Corporate Gov Social Key Motives and Disincentives Case Study

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Corporate Gov Social

Key Motives and Disincentives for Corporate Governance and Social Responsibility

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Globalization is the preeminent force defining the economic climate for business leaders, nations and even individuals. The internationalization of the world economy is predicated on the theory of trade liberalization, which predicts that by reducing the barriers to the flow of commerce between nations, it is possible to promote a collective advance of living standards while simultaneously promoting a greater harmony of interests on a global scale. These ambitions, however, have more often than not been countered by negative patterns such as labor abuses in developing nations, exploitation of environment and resources by multinational companies and a general descent into corrupt and unethical practice. This denotes the state of Corporate Social Responsibility on a global landscape, where the push for continued deregulation has placed the reigns of corporate governance in the hands of corporations themselves. This has proven naive and unrealistic, as the deregulatory environment has given way to myriad corporate collapses, revelations of massive embezzlement and rampant executive greed. The last decade of corporate collapse and economic recession, however, should be considered a glaring demonstration of the correlation between effective corporate governance and the achievement of long-term business success. Indeed, as the discussion hereafter will contend, Corporate Social Responsibility (CSR) should be seen not as an impediment to success but as a necessary protectorate of the corporate integrity, structure and functionality.

Case Study on Corporate Gov Social Key Motives and Disincentives Assignment

Certainly, we have seen that in the absence of effective internal governance, organizational failure is often imminent. That said, the structure which the new world economy has taken on presents certain inherent roadblocks to effective regulatory oversight. National governments in particular have been removed from this process to a problematic extent, leaving corporate personnel to define and enforce their own codes of ethics. For developing nations in particular, where flimsy labor protections and poorly defined environmental laws persist, many multinational companies operate unethically and with total impunity. Kahler & Lake (2001) identify this problem, reporting that "many believe that governments are now being pressed by the forces of globalization to transfer policy functions and political authority 'upwards' to supranational entities, 'downwards' to provincial and local governments, and 'sidewards' to private corporate and NGO actors." (p. 1)

This suggests that the patterns which have heightened economic interdependence between nations have simultaneously reduced their individual and collective authority. Ironically, the ambition of globalization to move nations forward collectively may be demonstrated to have actually diminished the capacity of any one nation to govern the affairs of corporate actors either domestic or foreign. And it is not sufficient to simply state that these patterns are displacing governmental power into the hands of multinational corporations. Even more than that, the atmosphere of deregulation is creating an atmosphere in which many companies can ill-afford the luxuries corporate governance or corporate social responsibilities. As competitors use illicit modes of internationalization in order to reduce costs and improve pricing, a great many firms have been forced to abandon long held corporate values in favor of mere survival. By placing corporate governance strictly in the hands of the corporations themselves, the world's governments have established an atmosphere of lawlessness. Many companies have acted on the international scale under the supposition that there will be no consequences for the depletion of natural resources, for the devastation of formerly livable lands, for the grave violation of human rights and for the use of labor facilities and factories hosting abhorrent worker conditions. To this point, it may be suggested that there have been modest to no legal consequences.

As a result, these transgressions are becoming the normative practice. Indeed, those organizations that rely on competitive customer pricing have been left with little choice but to seek these same avenues for production. In a sense, these firms are simply coalescing to a new structure in which corporate governance essentially translates to corporate entitlement. As noted by Kahler & Lake, "undermining the traditional view of government from another quarter, the bargaining power of private corporations, mobile and global, has grown, producing a retrenchment of government and an era of deregulation. Globalization in these popular views has meant a pulling apart of traditional roles of national governments in favor of international organizations on the one hand and more local forms of government on the other, and a rolling back of traditional government in favor of the private sector." (p. 1)

The produces a particularly negative outcome for the residents of many of the developing nations which have been subjected to globalization. With the opportunity for greater profitability abounding in those localities most poorly regulated by government oversight, multinational corporations have acted out of the inherent expectation of exploiting humanitarian and environmental concerns in favor of economic growth. To this extent, the very notion of Corporate Social Responsibility is perceived as irrelevant, and for those who will ultimately follow the prevailing wind of the marketplace, impossible to maintain.

This helps to contribute to the focus of our case study. Indeed, references to the dominance of certain corporate entities in defining -- or to phrase it more accurately, in undermining -- the notion of corporate governance provide an appropriate prelude to a discussion on the Wal-Mart corporation. Indeed, the world's largest retailer is also among the worst offenders in multiple categories of humanitarian, environmental and business ethics abuse. Wal-Mart is perhaps the best demonstration of why CSR has fared so poorly as a concept in the era of trade liberalization. The enormity and reach of Wal-Mart has allowed it to essentially pace the marketplace. By choosing to engage in labor practices in developing nations which may reflect sweatshop conditions, and by choosing to commission production operations in host nations where environmental laws are most lax, Wal-Mart has set the tone for corporate social responsibility. And as implied here above, its enormity has made it extremely difficult for competitors to resist and survive in simultaneity.

This makes Wal-Mart both a negative corporate citizen and a largely negative force in setting a template for corporate governance in the face of globalization and deregulation. As Smith (2004) contends, "Wal-Mart is one of the key forces that propelled global outsourcing -- off-shoring of U.S. jobs -- precisely because it controls so much of the purchasing power of the U.S. economy,' says Gary Gereffi, a Duke University professor who studies global supply chains." (p. 1)

For retailers who wish to survive in this atmosphere, Wal-Mart has left them with little choice but to abide many of the same practices. It is seen in this atmosphere that too stringent a sense of corporate social responsibility could tie the hands of a company which must make difficult labor practice decisions. Outsourcing is now a norm for many production-driven companies, particularly those based in developed nations such as the United States or Great Britain. The smaller scale of economy makes contexts such as India, Mexico and Indonesia attractive to companies which must employ foreign labor in order to attain a price index similar to that of a Wal-Mart or a Target retail chain. This helps us to identify the major disincentive for developing a code of corporate social responsibility.

However, as we transition toward a new generation of multinational corporations, we do so with consideration that both corporate governance and the assumption of corporate social responsibility are actually necessary to long-term survival. This assumption is precipitated by the wave of corporate failures that marked the last decade in economic history. This suggest that the quick profitability and reckless shortsightedness of unethical practice are likely to yield eventual operational failures. Certainly, this is the philosophical core of the premise of corporate social responsibility. So denotes the source provided by the University of Miami (2008), which reports that "the notion of companies looking beyond profits to their role in society is generally termed corporate social responsibility (CSR)….It refers to a company linking itself with ethical values, transparency, employee relations, compliance with legal requirements and overall respect for the communities in which they operate. It goes beyond the occasional community service action, however, as CSR is a corporate philosophy that drives strategic decision-making, partner selection, hiring practices and, ultimately, brand development." (p. 2)

To the perspective offered here, there are clear organizational benefits to reigning in the excesses of greed, exploitation and short-sightedness that have swept across the globe in accompaniment to free trade. In spite of the rigors produced by such competitors as Wal-Mart, the imperative to maintain sound internal functionality may be seen as a lynchpin predicting long-term survivability. For certainly, the practices committed by companies such as Wal-Mart will inherently bear some practical backlash such as the economic pressures created by unsustainable environmental and resource consumption practices or the fervor of worker revolt which democracy may well bring to some of its developing host countries.

By contrast, those companies which establish themselves as leaders in adapting global practices to meet greater ethical standards can help to restore the philosophical ambitions of globalization while simultaneously strengthening their own market position.… [END OF PREVIEW] . . . READ MORE

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