Consideration of Ethical and Legal Aspects of Corporate Social Responsibility: The Issue of Multi-National Corporations and Sustainable Development

Abstract

Trend of events over the last ten years have shown that the world has witnessed widespread business failures and even collapses.1 These failures and collapses have been devastating and tragic to the global economy.2 Within this period, corporations have claimed to promote Corporate Social Responsibility (CSR) and be committed to sustainable development, while at the same time perpetrating harmful business practices in the communities in which they operate.3 Unethical behaviour and illegal practices (such as cheating, greed and deceit) on the part of the executives of the corporations are the major causes of these crashes.4 The primary motivating factor to cheat in the business world is financial gain. However, cheating in any sense, be it greed, deceit, unethical conduct, acts of illegality or illegal practices, though detrimental to the sustainable development of the communities in which corporations operate their businesses, eventually in some occasions end up causing the executives of these multi-national corporations (MNCs) problems.5 The issue is topical, because CSR continues to be one of the most important and controversial aspects of global business - receiving much attention from all circles – business managers, lawyers, government leaders and academics in different fields. While continuing to increase in prominence, there are many aspects and many approaches evolving surrounding this global phenomenon. CSR of business is actually impacting on the people at this point-in-time, locally, nationally, regionally and globally. The financial crisis has provided a number of examples of firms that have engaged in practices that create systemic risk to the economy, but the issue is not confined to the financial sector. Virtually all firms are deemed to be sufficiently strategic in their undertakings in the local, national, regional and global community. Actions desired by the society may differ from those undertaken by the firm in order to make reasonable profits in their business. Thus, firms may adopt different (positive or/and negative) strategies to maximise impact on society for their benefit. However, business strategy also affects the likelihood of harm to the society as a whole (though, with the level of impact differing on developed and developing societies).6 It is argued that CSR initiatives of MNCs are all about cover-up and pretence.7 Most of the legal authoritative works on CSR, which analyse company CSR, primarily focus on developed areas, and therefore overlook or discuss only briefly the CSR situations in developing countries that more clearly demonstrate the box-ticking mentality of companies.8 The few works that focus on developing areas reveal that in developing countries almost all the corporations are involved in box-ticking; as this paper will demonstrate. In light of the harm caused by firms globally, the hypothesis of this paper is that the undertakings or business activities of most large global firms (i.e. MNCs) must have impacted heavily on the sustainable development of the society, particularly the communities where they operate their businesses and, especially in the developing countries. It is therefore important for this paper to consider the ethical and legal aspects of CSR of MNCs and their business impact on sustainable development of the wider community. This paper primarily examines the contribution of CSR of MNCs to the sustainable development of the communities in which the corporations operate their businesses; this is approached from the context of practice argued through the three chosen empirical cases,9 and supported with theoretical analysis. This paper provides a separate sub-section for the consideration of various definitions or/and meaning of CSR.10 However, the working definition for the purpose of this paper is that CSR is about the sensitivity of an organisation to ethical and legal practices, and beneficial responsiveness that promote sustainable development in the community. Thus, while this paper recognises the importance of the success of business activities regarding what goes inside the corporations (i.e. internality-the inner circle), it is more concerned on the impacts of the activities of corporations on the communities or environments in which they operate their businesses (i.e. externality-the outer circle). This focus is on how CSR of an organisation contributes to the sustainable development of the wider community. Section 2 primarily looks at the various definitions or/and meaning attached to the term CSR, and briefly explains the central concepts helpful in the understanding of CSR as used in this paper, such as sustainable development, social responsibility, corporate governance, corporate citizenship, corporate accountability, triple-bottom-line, and box-ticking mentality; as well as looks at the difference between ethics and legality. Section 3 presents the three empirical case studies identified; these are Enron, North America (USA); MacDonald’s, UK (Europe); and Shell, Nigeria (Africa); it also made comparative remarks of CSR in UK (Europe), North America (USA), and Nigeria (Africa). The empirical cases form the basis of analysis in the other sections of this paper within the framework of the contribution of CSR of MNCs in the sustainable development of the communities in which they operate their businesses. This includes: consideration of the ongoing heated debate within the academic circles whether CSR is voluntary or mandatory (section 4); the issue of box-ticking and its implementation on a practical level (section 5); it concludes in section 6 that the neglect of the ethical and legal aspects of CSR, though detrimental to the sustainable development of the communities in which corporations operate their businesses, eventually in some occasions end up in causing the executives of these multinationals or/and the corporations problem.