With reference to the CSR pyramid, what are the implications of stopping at a particular pyramid level? For example, would it be all right if a company took its sole responsibility to be financial responsibility to its shareholders? financial responsibility and legal responsibility? Do you agree that CSR is best represented by a pyramid? Why or why not? Can you think of a better way to graphically represent a company’s social responsibility?
To answer this question, we have to understand what the meaning for CSR is at first. According to Trevino and Nelson (2011), corporate social responsibility (CSR) refers to a pyramid constituting four types of responsibility which should be considered at the same time including the philanthropic responsibilities, ethical responsibilities, legal responsibilities as well as economic responsibilities.
I. Implications of different CSR level
i) Financial responsibilities
As a matter of fact, it is same that different responsibility namely, in different level of the CSR, there are different requirements for organizations to take into consideration (Trevino & Nelson 2011).
Referring to the economic namely the financial responsibilities, it is often regarded as the primary function or requirement for an organization especially a business organization to fulfill. As a producer of goods or services to meet the needs of customers, business organizations are also responsible to make some profits from their business, which should also be acceptable by its inside stakeholders to fulfill their interest needs including shareholders and employees (Matten & Crane 2005).
There are so many scholars supporting the perspective that the financial or economic responsibilities are primary compared the other three, because without the financial capacity, any business can’t go on healthily let alone the other responsibility included in the CSR (Trevino & Nelson 2011).
By and large, with reference to the financial responsibilities, we can find that it is so important and initial for all of these organizations especially these profitable ones to produce the acceptable amount of profit to meet the financial needs of its employees as well as these shareholders, and then other responsibilities inside the CSR can be manage more easily (Matten & Crane 2005).
ii) Legal responsibilities
For any business, it is a must to manage its work in the extent permitted by the laws as well as regulations from the government. As Prakash (2000) advocated, the legal responsibilities are the basic for organizations to own the legal right to run the business and carry out the other responsibilities in CSR or else it may be possible for this organization to violate the law or government regulations (O’Dwyer 2002).
iii) Ethical responsibilities
LRN (2004) mentioned that sometimes ethical responsibilities may not be included in the law or government regulations, while ethical responsibilities often refer to a more general responsibility for an organization to fulfill which is to do the right thing and avoid harms. Various examples of good practices carried out by companies in the global market proved the importance of ethical responsibilities for a business.
According to Orlitzky and Benjamin (2001), philanthropic responsibilities require organizations to engage into the activities to promote goodwill or welfare for human beings, which include several issues generally such as money donations or time donations to these people who need help. At the same time, some people also advocate the idea that if some organizations or people don’t carry out some philanthropic behaviors such as donation money or time to the society, we still can’t regard them as unethical ones.
That is to say, philanthropic responsibilities are more discretionary rather than compulsory responsibilities for an organization to carry out.
II. Criteria for organization to obey when deal with the CSR
For organizations, it isn’t an easy job to manage all of the four kinds of responsibilities so balanced. Hence, there is different situation for organization to deal with these responsibilities at different levels supported by different measures depending on the actual situation.
Sole financial responsibilities
There are two kinds of opinions, one of which is that it is right for a company to took its sole responsibility of financial responsibility to its shareholders and employees, the other of which is that the financial responsibilities and legal responsibilities are both important for an organization, there is no difference between the two.
In our point of view, it depends on the current situation for a company to decide whether to take the financial responsibility as its sole responsibility or not. For example, Herbing Wenan consulting company was founded in the year of 2011, till now it is still in the foundation period, which requires a relatively large amount of capital to support its development (Wenan 2012). Under such kind of circumstance, Wenan may not be so capable to carry out other responsibility. Hence in this situation Wenan may choose to solely fulfill the financial responsibilities for its inside stakeholders first due to the environment pressure.
While at the same time, we may not regard this kind of behavior produced by Wenan Consulting Company is inappropriate. As McWilliams and Siegel (2001) mentioned that it is the ultimate responsibility of the organizational management to maximize the profits for not only its shareholders but also its employees. Although it is expected by the shareholders of a business to earn as much money as possible, it will also be embodied in the laws as well as ethical customs for most organizations. Hence, we may infer the conclusion that when an organization has practised its financial responsibilities to meet the profit requirements in the scope of the law and ethics.
By and large, when companies such as Wenan Consulting Company, which are faced with more financial pressures than other kinds of pressure, we may suggest it be reasonable for the company to take the sole responsibility of financial responsibility in a reasonable extent.
Financial and legal responsibility
Marrewijk (2003) mentioned the definition of corporate social responsibility is not so absolute, while it often includes the content that to achieve the financial success in ways that both respect the ethical values and the society, communities, people as well as the environment. Hence, in another word, we may infer the conclusion that the financial responsibilities, legal responsibilities even the ethical responsibilities as well as the philanthropic responsibilities have close links with each other. As we discussed above, carrying out the legal responsibility may assist organizations to avoid the risks of violating the laws.
That is to say, it will ensure the business of the organization is operated in a healthy manner, which will not make this business to face the sentence of the law. Meanwhile, if the organization well fulfills the ethical responsibilities or philanthropic responsibilities, its reputation as an ethical organization in the public’s eyes will be enhanced, which may further promotes its profitable level (Marrewijk 2003). That is to say, the financial responsibility of this organization may be well fulfilled invisibly.
By and large, we also support organizations to take responsibilities including financial responsibilities as well as legal responsibilities and other responsibilities to make this organizational more social responsible to meet the needs of the public as well as the customers or potential employees and so on.
Let’s take the example of L’Oréal Group for instance, which is the world famous cosmetics brand with great fame. L’Oréal Group has been engaged into the practices and activities to maximize the welfare for not only the local community but also the society (L’Oréal 2010). At the same time, L’Oreal Group also tries every means to maximize the profits of its shareholders as well as its employees by well designed developing and expansion strategy in the global market to reach expected financial status (L’Oréal 2010). By and large, L’Oréal can be defined as the successful examples of company which both take the financial responsibilities and other types of responsibilities in its business practices.
III. Ways to graphically represent the CSR
As we discussed above, depending on different circumstances, the four responsibilities included in the CSR can be arranged in different ranks.
For instance, when company possesses insufficient financial capacity or lack of necessary capital to maintain the healthy circulation of its business, we may support this organization to fulfill the financial or economic responsibilities first in a reasonable manner and then it is suitable for this organization fulfill other kinds of responsibilities to the acceptable range. Hence, we may graph the CSR pyramid in the following, which support to fulfill the economic responsibilities first, and then the legal responsibilities, ethical responsibilities as well as the philanthropic responsibilities which are more discretional than the other three.
Figure 1.0 Pyramid of CSR
At the same time, when companies have been maintaining good practices in the legal and economy aspects, we may support these companies to devote more energy, money as well as time to the fulfillment of the ethical and philanthropic responsibilities to build better images as ethical organizations to gain more support from customers as well as the public which may support these companies to gain more profit indirectly. Hence, in figure 2.0, we graph a new pyramid for CSR in the following.
Figure 2.0 New Pyramid of CSR
I. Company example
Trevino and Nelson (2011) mentioned product safety issue is regarded as one of the basic customer right which may become the determinant on the reputation of a corporate. Hence, we may advocate the statement there is seemed nothing than the product safety issue to put a company out of business faster if it ignores the product safety and produce dangerous products.
There are a variety of examples to emphasize the importance in product safety issue for any business, especially the automobile manufacturing business. When referring to the economy crisis during the year 2008 to 2009, many industry sectors including the tourism industry, financial sector, the airline industry and automobile manufacturing industry have been suffering a lot of attacks especially the heavy financial pressures (Schwarzinger 2010).
During the economy depressing period, there are many problems taking place in the automobile manufacturing industry. Toyoda is a world famous automobile manufacturer in the global market, which once enjoyed a good fame on product safety as well as quality. While in the recent years, its recall incident put Toyota in the dilemma that Toyota had made announcement on the emergency issue to fix its sticky gas pedals which may further upgrade as the acceleration problem and become the nightmare for this global automobile manufacturing giant. Due to this incident, Toyota has no choice but to face the sales halted and billions of dollars loss. And worse still, its reputation as a high quality automobile brand may suffer great damage. (Connor 2010)
According to Milton (2003), it is seemed there is often involved with safety problems for the automobile products at any speed. And nowadays, there are several issues referring to the product safety in the automobile manufacturing industry including the unintended acceleration such as the recall event in Toyota, stability such as the problem of rollovers and roof crush which even becomes the common problem faced by car owners, risk of rollover due to the instability in the vehicle design, roof crush which even become one of the main causes for terrible injury and even deaths as well as the tyre related problem, the deficient in the quality which may result in terrible traffic accident (Davis 2009).
Hence, with more and more problems taking place related to the product safety issue in the automobile products, it’s time for us to draw the line on product safety based on the actual safety needs of the society as well as the customers.
For one thing, the automobile manufacturing industry refers to the certain kind of industry including both the production of original equipment for motor vehicles and these kinds of products which are demanded aftermarket. For the other, the original equipment refers to these products which are involved into the manufacturing process of the automobile products. Furthermore, the aftermarket products then refer to this kind of product which is divided into two types, namely the replacement product and accessory product.
Therefore, to ensure the certain degree of product safety in the automobile products are relatively tough tasks to offer reasonable and effective standard to ensure the safety of each manufacturing process as well as each components and the aftermarket products. Based the research from Spier (2011), we offer the standard to outline the line for product safety on automobile products to meet the needs both from the customers and the society.
As there are so many processes involved in the automobile manufacturing industry, the line to determine the product safety should including the following.
First, the quality of the manufacturing process for automobile product body to meet the requirement of both the regulation of government and the actual situation namely from the needs of customers and the society is important. If the automobile product can’t meet the most basic requirement, it can’t be regarded as safe (Spier 2011).
Second, these important components including the carburetor, piston, valves and so on are also important parts for automobile manufacturers to pay full attention. By and large, if the automobile products meet this quality standard that these components can fulfill, the automobile products then can be regards own the elementary safety factor(Spier 2011).
Third, the safety ratio in both the engine of gasoline and other engine parts should also be carefully design and manufacture (Spier 2011).
Fourth, lighting equipment for the automobile product should also meet the safety standards set by the government as well as the actual needs of the market (Spier 2011).
Fifth, the steering components, suspension components, brake system, seating system, as well as other components and systems of an automobile are also so important for the automobile manufacturers to pay full attention to ensure this product not only meet the requirements of related safety policies and regulations but also the real needs of the market(Spier 2011).
By and large, the above issues referring to the product safety in automobile products belong to the compulsory clauses, which every automobile product should meet, or else they may loss the chance to be introduced to the market.
Furthermore, for each automobile manufacturer, the product safety issue may not be so easy confined into these legal documents. Although the world economy is still in a relatively downturn period, the competition among automobile manufacturers both in the domestic market and the international market becomes more and more fierce. Hence, the requirement on product safety may be injected with new content (Spier 2011).
For instance, besides the safety level, the comfort levels of the automobile products are also regarded as one of the components inside the product safety issue. Therefore, automobile manufacturers have to try their best to meet these new requirements on product safety under the influence of market trend and economy developing level of the customers in the society (Spier 2011).
Generally speaking, based on our discussion above on the automobiles’ product safety issue, we may infer the conclusion that the actual safety level of the automobile products are far beyond the requirements on some legal regulations which are determined not only by the government but also the actual situation of the market including the requirements from the customers and the economy.
In a word, the right to determine the level of product safety is owned by the customers and economic status of the market.