Question

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Discuss two ways a corporate board member might engage in inappropriate ethical behavior, and explain why each is a problem for the company and shareholders.

Corporate social responsibility is one of my favorite topics for discussion in business as it is a subject that is of great importance in my personal beliefs and values which greatly shape my shopping behavior.

There are many companies that are worth mentioning for their commitment to social responsibility but one of the first that comes to mind is The Body Shop. Established in 1976, English founder dame Anita Roddick began making cosmetic and body care products with a vision for developing a business with a heart and one that would be a force of positivity in the world. The Body Shop is now a recognized brand around the globe and is known for its efforts to enrich products, people and the planet. The Body Shop has been a pioneer over the years in developing products in the beauty industry and doing so while maintaining a firm stance against animal testing and other environmental initiatives (The Body Shop, 2018a).

The Body Shop boasts a long history of socially responsible initiatives and has several pages on their website dedicated to these efforts. I have listed only a few of these initiatives below but have included a link to their about us page for those who may want to learn more about their socially responsible practices https://www.thebodyshop.com/en-gb/about-us/our-commitment

Body Shop initiatives have demonstrated stellar social responsibility and have set the following goals to achieve by 2020 (The Body Shop, 2018b:

Doubled community trade program from 19 to 40 ingredients; the Body Shop states that this has ‘enriched’ the communities in which the ingredients are sourced.

The Body Shop guarantees that 100 percent of the natural ingredients used are not only traceable but sourced through sustainable methods. The Body Shop aims to protect 10,000 hectares of forest and various other habitats.

Reduce energy usage by 10 percent in addition to relying on well renewable or carbon balanced energy to power 100 percent of its stores.

Aims have been set to create and deliver 3 new sustainable packaging alternatives.

Aims to guarantee that 70 percent of its product packaging is free of fossil fuels.

Goals have been set and will continue annually to reduce their environmental footprint across each of its product lines.

Aspires to include 8 million people in its “Enrich Not Exploit” campaign to spread their mission.

The Body Shop has also announced its commitment to releasing annual reports to offer insight into its business practices and target progress with total transparency. The Body Shop benefits from these efforts largely in part due to a shift in consumer values and their desire to support companies that share their values and beliefs. From a CSR standpoint, these efforts aid in fostering customer relationships and attracting new customers. The Body Shop has gained competitive advantage having been a long-time pioneer in green practices, raising the bar for higher ethical standards and its strong desire to fill consumer needs without harming animals or the environment (The Body Shop, 2018b).

As a result, the Body Shop has attained brand and product differentiation as well as solidifying a large and very loyal consumer base through increased brand recognition and positive brand association. Additionally, the Body Shop’s efforts to reduce energy usage utilizing alternative methods leads to a reduction in operational costs (NI Business Info, 2018)

NI Business Info (2018) also notes that social responsibility also attracts highly desirable talent and can work to retain the talent the company already has as such efforts are known for increasing motivation and employee satisfaction; this is great for companies as costs are further reduced due to a decline in disruption and the costs associated with recruiting and training.

Some additional benefits that can be attained from socially responsible practices as noted by NI Business Info (2018) include:

Greater access to capital: Investors are more likely to invest in responsible and reputable companies

Greater opportunities for positive media attention.

Restrictions and regulations may be easier to navigate through strong relationships with governing agencies.

Opportunities for growth and innovation.

LA#2.2

Explain why Corporate Social Responsibility is important to each of the above stakeholders.

Concerns of social responsibility are not only relative to consumers, but are also shared by corporate stakeholders. By definition stakeholders are comprised of customers as well as employees, suppliers, board director members, government agencies, political groups etc. It is these groups of interested parties that make up the communities and markets in which companies aim to serve (Saylor Foundation, n.d.).

Primary stakeholders have a strong interest in the performance of the organization and its actions relative to how its business is conducted. Those in this category (e.g. employees, shareholders), are directly affected by the positive outcomes (successes) and in turn, are also subject to the company’s failures (The Saylor Foundation, n.d.).

Secondary stakeholders such as the media, labor unions, political and social groups not only have the power to positively and negatively affect companies but are also capable of influencing company actions. Stakeholders in this category serve as an example of how vested interest no matter how far removed from the internal and external workings of the company relate to primary stakeholders, communities (Saylor Foundation, n.d.) and in many instances society as a whole on a global scale. Thus, the scale of cause and effect can be quite large and all encompassing.

In short, virtually everyone in the world today has a stake or interest in the behaviors and actions that businesses carry out in the world today as we all are subject to the economic, social and environmental outcomes that play out.

Answer 1

Ways in which corporate board member might engage in inappropriate ethical behaviour and its effect on company and shareholder.
In order to get rid of any additional expenses board member may try to evade implementation of environmental friendly operations.
Like implementation of solar panels for electricity in offices is beneficial for environment but as an expense to the organisation. The stakeholders can be affected buy wrong impression created in the minds of consumer resulting in lower revenues.

Board of member make siphon of funds for private interest in the name of CSR activities. This may hamper companies reputation in the long term hence effecting its primary stakeholders.

Corporate social responsibility is important for all stakeholders as it encourages philanthropic activities and encourages all stakeholders to take responsibility of society. These activities eventually benefits the organisation in long run by creating good impression stakeholders when in turn generates profits for the company.