The Importance Of Corporate Social Responsibility Policies And Corporate Culture

Nowadays there is an increasing importance of corporations to society in the XXI century. They have a bigger influence on society and the environment than ever before. As a consequence of the fact that increasing power is followed by increasing responsibilities, there is a bigger need than ever before to form proper corporate social responsibilities and control unethical corporate behavior. Furthermore, being responsible in the business world is not only about meeting all the formal and legal requirements, but also it is about increasing investments in human resources and environmental preservation.

In order to critically analyze the importance of corporate social responsibility policies and corporate culture, the essay will investigate their role in corporate transgressions by constructing all the arguments using case studies, as well as academic sources.

First of all, it is important to start from defining what corporate culture is. One of the most commonly cited definitions of corporate culture is the definition of an American social psychologist, Edgar Schein.

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He stated that, corporate culture is a group of values, traditions, beliefs and attitudes which are the essence of everything that everyone does and thinks in the organization (1990). It is powered by a system of rituals, communication patterns, and informal structures. Moreover as Dillard and Yuthas stated in 2002, they express what is important and what kind of behavior is desirable. Thanks to them, it is possible to set criteria for assessing the employee’s behavior and views of other colleagues. Moreover, according to Kroeber and Kluckhohn, these norms represent practical ways of implementing adopted values (1952).

In other words they create standards of behavior by showing what to do and what to avoid. These two components of corporate culture can be particularly visible in the company's mission statement, CSR statements, as well as in the way people are treated in the company. They also have a great impact on the criteria for selecting employees for particular positions, but also on the way of dealing with conflicts. In theory it helps to maintain the social order, but as Langenberg outlined, it should be remembered that company culture is constantly influenced by many factors (2004).

There are a huge number of corporate scandals which shocked society around the world, among others: Sports Direct scandal connected with employees’ conditions; BHS and Carillion scandal connected with pensions; Northern Rock scandal with reckless risk taking, Wells Fargo’s accounting scandal; News International scandal with phone hacking. All of these scandals have one common feature- one or a bigger number of employees decided at one point to commit immoral actions. Some can argue that corporate scandals are dictated by lack of proper CSR policies, but very often scandals are born within companies which had good formal policies. To illustrate this point it is worth to referring to: VW emissions scandal; Barclay’s market rigging scandal; BP or even Lehman Brothers’ reckless risk taking. It can be stated that in this case the biggest problem lay in wrong corporate culture. However it is a multi-faceted problem, which is caused by several factors. For instance there are corporate scandals in corporations which are popular for their positive and appropriate corporate culture, namely Apple’s iPhone fixing scandal; Samsung’s bribery scandal; Amazon’s employees’ exploitation scandal; Starbucks’s tax avoidance scandal; Tesco’s scandal connected with their accounts. As it is visible, sometimes it is not necessarily faulty of bad corporate culture, instead it can be caused by independent individuals or small group with exceptionally negative behavior in the company. Moreover, many factors have influence on company’s culture, among other external factors like national culture. We can interpret it as set of cultures of a given region, but also as local value systems. As a result, employee’s behavior can be more influenced sometimes by these external factors than by internal CSR policies or corporate culture.

Consequently there is a big difference between corporate social responsibility documents and employees' beliefs. It could be argued that often the reason why companies ask employees to read the CSR instructions is because of lack of confidence that employees will behave properly. This is not just a paradox, it can be also a very practical problem. Procedures within scope of behavior, shared values and everyday ethics can prove a lack of trust in the decency of oneself and other colleagues. That is why these documents sometimes can have the opposite result than the expected one. There is also a very important issue related to the implementation of CSR papers compared to the reality. For instance Webley and LeJeune in 2005 outlined that only few companies provide comprehensive trainings for their employees from CSR policies. Furthermore, Webley and Dryden in 2005 pointed out that not many companies provide advices and support for employees in ethical decisions. It is probable that a lot of companies have perfect CSR policies for just PR purposes. For instance the ranking published by Ethisphere measures ethics of the companies, but they are doing it mainly by analyzing relationship between internal corporate documents. Admittedly it leads to a race between companies to create the best policies and not necessarily to implement them to the company’s culture. Farrell and Cobbin also outlined a very important issue that in the process of creating CSR papers, the most important decision makers are often omitted, namely higher management and CEOs (1996). Even more, studies show that often CSR policies focus on forming dependable employee instead of ethical employee. Bearing in mind, it is clear that it is a multi-faceted problem. According to the research, the main challenge lies in finding a cause-effect relation between employees’ unethical decisions and its determining factor. Without any doubt, the individual employee’s culture will decide first of all about his behavior and it is born from upbringing, traditions and customs.

On the other hand, it can be argued that every employee will try to keep their job and position in place, to feel good and give the opportunity to find fulfillment. Moreover, they will do it by adapting to the company’s rules and culture. What's more, some can point out that the work and working styles of employees affect each other, that is why an individual is constantly put under the pressure of the environment and very often this effectively changes their behavior. The story of Enron Corporation is a great case which supports this argument and the statement that lack of corporate culture is a leading factor which pushes people in the company to the wrong actions. Although Enron Corporation had excellent CSR policies and perfect business ethics tools, they also created at the same time a culture of “cleverness”. As it is quoted by their employees, "you were expected to perform to a standard that was continually being raised”. They embraced the values of constant rat race at all costs as an important survival skill. Their motto included statements like “do it now and do it better". Furthermore, "it was all about an atmosphere of deliberately breaking the rules". Shein tried to answer the question, what pushed the corporate culture in such a negative direction (1985)? He pointed out attention as one of the leading factors. He argued, that all employees and the whole organization will be focused on the same problems as the leader is focused on. In other words, all employees will pursue a goal defined by top management. This case supports this view, because the CEO of Enron was described by his fellow co-workers as a leader who was focused only on money. As Wolfe said, leaders by focusing blindly only on profits "promote an unrealistic belief that everything boils down to a monetary game" (1988). In other words, there is a huge importance for top management to show an example for other employees of what values are leading in the company. For instance, Enron had a very good code of ethics, which promoted respectful behavior and righteousness between employees, but the reality was harsh. There were very little examples of top management behavior which would support these values.

There are further examples of corporate scandals, which indicate that despite the proper ethics principles in the company, there is still a lot of space for unethical behavior which cannot be stopped only by theoretical rules and formal papers. To illustrate, Shell’s “General Business Principles” which exist since 1976, didn’t have a big influence on deeds of top management. This is the reason why there were scandals connected with their Nigerian units, where company lied in their reports about the amount of oil reserves owned by the company. The other example is Barings case where the oldest British merchant bank was driven only by willingness of increasing profits. Furthermore, cases of Cadbury Schweppes and BP are different examples of corporate scandals, where higher management misappropriated funds and covered it up. It happened despite corporate social responsibility policies. In the same way the Volkswagen’s emissions scandal from 2015 “shows how established organizational practices of corporate business ethics are no barrier to, and can even serve to enable, the rampant pursuit of business self-interest through well-orchestrated and large-scale conspiracies involving lying, cheating, fraud and lawlessness”. Furthermore, the evidence of lack of an appropriate corporate culture was pointed out by Webley and Dryden in 2005. Nevertheless it is important to remember that good corporate social responsibility policies will make it easier to maintain ethical behavior inside the company. For instance, Google’s values are embraced in the phrase “Don’t be evil” (2010). They are described in the document titled “ten things we know to be true”, which clearly shows where their focus is based. Another good example supporting the importance of good policies is one of the biggest American supermarket chains, Wegmans. They loudly state, that their most important values are care and respect. Moreover they promise their employees jobs, which they will love. They maintain fifth position in Fortune magazine ranking of the best employees, what underline how successfully their policy is.

To sum up, economic activity causes numerous problems, which the company should also be involved in solving. Enterprises are legal entities, so they are a peculiar kind of citizen who should also take care of their environment and take responsibility for their actions. Additionally, it is important to remember that corporate culture brings together employees. It gives them a sense of common goals and missions. It is a guarantee of standards which are in force in the company. It has a soft impact on employees who have a sense of solidarity. As a result of it, they try to work as efficiently as possible and they want to strive after the best achievements for their own professional benefits and for the entire enterprise’s benefits.