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This report aims to review the corporate social responsibility (CSR) models which managers should consider important when deciding their CSR stance. The report will also review the corporative bank and their stakeholders regarding CSR. The report will then go on to analyse and evaluate the corporative bank’s CSR and ethical position.
2. Corporate Social Responsibility
Corporate social responsibility (CSR) as a topic has received the attention of organisations and managers as a whole. The 1950s marked the start of the modern era of CSR for managers, where Howard R.
Bowen (1953) defines social responsibilities in his publication as the businesses’ duty to make decision and follow principles that are acceptable to society. However, Milton Friedman (1970) argued that social responsibilities is for people not businesses, he claims that the only responsibility business managers should have is to use all their resources to maximise profit and increase shareholder’s wealth (Friedman, York Times Magazine, September 13, 1970, pp. 32-34).
2.1 Carroll’s CSR Models
In 1979, Carroll developed a social responsibility model with a hierarchy of four responsibilities, starting from economic, moving to legal, ethical and discretionary responsibilities (see fig.
1.1). This CSR model talks about responsibilities which are the main areas that managers should consider when taking a stance on CSR. The summarised views of Carroll’s hierarchy are businesses should strike to make profit as their main priority, and then complies with the rules and regulations of the law; also behave ethically and finally be good corporate citizen (Carroll, 1979, p.500). The hierarchical four responsibility model was later improved by Carroll in 1991 as “pyramid of corporate social responsibility” (see Fig.
2.2 Modern CSR Arguments
As the definition of CSR developed and gain more attention over the years, more arguments over CSR began emerge. In reviewing CSR, both Goyder (2003) and Moore (2003) argued that firms claiming CSR in expectation of achieving greater profitability is unethical. Firms should take up CSR only if they can ensure positive impact on society and the environment. Even though Jones (2003) argued that managers must not use CSR as a business strategy but should see it as an ethical stance. However, he does not believe firms taking advantage of the opportunity to make profit is unethical. (Wan Saiful wan-Jan, 2006, pp.176-184)
2.3 Introduction of 3C-SR Model
In order to counter the deficiencies of previous approaches, Meehan et al (2006) devised the 3C-SR model- “competitive advantage through “social resources””. This model claims that Corporate Responsibility (CR) is a tool to making profit not ways of reducing revenue. This model is made up of three inter-related components, ethical and social commitment, connection with partners and consistency of behaviour. According to Meehan et al, if management encompasses all three elements it will build a strong corporate social performance and become a good corporate citizen. (Meehan et al, 2006). However, the models has not been based on observations and experiments, also there was no criticisms by other authors. It is subjective base and was not well supported.
3. The Co-operative Bank and Their Stakeholders
The Co-operative bank is a part of the co-operative group, the largest consumer co-operative in the United Kingdom (UK). The bank offers a range of financial services such as saving accounts, current accounts loans and overdrafts. They are an organisation that makes profit consistently while operating in a socially and environmentally responsible manner by putting their ethics into action (www.co-operativebank.co.uk).
The Co-operative Bank is sensitive to the needs of all their stakeholders (see fig 1.3). It aspires to meet common economic, social, environmental and cultural needs of their stakeholders. Stakeholder of a company is anyone who has can be affected or can affect the company’s actions or decisions. The co-operative bank acts quickly on relevant and important stakeholder concerns. Engagement with their stakeholders is an important continuous activity. The cooperative bank’s CSR stance of responsible finance which consists of ethical screening, financial inclusion and microfinance is important to each of their stakeholders. (Co-operative bank sustainability policy, 2010)
4. THE CO-OPERATIVE BANK’S CSR and ETHICAL STANCE ANALYSIS
4.1 Sethi’s Three-Stage Schema
Sethi’s three-stage schema is useful in determining and analysing the Co-operative bank’s adjustments of their corporate behaviour to social needs. There are three categories of social commitments; social obligation, social responsibility and social responsiveness (Sethi 1975, pp. 58-64, cited Carroll, 1979). Social obligation refers to companies behaving in response to market forces or legal restrictions. Managers of such companies only limit their response to social issues which are guided by law and the economic system. Social responsibility is corporations acknowledging social values and expectations also the importance of ethics. Whilst social responsiveness states that it is important for firms to search for ways to be socially responsibly in the continuous changing society in the long run than how to react to social pressures (Sethi 1975, pp. 58-64).
Co-operative bank is continuously searching for ways to be socially and ethically responsible to meet to match the dynamic social system. They are constantly coming up with ethical policies either to meet suppliers needs or customers needs. They plan to the most socially responsible business in the UK. The bank is also making profit maintaining their economic duty to be successful. (http://www.co-operative.coop/join-the-revolution/our-plan/responsible-finance)
4.2 The 3C-SR Model
Ethical and Social commitments:
This element represents the values aspect of social resources. This component comprises of the promises that organisation made to their stakeholders, also the ethical standards set by them which are stated in their mission statement and goals. (Meehan et al, 2006). The Co-operative bank seeks to be the leading retail bank in global financial services industry. They have been operating with values that have been handed down by the founders which are social responsibility, openness and honesty. They aim;
▪ To be profitable
▪ To meet customers and community needs
▪ To respond to members and give them a fair return
▪ To be an ethical leader and exemplary employer in order to inspire others
The Bank is very committed to delivering value to their stakeholders. In 1992 they launched their ethical policy when the customers requested that they would like their money to be invested ethically. The policy was formed to reflect customers’ ethical concern not that of the managers. The bank practice ethics in action by turning away businesses that are involve in unethical practices (fossil fuel extraction, child labour etc). The bank’s suppliers gets paid fair price and there is effective communication between them and the bank, which leads long term relationship. With the banks fantastic delivering value policy some customers and employees are yet to be satisfied. (The co-operative bank sustainability report)
The Co-operative Asset Management (TCAM) ensures that there is gender balance within their banks employees and also there is no discrimination. In 2010, the bank extended this policy to other companies they do business with (The co-operative bank sustainability report, 2010, p112).
Connections with partners in the value network
Norman and Ramirez (1993, p69, cited Meehan et al) claims that a business network gets value from a value creating system in which all the stakeholders and the business itself work to together to create value. Meehan et al believe that if anyone of the parties fails to embrace the value network structure, then the socially oriented business model is bound to fail. If one organisation chooses to associate with another organisation, the nature of that relationship should be based on credibility on both parties, then the value structure works. In the other if on party fails to meet the commitment of the other then a stakeholder deficit will occur (see fig 1.4).
The Co-operate bank ensures that their corporate customers share the same values with them as in gender equality and anti-discrimination through their TCAM. There is also their ethical screening which helps them maintain the ethical finance image. The ongoing employee, members and customers survey ensure that the connection between them and the bank is still there (The co-operative bank sustainability report).
Consistency of behaviour
The consistency element refers to organisations implementing their policy to conform to the commitments and maintain the performance in the long term. It is the behavioural component of the social resources over time and across all aspects of an organisations operation. The common source of criticism is when businesses claims to be socially responsible and fails to act responsibly towards society. (Meehan et al)
The Co-operative bank’s ethical policies and social responsibilities have been improved to meets stakeholders needs and maintained over the years. The bank has been consistent with a satisfaction survey for their employees called “the Voice” carried out twice a year. They have also maintained their investments to their local communities and society at large over the years (The co-operative bank sustainability report). Ethical investment policy generated in 1992 is still an ongoing process for the bank (http://www.thenews.coop). In maintaining this policy, the bank is loose out on income resulting to a reduction in income for turning business away.
This report has reviewed some of the different CSR theories and models that are important to managers when they are deciding on their CSR approaches. The report also reviewed how CSR has been evolving over the years with theories and models of different scholars.
The co-operative bank engages their stakeholders in all their CSR approaches which help them to understand the stakeholders better. The bank understands the fact that a successful business occur only when all the stakeholders work together with mutual ethical values.
Using the sethi’s three stage schema and the 3C-SR model to evaluate the Co-operative bank, it is quite clear that the bank is an ethically and socially responsible corporation. Even thought they are losing income and spending a lot to remain ethically and socially responsible they still insist on maintaining ethical policy. On the other hand the benefits of sustaining their ethical policy out weight the losses being made. The bank made a more profit in 2010 than 2009. The bank is not only using CSR as a business strategy but they are also being sensitive to all the needs of their stakeholders including positive impact the environment.
Carroll, A.B. (1979), “A Three-Dimensional Conceptual Model of Corporate Performance”, Academy of Management Review, Vol. 4, No.4, pp. 497-505
Bowen, H.R. (1953), Social Responsibilities of the Businessman, Harper, New York, NY.
Carroll, A.B. (1991), The pyramid of corporate social responsibility: towards the moral the moral management of organizational stakeholders”, Business Horizons, July/August, pp. 39-40
Carroll, A.B. (1998), “The four Faces of Corporate Citizenship”, Business and society Review Vol.100 No.1, pp.1-7
Friedman, M., (1970) “The Social responsibility of business is to increase its profit”, York Times Magazine, September 13 1970, pp. 32-34).
Meehan, J; Meehan, K; Richards, A. (2006), “Corporate Social Responsibility: the 3C-SR model”, International Journal of Social Economics, Vol. 33, pp.386 – 398
Sethi, S.P. ((1975), “Dimensions of corporate social responsibility”, California Management Review, Vol. 17, No.3, pp. 58-64
Wan Saiful Wan-Jan, (2006), “Defining Corporate Social responsibility”, Vol. 6, Issue 3-4, pp. 176-184
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