Corporate Social Responsibility
The question of whether the corporation should build its activities in accordance with the requirements of society is a subject of constant debate. The very concept of corporate social responsibility was always highly controversial. The problem in determining the functions of business in modern society is to find an answer to the question if the profits can be the main aim of the company or the company is entrusted with solving the range of social tasks?
At the beginning of the 20 century some business leaders suggested that the business community should use its power and influence to extend social goals, not only to achieve the highest profits. As a result, there are two principals at the heart of the modern understanding of CSR. The first one is the principle of charity – the business must provide voluntary assistance to vulnerable people. More successful members of society must support those who are less than satisfactory. Both individual and corporate philanthropy are promoted as voluntary actions to support social initiatives. The second principle is the principle of trustee – the business that acts as a conduct for the will of society must take into account the interests of those who can be influenced by decisions and policies of the company. It is important to understand the interdependence of business and society and the balance of interests and needs of many diverse social groups. From this perspective corporate managers should think how the company’s activities affect the welfare of society.
Debates about the role of business in society gave rise to numerous arguments for and against social responsibility. Mescon, Albert, & Khedouri (1988) give the following arguments in favor of social responsibility.
- Favorable long-term prospects for business. Social activities for enterprises, improving the lives of the local community or eliminating the need for state regulation may be in their own interests by businesses in benefits of participation in society. In more prosperous society from a social point of view conditions for business activity are more favorable.
- Change of needs and expectations of the public. Business-related social expectations changed dramatically since the 60’s. To narrow the gap between the new expectations and the actual response of the enterprises, their involvement in social issues is necessary and expected.
- Availability of resources to assist in solving social problems. As business has considerable human and financial resources, it should send a part to social spending.
- A moral obligation to behave socially responsible. A company is a member of the society and, therefore, must also control its behavior. The company, like the individual members of society, must act in a socially responsible manner and contribute strengthening of the moral fabric of the society.
However, there are many arguments against social responsibility.
- Violation of the principle of profit maximization. The direction of resources to social spending reduces the impact of the principle of profit maximization. The company acts in the most socially responsible way, focusing only on economic interests and leaving social problems to the public institutions and services, charitable institutions and educational organizations.
- Expenditure on social inclusion. The funds allocated for social needs are expenses for business. Ultimately, these costs are transferred to consumers in the form of higher prices.
- Inadequate accountability to the public. Because managers are not chosen, they are not directly accountable to the public. The market system nicely controls economic performance of enterprises, but it controls their social involvement not in a good manner. As long as society does not develop direct reporting enterprises, the latter will not participate in social activities for which they do not consider themselves responsible.
- Lack of ability to resolve social problems. Staff of any company is equipped to work in the fields of economics, market and technology. It lacks the experience which allows making significant contributions to the solution of social problems.
In turn, Frederick, Davis, & Post (1998) put forward a series of their arguments “for” and “against” of CSR. Among the arguments “for” are the following:
- Balance of power and responsibility.
- Reducing over-regulation of business by the State.
- Ensure profitability in the long term.
- Improving the image of the company.
- Solutions of social problems provoked by the actions of the company.
- Awareness of the moral obligations of business.
Arguments “against” are put forward by those who believe that the main and the only purpose of business is profit and social problems should be resolved without its participation, for example, by the State. The negative aspects of social responsibility are the following:
- Reduction of economic efficiency and profit.
- Uneven costs between firms-competitors.
- Internal confusion and unreasonable social expectations.
- No social reporting.
- CSR shifts responsibility from individuals to the corporations in whole.
- CSR requires special skills.
Both arguments have their place. It is important to find a reasonable balance, taking into account the specific situation, the ration of revenues and expenses, and other factors. It is useful to relate all the pros and cons, to compare their weight and to formulate a strong position of the company.
The United Arab Emirates is an oasis of relative political and economic stability. This stability among other factors allows the UAE to become one of the most important centers of business in the world, with an impressive number of transnational corporations. In a rapidly growing economy, one of the most important business issues became CSR and its role in present and future business environment of the UAE.
Features of the implementation of CSR policies in the UAE have two aspects:
- The need for a clear definition of CSR, which will meet interests of local firms, as well as facilitate an understanding with international companies.
- A big influence of Islam in business. Most CSR activities in the UAE are carried out not by local companies, but by multinational corporations such as Intel, DHL, Shell, etc. Unfortunately, many international companies that have well-developed CSR programs in their countries, are unable to perform even their basic CSR in Dubai.
There are government agencies that contribute to the development of CSR in the UAE: the Chamber of Commerce and Industry, the Ministry of Economy and the Ministry of Social Affairs. There is a conference on corporate social responsibility under the patronage of the Minister of Social Affairs. In addition, in 2008 at the initiative of the Ministry of Social Affairs the program «Dirham Wa Bas» was established, aimed at financing of social assistance and social development projects of the United Arab Emirates. It became part of the strategy of the Ministry for 2008-2010, which was to support collaboration between public and private projects on the social and corporate responsibility.
One of the innovations of the Dubai Chamber of Commerce is holding special briefings for companies to improve and grow their business. The relevant departments informed of "sustainable development" and its positive impact on business performance. In addition, with the support of the Dubai Chamber of Commerce seminars held, aimed at the implementation of corporate social responsibility, awareness and capacity building for business.
The Community Development Authority and the government of Dubai, within its authority, attach to the implementation of social programs. In general, the community is aimed at achieving the objectives of Dubai Strategic Plan 2015, strengthening the role of citizens in society and the development of social standards.
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