Frame of Reference
Firstly, Corporate Social Responsibility is presented. The concept of Corporate Codes of Conduct is intro-duced by describing the principles, motives and process of implementation of these codes. We conclude this chapter with presenting Current Issues on Corporate Codes of Conduct, such as binding regulations versus the voluntary nature of codes of conduct
Corporate Social Responsibility
Corporate Codes of Conduct are often discussed in the context of Corporate Social Re-sponsibility, (CSR.). The concept of CSR has during recent years been recognised amongst companies and has had increased importance in business-related questions (Löhman & Steinholtz, 2003).
There is no universal accepted definition of CSR. Instead there is a wide range of defini-tions, often biased towards different interests. Private companies, governments and NGOs might perceive CSR differently. However, in general, CSR is widely defined as company ac-tivities – voluntary by definition demonstrating the inclusion of social and environmental concerns in business operations and in interactions with stakeholders (Marrewijk, 2003). Is-sues often brought up when discussing global business is the role of MNCs and their re-sponsibility in society. As public awareness on these issues are increasing, Sethi (2003) ar-gues that MNCs can no longer ignore voices of criticism as it reveals a gap between expec-tations from society and corporate performance.
CSR has arisen from the vision that businesses can and should have a role beyond purely earning profits. It involves an understanding that all actions undertaken by a business have some impact both on the inside or the outside of the organisation, more specifically on customers, employees, communities and the environment (Andriof & McIntosh, 2001). Social responsibility has almost become a requirement in today’s business relations. It is to-day generally accepted that corporations profit from the society, as long as the corporation takes an extensive social responsibility and contribute to the society’s development (Van Luijk, 2000).
CSR implies that it is the management of the company that must decide what responsibility it should have. It has to consider its fundamental values and its stakeholders and thereafter clarify its role in the society. Hence, the term CSR indicates companies’ voluntary integra-tion of social and environmental considerations in their activities beyond what is regulated in the law (Löhman & Steinholtz, 2003).
Further, Löhman & Steinholtz (2003) identifies two approaches of companies’ engagement in CSR. Firstly, that companies wish to take responsibility whatever consequences might oc-cur and secondly that companies are responding to the society’s demand on how companies should act. In the first approach the initiative is more complex. Policies are often devel-oped from the companies fundamental values, the engagement have an overall impact on the company’s business idea and strategy and long term results are emphasised rather than short term. In the second approach companies want to “give something back” to the soci-ety in which they operate in as well as benefit from. These initiatives are often formed as projects concerning a certain area and the demand of short term results are high. The man-agement is not necessarily involved in the continuous project that neither has a great im-pact on business decisions or the business strategy (Löhman & Steinholtz, 2003).
According to Sethi (2003) MNCs must acknowledge three conditions concerning enhanced social responsibility. Firstly, MNCs shall manage all their stakeholders in an equal manner, regardless of their economical or political power (1). Secondly, MNCs are to act as agents of change through the use of their economical power and thereby advocate democratic values and human rights (2). Thirdly, actions of CSR should be treated as standards for be-haviour (3). These actions of social responsibility should therefore be compulsory, trans-parent as well as a matter for validation from external actors (Sethi, 2003).
There exist some common beliefs from companies taking social responsibility which in-volves to provide sustainable jobs for employees, good returns for investors and prosperity for the communities in which they operate. The reasons companies engage in social re-sponsibility are the advantages they recognise from this engagement (Andriof & McIntosh, 2001). There is a great deal of companies that recognise the CSR process as a part of a brand building strategy or at least recognise that this has an impact on the development of the brand (Löhman & Steinholtz, 2003). The reputation of the company is of increased im-portance as consumers and investors often consider reputation and performance equally important to the price in purchasing decisions (Andriof & McIntosh, 2001).
Löhman & Steinholtz (2003) acknowledge that involvement in social responsibility activi-ties may give the impression that it negatively affects the company’s financial situation. Henderson (2002) is critical towards CSR and does not believe companies should have a different role than the traditional, that is, to maximise profit and act in the owners’ interest. The acceptance of companies taking an overall social responsibility will wrongly change the concern of profitability to the well being of the society. Although, a company taking social responsibility bring some positive effects to the company it also tends to have negative consequences, such as an increase in costs that may lead to lower profitability.
The following five activities within CSR, if implemented, will most definitely increase the company’s costs according to Henderson (2002). These involve: (1) adopting principles to limit activities that have negative effects on the environment, (2) adopting standards for protection of environment and health at all their various working places around the world, offering salaries and working conditions outside what is necessary on the local market according to local law, (4) formally and informally give priority to local subsidiaries and en-trepreneurs as well as (5) refusing doing business with companies not having an acceptable business custom.
However, Messick & Tenbrunsel (1996) argues that the advantages arising from engaging in CSR often are higher than the costs. Advantages that can be identified to compensate for higher costs involve customers’ willingness to pay a higher price for products from companies taking social responsibility and employees’ desire of working for socially re-sponsible firms leading to the ability of attracting skilled personnel. Advantages such as in-creased employee productivity due to a satisfying work environment can as well be identi-fied as a positive result of engaging in CSR (Andriof & McIntosh, 2001).
As MNCs recognise that they are not merely responsible for the profit of their shareholder but also expected to present a global social responsibility, a common response is the for-mulation of corporate codes of conduct (Gooderham & Nordhaug, 2003). Hence, one way for companies to relate to CSR is to express demands on their own organisation through codes of conduct (Löhman & Steinholtz, 2003)
Corporate Codes of Conduct
Mamic (2004) implies that the term codes of conduct does not have a fixed definition. However, basically it can be defined as a “statement of business principles defining a set of relation-ships on a range of topics between an entity and its stakeholders” (Mamic, 2004 p.36). The principles of a corporate code of conduct should not only serve as guidelines for certain behaviour but should also include tools used to implement, monitor and review the code (Wawryk, 2003).
Corporate codes of conduct are not authorised legally, rather they are voluntary initiatives undertaken by companies addressing various operational and social issues. These codes may be developed in collaboration with the companies’ stakeholders such as trade unions, NGOs and governments (Mamic, 2004).
There are various sources behind the many creations of guidelines to regulate the behav-iour of MNCs. The advantages of having a variety of different codes is that, amongst other issues, it stresses the specific requirements for companies operating in different industries and manners (Magnusson & Norén, 2003). The large range of actors and motives regarding codes of conduct result in a broad representation along the whole global production system and these initiatives can together generate positive results such as higher standards and ex-pectations (Jenkins et al., 2002). However, the variety of different codes may lead to a nega-tive aspect; it may be somewhat confusing for the individual company (Magnusson & Norén, 2003).
Corporate codes may be created both directly to the company’s employees as well as to its subsidiaries. However, progressive MNCs have developed codes that apply for suppliers, subcontractor and other business partners. That is, workers in the supply chain who are not directly employed by the company are to fulfil the terms of the code. This expansion is de-termined as one of the greatest innovations of modern codes (Mamic, 2004). Favourably a code of conduct should address the MNCs’ operational relationship as well as responsibili-ties towards other constituency groups, not merely focus on internal employees (Murray, 1998).
Jenkins et al. (2002) mentions that the various stakeholders’ objectives of an MNC differ, therefore the character of their guidelines, inevitably differ. These differences are deter-mined by the key issues of the stakeholder and impact the coverage and implication of the guidelines. This leads to various interest provided in the formation of guidelines, and it is important to bear this in mind when dealing with codes of conduct
Foundations for Corporate Codes of Conduct
As illustrated in figure 2.2-1, corporations that create and implement corporate codes of conduct often use international guidelines as well as codes created by NGOs’ as founda-tions for their own corporate codes of conduct (Wawryk, 2003). External organisations such as governmental departments, NGOs and international organisations such as The In-ternational Labour Organisation (ILO) or The Organisation for Economic Co-operation and Development (OECD) can provide useful assistance in the process of creating a code due to their insight in internal and external factors affecting MNCs in global business (Mamic, 2004)
Initiatives from International Organisations
In the international community there is a growing interest of corporations’ social responsi-bility and how they operate globally. In this context, ‘international codes of conduct’ are of-ten referred to as guidelines for MNCs. The emphasis on how corporations conduct busi-ness globally, the recognition of human rights in practice and other ethical business issues are central parts in the creation of international codes of conduct (Wawryk, 2003).
The Guidelines for Multinational Enterprises formed by OECD is one example of international codes of conduct and they are created as advice to MNCs on how they should conduct their businesses when operating globally (OECD, 2000). However, the OECD guidelines have met some criticism mainly due to their voluntary approach lack of supervision and mechanisms for complaint. In 2000 a reformation of the codes was therefore conducted and adopted (Magnusson & Norén, 2003).
Another example can be found in ILO, the International Labour Organisation, and their Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy. The princi-ples and advices in the articles concern the right to be members of trade unions, elimina-tion of discrimination at the workplace, elimination of child workers and the elimination of forced labour. The content in the declarations are voluntary guidelines intended for gov-ernments, labour organisations and multinational companies (ILO, 2001).
In 2000, United Nations (UN) introduced Global Compact. It consists of ten principles that are based on international agreements such as the ILO conventions and the human rights declared by UN. The principals are compiled as a set of values rather than directives and are formed to function as a self-adjusting process. The fundamental idea that lies behind United Nation’s principals in Global Compact is that a sustainable global economy can be de-rive through a collaboration of the private sector in partnership with other social actors. Global Compact is compiled as a set of values rather than directives and the implementa-tions of them are to be carried through by transparency. The principals do not conclude any control and are voluntary to their nature; and are formed as functioning as a self-adjusting process. The corporations involved are to report of “best practices” to inspire others (UN, 2004)
Initiatives from Non-Governmental Organisations
In the 1990’s many NGOs responded to the governmental ineffectiveness of controlling large corporations which was a result of the deregulations of the 1980’s. A concern among NGO activists arouse due to the apprehension of an uncontrolled globalisation would re-sult in negative social and environmental consequences for developing countries (Jenkins, 2001)
1.2 Problem Discussion.
1.4 Research Questions
1.6 Disposition of the Thesis
2 Frame of Reference
2.1 Corporate Social Responsibility
2.2 Corporate Codes of Conduct
2.3 Current Issues on Corporate Codes of Conduct
3 Methodology and Method
3.1 Research Approach
3.3 Practical Aspects of the Study
3.4 Evaluation of Chosen Method
4 Empirical Findings
4.1 The Government’s Viewpoint
4.2 The Non- Governmental Organisation’s Viewpoint
4.3 The Business Society’s Viewpoint
5.1 Corporate Social Responsibility
5.2 Corporate Codes of Conduct
5.3 Current Issues on Corporate Codes of Conduct
7 Concluding Discussion
7.1 Critical Evaluation of the Study
7.2 Implications for Further Research
List of References
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