The Characteristics of Events

Competitive events

Aggressive competition in business is allowed for as long as all the tactics and moves employed remain within the confines of the law. When negative actions are committed by a company during competition, stakeholders expect their firms to turn out vigorously and aggressively and defend their competitive action in case a litigation process ensues. For the stakeholders to be able to benefit from competitive success of their company, such as customers enjoying quality goods, employees to retain and enhance their positions, governments as well as communities to receive tax benefits, together with investors to earn their dividends, a firm must remain committed to pursue its business interests and act in a manner that is self-serving.

Negative events that occur as a result of companies engaging in business competition often raise concerns, on the part of stakeholders, of whether the act was bad itself, or whether it was a mere misinterpretation of policy. The intention or motivation is framed with regards to realities that result from competition. The management of the firms needs to be a good actor in this regard by maintaining their self-serving interests, as well as defending the explicit interests of the firm (Banerjee 2007, p. 28).

Stakeholder-based negative events

Negative events may occur when the stakeholder’s well-being is jeopardized in a way, for instance when product safety issues arise, or when violation of health and safety occurs at the workplace. In such instances, little ambiguity exists about the extent of the act’s badness. The existing evidence could be suggestive of the fact that the firm occasioned either a potential negative outcome or an actual event occurred, to the effect that some key stakeholder groups were actually affected negatively. The ambiguity in this case, however, comes from the motivations of the involved actors. Two questions are likely to be asked in this regard; was the act deliberately done due to the pursuance of self serving interests of the management, or did it result from maladapted systems.

In the first instance, a bad act was caused by bad actors. In the second instance, good actors were somehow caught up and compelled, in a way, to committing a bad situation. In general, stakeholder-related negative events, intentions and determination of the actors is a weighty matter that goes a long way in determining what the appropriate punishment could turn out to be. The moral capital that is generated from the engagement of CSR activities, in this case, is supposed to play a significant role in estimating what negative stakeholder reactions could be.

Negative events resulting from integrity issues

There are times when the moral character or integrity of the company is in question. For instance, the management can act in a way that violates ethics, like unfairly treating employees and other stakeholders of the company. In this case, as like the case with stakeholder-based events, the action’s status is considered unambiguous and negative. It is the moral characters of the involved actors that are questioned.

The ambiguity surrounds the core commitment of the management and their ability to abide by social principles, as well as the acceptable norms and ethics. In other words, stakeholders may begin to doubt the fundamental integrity of the firm. The firm’s engagement in CSR offers stakeholders with two choices on how to resolve the ambiguity; firstly, the CSR engagement can be viewed in good light as not having any bad mind, and evidence that there exists good character on the part of the management. Secondly, the CSR can be viewed in bad light, in the sense that the management has a bad mind and are only acting hypocritically. For the good interest of the firm, stakeholders should opt for the first choice of interpretation because of a sustained goodwill relationship. This will result in a scenario where the stakeholders accord their firm the benefit of doubt in situations where ambiguity is noted. Equally, like in stakeholder-based events, CSR engagement and the resultant moral capital should play a major role in assessing the intentions of the management.

Demanding Stakeholders

Companies should strongly focus on their own sustainability by listening to, and partnering with the diverse groups which, in one way or the other, are affected by the operations of the company. For any firm, its main stakeholders are the employees or labor unions, government ministries, consumers, suppliers, insurers, the media, banks, institutional and private investors, trade associations, competitors, the local community, first nations, non-governmental organizations, as well as the environment at large, often represented by government, NGO, or the community.

It is often noted that managers of firms tend to pay a lot of attention to relationships that touch on powerful stakeholders, those that touch on legitimacy, and those that touch on urgency (Hillebrand 2009, p. 52). The company executives build social capital through developing an organizational culture, as well as capabilities to communicate with an all inclusive network of the major stakeholders. For the firms and the managers, building social capital effectively also builds financial capital. In general, company managers need to treat all stakeholders as important players whose contributions and interests must be included in the strategic decision making process.

Governance and the green consumers

“Green” consumers place their concerns more on social and environmental aspects. Their main concerns are climate change, depletion of natural resources like forests, and pollution issues. Their concerns range from the effects of greenhouse gases, socio-environmental impacts that result from hazardous waste materials and company efforts in dealing in CSR. “Green” consumers make up quite a substantial number of clients or people buying from any firm and use their wallets to vote. These consumers can go to all extents to pay expensively for green products although they express their dissatisfaction at the failure by corporate organizations to express commitment in dealing with environmental matters. In other words, these consumers reward or punish companies by either buying their products or failing to buy them, basing on their social performance.

It is prudent for companies and their management to discover the fact that a majority of their consumers consider the environmental consequences before they buy their products or services. This describes the reason as to why there has been growing shift or turn from the processed products to alternative therapies, natural products and organic foods. Companies can turn to CSR as a reliable cushion to help them acquire the much needed competitive advantage. As the awareness on social and environmental aspects grow among societies and communities, the governance of companies must explore on different ways through which they can win the confidence of these stakeholders. In particular, investor relations professionals, otherwise referred to as IRO’s must be hired by companies and regularly trained in order to keep pace with the ever changing demands and requirements of the subject. The mainstream investors for companies are more likely to consider social and environmental criterion in their analysis and assessment of the firm (Parry & Day 2010).

The activist shareholder

Investor relation officers play a significant role in assisting the investors to appreciate the firm’s CSR and what its practical effects are in as far as the firm’s performance is concerned.

Additionally, CSR, sustainable development, and climate change have become some of the fastest-growing resolutions that are initiated by shareholders. As company investors use their votes as well as voices to demand for corporate governance that is more powerful, they graduate from passive stockholders to responsible owners who are also active. They know better the leverage that they enjoy as individuals or institutions with full investment of their faith and capital in the company. Using different channels such as proposals, dialogue, campaigns, together with strategic shareholder resolutions, their demands are pushed through to the corporate management for action.

The mainstream investors also use general meetings to introduce sustainable resolutions. This has forced the actions of a majority of institutional index fund managers to be more transparent. In the past, such institutions operated in a lot of secrecy about their casting of proxy votes so as not to upset their potential corporate clients managing the pension fund services. New rules have also been put in place which requires fund managers to divulge information about their proxy-vote policies, as well as their voting ways in passing resolutions. In other words, the information about how fund managers voted with regard to relevant resolutions. The non-profit sector which encompasses CSR is experiencing a rise that had previously not been anticipated.

There are fears that with lack of controls, the non-profit sector could easily appear in retrospect of the idea and objective of business (Coombs, & Holladay 2011).

The civil society or NGO shareholder group

A majority of the people are actually social activists who have high expectations on the company to solve their social problems while also acting ethically. Others are latent activists who may develop to become active and therefore demand that firms become environmentally and socially responsible. These activists push their demands by protesting, lobbying, campaigning, and even boycotting the company goods and services.

Many activists also turn out to be members of civil societies, who belong to such nongovernmental organizations like environmental groups, labor movements, women’s network, civil rights organization, peace networks among many others. In general, civil society groups form a formidable force that pushes through their agenda by ensuring firms comply with the required stipulations without fail. Civil societies constitute a market force whose main activity is “naming and shaming” non-compliant players or participants. When dealing with influential stakeholders, corporations must ensure they include the demands of the civil society. Through nurturing of stakeholder relationships, firms are able to learn, acquire competitive advantage, build a good reputation, and grow their innovation (Aras & Crowther 2010). On the contrary, failing to nurture stakeholder relationships may result in adversarial relations which in turn consume a lot of resources and time than would be the case in a collaborative partnership relationship. According to the February 2003 edition of Columbia Journal of Environmental Law, there has been an increase of legal lawsuits that are holding companies answerable to climate changes being witnessed. The costs of these litigations are so immense that they threaten to eat into the profits of such companies.

In such instances, therefore, the companies have to protect their interests and those of their stakeholders by ensuring they put mechanisms into place that addresses pollution and environmental concerns. Although a CSR activity that looks into the environment may appear expensive, it is viable than ending up in a court of law to answer to charges of environmental degradation. The high cost of a legal fine slapped on a firm for environmental negligence would affect the prices of its goods and services. As such, the consumers are likely to suffer from expensive goods. To the shareholders of the company, their dividend value will be reduced as the firm seeks to consolidate all funds available to pay up the fine. Equally, the spoilt reputation of the firm may mean it becomes very difficult for it to participate in business as there could be a possibility of consumers and investors alike to boycott its activities and goods. The government as a stakeholder

Governments control the activities of companies by formulating policies and regulations that check on environmental pollution and the dumping of hazardous waste material. The government also formulates legal requirements that ensure the working environment for the workers remains healthy. Government regulations have also been introducing new measures to try and keep checks on the climate change being witnessed. For instance, governments which are signatories to the Kyoto Protocol have been enacting laws that comply with the protocol. It is therefore a CSR activity and obligation for firms to adhere to all government regulation that intends to control the smooth performance of business.

The financial sector as stakeholders

Mainstream investment decisions by corporations have taken a trend where CSR considerations are taken into account. The financial sector, which include financiers of the organization like commercial banks, investment banks, project financiers, pension fund managers, re-insurers, and many more appear to accept funding to projects that have a social appeal. As such, many companies are being forced to undertake projects that also put other stakeholders into perspective in terms of their interests (Sage Publications 2011).

Financial markets often base their decisions to finance company projects on financial capital. However, with the heightened awareness on environmental activities, financial companies are likely to shift their basis on social and environmental performance as part of company valuation. Financial analysts recognize the fact that financial capital of firms ride on intangibles which represent between 50 and 90 per cent of the market value of a firm. On average, quite a substantial amount of information that is used by firms to justify investment decisions as well as predict share price often is non-financial. Thus, financial analysts must be in a position to recognize invisible intangibles, most of which are often sustainability-related risks, also known as value-driving sustainability opportunities (Willard 2005).

Recommendations

Organizations can regulate themselves in CSR activity by making their executives responsible for overseeing their compliance systems. This can be tied to organizational, as well as personal liability. It is very prudent that the related outcomes are also presented to the corporate officials of the firm (Horrigan 2010, p. 162). CSR, like the core business activity of any firm, is an investment whose quality and efficiency will work towards improving the business performance of an organization. It is important for the management to reconcile contrary needs, given the competitive business environment, because there is a close connection between profitability and operating in a socially responsible manner. Independent organizations can be drafted to assist in auditing CSR activities and general performance. The management of organizations should give out reliable and more systematic information about how their business activities are affecting the general society. The company website would be the most appropriate channel to convey this message, through a special CSR section. Reports presentation should be in a universally acceptable format for easy communication (Sun, Stewart & Pollard 2010, p. 297).

Conclusion

Corporate social responsibility has become an integral part of business which determines its success or failure. CSR activities normally aim at improving the social quality communities that involved, in one or the other, in the overall running and performance of the organization. These communities include the consumers, employees of the organization, the neighboring community or society, government, financial sponsors, shareholders, NGO’s, among other groups. CSR makes the organization to appeal to the outside community and therefore create competitive advantage. It expresses the company’s commitment not only to serve its interests but also to involve the interests of the stakeholders. Organizations with bad reputation fail to attract investors and their goods and services can easily be boycotted by consumer groups. However, CSR activities act in a way that strengthens or cushion relations between the firms on the one hand and the stakeholders on the other hand.

List of References

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