CHAPTER 1 PDF

Good Governance and Social Responsibility (Chapter 1) Appreciation Diagnostic questions; 1. What is a corporation for you? 2. What, for you, are the values and mores that make up a good organization? 3. What...

Good Governance and Social Responsibility (Chapter 1) Appreciation Diagnostic questions; 1. What is a corporation for you? 2. What, for you, are the values and mores that make up a good organization? 3. What do you think is the role of management in the survival of a company? 4. Do you believe that corporations should behave ethically and be morally accountable to the society at large? Exploration It is a legal entity created by an individual or group of shareholders who have ownership of the corporation (through What is a shares of stocks issued by the corporation) engage in business activities. corporation? Monk and Minow (2011) defines a corporation as a structure established by law to allow different parties to contribute to capital, expertise and labor for the maximum benefit of all of them It is generally represented by their holding of common stocks (1 share=1 vote) Exploration It is a legal entity created by an individual or group of shareholders who have ownership of the corporation (through What is a shares of stocks issued by the corporation) engage in business activities. corporation? Monk and Minow (2011) defines a corporation as a structure established by law to allow different parties to contribute to capital, expertise and labor for the maximum benefit of all of them It is generally represented by their holding of common stocks (1 share=1 vote) All corporations are The by- laws of the corporation determine what shares of stocks have more voting formed with the rights or dividend priority. objective of making Not all corporations are formed purely for profit profit, like charitable institutions, non-profit, or non governmental organizations. Corporations started during the 19th century, supplying people their needs and wants in the form of products and services, like food, utilities, housing, etc. in order to survive. Corporations is a 1. Limited liability- in cases of bankruptcy, owners of corporations popular organization may protect their assets from being because of four foreclosed or confiscated, and creditors can only recover debts appealing attributes. incurred by the company through the liquidation of remaining assets owned by the corporation, thus individual liability is avoided. 2. Transferability of ownership - allows a shareholder to sell his shares of stocks in the stock market freely should one decide to let go a part or all of his shares unless explicitly stated in the corporate by-laws 3. Corporations are legal entities and are referred to as “legal persons” They are allowed to perform functions that humans make, such as buying and selling properties, owning copyrights, patents, trademarks and engaging in any other business activities It has an indefinite life span that can survive from generation to generation. 4. Centralized management- the company is managed and its governance are under the jurisdiction of executive managers and the board of directors. It also allows the company to operate efficiently without having individual shareholders meddling with corporate affairs. They usually look at the stock price as a performance indicator. The Philippine Under the Revised Corporation Code (RCC), there is no minimum number of Corporation incorporators (directors) but shall have not have more than 20, and each of the incorporators(directors) must own at least one share of stock. A corporation is also granted a perpetual corporate term (in lieu of the previous 50 years) There is also a required subscribed/paid up capital, and residency of incorporators was made to keep up with global standards The most significant The RCC focuses on four areas of reforms; change done in the a). Enhancement of doing business in the Philippines RCC was the introduction of the b). Fortified stockholder protection and institutionalized corporate governance One Person provisions Corporation (OPC) c). Emphasis on corporate social responsibility d) Improved policies and regulatory corporate framework Importance of The way a corporation conducts its business has profound effects on Social individuals and societies where they operate. Responsibility and Corporations have continued to grow and Good Governance can sometimes influence government policy through political lobbying. Corporate Social Responsibility (CSR) is a manifestation of good corporate governance, it is a responsibility of companies to act and behave ethically to satisfy their various stakeholders’s needs. CSR is an on-going commitment of organizations to ensure accountability to the stakeholders whom their existence impacts.  Philanthropical (above and beyond compliance Four Different Perspectives of Ethical (Do Corporate Social what is right) Responsibility (Archie Carroll) Legal (Follow rules) Economic (make profit) 1. Economic- An expectation of profit is natural when shareholders form corporations. The lowest layer of the pyramid suggests that companies must first be profitable, after they have paid their legal obligations to employees, and suppliers, and and conform to consumer’s needs and demands. This is the foundation and is required of all corporations. 2. Legal - A corporation is created through law and as such, must abide by the rules and regulations imposed for fairness and justice. Like economic responsibilities, it is required for companies to be legally compliant as well 3. Ethical- Doing what is right for stakeholders is what ethical companies should aim for. Society expects companies to take on this responsibility beyond what is required of them legally. 4. Philanthropic- To fulfill this responsibility, companies need to truly embrace philanthropy, meaning issues that pertain to the improvement of human lives must be addressed without compromise. This responsibility,however, is not required nor expected but rather desired by companies. A brief history of It can be traced back to the industrial revolution when here was a growing Corporate Social concern for the well-being of workers and its effect on productivity. Responsibility The industrial revolution was responsible for the economic growth of nations, but the downside was that it contributed to social problems (increased poverty and unfair labor practices, among others)CSR was started as a philanthropic endeavor by successful businessmen who just wanted to do good through their donations to help the underprivileged. CSR was officially introduced in the early 1950’s through American economist and educator, Howard Bowen’s (1953) work on social responsibility. It paved the way for the succeeding academic research and management practice on CSR. In the 1970’s, saw the marked developments in CSR as companies started to be more aware of their social responsibility, In the 1980’s and 1990’s more companies became more responsive to the various stakeholders due to social activism. At the turn of the 21st century, CSR has become an integral part of organized strategy and rightfully, so companies do not exist in a vacuum. In the Philippines, CSR started as donations from various businesses. In the 1960’s activities from this decade were unorganized and sporadic. The 1970’s saw more coordinated efforts between companies and intermediaries. CSR flourished in the 1990’s as companies acknowledge their role as social catalysts. From the year 2000 onward, CSR has become an essential part of a company’s identity, (Roman, 2007). Top companies started to approach CSR an an integrative strategic management tool. CSR is now a universally accepted norm of good corporate governance  CSR in the Philippines started a donations from Corporate Social various businesses in the 1960’s. Activities were rather unorganized and sporadic. Responsibility in The 1970’s saw more coordinated efforts the Philippines between companies and intermediaries. The 1980’s saw the closer collaboration between donors and donees. It flourished in the 1990’s as companies acknowledge their role as social catalysts. During 2000s onward, CSR has become an essential part of a company’s identity Top companies approached CSR as an integrative strategic management tool and has started to be accepted norm of good corporate governance. Drivers and Barriers of CSR DRIVERS BARRIERS C Regulation Limited Financial Market Resources Behavior S Profit Social Maximizati Activism on Culture Availability of human Strategy R resources  Regulation- and law provide a framework that must be complied with. In China, CSR is no longer voluntary act but is mandated by the central government (Hudtohan and Zhang, 2018) DRIVERS Market Behavior - Benchmarks have been established because of companies’ best practices that use CSR as a builder of reputation. Market behavior influences and how companies engage in their CSR initiatives have become a source of competitive advantage. Social Activism- How stakeholders in society react and voice out their concerns to corporations publicly through social media, demonstration, lawsuits, etc. have impacted how organizations behave. Social activism - can be internally or externally driven, companies do not necessarily have to respond to public clamor but can internally drive change from within the organization Culture- is a mixture of beliefs, norms, symbols, and the heritage that a particular country or geographic area shares and practices. It is built over time and it becomes part of its normative values. For CSR and good governance to thrive, a culture of benevolence and philanthropy must be ingrained or deeply embedded in an organization. BARRIERS: Limited financial resources- A company should be profitable, take care of its needs before it has the ability and resources to engage effectively in corporate social responsibility. CSR requires a long term stance in its commitment of resources to truly see the benefits of initiatives. Profit maximization-A company that is operationally efficient is usually driven by profit maximization, most executives support the view of maximizing returns to shareholders despite the view of CSR’s positive effects on corporate financial performance, persistence, and acceptance of maximizing profits acts as a barrier to CSR. Availability of human resources- Despite the good intentions in promoting CSR in organizations, it will need efficient mobilization through employee involvement and engagement in its programs. Without the support of human resources in its implementation, CSR activities will be lacking luster.  The purpose of measurement is to understand what is being measured better and to lay the groundwork for improvement. Measuring CSR CSR is a management concept that is not easy to measure Unlike other functional areas which can more or less be measured, like market share, customer satisfaction, attrition rate, turnaround time, financial ratios, good will, loyalty, and social/environmental impact are some CSR concepts that cannot be accurately measured.  Measuring CSR provides benefits, such as Kaplan and helping organizations make better decisions on allocating resources with the greatest Norton’s Balanced impact, improving processes that will make CSR initiatives more efficient, and providing more support for the business. Scorecard Kaplan and Norton’s Balanced Scorecard is an example of an integrated strategic measurement system. It is a framework by which companies can include both tangible and intangible measurements that can identify if goals are met in each of the four dimensions ( financial, customer, processes, and learning and growth. Metrics must be carefully identified for each objective. Triple Bottom Line It is an accounting framework that describes three evaluation perspectives (Three P’s) that contribute to creating greater value for the organization. People, (Social) The increasing pressure from the government and society to manage and Planet, assess the results of their operations gave (Environmental) way to scrutinizing companies from their and economic (profit), Profit (Financial) social (people) and environmental (planet) impact. In recent years, there is a growing emphasis on employee happiness and good corporate governance, ideal results such as employees’ well-being, ethical behavior, and other factors have been considered as part of a company’s “bottom line”, contribute to multiple bottom line reporting. As human development continues to prosper in the future, the traditional look at the bottom line (profit) is already a thing of the past  It has a key role in influencing CSR. Both CSR and leadership are founded on concepts of service, integrity, and Leadership inspiration to others. The relationship between them is mutually empowering and transforming. Employees and Managers as members of organizations are naturally concerned about, contribute, and react to their organization’s social consciousness, particularly to their leaders’ commitment to CSR. Leader perceptions provide evidence regarding their CSR attitude and acts of the leaders can trickle down to affect employees’ subsequent attitude, behavior, and actual engagement through volunteerism. A leader must be able to communicate their CSR stories internally and externally effectively, through internal memos, press releases, social media, and others contribute to company’s reputation. It is critical that accomplishments made thru their initiatives and programs, have to be made known to the various stakeholders for CSR to thrive and progress even further in the long term. As per the study conducted by Ng and Rivera (2018) the Filipino concept of “kapwa” (fellowship) is considered to be an essential component of effective leadership. “Kapwa” is a shared identity with others, ibang tao (outsider) and one of us(hindi ibang tao) sparks genuine concern. Philippine CSR maybe viewed from the concepts of fellowship, which has parallel conceptual foundations with leadership  Corporate Social Responsibility has become an integral part for most companies as it becomes an opportunity to wholly and directly engage stakeholders, creating a The Future of shared value for both the organization and the community it serves. Philippine CSR It goes beyond profit, it is about serving the Filipino, and is a clear reflection of the values that the company stands for. With the current global trends on sustainability and community connectivity, CSR will be critical in mapping out company policies particularly when it comes to serving the best interest of the greater public. (SM Cares) CSR in the Philippines is promising and continually evolving, coming from the awareness of the individual that his/her contribution to society is ever-increasingly important. As the environment deteriorates, CSR can be brought to the forefront, top Philippine corporations, like Ayala Land, BDO Unibank, Coca Cola Phils, Globe Telecoms, and many others are leading the way in setting examples on how to embed CSR in their corporate strategies. Hudtohan(2009) argues that the criticality of the individual social responsibility in shaping CSR that leads to sustainable development. It is the individual, not corporations that will act as the catalyst for the socio-political-economic influence of a nation. Volunteerism and activism will be one of the key drivers in furthering the progress of CSR. Full disclosure and transparency will be the norm, synergy among the socio-political- economic is crucial. If CSR is to be effectively carried out. The Philippines is abiding by international regulatory frameworks so that CSR will be universal in its approach, as we all live on the same planet, and breathe the same air. The survival and sustainability of the human race is the common goal, regardless of gender and race.