Corporate Social Responsibility and Globalization

1. Corporate Social Responsibility and Globalization Prof. Lok Sang Ho Centre for Public Policy Studies Lingnan University Peoples’ Council for Sustainable Development

2. Why CSR? • Multinational Companies today have become extremely powerful, and are not like any of the private enterprises that existed, say, two decades ago; • To put it mildly, the future of humanity is very much at their mercy.

3. CSR and Free Market Economics • Milton Friedman has argued that the social responsibility of business is simply to maximize the rate of return to the general shareholders, consistent with the law. • This Legal Approach implies Regulation. • If Regulation were effective and appropriate, Friedman’s approach is fine.

4. Limitations to the Regulatory Approach • Transnational Regulations are notoriously ineffective because there is no one to enforce them; • National Regulations are often not enforced because of widespread corruption in many developing nations; • Globally needed regulations are often not even in place because of short-term behavior of people in power or because of poverty.

5. Examples of Regulatory Failures • Bhopal disaster and Union Carbide—compensations by Indian standards may be affordable and “within the law”, but are we content with having had the disaster? • Human cost of coal mine accidents in China; • Politicians and their constituents may not be sensitive to pollution that drifts across national borders and causes only small short term problems at home

6. Advantages of the CSR Approach • Often more effective than the regulatory approach; • CSR implies a constant dialogue between the corporation and the community, and allows considerable leeway for implementation that may reflect the changes of the times; • The CSR approach allows struggling small and medium enterprises greater room for survival

7. How much is Perfectly Legal worth? • David Cay Johnston, a Pulitzer Prize-winning reporter for the New York Times, reveals how the government provides the "super rich"--from private individuals to profitable corporations—-to hide their wealth, to defer or evade tax payments, and to pass the bill to law-abiding middle-class Americans.

8. CSR and the Bottom Line • If corporations operate within the law and maximize profit by disregarding industrial safety, because industrial safety is more costly than paying compensations when accidents do occur, is this acceptable? • If corporations cause serious environmental damages but the law allows that, is this acceptable?

9. Supply and Demand • When numerous suppliers vie for the business Big Corporations can keep costs very low and profits very high; • When hundreds of thousands of workers vie for the scarce jobs Big Corporations can pay very low wages and raise their profits; • The low costs and wages may have nothing to do with “low productivity”, and are often the result of the working of supply and demand.

10. Human Costs • When profits are the result of huge human costs, they are unhonorable and the world should be made aware of it; • “Productive and hardworking but poor” should be history; • Avoidable industrial disasters should be history

11. Sustainable CSR: Corporations generate sufficient profit to sustain their operations over the long term while: • paying their workers and providing a clean working and safe working environment • paying their suppliers reasonable prices • paying due respect to the environment

12. A Better World • With a living wage, hundreds of thousands of manufacturing and service workers will be able to unleash their newly found spending power on goods and services, and this will cause a BOOM in investment and a new prosperity • More inequality and less waste • A sustainable, happier and more peaceful world.