Corporate Social Responsibility and Human Resource Management

Corporate social responsibility (CSR), is also known as corporate responsibility, responsible business or corporate social performance, is a form of self regulation for the company. It acts as an autonomous mechanism whereby the business supervises its actions and guarantees adherence to law, ethical standard and international norms. The business is accountable for the results of its actions on the environment, employees, consumers, stakeholders and the community as a whole. CSR is a purposeful addition of public interest into corporate decision making. Managers face pressures to devote the resources of the company towards fulfillment of CSR which is a result of the demands of various stakeholder groups such as customers, suppliers, employees, stockholders and the local community.

According to Doane D, “‘Corporate Social Responsibility’ (CSR) has become the mainstream prescription by business and governments for dealing with social and environmental ills. It is a voluntary form of self-regulation that aims to tackle everything from human rights and labour standards to limiting carbon dioxide emissions that lead to climate change. But because CSR ultimately lies within the framework of markets, and requires market-based incentives for companies to invest in such programmes, it ultimately falls prey to the vagaries of the market.” (Doane, 2004, p. 215)

Human resource management on the other hand refers to the management of the human resource of the organisation. human resource management plays a major part in training and conditioning the employees to fit into the organisation’s culture. Employees gain valuable attributes that help them perform effectively and efficiently to benefit the employers. The human resource of the firm when managed properly can prove to be valuable assets and help in gaining competitive advantage over the other firms. The human resource is not substitutable or duplicable and hence gives the company a distinctive edge over its competitors.

Companies like to create a public image wherein they are viewed as a responsible part of society. They wish to, in their own way, fulfill the duties and responsibilities of a model citizen. “Companies like to refer to themselves as “corporate citizens”, or even “good corporate citizens”. A review of company websites and codes of conduct presents examples such as: ABN Amro “We are a responsible institution and a good corporate citizen”, Boeing “Good corporate citizenship is a key Boeing value”, Hitachi “The Hitachi Company strives to be a responsible corporate citizen in communities worldwide”. Shell “To conduct business as a responsible corporate member of the society.” (Jeurissen, 2004:87)

“Some examples of CSR actions include going beyond legal requirements in adopting progressive human resource management programs, developing non-animal testing procedures, re-cycling, abating pollution, supporting local businesses, and embodying products with social attributes or characteristics.” (McWilliams & Siegel, 2001: 117)

“Corporate Social Responsibility (CSR) is gradually becoming a leading issue in business. A growing number of companies embraces the concept and feels the need to make clear what it actually means. They take a variety of initiatives all aimed at making sense of CSR.” (Cramer, Jonker, & van der Heijden, 2004: 215) A company needs to be sensitive to the social, political and legal environment as it is dependent on the elements of each of these in order to be able to survive, let alone flourish.

“For the better part of 30 years now, corporate executives have struggled with the issue of the firm’s responsibility to its society. Early on it was argued by some that the corporation’s sole responsibility was to provide a maximum financial return to shareholders. It became quickly apparent to everyone, however, that this pursuit of financial gain had to take place within the laws of the land. Though social activist groups and others throughout the 1960s advocated a broader notion of corporate responsibility, it was not until the significant social legislation of the early 1970s that this message became indelibly clear as a result of the creation of the Environmental Protection Agency (EPA), the Equal Employment Opportunity Commission (EEOC), the Occupational Safety and Health Administration (OSHA), and the Consumer Product Safety Commission (CPSC).” (Carroll)

“The pressure on firms to engage in corporate social responsibility (CSR) has increased. Many managers have responded to these pressures, but many have resisted. Those who resist typically have invoked the trade-off between socially responsible behavior and profitability” (McWilliams & Siegel, Corporate Social Responsibility nad Financial Performance: Correlation or Misspecification?, 2000:607)

“Expectations of stakeholders not only relate to the direct transactions between parties, they now expect management to participate in the debate on societal problems (e.g. unemployment, poverty, infrastructure) and proactively think about the effects of the business on society at large.” (Kok, Van Der Wiele, McKenna, & Brown, 2001:285)

“The economic and social purpose of the corporation is to create and distribute increased wealth and value to all its primary stakeholder groups, without favoring one group at the expense of others. Wealth and value are not defined adequately only in terms of increased share price, dividends, or profits.” (Clarkson, 1995, p. 112)

“Managers can no longer be held responsible for maximizing returns to shareholders at the expense of other primary stakeholder groups. Instead, managers are now accountable for fulfilling the firm’s responsibilities to its primary stakeholder groups. This means that managers must resolve the inevitable conflicts between primary stakeholder groups over the distribution of the increased wealth and value created by the corporation. Resolving conflicting interests fairly requires ethical judgment and choices.” (Clarkson, 1995, p. 112)

When it comes to the question whether corporate social responsibility and human resource management are linked they certainly are. One of the major responsibility of the organisation is to keep their employees happy and to treat them in an appropriate manner, the employees in turn perform better and the organisation earns profit. The money earned by the organisation as profits are utilised to carry out responsibility of the organisation towards the employees and the community.

The issue of business ethics and social responsibility is thus becoming a theme for organisations which are serious in their approach towards business excellence (Fisscher, 1994; Buban, 1995; Nakano, 1999). Kok mail IMP

According to Woods, “definition of corporate social performance (CSP) is not entirely satisfactory” (wood, 1991). The definition of corporate social responsibility in itself is not well explained and its link to human resource management cannot be confirmed. However, as we know that corporate social responsibility of a firm refers to the firms acknowledment of its responsibility to the community and its members and the society as a whole, it can be said that human resouce management and corporate social responsibility are linked as employees constitute of the integral part of the organisation and also members of the society. Hence, organisations to call themselves responsible corporate citizens they need to focus their attention on the human resource they possess and be sensible to their needs.

In the OECD (Organisation for Economic Co-operation and Development) guidelines to Multinational Enterprises, it outlines few guidelines in the General Policy for the employees of the organisation in the country they are operating. Few policies relating to the employees for the enterprise are:

Respect the human rights of those affected by their activities consistent with the host government’s international obligations and commitments.

Encourage human capital formation, in particular by creating employment opportunities and facilitating training opportunities for employees.

Promote employee awareness of, and compliance with, company policies through appropriate dissemination of these policies, including through training programmes.

Refrain from discriminatory or disciplinary action against employees who make bona fide reports to management or, as appropriate, to the competent public authorities, on practices that contravene the law, the Guidelines or the enterprise’s policies. (OECD Guidelines for Multinational Enterprises)

To carry out the policies underlines the Human Resource management should play an active role and these policies should be accepted. The OECD mandates economic, environmental and social issues and for companies to who aspire to be good corporate citizens have to abide by the policies and this implies that there is a link between Corporate Social Responsibility and Human Resource Management.

Ethical issues with regard to employment are one of the major elements of corporate social responsibility. The human resources of a company may be internal to the company in theory. However, the employees of a company are a part of the society within which it functions. It is therefore, in the best interest of the company to take into consideration, the needs of its own employees and lay just as much emphasis on the satisfaction of its own human resource as it does on that of its customers. HRM can, therefore, be linked to corporate social responsibility.

“Corporate Social Responsibility (CSR) is typically defined as actions on the part of the firm that signal their willingness to advance the goals of stakeholder groups. It is the most important issue in this period of time to achieve competence in the changed world to get the dynamic equilibrium. Achieving competitive success through people involves fundamentally altering how managers think about the workforce and the employment relationship. Firms that take this different perspective are often able to successfully outmanoeuvre and outperform their rivals.” (Chang, 2009)

IS THE LINK BETWEEN CORPORATE SOCIAL RESPONSIBILITY AND HUMAN RESOURCE MANAGEMENT REALISTIC

Furthermore, in the current climate of restructuring and redundancies, companies are finding themselves more and more hard pressed for fulfilling and living up to their economic commitments. In such a scenario, companies are cutting costs by downsizing operations. This results in them having to let go of a large number of employees. As simple as it sounds, society as whole has now turned its attention towards how companies treat their employees during times when resources are hard to come by. Companies are viewed as beneficial or detrimental to society based on whether or not they can fulfill their legal and social obligations towards their own employees. It has, in fact, become more important for companies to fulfill their corporate social responsibility with respect to HRM in order to come out of the entire economic crisis with their reputations intact or even enhanced.

RESTUCTURING AND REDUNDANCIES

“Corporate restructuring is defined as a period of multiple divestitures for larger multiproduct firms where at least 10 percent of the asset base of such firms was divested.” (Hoskisson & Johnson, 1992, p. 625). Restructuring refers to the change in the structure, operations or ownership of the organisation. It a fundamental change in the direction and strategy of the organisation. Restructuring may involve increasing or decreasing the layers of personnel between the top and bottom, or reassigning roles and responsibilities. Corporate restructuring includes mergers, acquisitions, take- over, tender offers etc. an organisation seeks to restructure itself as a consequence of poor performance and this results in closure of many part of the business and the outplacement or letting go of personnel.

“Three types of corporate restructuring trans-actions occur: (1) financial restructuring including recapitalizations, stock repurchases, and changes in capital structure; (2) portfolio restructuring involving divestment and acquisitions and refocusing on core business(es), resulting in change of the diversity of businesses in the corporate portfolio; and (3) operational restructuring including retrenchment, reorganization, and changes in business level strategies. These three types of restructuring are not mutually exclusive; and in fact, frequently occur together.” (Gibbs, 1993, p. 51)

Redundancies refer to the dismissal of employee by the employer. Lay- offs and job loss are very frequent in the current economic climate where many countries are hit by recession and organisations are compelled to let go of the major workforce in order to sustain and as business is not good at the current climate having many employees is only increasing costs of the organisation and they are left with no other option than to let go of their employees. When economies face credit crunch and this being an external factor, the organisations are left with no other option than to make some of their employees redundant this is the part of human resource management where companies in order to survive have to adapt very quickly and also act wisely. Recently many organisations had let go of a major part of their workforce, the workers were made redundant by organisation.

Although there is a link between Human Resource management and corporate social responsibility, the link does not seem to be realistic in the current climate of restructuring and redundancies. Organisations are becoming leaner and meaner by the day. There are different examples to support this. Companies in order to survive have made a number of employees redundant or they choose another path of restructuring which also results in downsizing the operations of the company which ultimately results in employees losing their jobs. This is an outcome of the economic condition or can also be a result of organisations intension to work on towards becoming HUGE?? And in this course leave behind the employees who don’t seem to be beneficial to the company and are not productive.

Organisations change their policies due to external factors, like during the last economic downturn many companies were laying off their staff. Downsizing in companies like Citigroup, the CEO Vikram Pandit announced layoff of 50,000 employees i.e. 7% reduction in the overall workforce as the credit crunch took a toll on the financial giant resulting in panic across the company. The layoffs were due to the economic situation of the country and nothing could be done by the company than to cut off employees to survive in that market situation.

Under the same circumstances Jet Airways, one of the leading companies of civil aviation in India, fired 1100 employees after the economic disaster. The employees protested against the insensitive decision taken by the company’s Chairman Naresh Goyal. However shortly, the employees were taken back into the company due to political pressure put on him.

The survey was conducted among top level and financial managers of Estonian companies. The managers were asked to what extent the company has cut or intend to cut the basic salaries and what other cost- cutting strategies have been implemented in the organisation.

“According to the results of the express survey AS PricewaterhouseCoopers conducted among the leading Estonian companies and organisations, 2/3 of the surveyed companies have made employees redundant and 1/3 have reduced basic salaries in the last 6 months. Nearly half of the respondents have cut performance pay and other monetary and non-monetary benefits.

2/3 of the companies have reduced or are about to reduce the number of employees, while nearly 1/3 have introduced part-time work or forced leave.” (Lehtsaar, 2009)

The results of the survey show that 66% of the respondents have made their employees redundant or are planning to do it in the nearest future. 36% of these companies have lain off employees at all levels of the organisation out of which 26% have mostly laid off unskilled employees and 6% specialists and members of management. 34% of the respondents have not reduced and are not planning to significantly reduce the number of employees in the nearest future.

According to an article written in November 2008, the month of November have been fierce for the job market, almost 15000 announced job cuts from a number of companies across several industries. Eight companies announced job cuts as a means of cutting cost during desperate times. The industries ranged from retail, finance, leisure, pharmaceutical and toy and automobile manufacturing. The Labour Department reported that the U.S. economy sloughed nearly 1.2 million jobs through October. Just in the month of October, the economy lost 240,000 jobs, raising the unemployment rate to 6.5%.

“Circuit City (CC, Fortune 500), an electronics retailer based in Richmond, Va., kicked off the week by announcing on Monday that it was reducing its domestic workforce by 17%. The company would not comment on the number of employees that would be affected, but according to a recent 10K filing, Circuit City employs about 43,000 people in the U.S. That would mean roughly 7,300 positions are being lost, the biggest of the cuts in November so far.” (Smith, 2008)

“The Connecticut-based insurer Hartford Financial (HIG, Fortune 500) reported 500 cuts.” (Smith, 2008)

“Ford Motor (F, Fortune 500) was the most recent to announce job cuts, with 2,600 cuts announced on Friday. The battered auto maker said it was trying to hold on to its dwindling cash reserves as it reported a $3 billion operating loss for the third quarter.” (Smith, 2008)

In November 2008 companies like Circuit city, Hartford Financial, Glaxo, Fidelity, Mattel, Borgata Hotel Casino, La-A-Boy and Ford cut down jobs which summed up to almost 15000. These companies work in different industries and all have laid off their employees this directly shows that the economic downturn has affected these companies and in order to sustain they have opted to let go of a number of employees from their company.

“According to a study conducted by the human resources consultancy SD Worx, half of the companies located in Belgium expect to undertake restructuring during 2009. The companies expressing this view are mainly large organisations employing more than 500 employees and many are internationally owned. Domestic companies and small and medium-sized enterprises seem to be less concerned by restructuring processes.” (Perin, 2009)

The global economic crisis led to negative results for the Belgian economy in 2008. Furthermore, the Belgian central bank expects worse result for 2009. “Between December 2008 and December 2009, a slowdown of 1.9% of gross domestic product (GDP) is expected, as well as an increase in the unemployment rate from 7.1% to 7.8%. The Central Bank forecasts a loss of 58,000 jobs in 2009.”

The human resource consultancy SD Worx recently published a study on corporate restructuring in the Belgian market between 2006-2009 and over the last three years 41% of the companies located in Belgium undertook a restructuring process.

“Unemployment in vulnerable sectors is increasing, with major consequences for qualified and unqualified manual workers. Moreover, the economic crisis also concerns other types of workers. Between the second and third quarters of 2008, the Federal Public Service of Economy, SMEs, Self-employed and Energy noted a 25.3% increase in the total number of unemployed people, while the unemployment rate of workers aged between 15 and 24 years rose substantially by 78.1%. It should be noted that September always leads to an increase in the unemployment rate of young workers as they finish school and enter the labour market.” (Perin, 2009)

“Cisco’s second quarter conference call, CEO John Chambers seemed intent on not doing what nearly every big tech company (except Apple) has done in recent weeks: announce layoffs. But while there has been no across-the-board cut, the company has shed up to 1,000 employees through “realignment and restructuring” efforts over the past six quarters as the company focuses more resources on more promising growth markets. And the company expects 1,500 to 2,000 of its staffers to be similarly dis-employed in this manner in the months ahead.” (Burrows, 2004)

The distinction the company is making is to realign the people into the best prospect and cutting jobs in bad businesses, the company looks at it as a positive application that will bring out something good for the future. The company says that it has realigned $500 million in resources over the past few years and intends to realign another half a billion in the coming months. The company’s total workforce consists of 67,000 people out of which there will be a few hundred job cuts per quarter. “And Cisco management is clearly not looking to layoffs as the cost-cutting measure of first resort. Chambers says the company has already achieved a one-year goal to cut expenses by $1 billion (though some as a result of those job reductions), after just two quarters. One example: travel-related expenses per employees have dropped more than 50%.”. (Burrows, 2004)

In the examples given above, it clearly describes that the last economic downturn left scars on many companies performance and structure. Many companies restructured and redesigned their operations leading on to making many employees redundant. Letting go of employees of a firm is not an easy task to be done but in critical situations like this companies have to make harsh decisions be it downsising their operations and letting go of employees. Companies like Microsoft, Dell, Intel, Proctor and Gamble, Walt Disney, Motorola, IBM, Ford, Boeing and many others have cut off employees. The job cuts were although a tough decision to be made, the companies had to get it done. These companies prove to be good corporate citizens as company like Dell work towards betterment of the society and are sensitive to the environment as they are determined to be greenest technology company and achieved carbon neutrality in their global operations, the company also helps customers significantly increase energy efficiency. And others like Microsoft, intel, Disney Motorola and other are good corporate citizens and have work towards the betterment of the society in their own ways but recently they all have laid off employees amking them redundant. This clearly shows that the link between Corporate Social Responsibility and Human Resource Management is not realistic in the current climate.

CONCLUSION

To conclude this, it can be said that there is a link between Corporate Social Responsibility and Human Resource Management. CSR works towards the well being of all the stakeholder of the company and is responsible for the actions taken by it towards them. Employees however being a part of the stakeholder group, the companies are responsible towards them and also because they form the integral part of the organisation. In addition to this the link between them is not realistic in the current climate of restructuring and redundancies. It is crucial for the company to maintain crucial competency and while countries are facing an economic downturn they have to act in the way they are. Holding on to the employees and continuously making loses will take the company nowhere and will do no good to either the company or the employees. However in the long run the company does act sensitive to its employees and works towards the empowerment and betterment of their employees along with the various stakeholder group but in recent times and what the recent research has suggested that the link between Corporate Social Responsibility and Human resource management is not realistic.

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