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American Businesses Social Responsibility to AmericansResearch Paper

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Social Responsibility of American Businesses to Americans

Corporate Social Responsibility (CSR) is all about combining both economic and social issues in the decision or policy making process of the organization. It is an approach whereby the organization looks after both its own needs and those of the society in which it operates while looking to maximize profit and its market share. According to Jones and George (2011), CSR is the driving belief representing an ethical issue. CSR is a way through which a company and its management perceive and choose to act upon their responsibility towards the company's stakeholders. Another researcher, Tyrrell (2006), noted that CSR is the integration of values into business operations in a manner in which the interests of all the concerned stakeholders, including the customers, society, environment, staff, and investors are reflected in the organization's actions and polices (Mohammed, 2015).

Businesses seeking cheaper ways to employ workers (internationally)

Many organizations are outsourcing their businesses, not just for the purposes of improving their responsiveness, but also to reduce costs and increase growth. This approach is referred to as transformational outsourcing and its aim is not merely reducing the number and/or the costs of workers. Indeed, in some instances, more workers are needed in the United States. Recently, Wachovia Bank outsourced some finance, accounting, and human resources programs so as to improve customer relations (Engardio, 2006; Gordon, C., & Zimmerman, 2010). Off-shoring firms could be perceived in a different context as efficiency seekers, according to the internationalization theory proposed by Dunning (1993). This is because they relocate their production to locations abroad so as to take advantage of less expensive and better assets and resources. This potential cost advantage is essential in explaining off-shoring programs. Given that capital by and large is more mobile than labour, price differences are often greatest for labour. Off-shoring the labour-intensive production stages of a firm to a low wage country is thus seen as an instrument for arbitraging on these cost differences (Kohler, 2004; Bottini et al., 2007).

Businesses responsibility for unemployment rate

Economists have developed several theoretical models for understanding the impact of Off-shoring programs on the level of employment and its skill-bias. Jones and Kierzkowski (1990, 2001) conducted studies on what could happen to employment in situations where a previously integrated production process is divided into two or more segments that can then be traded internationally. One possibility is that, in their model, a country that had the capability of producing integrated products stops producing the labour intensive segment (or in a different terminology, it off-shores this segment); it however remains competitive in the global markets for the more capital intensive segment. The country would then turn into an exporter for this segment, and if the said country is capital abundant compared to others-it will result in employment for more workers to produce the remaining segment (Jones and Kierzkowski, 2001). On the other hand, there is a possibility that a nation that was initially 'second best' in both of the integrated products, but still had the most competitive cost structure. However, as soon as production is divided, either fragment will move to the country that has the best average cost structure. In this case the initial country looses all production and labour as a result of fragmentation. Thus, Jones and Kierzkowski are explaining two different employment outcomes in a single theoretical model and are attributing the outcomes to a country's factor (capital) endowment (Bottini, Ernst & Luebker, 2007).

One important drawback of most estimates on the higher end is that they only take into account direct job losses as a result of outsourcing, and assume or neglect both indirect employment effects and Off-shoring flows from the opposite direction. For the discussion on Off-shoring services from the U.S., this seems ironic, given that the country remains the largest exporter in the world of information technology services and other business related services. Academic studies have arrived at a far less grim picture in contrast to the numbers published by management consultancy firms; the studies have provided evidence that points to the fact that the overall impact of Off-shoring on the local labour market is rather small in quantitative terms (Bottini et al., 2007; Jones and Kierzkowski, 2001).

Is it ethical for businesses to lay off American workers just to hire cheap work internationally?

Off-shoring is one of the new approaches to conducting global trade. We are very used to products being produced in other countries and then being shipped here. However, we are not used to production of services abroad and then shipping them here via telephone wires, large shipping vessels, and the internet. Is it of concern to us then, from an economic standpoint, if values of goods produced overseas come via fibre optic cables or on ships and planes? Well, the frank answer is no, since the economics are basically the same. More goods are tradable today than they were in the past and that's good. That doesn't imply that there are no dislocations; in trade there will always be dislocations. Thus we need to assist domestic workers to find jobs. However, we should not retreat from the key principle of free trade. Off-shoring is the latest manifestation of free trade that influential economists, such as Adam Smith, have since time immemorial talked about (Mankiw and Swagel 2005, p. 9; Gordon, C., & Zimmerman, 2010).

Do American businesses have a social responsibility to Americans?

Yes. Corporate social responsibility is a concept framework that involves the integration of values into business operations in a way that considers the interests of all the concerned stakeholders, including customers, society, environment, staff, and investors. Social responsibility in business is associated with the duty of a firm to increase its positive influence and to reduce any negative action it has on the society. The World Council for Sustainable Development noted that CSR represents a firm's commitment to contribute sustainably to the economic development of the local community/society so as to improve the quality of life among the individuals. According to the European Union, being socially responsible also entails investing in human capital, the environmental, and relationships with stakeholders (?eha, 2013). Generally, CSR is based on the concept that for the profits companies have made, they are responsible not just merely to their investors but also to the people and communities that have been affected in the generation of that profit (Kotier and Li, 2007, p.3). Reasons for using CSR include: strengthening corporate image, increasing market participation, improving the ability to attract and motivate employees, strengthening the position of brands, increasing attractiveness for investors, and reducing operating costs (?eha, 2013).

Besides cheap labour, why else would American businesses move overseas to other countries?

When companies move some of their services offshore, their main reason is often that this is a 'strategic option'. That is, they move these businesses to: expand capabilities, get access to more employee competencies, and to take advantage of new business opportunities. Off-shoring can also help firms to exploit economics of scale for different services thus providing a cost advantage to these firms (Bottini et al., 2007).

India and China have given multinational firms access to a large and diversified pool of labour and increased profitability (ILO, 2004). The entrance of these two countries and their success means that the wage differential between industrialized nations has increased substantially, and that the minimum available wage rate has also further reduced. The opening up of Eastern Europe through these countries embracing capitalism has also effectively doubled the international labour force to about 3 billion workers (Bottini et al., 2007).


Bottini, N., Ernst, C. & Luebker, M. (2007). Economic and Labour Market Paper 2007/11; Off-shoring and the labour market: What are the issues? International Labour Organization

eha, M. (2013). Analysis Of The Application Of The Concept Of Corporate Social Responsibility In Local Businesses. Singidunum Journal Of Applied Sciences, 10(1), 1-10. doi:10.5937/sjas1301001C

Dunning, J.H. (1993). Multinational Enterprises and the Global Economy, Addison-Wesley.

Engardio, P. (2006, January 30). The future of outsourcing. Business Week, 50 -- 58.

Gordon, C., & Zimmerman, A. (2010). Fair Shares: A Preliminary Framework and Case Analyzing the Ethics of Off-shoring. Science & Engineering Ethics, 16(2), 325-353. doi:10.1007/s11948-009-9147-0

ILO. (2004). World Employment Report 2004-05: Employment, productivity and poverty reduction. (Geneva: International Labour Office).

Jones, G. & George, G. (2011). Contemporary management (6th ed). USA: McGraw-Hill.

Jones, R.W.; Kierzkowski, H. (1990). "The Role of Services Production and International Trade: A Theoretical Framework," in: Ronald W. Jones and A. Krueger (eds.), The Political Economy of International Trade. Essays in Honor of Robert E. Baldwin. (Oxford: Blackwell), pp. 31-48.

Jones, R.W.; Kierzkowski, H. (2001). "Globalization and the Consequences of International Fragmentation," in Calvo, G.; Dornbusch, R.; Obsfeld, M. (eds.), Money, Capital Mobility, and Trade. Essays in Honor of Robert Mundell. (Cambridge, MA: MIT Press), pp. 365-383.

Kohler, W. (2004). International Outsourcing and Factor Prices with Multistage Production, The Economic Journal, Vol. 114, pp. C166-C185.

Kotier, F., Li, N. (2007) Korporativna drustvena odgovornost: uciniti najvise za svoju… [END OF PREVIEW]

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