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Responsible Corporation

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Responsible Corporation

Corporation as a legal entity by law is granted the ability to obtain rights and obligations. While existing only on paper with the hands of their employees of various levels and shareholders a firm is created, operated, developed. The downside of being an ephemeral entity is that all the responsibilities of a corporation are assigned by law and directly linked to the main purpose of its mere existence. To generate profits in order to generate more profits in the future. Merriam-Webster Dictionary defines responsible as “able to answer for one’s conduct and obligations and able to choose for oneself between right and wrong” (Merriam-Wbester Inc.). In this essay we are going to identify in what ways a corporation may realize its responsibility and how in practice some of these responsibilities are fulfilled.

In his work on corporate social responsibility John Campbell discusses several dimensions of how it is possible to measure (social) responsibility of a corporation. Among them are mentioned the following levels: “how the corporation treats its employees with respect to wages, benefits, and levels of workplace safety; how it treats customers with respect to product quality, truth in advertising, and pricing; how ihow the corporation treats its employees, how it treats customers, how it treats its suppliers, how it treats the government, how it treats the community (p. 5). It possible to distribute these levels into two groups. Responsibilities towards employees, customers, and government are in reality obligations embodied in the law and imposed on firms. Would a corporation be committed to these responsibilities if they were not enforceable?

Wages to its employees, employment benefits and work safety are the costs to business. In order to minimize and avoid these costs some multinational firms move their departments to countries with low standards of living. Thus, for example, a corporation in order to reduce production costs moves manufacturing to another country where it is cheaper to hold a factory. The home country of that corporation has outflow of money, the level of employment level likely to fall. None of the government regulations are broken; however, is it still possible to say this firm lives up to its (social) responsibility? Yes, but not towards the community it was initially incorporated. The main goal of generating profits leads to an inevitable trade off spotted by Devinney ”… any position taken by a firm and its management, social, ethical, or otherwise, has trade-offs that cannot be avoided. Corporations can be made more “virtuous” on some dimensions…, but this will invariably involve a price on other dimensions… Corporate social responsibility, like most aspects of life, has very few, if any, win/win outcomes” (p. 46). By moving its facilities to a region with a cheaper work force a corporation improves standards of living in that region, what in its turn at some point raises the costs of doing business and forces that corporation to abandon the area and move to another region (Achbar & Abbott, 2003). Thus, in fact the corporation is just using the recourses of such an area until economic benefits are prevail; however, it is possible to say that the benefits are mutual as the region has an in-flow of capital and faces economic growth.

As the main characteristic of the first group of responsibilities is enforceability, the second group is more voluntarily but focuses on profit directly. In order to achieve its immediate and long-term goals corporations conduct deals. It is in their own interest to uphold their contractual responsibilities, both formal and informal. Generally, entering into an agreement assumes a win/win situation for all the parties. If a company constantly frustrates their obligations its business reputation may be eventually damaged and it won’t be able to find a reliable business partner, what would upset profitability. The other responsibility in the group, which represents the most interest for the discussion, is obligations towards community, which have several aspects: philanthropy and environmental awareness.

Philanthropy is a very double-edged idea. On one hand by making charitable contributions a corporation fulfills its social duty, supports the society values, puts an effort to make the world “a slightly better place”. On the other hand, everything is about profits. First of all, charity activity significantly improves the image of a company in the eyes of consumers. In 2010 the whole world was monitoring the development of ecological disaster in the Gulf of Mexico caused by British Petroleum. The price of stocks fell from USD 44.6 in March 1 2010 to USD 23.34 in June 1 2010 (Yahoo! Finance). A well-thought sponsorship activation programme saved the public image of the company. What else do you remember about the year 2010? London Summer Olympic Games was generously supported by British Petroleum as a top tier sponsor. By the end of the year the stocks of British Petroleum were 10 points up; shareholders were collecting dividends again (Yahoo! Finance).

Apart the marketing programmes like sponsorship the charity itself is a viable tool of regulating taxable income in the hands of a corporation. Sponsorship is an expense for a firm, charitable contributions are tax deductible. It seems quite questionable to raise a matter of social responsibility when on a main Canadian news liners, CBC News, closer to the end of the fiscal



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