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ELECTION ISSUE 2
NOV 2007 - FEB 2008
Dr Sopon Pornchokchai
President, Agency for Real Estate Affairs Former Consultant to ESCAP, UNCHS, ILO, FAO
CORPORATE SOCIAL RESPONSIBILITY
by Dr Sopon Pornchokchai
All definitions of Corporate Social Responsibility (CSR) are clear, that it is an obligation to a corporation’s beneficiaries: shareholders, investors, suppliers, customers or consumers, the communities where the corporation is located, and the society at large. There are some misunderstandings of CSR, however, which should be discussed in order to prevent any possible distortion and to perform the correct practices of CSR.
1. CSR or CSD?
CSR should not be distorted to become CSD (Corporate Social Donation). In many cases, the physical doing of good deeds is often used to cover crime! In terms of CSD, whether corporations do or do not contribute to the society is their own right. If they do, it will be good for themselves in terms of image, reputation or pleasance. However, if they don't practice CSR, then they harm their customers, adjacent communities or society at large. This implies that they break the law and have to be punished and pay fines. Their executives may be put in jail in some cases.
2. Crime and CSR
Industries with poor CSR tend to promote CSD. Some large cement, petroleum or mining corporations are very poor in CSR because they do not properly prevent pollution. Perhaps they do not want to lose their profit. However, they try very hard to promote CSD. There is a hypothesis that since these large corporations are spending a certain amount of cash on CSDs (partly by buying advertisements), the media or NGOs will tend to critique or question them less.
3. A Little donation?
In Thailand, for example, the average person contributes 2.69% of their income for charitable donations. Most large corporations with good reputations are believed to donate a very slight portion of their income to the society. However, they do a lot of publicity. They earn a good image by spending only a little amount of money. This is why almost no social impact can be observed even if a lot of CSDs have appeared. If they only contributed to the society as much as the ordinary man above, then significant and positive changes in the society could have been observed.
4. CSR of banking corporations
Banks appear to do a lot of CSDs. However, many of them may not perform proper CSR. During the 1997 financial crisis in Asia, the failure of banking systems was due to lack of supervision, insider lending, lack of disclosure, unsound practices and close relationships among commercial banks, private companies, finance companies, real estate developers and politicians. In Thailand in 1997, 2,000 large corporations borrowed as much as US $25 billion. Each loan was worth US $1.25 billion. This became bad debt, due definitely to the lack of the CSR of the banks toward their shareholders, their stock investors and their depositors, etc.
5. CSR and Patriotism
Some local petroleum companies may say that they are local firms and that local people should help support local products. This might occur in other businesses like convenience stores, hotels, and the like. Actually, this is a trick of local entrepreneurs. If they are a local business, they should sell their services or products at lower prices but at compatible quality as well. If they cannot do so, they have no right to ask local people to buy their products or services. This would simply be cheating.
6. SME and CSR
If CSR is understood as CSD, SME might feel that it is very difficult to contribute to the society. Many of them are still struggling for their survival. However, CSR is really a prerequisite for SME; otherwise SME will not gain reliability. SME entrepreneurs should be educated to be responsible to the customers. They should not cheat their customers, who are their stakeholders, for their immediate benefit. This is the way to build trust so that their SME business will grow substantially.
7. Workers better off?
Some factories may have a lot of face-lifting programs on so-called “CSR” (but actually CSD). If they just pay a minimum wage forever, how can they claim to have good responsibility to their workers, a major group of their beneficiaries? Some factories may simply pay a slightly higher wage to their workers in order to attract employees from others. This is only a tactic in personnel management. Often, unskilled labour working life is as short as 6-8 years (18 to 25 years of age). They tend not to become better off but their employers do.
8. Standards for whom?
Standards are set for whom? For example, some international banking standards were set because once Japanese banks performed better than those of other superpower economies. Japanese firms were forced to work for five instead of six days a week because they are above-standard. Considering the maximum working hours, it is very illogical to prevent people from working longer because this is a way to earn more money. People need to be allowed to work hard as long as they are well-paid and it is not harmful to their health. Many business owners work 7 days a week with long hours. Workers in developed countries prior to the 1970’s were also exploited beyond current standards (long compulsory working hours with low payment). Perhaps, these standards were set to obstruct the development of our developing countries.
9. Need laws and regulations
There is a saying that CSR is about the change of mindset (no need for laws and regulations). This might be an exaggeration. The privileged tend not to give up their privileges themselves. It is necessary to make sure that CSR is performed for all beneficiaries. It should be made clear that CSR is enforced by law in order to protect the customers, the communities and the employees – at an equivalent level to the shareholders. Therefore, in practice, there is a need for frequently updated laws and regulations. In addition, there is a need for proper and transparent enforcement of these laws and regulations.
A clearer picture and understanding of CSR is needed in order to perform CSR for the benefit of all. To do the right thing should no longer be a voluntary action, but a legal requirement. Donation can be accomplished additionally only when CSR is performed; otherwise, it would be a distortion of CSR or merely an attempt to cover crime. •
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