Responsibility

The different arguments for and against the state taking on responsibility for social welfare have been powerfully put across by people of opposing political persuasions in Britain over the last 60 years. In this essay, therefore, I intend to use Britain’s welfare state to exemplify arguments for and against the state taking primary responsibility for social welfare. The welfare state in Britain was introduced in 1945 by the newly elected Labour government. Although this was the first comprehensive attempt at creating a functional welfare state it is important to note that it was not an entirely new policy.

In fact, we can trace back to 1601 to find an early attempt at implementing a state welfare provision – the Poor Law. The theory behind this legislation was that the poor were to be categorized into the deserving (“the impotent poor”) and the undeserving (“the persistent idlers”). There were many obvious flaws in the methodology and logic in the implementation of the Poor Law but it must be recognised that this was an early attempt at providing a social welfare system. This demonstrates that for hundreds of years a case has been made for some measure of state social welfare provision.

It is also vital not to underestimate the impact the studies carried out by social researchers such as Rowntree (1901) and Booth (1902) had on the forming and implementation of a social welfare provision in 1945. The Beveridge report (1942) pointed to the “chaotic” and “piecemeal” introduction of changes into the system and stated the need for a new and more comprehensive system to be installed. Beveridge’s report was underpinned by the need to cure the “five giants”. Beveridge identified these “five giants” as: Idleness, Squalor, Ignorance, Want and Disease.

He identified the need for a state commitment to securing full employment to combat idleness. He argued public housing must be available for all citizens to rent. To cure ignorance he suggested the need for a free education system for anyone up to the age of 15. He suggested the implementation of a national health service to help cure disease. Finally, Beveridge argued that National Insurance benefits should be handed out to all in need. The welfare state had to be introduced in a series of acts, notably the National Health Service Act (1946), the Education Act (1944), the Family Allowance Act (1945).

At the time there was much reluctance towards carrying out all of the proposals. The arguments against this degree of state provision stemmed from concerns about cost and the fundamental principles of welfare (e. g. how decisions are made and who should be entitled to receive welfare). Because of the reluctance that grew from the fact that these arguments were never resolved. Beveridge’s suggestions were never fully implemented but his ideas still clearly formed the inspiration for the future of welfare reform.

One of the main criticisms of Beveridge’s proposals and of the concept of a welfare state is that a number of important assumptions have to be made for it to function successfully. For example, within the report, Beveridge makes the assumption that married women would be full time housewives and that for most of their lives women would not be employed. Therefore, married women would only receive benefits through men, thus, creating a culture which encourages women’s reliance on men. Because of this feminists have argued that the British welfare state relied on a “familial ideology” and treated women as second class citizens.

This example of the role of women within the welfare state illustrates the point that any welfare system is not neutral that is based on ideological assumptions. These assumptions will influence the way that different members of the public will respond to state provision of welfare. Another example of these ideological assumptions would be the 17th century belief that only the “impotent poor” deserve state welfare. The economics of Britain’s state welfare system have also come under a lot of criticism. These critics argue there are some fundamental flaws with the economic ideology underpinning the system.

Firstly, for the welfare state to operate properly and fairly their must be nearly full employment in the country where it is based as, in theory, this will maximize tax revenue and minimize unemployment benefits. This system worked relatively effectively until the early 1970’s. However, due to the relative decline of the UK economy, Britain suffered an economic crisis and unemployment started rising rapidly. Since then mass unemployment has been a serious problem within British society. Critics suggest that this is proof of how dependent a welfare state is on a prosperous economy.

Basically this meant that the welfare state was reliant on capitalism – rather than contributing to the undermining or softening of its most brutal aspects . The New Right have made strong arguments against state welfare provision. The 1979 election brought into power a conservative government that had a new and radical approach to public expenditure and the welfare state as a whole. Probably the most notable change in policy brought in by the New Right was the end of the commitment to full employment that previous governments had encouraged.

The New Right believed in a “natural level of employment”. They felt that this “natural level of employment” was being undermined by wages being too high due to the actions of trade unions. Therefore, they argued that the market would solve unemployment by creating downward pressure on wages. Because of this, the differential between wages and benefits was increased by creating downward pressure on benefit levels and therefore welfare expenditure. However, despite this right wing shift in political thinking, there was no major change in welfare expenditure until the late 1980’s.

The year 1988 was an important one in terms of implications for the welfare state as it represented a far more radical application of New Right thinking towards the welfare state. Firstly, the New Right introduced a shift from the previous system of universal provision towards a system based more upon selective provision. For example, some of the benefits that were previously available to everyone (universal) became only available to some via a “means test” (selective). This was a big move that completely contradicted the universal method employed by previous more left wing governments.

Another change made by the New Right was the introduction of privatization and marketization. An example of this is the case of the sale of council houses. The public housing stock was privatized and sold off in an attempt to create a market for the council housing which had originally in Beveridge’s thinking, been intended for public ownership and private rent. Another major shift made by the Conservative government was towards community care. There was a trend for mentally ill, elderly and disabled people to be moved from institutions to care in the community.

However, what this basically meant was that rather than institutional care the responsibility was shifted onto the family. It is also very important to note that care in the community was considerably cheaper for the state to maintain than institutional care. The New Right also consciously made an effort to change the public’s perception of welfare – shifting away from the view that the state is the only provider of welfare. The responsibility of the state was reduced through the encouragement of private provision and by emphasizing the importance of the charitable and voluntary sector.

This is one of the central strands of the argument against state welfare provision. At this juncture it is important to consider the effect privatization has had on society and the welfare state. Since the New Right introduced new policy pertaining to welfare in 1979 there have been a number of examples of the UK government seeking to encourage private provision of welfare. People have been encouraged to take out private insurance plans for their welfare needs and the number of people covered by private health insurance rose from 2. million to 5. 2 million between 1976 and 1986 (Julian Le Grand, 1990).

In the mid 1980’s the Conservative government tried to shift sickness insurance and pension insurance into the private sector also. These plans, however, never came to fruition owing to major criticism and insurance companies expressing a reluctance to take up policies for all employees Hutton (1996) strongly criticizes the New Rights welfare expenditure policy. He argues against the belief that public expenditure should be reduced during troubled times for the economy.

Hutton believes that the cuts are spurred by political ideology rather then by economic need. In Hutton’s words “apart from Iceland, Britain runs the meanest, tightest, lowest-cost social security system in the world”. Hutton alleges that the twenty-first century will see a large rise in the amount of tax revenue available to fund welfare payments. The voluntary sector must also be discussed when considering arguments for and against the state taking on responsibility for the welfare state.

Organizations such as Barnados, the Salvation Army and the NSPCC provide voluntary care. They serve a different role to statutory bodies set up by Parliament, but the views of these voluntary providers are respected and need to be taken into account as well. These organizations tend to have specialized expertise and experience in certain areas and the government can benefit from this knowledge. A major bonus of voluntary provision is that they are often very cost effective as unpaid volunteers are often used.

It is estimated by Knapp (1989) that the total amount of public-sector support for voluntary provision between 1983 and 1986 was i??3151 million. However, there are also inherent weaknesses in voluntary provision. The biggest and most blatant problem stems from the nature of voluntary work as it cannot be guaranteed. Critics also point to the fact that voluntary work may be unequally provided across the country. The service can therefore be inconsistent and the advice from the voluntary sector to government might differ depending on the region.

It is also suggested that due to financial restrictions the voluntary sector will never be anything more than a secondary level service that relies on the state or private sector provision. Social security benefits are the most redistributive aspect of the welfare state as they distribute income to the poorest people in the country. A point in favour of a social welfare system, from a socialist or social democratic perspective, is that the social security benefits can be used to redistribute wealth to make society economically fairer by heavily taxing the rich and giving it to the poorest people in society.

On the other hand, opponents see this as a Robin Hood aspect of state social welfare which demotivates both the richest and the poorest people in the country – encouraging idleness (one of the “five giants” beveridge was trying to eradicate) amongst the poor and encouraging the rich to leave the country. The New Right when in power, therefore, cut back on the redistributive aspects of welfare provision. The one-off grant system that was previously in effect was replaced in the 1986 and 1988 security acts and 16 to 18 year olds entitlement to income support was revoked.

In current political debates the Conservative party, now in opposition frequently accuse the Labour party of redistributing wealth from the rich to the poor via “underhand” or “stealthy” methods. This is an indication that the argument about the extent to which the state should take responsibility for social welfare remains highly contested. Where you stand on this issue is fundamental to your political beliefs and how you will vote.

Starbucks Corporate Social Responsibility

Introduction

            Business ethics plays a vital role on establishing good reputation of a business entity towards its customers, suppliers and society as a whole (Mares, 2005). There have been a lot of multinational companies around the globe that demonstrated the destructive effects of unethical company leadership behavior. Business ethics serves as the standard of conduct of individual business people and not necessarily the standards of the business as a whole; therefore, it is the ethics of the business that molds the nature and values of its employees towards their customers, suppliers and the society.

An organization that behaves ethically will influence its business associates to behave ethically as well; and by having ethical business associates, the company will be able to improve the welfare of its customers, suppliers, shareholders and the environment. This is where the Corporate Social Responsibility comes into picture. The fact that the ethics of the business directly affects the ethical behavior of its business associates towards their suppliers, customers and other stakeholders; therefore, intensifying the ethics of the business is one of the many roads towards the attainment of its success (The Economist, 2005).

Under the Corporate Social Responsibility, an organization must give premium on the welfare of its employees, customers, shareholders and the environment; and take responsibility for all the detrimental impacts of all the activities of the organization (Timms, 2004). Moreover Corporate Social Responsibility is deemed to be acting beyond the statutory obligation of an organization and voluntarily taking the initiatives to improve the quality of life of their employees as well as their families and the society as a whole.

With the advent of globalization, both the European and American Region start to become more influential in especially in the corporate world and the society. Among the impressive companies nowadays would be Starbucks, an American based company, and presently have a wider scope of business operation. In this regard, it would be helpful to determine the similarities and differences of Starbucks Corporate Social Responsibility to European based companies like the European Aeronautic Defense and Space Company [EADC], as well as if whether the mission of Starbucks is truly driven to support the efforts of Corporate Social Responsibility.

Starbucks Corporation

            Starbucks Corporation was founded in 1971 by Jerry Baldwin, Zev Siegl and Gordon Bowker as a coffee bean retailing store which sells whole-bean coffee in Seattle. But the market of who-bean coffee was not that profitable thereby forcing the three owners to sell their company. This is when Howard Schultz enters into the picture and bought Starbucks. Schultz started to introduce the coffee beverages which improved the profitability of the company and that serve as the stepping stone of Starbucks towards its attainment of market dominance domestically and internationally.

Corporate Mission of Starbucks

            One of the missions of Starbucks is to provide their employees with great working environment and treating each other with respect and dignity. Also, Starbucks concentrates more their strategies towards providing their customers with the highest possible satisfaction every time they enter the store. Moreover, Starbucks has a set of environmental mission separate from its corporate mission. One of its environmental missions is to buy and sell environmentally products as well as instilling to its employees and shareholders the environmental responsibility as a corporate value.

Corporate Social Responsibility of Starbucks

            Aside from providing their customers the highest possible satisfaction, Starbucks also make an effort to establish loyalty with their customers in order to provide good customer relationship since customers prefers to do business with a company they believe to be socially responsible and establish harmonious relationship with them. The Starbucks Business Ethics and Compliance [BEC] program serves as the guide of Starbucks’ employees in making decisions, facilitating legal compliance and ethics training. Starbucks also take the initiative to establish CSR Executive Committee wherein the said committee will be the one responsible for strengthening the CSR of the company’s overall performance through setting CSR related strategy and policies as well as its progress. The said CSR Executive Committee is comprised by the CEO, as the chairman of the committee, and the senior level officers of the company.

Giving premium to the satisfaction of their customers is also one of the fortes of Starbucks since its establishment. Some of the market analysts say that is has been one of the main ingredients of Starbucks success for the past decades. Like for instance, to respect the culture of countries in the Middle East, Starbucks provided separate section for women on their stores (Dutta& Subhadra, 2003). Moreover Starbucks strictly implements “no smoking” policy inside their stores which attracted more customers to come into their stores especially those health conscious people. Bartenders of Starbucks are highly trained employees in order to secure the quality of every coffee beverage that they will serve to the customers.

            Last 2006, Starbucks was included in “100 Best Companies to Work For” of Fortune Magazine and that was already the eighth time wherein Starbucks received such prestigious recognition (Fortune Magazine, 2006). Moreover, Starbucks was also recognized as one of the “50 Best Workplace in UK” Financial Times sponsored by Work Institute UK while taking the ninth place in Taiwan’s “Most Sought After Enterprise” among 100 private and 50 state-owned enterprises (Starbucks.com, 2007). The reason behind the said mentioned awards of Starbucks lies on the fact that the company recognizes and treats their employees as one of their assets and plays a vital role on the success of the entire company. This is also the reason why the management of Starbucks calls their employees as “partners” and not just a mere servant of the company.  Starbucks’ management let their ‘partners’ to participate in planning activities especially if it concerns them.

Moreover, Starbucks management listen on the voices of their employees in order to create harmonious working relationship with one another, as well as recognizing even the smallest effort every employees for the benefit of the company. The management also releases Partner View Survey which solicits feedbacks from their partners around the globe every 18-24 months regarding their experiences and development while inside the floors of Starbucks. The said survey serves as the determinant if Starbucks is performing well for the past 18-24 months. In this regard, a lot of people would want to become a member of Starbucks family and the reason why Starbucks has been being recognized by various NGOs as one of the many companies that promotes employee welfare improvement. Even if the company employees diverse group of employees, still, Starbucks has been able to manage diversity related problems which gives way for the employees to work in harmony and more efficient by establishing strong corporate goals within the floors of Starbucks. Starbucks was identified last 2006 as one of the “Top 50 Companies for Diversity” which is being sponsored by Diversity Inc. Magazine. In addition to this, to some extent, Starbucks even use the diversity of employees that they have to their own advantage.

            In order to promote transparency with regard to the performance of Starbucks as well as other important information from the company that determines the social and environmental responsibility of the company, Starbucks launched since 2001 CSR Report as part of their broader communications efforts to provide transparency on their CSR performance and activities. Like for instance, Starbucks had contributed $1.87 million to the international relief and development nonprofit CARE to support its community development projects like literacy promotion and clean water supplies in coffee origin countries since 1991. Moreover, Starbucks also supports the projects of Conservation International [CI] which mission is to preserve Earth’s living natural heritage and its global biodiversity to demonstrate that human societies are able to live harmoniously with nature. Like for instance, the Chiapas Project of CI, which promotes the use of shade-grown coffee varieties and prevents the deforestation of the buffer zone of Chiapas reserve, has been being supported by Starbucks by purchasing shade-grown coffee varieties to help the coffee farmers of Chiapas, Mexico and discourage the production of sunlight-grown coffee varieties which contributes to the deforestation in Chiapas, Mexico (Austin & Reavis, 2004).

Furthermore, Starbucks is also a member of Free Trade Movement which organizes farmers that produces various commodities into cooperatives. Starbucks also buy coffee beans from the cooperatives organized by Fair Trade Movement in order to support those small farmers of less developed countries. Because of the support of Starbucks to Conservation International and Free Trade Movement, a lot of customers were pleased, especially those that are environment conscious, to know that Starbucks support such NGO’s. Customers start to visit Starbucks more often to extend their support to the mission of Starbucks and to the NGOs that Starbucks has been supporting. In this regard, it is clear that Starbucks has been actively participating to various international organizations that promotes environment preservation and improving the welfare of depressed industries like on the case of the farmers of Chiapas which cultivates shade-grown coffee varieties.

In this regard, it is clear that Starbucks makes great effort in providing good effects not only to the welfare of its customers and employees but also provide concerns on the condition of the environment through internalizing the sense of responsibility towards the maintenance of the environment. To put into stress, Starbucks treat their employees as their partners and recognizes the fact that without them the company will not be able to experience impressive growth for the past years. Furthermore, Starbucks supports various environmental movements by extending their hands towards the accomplishments of various environmental projects. At this point, Starbucks has been able to materialize their mission statements based on the number of welfare improvement that the company shared to its employees, customers and environment through their support on various NGOs like the Conservation International and Free Trade Movement.

European Aeronautic Defense and Space Company

             European Aeronautic Defense and Space Company or EADS is a European Union based group of companies that provides aerospace, defense and related services. Airbus S.A.S., the manufacturer of Airbus A380- the world’s largest commercial airliner, is also part of EADS. The Group also includes the world’s largest helicopter producer- Eurocopter, and the European leader in space programs from Ariane to Galileo- EADS Astrium. Based from the subsidiaries of EADS, it is clear that the said company have a large impact on the societal welfare of the member countries of the European region.

Corporate Mission of European Aeronautic Defense and Space Company

            One of the missions of EADS is to provide quality as well as long term information assurance and secure network solutions for private and government organization in order to guarantee the availability, authenticity and confidentiality of information, and the protection of IT resources. Moreover, EADS aims to maintain their mastery in the management of information service, infrastructures, and telecommunications; same goes for their awareness on the demand of highly-critical Information Systems (Its.eads.net, 2007). Providing personalized services is also one of the missions of EADS and a reliable provider of secure information services.

Corporate Social Responsibility of European Aeronautic Defense and Space Company

            Despite of the fact that all of the company missions of EADS suggest less on their CSR, the company still manages to provide efforts on fulfilling its social responsibility towards its employees, customers and environment. Other hand any other aspects, EADS gives more premium on the customer satisfaction since the company recognizes the importance of maintaining good reputation with their customers in attaining impressive company growth.

            As for the welfare of their customers, EADS provides high quality services with the use of today’s most advance technology available in the field of aerospace as well as defense. Moreover, EADS implements the “On-Time and On-Quality Delivery” concept in order to further boost the satisfaction of EADS customers. EADS also implements customer feedback strategy of assessing the quality of their services through the “Group-wide process of Customer Reviews.” EADS believes that through soliciting customer feedback, the management could further improve the quality of their service. EADS also established Quality Council, headed by the Chief Quality Officer [CQO], in order to ensure the proper implementation of “On-Time and On-Quality Delivery” as well as ensuring the EADS Improvement Program which is directly tuned on the performance of their business units.

            About the welfare of their employees, EADS ensures the provision of safe and healthy working environment which will be based on the evaluation, anticipation and risk management after taking into account all the specificities and the needs of every employees of EADS business units and subsidiaries. Due to this, the number of accidents that occurred in EADS has declined after the strict implementation of Health and Safety Management of the company. Like for instance, the case of Airbus, between 2004 and 2006 the number of accidents recorded significantly decreased from 13.18 percent to 10.6 percent. Furthermore, despite of the diversity of their labor force, EADS has been able to solve and prevent diversity related problem through providing equal opportunity for all of its employees and avoiding from any form of discrimination against their employees (Org.airbus.com, 2007).

            As for the role of EADS on the environment, the said company takes the initiatives on further minimizing the level of pollution of their aircrafts. Like for the case of Airbus, the said commercial airline company is about to increase its budget this year for their research and technology by 25% in order to finance researches that will lead to the cutting of their planes CO2 emissions to 50% by 2020 (Environmentalleader.com, 2007). Airbus supports the goal of IATA, a trade group that represents the airlines of the world, which aims for the development of “zero-emission” planes in the next five decades. In this regard, it is clear that EADS, to some extent, made a significant role in minimizing the level of air pollution in the society. But even if the company is putting more value on the satisfaction of the customers, still, its responsibility to the environment and customers will not be forgotten by EADS.

Conclusion

            It is clear that, based from the identified Corporate Social Responsibilities of Starbucks and EADS; both of the companies have the gives premium on the quality of their customer service and provide various strategies in order to further boost the satisfaction that their customers derived from availing their services. In addition to this, both Starbucks and EADS spends reasonable amount of money just to improve their facilities and skills of their employees. On the other hand, one of the differences between the CSR of Starbucks with respect to EADS is the support of the former to NGOs that advocates for environmental reservation and protection. Though EADS also contributes to the preservation of the environment, but its effort is concentrated mainly on their internal aspects like investing in research and development in order to minimize their CO2 emission of their planes. In other words, Starbucks not only just supporting the preservation of the environment internally, like the use of recycled materials, but also externally to the company such their membership and active participation of CI and Free Trade Movement projects. The last but not the least would be the ethical actions of Starbucks to its employees; Starbucks, based from the identified policies and strategies of the management, provides premium to the efforts of their employee and treat them as one of their partners, and trainings that would enhance their skills. EADS provides safe and harmonious working environment for its employees and with such effort, the company has been able to minimize the number of accidents of their employees since 2004. EADS management also provides room for career development and avoids any form of bias like gender, race and religion to name a few. With regards to the difference of Starbucks and EADS in terms of employee welfare improvement, Starbucks views their employees as the source of their competitive advantage based on the treatment of the management to the employees; while EADS views their employees as a “tool” towards the attainment of high quality services that will further boost the satisfaction of their customers.

Recommendation

            It is now clear that American company –Starbucks, provides higher level of CSR since the said company puts more premium on accounting the welfare of their environment and employees on every policies and strategies of the management. Therefore, it is a must for the European Union based companies like EADS to further improving the scope of their CSR on their environment and employees. Although it is a good thing that despite of the constraints in EADS, the company still manages to provide an effort in fulfilling its social responsibility. But it would be much better if EADS will further improve their efforts in improving the welfare of their environment and employees.

References

Austin, J. E. & Reavis, C. (2004). Starbucks and Conservation International. Harvard Business School, 1-14

Dutta, S. & Subhadra, K. (2003). Starbucks’ International Operations. Harvard Business School, 1-9

Environmentalleader.com (2007). Airbus To Cut Emissions 50% by 2020, Calls Out Boeing. Retrieved March 23, 2008, from http://www.environmentalleader.com/2007/06/15/airbus-to-cut-emissions-50-by-2020-calls-out-boeing/

Fortune Magazine (2006). Fortune 100 Best Companies to Work For 2006 : Starbucks. Retrieved March 23, 2008, from http://money.cnn.com/magazines/fortune/bestcompanies/snapshots/1267.html

Its.eads.net (2007). Company Mission. Retrieved March 23, 2008, from http://www.its.eads.net/1024/en/Company/mission/mission.html

Mares, M. (2005). The Importance of Business Ethics. Retrieved March 23, 2008, from http://www.pkfwittmares.com/news/articles/corporate/BusinessEthics_Corporate_2005.pdf

Org.airbus.com (2007). The Airbus Way. Retrieved March 23, 2008, from http://www-org.airbus.com/store/mm_repository/pdf/att00007006/media_object_file_The_Airbus_Way_The_corporate_brochure.pdf

Starbucks.com (2007). Corporate Social Responsibility 2006 Annual Report. Retrieved March 23, 2008, from http://www.starbucks.com/aboutus/csrannualreport.asp

The Economist (2005). The Importance of Corporate Responsibility. Retrieved March 23, 2008, from http://graphics.eiu.com/files/ad_pdfs/eiuOracle_CorporateResponsibility_WP.pdf

Timms, S. (2004). Corporate Social Responsibility: A Government Update – UK. Retrieved March 23, 2008, from http://www.csr.gov.uk/pdf/dti_csr_final.pdf

Thirty-five years ago, Milton Friedman wrote a famous article for The New York Times Magazine whose title aptly summed up its main point: “The Social Responsibility of Business Is to Increase Its Profits.” Friedman had no patience for capitalists who claimed that “business is not concerned ‘merely’ with profit but also with promoting desirable ‘social’ ends; that business has a ‘social conscience’ and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers.” Friedman wrote that such people are “preaching pure and unadulterated socialism.

Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.” John Mackey, the founder and CEO of Whole Foods, is one businessman who disagrees with Friedman. Mackey believes Friedman’s view is too narrow a description of his and many other businesses’ activities, and he further argues that Friedman’s take woefully undersells the humanitarian dimension of capitalism. In 1970 Milton Friedman wrote that “there is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” That’s the orthodox view among free market economists: that the only social responsibility a law-abiding business has is to maximize profits for the shareholders. Mackey, however, strongly disagrees, “I’m a businessman and a free market libertarian, but I believe that the enlightened corporation should try to create value for all of its constituencies. From an investor’s perspective, the purpose of the business is to maximize profits. But that’s not the purpose for other stakeholders–for customers, employees, suppliers, and the community.” Mackey wants it known that he is not against profit. When he co-founded Whole Foods Market (WFM), they began with $45,000 in capital and only $250,000 in sales their first year.

Twenty-seven years later, they had sales of more than $4.6 billion and net profits of more than $160 million. However, WFM did not achieve their tremendous increase in shareholder value by making shareholder value the primary purpose of our business, they measured success by how much value we can create for all six of our most important stakeholders: customers, team members (employees), investors, vendors, communities, and the environment. Many thinking people accept that caring about customers and employees is good business; but, they might draw the line at believing a company has any responsibility to its community and environment. To donate time and capital to philanthropy, they will argue, is to steal from the investors. After all, the corporation’s assets legally belong to the investors, don’t they?

Management has a fiduciary responsibility to maximize shareholder value; therefore, any activities that don’t maximize shareholder value are violations of this duty. If you feel altruism towards other people, you should exercise that altruism with your own money, not with the assets of a corporation that doesn’t belong to you. This position sounds reasonable. A company’s assets do belong to the investors, and its management does have a duty to manage those assets responsibly. However, Mackey feels that the argument is not wrong so much as it is too narrow. There can be little doubt that a certain amount of corporate philanthropy is simply good business and works for the long-term benefit of the investors. For example: In addition to the many thousands of small donations each WFM store makes each year, they also hold five 5% Days throughout the year. On those days, WFM donates 5 percent of a store’s total sales to a nonprofit organization. While WFM selects worthwhile organizations to support, they also tend to focus on groups that have large membership lists, which are contacted and encouraged to shop our store that day to support the organization. This usually brings hundreds of new or lapsed customers into our stores, many of whom then become regular shoppers. So a 5% Day not only allows WFM to support worthwhile causes, but is an excellent marketing strategy that has benefited Whole Foods investors immensely. However, Mackey feels that ultimately the company founders, not the current investors in a company’s stock, have the right and responsibility to define the purpose of the company. When WFM first announced that they would donate 5% of the company’s net profits, all seven of the private investors voted for it when they served on our board of directors. When they brought in new investors, none of them objected to the policy. Moreover, in almost 14 years as a publicly traded company, almost no investors have ever raised objections to the policy. How can WFMs’ philanthropy be “theft” from the current investors if the original owners of the company unanimously approved the policy and all subsequent investors made their investments after the policy was in effect and well publicized?

The shareholders of a public company own their stock voluntarily. If they don’t agree with the philosophy of the business, they can always sell their investment; or, they always have the legal right to submit a resolution to change the company’s philanthropic philosophy. Another objection to the WFM philosophy is where to draw the line. If donating 5 percent of profits is good, wouldn’t 10 percent be even better? Why not donate 100 percent of our profits to the betterment of society? But the fact that WFM has responsibilities to its community doesn’t mean that they don’t have any responsibilities to their investors. It’s a question of finding the appropriate balance and trying to create value for all of their stakeholders. Is 5% the “right amount” to donate to the community? Mackey thinks that “there is no right answer to this question, except that 0 percent is too little.” Corporate philanthropy is a good thing, but it requires investor approval. Most investors understand that philanthropy can be beneficial to both the corporation and to the larger society. WFM donates money to the community stakeholder because, as Mackey explains, “human nature isn’t just about self-interest. It also includes sympathy, empathy, friendship, love, and the desire for social approval.” When we were small children we were egocentric, concerned only about our own needs and desires. As we mature, most people grow beyond this egocentrism and begin to care about others–their families, friends, communities, and countries. People’s capacity to love can expand even further: to loving people from different races, religions, and countries–potentially to unlimited love for all people and even for other sentient creatures.

This is our potential as human beings, to take joy in the flourishing of people everywhere. Mackay says, “WFM gives money to communities because we care about them and feel a responsibility to help them flourish as well as possible.” Friedman, on the other hand, says Mackey’s belief that “corporate philanthropy is a good thing” is wrong. When the founding members of WFM decided to donate 5% of net profits, they were clearly within their rights in doing so. They were spending their own money. However, “why do they think the 5% donation would do more good for society than taking the money, investing it, paying out the profits as dividends, and then letting the stockholders dispose of it?” asks Friedman. This in turn would create more jobs because someone has to manufacture what the stockholders bought. In addition, factories and roads have to be built to make the products that the stockholders had bought. Someone has to sell the products that the stockholders just purchased. In effect, the 5% could be turned into a real investment which translates into permanent jobs and income for people, not one time handouts. WFM’s contribution to society is to enhance the pleasure of shopping for food. WFM has no special competence in deciding how charity should be distributed. Any funds devoted to philanthropy would surely have contributed more to society if they had been devoted to improving the shopping for food.

T.J. Rodgers, CEO of Cypress Semiconductor, offers another view of a company’s responsibility to its community. He views it as good business when a company caters to its customers, train and retain its employees, build long-term positive relationships with its suppliers, and become a good citizen in its community, including performing some philanthropic. His interpretation of Friedman’s comments that a company should stay “within the rules of the game” and operate “without deception or fraud,” he [Friedman] meant it should deal with all its various constituencies properly in order to maximize long-term shareholder value. He does not mean that a company should put every last nickel on the bottom line every quarter, regardless of the long-term consequences. Insofar as philanthropy and community service, Cypress Semiconductor has won the trophy for the Second Harvest Food Bank competition for the most food donated per employee in Silicon Valley for the last 13 consecutive years (1 million pounds of food in 2004). The contest creates competition among Cypress’s divisions, leading to employee involvement, company food drives, internal social events with admissions “paid for” by food donations, and so forth. It is a big employee morale builder, a way to attract new employees, good public relations for the company, and a significant benefit to the community–all of which makes Cypress a better place to work and invest in. Rodgers views WFMs philanthropy with skepticism, “Why is it that when Whole Foods gives money to a worthy cause, it serves a high moral objective, while a company that provides a good return to small investors–who simply put their money into their own retirement funds or a children’s college fund–is somehow selfish?” Rodgers finds the philosophy and motives of WFM objectionable, not the specific actions. “There is the arrogant thinking that if other corporations would simply emulate the higher corporate life form defined by WFM, the world would be better off.”

Friedman thinks the differences between himself and John Mackey on the issue of social responsibility of business are for the most part rhetorical. Mackey, however, disagrees, “We are thinking about business in entirely different ways. Friedman is thinking only in terms of maximizing profits for the investors. If putting customers first helps maximize profits for the investors, then it is acceptable. If some corporate philanthropy creates goodwill and helps a company “cloak” its self-interested goals of maximizing profits, then it is acceptable (although Friedman also believes it is “hypocritical”).” In contrast to Friedman, Mackey does not believe maximizing profits for the investors is the only acceptable justification for all corporate actions. The investors are not the only people who matter. Corporations can exist for purposes other than simply maximizing profits. Mackey concedes that many other businesses, such as Cypress Semiconductor, have been created by entrepreneurs whose sole purpose for the business is to maximize profits for their investors.

Does Cypress therefore have any social responsibility besides maximizing profits if it follows the laws of society? No, it doesn’t. Rodgers apparently created it solely to maximize profits, and therefore all of Friedman’s arguments about business social responsibility become completely valid. Business social responsibility should not be coerced; it is a voluntary decision that the entrepreneurial leadership of every company must make on its own. While Friedman believes that taking care of customers, employees, and business philanthropy are means to the end of increasing investor profits, Mackey believes that “Making high profits is the means to the end of fulfilling Whole Foods’ core business mission. We want to improve the health and well-being of everyone on the planet through higher-quality foods and better nutrition, and we can’t fulfill this mission unless we are highly profitable. High profits are necessary to fuel our growth across the United States and the world. Just as people cannot live without eating, so a business cannot live without profits. But most people don’t live to eat, and neither must a business live just to make profits.” Friedman contends that “the social responsibility of business [is] to increase its profits” and my statement that “the enlightened corporation should try to create value for all of its constituencies” are “equivalent.”

He argues that maximizing profits is a private end achieved through social means because it supports a society based on private property and free markets. Both capitalism and corporations are misunderstood, mistrusted, and disliked around the world because of statements like Friedman’s on social responsibility. His comment is used by the enemies of capitalism to argue that capitalism is greedy, selfish, and uncaring. It is right up there with William Vanderbilt’s “the public be damned” and former G.M. Chairman Charlie Wilson’s declaration that “what’s good for the country is good for General Motors, and vice versa.”

If we are truly interested in spreading capitalism throughout the world, we need to do a better job marketing it. I believe if economists and business people consistently communicated and acted on my message that “the enlightened corporation should try to create value for all of its constituencies,” we would see most of the resistance to capitalism disappear. Friedman and Rodgers probably will never agree with Mackey’s business philosophy. Mackey feels that his philanthropic philosophy will result in a more robust business model than the profit-maximization model because his philosophies encourage and tap into more powerful motivations than self-interest alone. According to Mackey, his ideas “will triumph over time, not by persuading intellectuals and economists through argument but by winning the competitive test of the marketplace. Someday businesses like Whole Foods, which adhere to a stakeholder model of deeper business purpose, will dominate the economic landscape. Wait and see.”

Note: Thomas Malthus was not the author of the article. I put his name as the author, so you have a name to use as a reference when you summarize and answer the midterm questions.

Source: Reason (2005). Rethinking the Social Responsibility of Business: A Reason debate featuring Milton Friedman, Whole Foods’ John Mackey, and Cypress Semiconductor’s T.J. Rodgers. Retrieved from http://reason.com/archives/2005/10/01/rethinking-the-social-responsi

Charles Handy’s Stakeholder View

The New Capitalists’ Argument: ‘Society and shareowners are becoming one and the same’

TASK B : Applying the above concepts and tools, provide table(s) and/or figure/s to answer the

Following questions:

Drawing on corporate responsibility stances, or the three perspectives on the key debates ( Johnson et al.; p.147) what is the rationale of : The founders of (Product) RED?
The director for social responsibility for GAP?
The author of the article in the TIMES?

(Product) RED
GAP
TIMES’ Author
Corporate Social Responsibility Stance

Perspective on the Key Debate

Rationale

TASK C: Provide a 500 word commentary on TASK B.

Guide Questions:
1. Provide a summary of the above table.
2. What views might shareholders of GAP of (PRODUCT) RED?
3. In your view, is (PRODUCT) RED an appropriate corporate activity? 4. If you were a shareholder of a company and wished to persuade top management to join the (PRODUCT) RED Initiative, how might you do this (Use stakeholder analysis as a means of considering this? 5. Are the corporate social responsibility stances as well as the business perspective views of (PRODUCT) RED and GAP explicitly stated in their vision/mission, objectives and corporate values? 6. What other companies, as well as key society figures/individuals support the new business model as well as the advocacy of (PRODUCT) RED? 7. Of (PRODUCT) RED’s earnings how much have been donated to the benefitting institution? How much are retained for the company’s profit? 8. What is the impact of (PRODUCT) RED ‘s social responsibility stance on the company’s overall position? 9. What is the impact of (PRODUCT) RED on GAP’s business?

CSR or the corporate social responsibility is the social arm of a company. CSR is a company program that focuses on the welfare of the employees and the community involvement of the company. Personally, CSR is a good move for the company management because it extends its help not only to the company itself, not only to the employees but even to those societies outside the premises and jurisdiction of the company. Cultural Relativism and Ethical Imperialism. Countries are known to have various cultures and tradition. We normally respect the culture of other people.

This is cultural relativism; that we view other countries’ culture based on how they are accustomed to it and not by our own way. Imperialism means one country extending its power to another country, while ethical means in agreement to the standard of social behavior. Thus, ethical imperialism means the universalism or the acceptance of standard ethical behavior throughout the countries. Ethics and Corporate Social Responsibility in Canada. In Canada, Corporate Social Responsibility is already a part of the business process (Greenall 2008).

Companies in Canada are concerned about their image in the society. With CSR, these companies include in their business process the ways or the activities on how to keep a good image in the society. Conclusion. In planning for a CSR activity, the company has to consider the cultural practice in the place where they want to hold the CSR. Regarding ethical imperialism, Canada could take the lead in the strong promotion of CSR in all companies. This is a good way to extend Canada’s “power” in other countries.

Not in the way that Canada will these countries but will only encourage them to adapt CSR in their business program. Canada has started it!

Works Cited

“Corporate Social Responsibility. ” 30 March 2007. Natural Resources Canada. 02 June 2008 <http://www. nrcan-rncan. gc. ca/sd-dd/csr-rse/csr. html> Greenall, David. “Corporate Social Responsibility: Managing Risks, Leveraging Opportunities. ” 02 June 2008 <http://209. 85. 175. 104/search? q=cache:UJINM7lZ8pAJ:www. hazmatmag. com/posted_documents/pdf/NationalCSR. pdf+corporate+social+responsibility,+canada,+effects&hl=tl&ct=clnk&cd=2&gl=ph>

Corporate Social Responsibility is defined as  the  consideration made by companies for the  interest of the society in which they operate  and involves  taking  responsibility by the company for the impact of a company’s activities to the customers, employees,  shareholders, communities, stakeholders and the environmental concerns resulting from its activities. It becomes an obligation extending beyond the laid statutory obligation prerequisites. It aims at improving the social status of those people that are in contact with the company (Crane et al 2008).

Corporate social responsibility involves working in partnership with other organizations or groups. It is a form of strategic management, aimed at encouraging the organizations to do over and above that which is beyond their mandate (Kytle 2005).

Milton Friedman missed the essence of corporate social responsibility in that he only sees it from the narrow perspective of the organization and not through the lenses of the society from which the company derives profits The fact that this organization has meet the statutory requirements and is engaged only in scrupulous endeavors does not necessarily mean a social concern which is a broader concept that seeks to touch a wider society and it is not just about business ethics.

Any serious organization should have a strategy to give back to the society from which it earns her profits, however corporate social responsibility may be of different forms. It could be through trainee programs where they consider graduates who are in an almost saturated job market after the training they can be considered for jobs in these companies.

The most common approach of Corporate Social Responsibility is the provision of aid to organizations that are locally based including the impoverished populations in the countries that are developing. However this approach, does not necessarily equip the locals with the requisite skills as opposed to the community-based development which assures sustainability.

Friedman says that it is only individuals that have a social responsibility and not organizations. I believe a good corporate social strategy may improve sustained profitability to the advantage of the business. I thus believe that it is an important ingredient of an organization’s success and should be included in the corporate strategy. The adoption of good CSR strategies  can open doors for new market opportunities and bring other benefits that includes a reduction in cost, improved public perception and better business opportunities (Grayson 2004).

Those companies that voluntarily take the initiative have the capacity to convince governments and the public at large that they are getting hold of issues like, diversity or environmental management and may avoid further securitizations. Most firms that make super profits including exorbitant boardroom salaries apply such methods. On the other hand companies that operate overseas away from the home country strive to endear themselves to the host country by extending good citizenship through comprehensive and better labor standards and environmental impact assessments. This may raise their reputation with governments or with the citizenry. Critics of corporate social responsibility have legitimate concerns as to the hypocrisy and insincerity that is the driving force for organizations that engage in these projects and says that this is not a panacea to problems that bedevils the locals and suggests that  governmental, international regulation and enforcement is paramount and that instead of utilizing voluntary measures it is  necessary to ensure that companies  must behave in a socially responsible way even if they will result to acts of philanthropy. Read about Wegmans Social Responsibility

Another aspect of corporate responsibility is through giving information to the locals to prevent vices that are deeply embedded in the society such as drug abuse and other forms of delinquency and by so doing the company is able to change the society for the better. Though corporate social responsibility is important that there be a thorough vetting to ascertain company’s motives and thus take what is good for the society  and this should not be a shortcut to assume the existing rules. It is thus a necessary evil.

List of References

Bhattacharya, C.B., Sankar Sen and Daniel Korschun (2008), “Using Corporate Social Responsibility

Crane, A., et.al.: The Oxford Handbook of Corporate Social Responsibility (PDF), Oxford: Oxford University Press.

Grayson, D. and Hodges, A. (2004) Corporate Social Opportunity! Seven Steps to Make  Work for your Business

 Habisch, André; Jan Jonker, Martina Wegner, R. Schmidpeter (eds.) (2005). Corporate Social Responsibility across the Europe. Heidelberg: Springer.

Kytle, Beth; John Gerard Ruggie (2005). “Corporate Social Responsibility as Risk Management: John F. Kennedy School of Government, Harvard University. Retrieved on 2008-03-07.

Orlitzky, Marc; Frank L. Schmidt, Sara L. Rynes (2003). “Corporate Social and Financial Performance: A Meta-analysis” (PDF). Organization Studies 24 (3)

 R.H. Gray, D.L.Owen ; K.T.Maunders,(1987)Corporate Social Reporting: Accounting and accountability (Hemel Hempstead: Prentice Hall,

Williams, Cynthia A.; Ruth V. Aguilera (2008). “Corporate Social Responsibility in a Comparative Perspective”,

5. Discuss a company which is following CSR principles. What initiatives has the company adopted in order to ensure that it is socially responsible? Include information on the company and its business operations in your discussion.

Apple is one of the leading technologies and most significant companies in the world. Apple is one of the companies that follow Corporate Social Responsibility principles, and they take it very seriously. (Vilas, 2017)

One the of Apple social initiatives is the environment; they have a mission called “ask less of the planet” where they are reducing their impact on the climate change, they use renewable energy sources and managing energy efficiency in their products, machines, and supply chain. Furthermore, the company planted 9000 drought-tolerant trees. Greenpeace has labeled Apple the “greenest tech company in the world” for three continuous years. (Apple, n.d.)

Apple is they do not only use renewable energy; their packaging is 99% recycled paper products. (Vilas, 2017) Also, they offer free-charge education, and they developed a program in 18 buildings, and more than 280,000 workers took many courses. Apple has grown its worker benefits programs to a large size. For example, mothers can take more than 4 weeks break before birth and up to 14 weeks after birth. Meanwhile, the fathers are likely they will take six weeks of parental allowance. (Dudovskiy, 2018)

Apple launched Apple Supplier EHS Academy, which 18-month program to develop worker health and safety in the business. In the program, 240 suppliers participated, and also 270,000 workers participate in the program. (Dudovskiy, 2018) Apple cares a lot about the environment; they decreased the total power consumption of their products by 57%, the introduction of Mac mini as the world’s most energy-efficient desktop laptop and surpassing energy star guidelines. (Apple, n.d.)

Also, Apple supply chain partners have high measures for supporting labor and human rights protections, sustaining effective health, safety and security, and environmental practices, and sourcing supplies responsibly. (Apple, n.d.)