholders, and others. It also provides a structure through which the objectives of a company are set, and the necessity of setting these objectives, to accomplish them, and to survey the performances.

Social responsibility should provide specific stimuli to the boarding council and management to obtain favorable objectives for the company and for its shareholders, and it should enable the survey. The presence of an effective system of social responsibility, within a company and in an economy as a whole, helps to deliver a confidence level necessary for good functioning of a market economy. Social responsibility is just a part of a wider economic context in which the firms operate. The social responsibility frame depends on a legal, regulatory, and institutional environment. In addition, factors such as business ethics and community social interests where the company operates can also have an impact on its reputation and long-term success.

The degree to which every company observes the basic principles of social responsibility is a growing factor, extremely important in making decisions and investments. Of a particular relevance is the relation between the social responsibility practice and the increasing of international character of investments. The international stream of capital entitles companies to obtain financing from a wide range of investors. If countries try to gain total profit from global capital markets, and if they try to bring long-term capital, the social responsibility arrangements need to be credible, well understood, within council, and in conformity with the accepted international principles.

The principles are not obligatory, and they try to set objectives and to suggest different ways of accomplishing them. Their purpose is to serve as a reference point. They can be used by those who politicize to examine and develop the law and regulatory frame of social responsibility to reflect their own social, economic, legal, and cultural circumstances.

To remain competitive in a changing world, the c...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Preface
• Acknowledgments
• 1 International Organizations Increasing Awareness on Social Responsibility
• 2 Nonmarket Diffusion of CSR in Emerging Economies
• 3 The Impact of Economic Policy on Environmental Responsibility
• 4 CSR Disclosure in Emerging Economies
• 5 Social Responsibility and Its Involvement in the Economic Growth
• 6 Motives Underlying CSR Practices of Western MNEs in Emerging Economies
• 7 Business Ethics and Social Responsibility
• 8 Ownership and Sustainability Practices in Emerging Economies
• 9 A Topical Sustainability Issue: Recycling
• 10 A Hermeneutical Approach to Sustainability Research and Practice Reflection by Ana Cristina Campos Marques
• References
• Index