Table of Contents
Table of Contents.................................................................................................................................1
List of Figure
Figure 1: Corporate Social Responsibility Pyramid.
Figure 2: Mizuho's Stakeholders
Figure 3: Relationship between Stakeholders and CSR
Figure 4: Human Rights facts in 2012
Figure 5: Corporate Governance Structure
1. EXECUTIVE SUMMARY
Nowadays worldwide market has changed along with the development of humanity. With the fast
changes of society and the finance problems arise, corporations among companies to ensure their
benefits has become more essential. Corporation, then has greater importance as well as
responsibility in the future of the company. Consequently, Corporate Responsibility (CR) is
gradually becoming a major activity in global community (The Economist Intelligent Unit, 2005) .
In order to provide more information about this term, the writer decides to make a further research
about issues in this area. Because of limitations of time and human resources, the study mainly
focuses on Corporate Social Responsibility (CSR), a sub-component of CR. The research then
provides a basic information about CSR, stakeholders and international multilateral organizations.
The paper also discusses more deeply about issues of CSR. They are considered as Business Ethics,
Human Rights, Corporate Governance, and Socially Responsible Investing.
2. Corporate social Responsibility
2.1. Overview of Corporate Social Responsibility.
Corporate Social Responsibility (CSR) can be understood in various ways by individual enterprise.
Generally, CSR is the ideal that an enterprise has responsibility to serve society, especially the
economic interests of stockholders. Normally, business has financial role in the development of
society, in addition, it has wider duty of making a better world. The responsibility of business
involves area of ethics, legislation, relations between company and community, etc. (Carroll and
Buchholtz 2003, p. 36). Meanwhile, Lance Moir (2001) claims that CSR plays an important role in
the future of areas such as environment, human rights, community, employee workplace, relations
with customers and suppliers, and of course ethics. Therefore, CSR could be identified as a useful
tool for business to conduct its duty toward society. CSR then is the responsibility of business to
strength its good impacts and improve quality of society through policies, decisions, and activities
of the company. It is undeniable that to conduct a CSR program effectively is uneasy and take a
long period of time and effort, but the achievements received after that is definitely enormous. For
instance, HSBC bank, one of largest banking and financial organization, has success in conducting
CSR. That is definitely the result of its huge effort in accomplishing the company's citizenship
CSR concepts includes many parts of responsibilities in different levels. In 1991, Carroll A.B.
constructed a pyramid of corporate social responsibilities (See Figure 1). The pyramid showed the
relationships of the four main responsibilities in CSR, for example, without economic and legal
responsibilities, an organization could not accomplish its legal responsibilities.
Figure 1: Corporate Social Responsibility Pyramid.
(Source: Carroll A.B., 1991)
CSR is specifically connected with ethical matters (Review in Strategic Direction, 2008) such as
human rights, business ethics, health and safety, and so on. Joe Scibilia of CSRwire states in
Warren Strugatch (2011) that roles of CSR in global market is continually raised which allows
people to have more meaningful judgment about companies based on their own values. At first
sight, it seems that the role of CSR is not much significant, but in fact, CSR keeps key value to
stakeholders as well as corporations. Dra. Belén Fernández-Feijóo Souto (2009) identified some of
key benefits of CSR as following:
1. Help identify impacts of the company's decisions and action on management of decision making
in long term.
2. Assist in the improvement of relationship of the company, consumers and investors based on
trust and right things.
3. Enhance living condition of employees, thereby create motivation and loyalty, and improves
productivity and behaviors of the employees.
4. Assist in solving problems related to legislation and other legal matters so that a transparent
culture in the organization is created.
5. Create competitive advantages and reduce disadvantages by attracting and retaining the selection
of consumers and investors,
6. Build a reputation and positive image of trustworthy organization and maintain key personnel
and direct investors' confidence towards CSR.
2.2. CSR and Stakeholders.
To verify the importance of CSR toward stakeholders, it provides opportunities to have a good
workplace for employees, high-quality products and services for consumers, huge benefits for
investors, and better contributions for environment around the enterprise. Such things define the
significance of CSR to stakeholders, and then make the role of stakeholders to the development of
society more specific. In fact, stakeholders are considered as one of the main implementers of CSR
in society. In nowadays society, each person directly or indirectly becomes a stake holder and the
enterprise realizes the importance of CSR since matters in each sector of the world is linked. A
public by Kerr M (2006) identifies stakeholders as People or organizations that are influenced or
influence the decisions, objectives, policies, or activities of a business. Basically, according to Fred
Robins, (2008) main stakeholders of any enterprise can include shareholders, sponsors, employees
and customers, government agencies and competitors, and so on. For example, below chart shows
the main stakeholders of Mizuho Financial Group.
Figure 2: Mizuho's stakeholders
(Source: Mizuho Financial Group, 2012).
Summarily, stakeholders are classified into various categories which is discussed in later researches.
Stakeholders, then play an important role in the implementation of CSR. A stakeholder have
responsibility for positive or negative outcomes of the company since they can affect the decisions
of the heads of that company. For example, as stakeholders of the company, they want high profits,
great value for the shares, good compensation in return to their investment. If the company could
not fulfill their needs, they put pressure in the managers, decided the promotion of the staff, or even
sold their shares. Nobuyuki Tokoro (2007) shows the figure of relationship between stakeholders
Figure 3: Relationship between stakeholders and CSR
Source: Nobuyuki Tokoro (2007)
According to the figure, both stakeholder and CSR are creating the value for each other, dealing
with all matters around resources of the company, the stakeholders put a very restrict requirement
for the CSR of the company.
2.3. CSR and International multi-lateral organizations
CSR affect organizations, especially all the global multilateral organizations in the process of
managing the reputation, attracting and remaining talent, making brand competitive advantages, and
comforting relation with government (Argenti, P. A., 2009). In return, international multilateral
organizations affect the success of implementing CSR in nowadays worldwide market.
Multilateral organization refers to group of more than three countries formed to solve issues related
to all member nations in the group. Normally, these organizations are non-profit and no
governmental (NGOs). The international multilateral organizations responsible for promoting CSR
and developing standards include United Nations Educational, Scientific, and Cultural Organization
(UNESCO), World Health Organization (WHO), United Nations (UN), International Labor
Organization (ILO), Food and Agriculture Organization of the United Nations (FAO), etc. They are
active in wide areas from economic issues, social problems to environmental concerns. For
examples, matters relevant to discrimination, pollution, health and working condition, human rights,
and so on are taken by these NGOs. Nirav Rajpara (2006) claims that international multilateral
organizations have biggest effects to the development of CSR policies because of their size and
spread over the world.
3. Corporate Social Responsibility Issues
3.1 Business ethics.
Business ethics are considered as principles that a company must follow. In facts, Ferrell and
Fraedrich (cited in Zoe S. Dimitriades, 2007) defines business ethics as moral rules and standards
decide which behaviors in business are allowed while CSR is the obligation of an enterprise to bring
advantages and reduce disadvantages to the enterprise in nowadays society. Both these terms seem
familiar, however, they are used in different business cases. CSR is considered when people
mention positive things that a company are implementing, in contrast to business ethics or lack of
business ethics when negative things are mentioned.
Business ethics have several roles in both local and international levels. The prior role of business
ethics is behavior management. Such things keep managers and staff understand the impacts of their
behaviors so that they would think carefully before making a decision or action. By having a code
of conduct, a business is able to control its behavior in appropriate way. Another important role of
business ethics is to build trust about the organization. Following ethic principles in business, a
company would gain trust of the customers and then attract and remain more customers and
suppliers for the company. Act honestly, and the customers would come. Charles Holme (2008)
confirms in page 252 that relationship with the consumers and other corporate firms will be better if
a company is more trustworthy, which is helpful in cases of problems occur.
3.2. Human Rights
Human Rights supports the ideas that all human beings are born free and equal in social position ,
and they have undeniable entitlement as the right to life and liberty, freedom of thought and
expression, and equality before the law. Human rights refers to aspects in business, environmental,
and social areas. In today corporate society, human rights are influenced by various factors in
economics, politics, and society. Since corporations among companies appeared in decades, its
impacts on human rights are also increased which tightens the links between human right and
Although some believes that human rights have four generations, most people agree there are three
main generations of Human rights as Civil and political rights, Economic and social rights, and
Environmental, cultural and developmental rights (Shikyil, Sylvester, 1998). These rights ensures
the common development of a person in nowadays society. Human rights and CSR are once
considered to have some similarities, however, they are different concepts. While a CSR refers
responsibilities to society that the company must follow, human rights relates to all legal
entitlements that a person deserve to have in an enterprise. Previously, the rule-setters of many
companies have not taken human rights into consideration when researching CSR, but now human
rights are generally adopted in CSR framework (Avery C., 2006). The following figure shows the
numbers of companies accepted human rights in their financial statements.
Figure 4: Human rights facts in 2012
(Source: Mary Robinson, 2012)
According to the figure, in 2012, there were 300 companies in the world initiated human rights
policies. It is a positive numbers, but still not equal to the huge amounts of companies around the
world. Human rights in workplace are very important with staff, so they must be considered more
seriously. In contrast to the wide spread of CSR, area of human rights is still narrowed. For
example, human rights are not paid attention in the domain of business. In fact, there are various
areas in business sector that need this kind of concept. Otieno Mbare (2007) stated the key areas of
human rights in business include child labor, forced labor, discrimination, harassment, living wages,
health and safety, freedom of association, compensations for working overtime... John F. Kerry
(2012) mentioned in Country Reports on Human Rights Practices for 2012 that every business as
well as nation must adopt polices about human rights concerning genders, ages, religions, ethnicity
or disability in order to create a spacious customer base for the global marketplace.
3.3. Corporate Governance
Business Governance relates to policies used to manage and implement the duties of stockholders,
CEOs, or managers to sponsors and other stockholders. It can be principles, rules, systems that are
relevant to relationships among stakeholders and management of the company. The definition of
Corporate Governance is also mention in Cadbury Report (1992) as a set of principle by which
company activities are governed.
Figure 5: Corporate Governance Structure
(Source: Zafar & Associates-LLP, 2012)
The figure shows the relation among missions, objective, goals, strategy, and vision of corporate
governance in a business. The purpose of Corporate Governance is to control the internal factors of
the company to promote transparency and accountability within the structure of the company. The
boards of directors, whose responsibility to set the corporate governance to the company ensures
these principles are conducted appropriately.
Corporate Governance have significance roles in business sector. As mentioned above about the
goals of Corporate Governance, company with good governance make its policies and activities
transparent to all members, and that results in the efficiency of that company. Enterprise with wellgoverned structure usually has better operation and is more attractive to investors. (Eveline Van de
Velde et. al., 2005). Moreover, good governance would help prevent business-related problems
such as fraud or abuse since the company has fixed system requires exactly activities. With wellgoverned structure, a company requires each employee to have positive behaviors and awareness of
their responsibility as well as benefits of good implementations. Corporate Governance also
improves goodwill and reputation of companies (Lipman and Lipman, 2006). Corporate
Governance is helpful in building relationship with customers and sponsors which and creating
3.4 Socially Responsible Investing
Socially responsible investing (SRI) is considered as policies and activities related to environmental
and social objectives. Mansley (2000) has described it as a investing strategy considering ethical,
social, and environmental results of investment process. Moreover, SRI is considered by the Social
Investment Forum (2010) as disciplines in area of investment that take social and environmental,
corporate governance in to account researching impacts and returns of investment.
Previously, both CSR and SRI are used because of their relevant meanings, but they are now
separated. While CSR reminds overall responsibility of an enterprise toward society, SRI is more
specific and as one of sub-parts of CSR, which considers more about social and environmental
factors to the development of the company.
SRI, as other components of CSR have definite roles in different level of corporations. A good SRI
is responsible for the success of process of attracting and retaining consumers, staff, and investors
of an enterprise. Through it, organization's future strategy is transparent to investors, so they can
easily research whether the future of the firm is ensured or not, and illustrate a bright belief of the
firm's future development. This would be a great help in enhancing the credibility of the
organization. Further, company with well-organized SRI program would bring a great improvement
of its employees as well as workplace conditions, so that becomes a driving force to employees. By
motivating employee with better living condition, company continues promoting loyalty and
satisfactions of its human resources, which would create efficiency and increase productivity. SRI is
also a key factor in making competitive advantages of the company. Since the SRI program
contributes greatly to the stabilization of economic and social environment inside and outside the
company, it assists to creating more new positive ideas and inquiries about operation process of the
business, thereby improves its corporate images and increases returns in investment. The result,
then become a significant advantage of the company in today's corporate and competitive market.
Finally, SRI gives a great assistance in alignment of the business with other industrial disciplines
such as Social Responsibility Index and Global Reporting Index.
Corporations provide opportunities to develop the future of a company in today's marketplace.
However, the success of the process of developing a company depends on whether the company
realizes its responsibilities toward society economics and environment or not. The paper, therefore
provides an overview of Corporate Social Responsibility (CSR) in today's marketplace. The
importance of stakeholders and international multilateral organizations is also mentioned. The
research then discusses some issues of CSR including business ethics, human rights, corporate
governance, and socially responsible investing in term of their relations with CSR and their role in
business sector. CSR, in conclude, captures the decisive concerns about relation between economics
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