QANTAS or the Queensland and Northern Territory Aerial Services Ltd. came into existence in the year 1920 in Winton, Queensland and the company expanded into the transportation carrier business soon. QANTAS expanded its airline operations in both the domestic and the international markets and built upon its value proposition based on the company’s reputation for security and safety, good customer service, and operational reliability. QANTAS soon became one of the leading Australian brands. Alan Joyce took over as the youngest CEO of QANTAS airlines in the year 2008 from his predecessor Geoff Dixon. Alan Joyce aims to maintain the identity of QANTAS as a profitable yet socially responsible organisation which upholds the fundamental values that are the identity of all the Australians (The Qantas Story, n.d.).
A group of high-profile CEO’s in Australia, including the CEO of QANTAS Mr. Alan Joyce, recently wrote a letter to the Australian Prime Minister extending their support for the same-sex marriage. This led to the sparking of a debate with some ministers in the Australian government criticising the letter and the stand taken by the CEOs of corporate Australia. In their view, the business houses should focus on delivering the best of the services to the customers and concentrate on providing good returns to the shareholders as this was the primary responsibility of the business organisations and refrain from passing any kind of political statements about the policy issues (Belot, 2017). A spokesperson on behalf of the CEO of QANTAS, Alan Joyce, issued a statement that QANTAS would continue to support the social issues which the company believes in including the same-sex marriage. The statement received support from some of the prominent business names in Australia (Stefano, & Sainty, 2017).
The key issue that arises here is whether the corporate Australia and the CEOs of the prominent business corporations should be involving themselves in issues related to the public policy and using the name of the corporate brand to advocate their political opinions or advocating social issues. Additionally, another issue emerging is that should the business corporations restrict themselves to generating the best returns to their stakeholders and providing the best of the services to the customers and keep themselves away from the political and social policy issues (Serafeim, 2013). This paper will analyse the aspects of the key issues here by using the Stakeholder and the Shareholder theories of Corporate Social responsibility.
The contemporary business organisations in the modern era are continuously evaluating their policies and approaches that can help the company to leverage its position better in the market. Due to the prevalence of ambiguity and uncertainty in the global economy, organisations have to embrace policies and develop strategies that can provide them with a cushion to support the company during lean times. CSR or Corporate Social Responsibility is one such strategy that can provide an organisation with new opportunities and give the necessary competitive edge over rivals to an organisation (Baumgartner, 2014).
CSR or Corporate Social Responsibility can be broadly defined as the social initiatives taken up by the business organisations that are voluntary and transcend the compulsory legal regulations. These social initiatives can be in various forms like acts of charity, environmental activism, humanitarian activism, community service, and much more. There are two different approaches or theories to define the Corporate Social Responsibility. One is the Shareholder theory and the second approach is the Stakeholder approach (Malik, 2015).
The shareholder theory of CSR takes a narrow approach to the CSR of a company by stating that the sole responsibility of a business organisation is to maximise the returns for its shareholders by conducting the business within the legal framework of the law. The company is extending a beneficial service to the society if it is providing the goods and services at reasonable prices to the customers. Since the shareholders have invested their money in a company they are entitled to get a good return from the company (Flammer, 2015).
Therefore, the companies should not try to engage themselves in any philanthropic pursuits and social causes that use the financial resources belonging to the shareholders of the company. Any philanthropic pursuits which reduce the cash flow to the investors should not be followed by the company but any kind of CSR initiatives that help in increasing the profits of the company can be pursued by the company. The shareholder theory advocates that social concerns like environmental protection, helping communities, and other such socially valuable projects are the responsibility of the government and not the business organisations (Cheers, 2011).
The main business or concern of a business organisation is wealth generation for its shareholders and in turn the society. The shareholder theory is backed by an argument that any kind of social initiatives is the prime responsibility of the political and social institutions of a nation and not the business organisations. Scholars advocating the Shareholder theory argue that the government of a country determines the moral obligations of a business organisation with its rules and regulations (Costa, & Menichini, 2013).
The stakeholder theory, on the other hand, takes a much wider perspective of the Corporate Social Responsibility or the CSR of an organisation. This theory takes the view that a business owes a responsibility to not just its shareholders and investors but to all the people groups who have a stake in the business or any claims on the organisation. This includes the shareholders, employees, suppliers, customers, and the community. The stakeholder’s theory advocates taking a more socially aware view of the Corporate Social responsibility of a business keeping in mind the sensitivities of the various stakeholder groups associated directly or indirectly with the business. The advocates of the stakeholder’s theory hold the view that a business should use its vast resources voluntarily to propagate social good (Argadona, 2011).
The scholars and thinkers in favour of the stakeholder’s theory advocate that the focus of the modern day business organisations goes much beyond the classical view of profit maximisation for its shareholders to the concept of a business organisation trying to create value for its stakeholders. The value to be created can be bifurcated into the economic values, an intangible extrinsic value, a psychological intrinsic value, transcendent values, and values that are made of both negative and positive externalities. This notion of value creation goes beyond the traditional meaning of economic value and includes the other forms of values which are the need of the stakeholders, for different uses and in different proportions (Moriarty, 2016).
A business organisation affects the community and the society as a whole in a number of ways. Therefore, in the modern world, the business corporations face a number of sustainability issues from its different stakeholders. These issues can sometimes include concerns about the environmental defence, corruption, product safety, biodiversity, political lobbying, human rights issues, and much more. Different stakeholders place a different importance on these sustainability issues depending on the importance of the issue to different stakeholder groups (Park, & Ghauri, 2015). Therefore, advocates of the stakeholder theory claim that a company can continue to ensure its success in the modern age by maintaining a balance between the interests of all its stakeholders and not just by following the norms of profit maximisation as prescribed by the shareholder theory. Maintaining the Altruistic and the Strategic Corporate Social Responsibility is necessary for the business organisations today to ensure goodwill and positivity towards the organisation (Malik, 2015).
The campaign which has been supported by the QANTAS CEO Alan Joyce involves a lot of external and internal stakeholders. As explained by the Stakeholder theory, the modern day business organisations do not function in isolation and are dependent on the various stakeholders for their success. The business organisations today are responsible for serving a wider range of societal concerns and not just maximising the shareholders’ value. The different stakeholders would be affected by the altruistic CSR of the business organisations in campaigning for social issues in different ways (Crane, & Matten, 2016). Some of these are:
Employees: The employees are one of the most important stakeholder groups in any business organisation today. An ethical practice by the leadership of an organisation is a significant factor in attracting the best talent in the industry. Studies have shown that a dwindling faith in the ethics, values, and leadership of an organisation, are the main factors behind low level of employee loyalty and increasing employee turnover in the organisations. To build a corporate culture that strengthens employee relations, organisations need to invest more into establishing a values-oriented corporate culture with principles of equality, human dignity, fair work, trust, concern, and care for the employees and ensure a work culture that promises equal respect for all employees (Enderle, 2015).
Studies have shown that people who work in organisations with strong ethical values, policies of social responsibility, and with a culture of high-integrity, are less prone dissatisfaction and stress. This personal level of satisfaction results in more happy and productive employees. It has been seen that in organisations that are piloted by ethical values, the employees are more inclined to work as teams for the achievement of the organisational goals and objectives instead of being engaged in turf battles professionally. This automatically serves to improve the efficiency and productivity of the organisation at all levels, helping them to serve the customers in a much better manner and generate better profitability for the investors and shareholders at the same time (Jackson, Wood, & Zboja, 2013).
Consumers and brand identity: The consumers today favour the brands, suppliers, and producers who practice social responsibility and demonstrate ethical practices. The studies and the empirical evidence gathered from research shows that the consumers’ concern about corporate citizenship has been steadily gaining momentum. A good CSR and ethical conduct can help an organisation gain significant competitive advantage over its rivals in the minds of the consumers gaining customer loyalty, resulting in higher returns (Costa, & Menichini, 2013).
It takes a company a long time to establish its brand name, identity, and reputation, but, in the global business world of today and the age of the internet, even a single scandal at times can destroy the company’s goodwill. The organisations which have a strong ethical base are less prone to the damage caused by scandals and other such legal or social concerns. If the organisation has strong ethical values in place, it becomes much easier for such a firm to deal with any such scandal in an honest manner. Consumers and markets are more open to forgiving organisations which have a genuine interest in addressing the problems in the right and ethical manner, instead of organisations which do not try to address the root cause of the problem (Floyd, Xu, Atkins, & Caldwell, 2013).
Existing Shareholders: The altruistic CSR investments by the business organisations in concerning themselves with the larger social issues help the companies in developing a positive stakeholder reputation, which is essential for a firm to succeed and maintain its profitability. Without a positive stakeholder reputation, the companies are likely to suffer from competitive disadvantages which could result in a loss of sales and profit, discontented employees, negative publicity, directly impacting the shareholders return from the organisation. Therefore, taking the view of the shareholders’ theory, the companies should engage in CSR activities which work to enhance its profit (Ford, & Richardson, 2013).
Potential Investors: While choosing an organisation to associate with, the potential investors look at the integrity of the organisation and the responsible behaviour exhibited by the company, along with the profitability statements. Ethical practices cultivate trust and that is one of the important deciding factors for the potential investors while deciding upon the kind of organisation they want to associate with (Crane, & Matten, 2016).
Society and Communities: For a long time the traditional business view held on to the ideas of profit maximisation and aggressive competitor management to succeed in the business world. The other ‘stakeholders’ in the business like the community and society was kept marginalised in the domain of Corporate Social Responsibility (Mahlab, 2017). But in the changing times, the margins have diminished and the society and community have taken the centre in the business strategy of the modern day corporations. The business corporations in the modern day are powerful entities that have the power and the opportunity to make a change and bring resilience to the delicate balance of the fragile world in which they are functioning. The business corporations will only flourish if the community and the society around them are flourishing (Wilkins, 2017).
The society and the community provide the resources to the business and are the source of a business organisation’s profitability; therefore, it becomes a moral and ethical obligation of the business organisations to promote the society’s interests in turn. The corporate world has the resources to engage in pursuits and raise their voices to solve social issues which are beneficial to the whole society, provided it does not hinder the basic function of revenue maximisation of the business organisation (Gratton, 2014).
Challenges of the modern societies like the climatic change, social issues, gender inequality, human rights for all, and other such societal concerns have a trajectory of corporate impact in some way or the other and the business organisations of today realise this factor. The business organisations of today are not just the agents of the shareholders but can be regarded as the harbingers of stakeholder relations (Baumgartner, 2014). In the digital world of today’s business which is connected deeply by the social media, the business leaders of the corporations are expected by the society to act as the catalysts of change not just within the organisation but also in the larger social arena, because of the larger resources at the disposal of the business and much better networks, which can lend a powerful voice to the social causes like in this case of the QANTAS CEO and other prominent CEOs in Australia lending their support for the cause of same-sex marriage (Wilkins, 2017).
The commercial and the social domains are coming closer to each other as the demarcation lines between the two are becoming diminished. Campaigning for a social cause that resonates with the majority of consumers and other stakeholders’ values is not just a novelty for the companies but is fast becoming the central strategy to build the trust in the brand name of a company and the values of the company (Crane, & Matten, 2016).
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