Corporate Governance: Stakeholder Engagement and Corporate Social Responsibility (CSR) As Tools for Commercial Successes
Corporate Governance: Stakeholder Engagement and Corporate Social Responsibility (CSR) As Tools for Commercial Successes
While it is widely acknowledged that interplay between corporate governance, stakeholder engagement and corporate social responsibility (CSR) continue to evolve, the three mechanisms have significant positive social and economic impacts, which may bolster the competitiveness of companies that operate in an industry where competition is seen as a dominant force. Stakeholder engagement and CSR are intrinsically intertwined with market forces, and companies with botched stakeholder engagement governance and CSR become less competitive (Grigore et al. 2015). Hence, an organisation has to be accountable to and engage the society. The idea points to the concept of CSR and stakeholder engagement. CSR refers to a systematic attempt a business makes to commit itself into behaving ethically, engaging stakeholder, and contributing to economic development while simultaneously improving the wellbeing of its employees, the local communities, as well as the larger society (Mwangi & Jerotich 2013). On the other hand, engagement describes the degree of interaction demonstrated by stakeholder towards a company, and how the interaction influences the stakeholder’s emotions and actions (Bal et al. 2013,). This implies that businesses have to contribute to the wider societal development, rather than just focus on profit-making interests (Reinhardt et al. 2008). It is against this backdrop that the media article «Why startups can’t ignore CSR,» which was written by Dinushi Dias and published by SmartCompany on 28 July 2016 is reviewed. The objective is to provide an outline and summary of the arguments in the article, examine the corporate governance issues it raises, determine why the arguments are made, and provide an opinion on the corporate governance issues it raises.
The corporate governance issues raised in the article
The selected article raises two critical corporate governance issues. These include CSR and stakeholder engagement. It has described the significance of CSR to start-up business, narrated convergence between CSR, stakeholder engagement, and business profitability, as well as highlighted how some companies have successfully incorporated CSR as part of their corporate governance.
Outline and summary of the arguments the article makes
Dinushi argues in her article that start-up companies should consider CSR in their corporate governance strategies as this would allow them to attract more customers and at the same time create a better society. In her view, start-up companies and CSR go hand in hand, as they rely on the success of the society for their businesses to grow. To support this argument, Dinushi goes ahead to argue that start-up companies are less likely to be successful when the economy experiences crisis. The author of the article highlights that it would be difficult for start-up companies to grow when their customers are marginalised by social issues hence leading to a situation where they cannot even notice an innovative product the start-up companies promotes. Hence, CSR brings start-ups vast opportunities to achieve competitive advantage.
Indeed, as Dinushi illustrates in the article, it is estimated that nearly 50 percent of the Australian population consider it crucial for a company they buy from to practice CSR, and will consider buying from a company that is socially responsible. Additional statistics that Dinushi provides in the article show that some 60 percent of consumers in Australia are bound to consider buying brands linked to socially responsible companies.
An additional issue raised is, stakeholder engagement. The article argues that stakeholder engagement, particularly engagement of customers, through CSR is central to organisational success. It considers CSR to have suddenly transformed into a topical issue because of its capacity to bring about stakeholder engagement. According to Dinushi, among the communities CSR engages include the Millenials, which it also considers as the current youngest consumer market in the world. For instance, in the United States where the Millenials are estimated to reach about 80 million, close to 80 percent of these Millenials buy from companies that practice CSR, while companies that target the Millenials will most definitely use CSR to engage them.
Discussion of the corporate governance issues raised
As discussed, a major issue identified in the article is corporate social responsibility. In a study by Asemah et al. (2013), the researcher emphasised how CSR is a critical component of business, regardless of their size. The researchers considered CSR as an intricate multidimensional issue that serves as the compass that directs an organisation on how to be wilfully accountable for its actions or inactions and how they affect the stakeholders.
In Dinush’s article, it is clear that organisations whose actions or inactions have positive effect on stakeholders can achieve greater credibility in the society, as a result winning the loyalty of consumers. Essentially, CSR does not merely alter the marketplace, where businesses operate. Rather, it is a company’s realistic way to improve its performance by appealing to customers and the larger society (Khanifar et al. 2012). Indeed, Kitzmueller and Shimshack (2012) highlight that CSR should be viewed as capable of providing a means based on which companies can attain a balance between an attempt to generate profits and the implications of these attempts on the larger society.
Dincer (2011) highlighted that CSR has positive social, economic, and environmental implications on company’s operations, as well as how they respond to the expectations of employees, customers, stakeholders, as well as shareholders. To explain further, CSR is not limited to corporate philanthropy, as it has positive effect on organisation’s profits and performance (Rajput et al. 2012). This idea is related to the article’s key argument that CSR leads to greater profitability. In a study by Branco and Rodrigues (2006), the researchers observed that companies that accepted social responsibilities and practiced CSR tended to experience greater competitive advantage and profitability. At this rate, it is important to consider CSR as not just being a dominant CSR factor. In fact, in the media article, it is argued that start-up companies should refrain from considering CSR to have strictly philanthropic objectives and instead consider it as a means to realising greater profitability.
Broadly speaking, CSR is concerned with the effects of a business on the wider society, or societal development (Matten & Jeremy 2004). In narrower sense, however, it is a multifaceted organisational phenomenon, which denotes the degree to which an organisation becomes directly accountable for its actions or inactions and how these affect stakeholders. Dinushi, in her article, also raises the issue of stakeholder engagement. Mustafa et al. (2012) considers stakeholder engagement to be at the heart of sustaining positive organization’s relationship with the public or stakeholders. Grigore et al. (2015) further argued that stakeholders hope for great levels of engagement with organisations, and, therefore, what the stakeholders feel really matters. Therefore, stakeholders, such as customers, who develop trust for organisation, are bound to be loyal to the company. Ihugba anf Osuji (2011) also argue that many organizations consider customers and stakeholders to be the key resources that need to be leveraged. Therefore, engagement, as a variable, facilitates the development of the relationship between organisations and stakeholders, as well as brands and stakeholders.
Indeed, Dinushi discusses that as stakeholder (customer) engagement has become a trend through CSR, many companies have began to view stakeholders to be long-term company assets that need to be engaged. As stakeholder engagement cannot be forced, it is imperative that organisation seek strategies that can lead stakeholders into developing long-term relationship by presenting themselves as being credible or trustworthy. It is considered that a means in which this can be achieved is through CSR programmes (Carroll & Shabana 2010).
Reasons the arguments have been made in the media
The arguments have been made in the media to encourage start-up companies to consider practicing CSR as part of their corporate governance. Therefore, it is expected that when people who run these start-ups read the article, they would consider integrating CSR into their corporate governance strategy. It is also hoped that companies that use CSR will easily achieve community engagement.
Opinion about the corporate governance issues raised in the article
Like CSR, stakeholder engagement is critical for an organisation’s success. I consider it as intrinsically intertwined with CSR, where companies cannot operate CSR programs without managing to engage stakeholders of interest. Within the context of this paper, I consider CSR to be a tool for attaining commercial successes in a manner that gives consideration to ethical values, as well as respects the local communities, general society, as well as the environment. In other words, it has to be acknowledged that for a business to achieve greater profitability, it has to create a greater market appeal through its recognition and response to a more extensive spectrum of the interests of stakeholders as a whole. Greater market appeal engages key stakeholders like shareholders, employees and customers.
I agree with the arguments presented by Dinushi in her article. She mentions that start-up companies should consider CSR as it potentially improves profits. I believe that CSR can bring about greater level of stakeholder engagement, particularly the customers, by promoting respect for the company within their specific industries leading to greater sales, and improved loyalty of employees, customers and the society at large. These, in my view, imply that for start-up companies, CSR should be concerned with innovation to search for creativity, in addition to value-adding solutions to the challenges in the environment and society. In this way, stakeholders are bound to be engaged in the sense that they would respect the company, as well as feel that the company is interested in improving their general well-being rather than just making profits. Therefore, I consider CSR as also concerned with stakeholder engagement and engaging them to build a better society and to show them that a company appreciates their contribution to its financial wellbeing in order for the company to have the financial might to make positive impacts to the society.
Therefore, CSR is a crucial management strategy that start-up companies can rely on to make positive societal impact while at the same time pursuing their profit objectives. I feel that these companies will need CSR and stakeholder engagement to succeed in a highly competitive marketplace, as these two issues make them credible and respectable in the society. It is also justified to argue that CSR and stakeholder engagement would enable the start-up companies to earn the goodwill of other stakeholders other than just customers. In turn, this would enhance organisational performance as more stakeholders, including customers, employees, or shareholders, would feel comfortable associating themselves with the company. For instance, more customers would be willing to buy from the company. Hence, CSR and stakeholder engagement provides organisations with great opportunities to set themselves apart from potential competitors, and to reduce costs. To conclude, in a competitive marketplace, CSR and stakeholder engagement are viewed to be a components of strategic planning for companies that look to be successful, and want to develop credibility and gain reputation, as well as become more competitive.
The selected article discusses CSR and stakeholder engagement. It has described the significance of CSR to start-up business, narrated convergence between CSR, stakeholder engagement, and business profitability, and highlighted how some companies have successfully incorporated CSR as part of their corporate governance. Dinushi argues in her article that start-up companies should consider CSR in their corporate governance strategies as this would allow them to attract more customers and at the same time create a better society. It considers stakeholder engagement, particularly engagement of customers, through CSR as central to organisational success.
As later established, CSR can be a tool for attaining commercial successes in a manner that gives consideration to ethical values, as well as respects the local communities, general society and the environment. For business to achieve greater profitability, it has to create a greater market appeal through its recognition and response to a more extensive spectrum of the interests of stakeholders as a whole. Greater market appeal engages key stakeholders like shareholders, employees, and customers. Therefore, stakeholder engagement is at the heart of sustaining positive organization’s relationship with the public or stakeholders. Overall, in a competitive marketplace, CSR and stakeholder engagement are viewed as components of strategic planning for companies that look to be successful, and want to develop credibility and gain reputation, as well as become more competitive.
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