The Income Inequality: Corporate Social Responsibility

Business ethics is a type of ethics that takes into consideration the ethical principles, moral and ethical problems that occurs in a business environment. It is a form of applied ethics that deals with ethical questions in business. It deals with the application of ethical values in the business world. It takes into consideration all aspects of business conduct which are relevant to the conduct of business organizations and individuals. Ethicism aims at improving business ethics by application of new public initiatives and regulation. This prevents business from acquiring short-term profits by engaging in unethical practices. Such unethical practices usually weaken the economy over time. Business ethics as it is applied can be normative or descriptive. It is normative if applied as a business corporate practice.The extent of business ethical issues indicates the degree of how the business is taken in relation to non-economic social values (Harwood, Sterling (1996).

Business ethics can be looked at from various perspectives. These include perspectives of the society, the commercial enterprise and the employee and the consumers. In some cases, large multinational firms may take advantage of shared beneficial association at the cost of the consumers by forcing them into signing arbitrations credit traps, whereby they enslave the consumers in more or less cycle of credit rating. In some cases conflicts do arise between one or more parties such that an outcome might be good to one party and bad to the other party. The principle role of the business ethics should be to harmonize and reconcile the conflicting parties. In most cases the problem of dumping poses a competitive threat in foreign countries. This involves selling of products at a price lower than their actual prices. This usually leads to problems in their domestic problems. This makes firms producing similar products in the domestic market have problems in competing with the pricing set by larger foreign markets. Such practices like dumping constitutes unethical issues as larger companies do take advantages other less economically endowed companies (Seglin, Jeffrey L. 2003).

Internationally business ethics and practical issues came to being out of international context of business. Issues such as cultural relativity of ethical values attract more considerations. These considerations include, the search for values that are universal as bases for international commercial behavior, comparing of different countries business ethical traditions, comparing of business ethical traditions in relation to various religious angles, ethical practices that arise from international business transactions, globalization and cultural imperialism, different global standards and unethical practices in which multinational companies take the advantages of international differences in underdeveloped economies (Rothman, Scott &Mary 2004).

The principle aim of any business organization is to maximize the profits of its owners. However, in this context only those practices that increase the returns of the business should be entertained. By doing so a business may engage in activities that harm the environment or other stakeholders. The business in its quest to maximize profits should do so within the law and also take into consideration the basic moral rules. Lack of adhering to moral rules might turn out to be very costly to any business organization in terms of fines, cancellation of license and bad business reputation. Any business organization is supposed to have moral obligation towards other parties other than serving the interest of its stakeholders. These other parties might include its employees, customers, the society and the community at large. It should consider both primary and secondary stakeholders. Primary stakeholders are those people who are directly affected by the operations of the business. Secondary stakeholders are those people who are not affected directly by the business operations (Knight, Frank 1980).

Ethical theories have been developed to solve the issues of ethical behaviors in business. The social contract theory applies where companies operates as a semi democratic associations. The business employees and other stakeholders are given space to participate in decision making regarding its operations. This theory has been developed to a new version for business called Integrative Social Contract Theory. The theory argues that conflicting interests are well solved by reaching a fair agreement between the conflicting parties using various principles. These principles are macro and micro principles. Macro principles require that all well thinking people should agree upon universal principles while micro principles are usually formulated by actual agreement concerning involved parties. Ethical issues do arise where a company has to comply with diverse and conflicting legal and cultural standards. This mostly occurs where a company operates in more than one country with diverse practices. The issue that arises is whether the company is supposed to obey the rules of the mother country or the rules of the country where it is operating from. There are some issues that arise which are in conflict. Such issues include use of bribes, child labor, and safety of the employees, wage rate, racial discrimination, working hours and laws regarding environmental protection (Hartman, Laura 2004).

Corporate social responsibility is a form of corporate self regulation integrated into a business model that functions as business self regulating model where business consider their involvement and adherence to law ethical standards and business norms. Business should have responsibility for the impact of their continued operation in the environment, employees, community surrounding, consumers and the general public. Companies should promote public interest by participating in projects that encourage community growth and development and willfully churning practices that would harm the environment whether it is legal or not. This is a deliberate measure to include the general public’s interest in the corporate decision making.

It is the commitment by business organizations to behaving ethically and their involvement in economic development programs and improving the quality of life of the employees and as well as the economic welfare of the society at large. Corporate social responsibility by companies in developing countries has been widely neglected. Large multinational companies operating in developing countries carry out unfair trade practices. These practices assume the interests of the society and its effects on the environment. They often disregard international labor standards. They operate to maximize their profits with no regard to the well being of the local communities in which they operate. Corporate social responsibility involves the quality of management regarding human resources, processes and impact of the organization on the communities in regard to environmental changes, health hazards, climatic changes, social safety and labor practices (Jackson, Kevin 2004).

The business organization should have an interactive relationship with all the stake holders. These stakeholders include the employees, suppliers, consumers, other business organization, social organization, local peoples and law enforcers. Business practices such as fair competition, use of science and technology, labor, social economic values, stakeholders involvement, simplicity in reporting and verification, respect for the countries laws and regulation, rehabilitation of the environment, use of technology that does not affect the environment negatively, preservation of biodiversity, use of non pollutant source of energy and proper management and disposal of wastes and emissions. Involvement by stakeholders is very vital for any company in need of boosting its image, increasing its market share, continued product loyalty and workers commitment towards achieving of the company’s goals and objectives (Seglin, Jeffrey L. (2003).

Many large companies have devised their own internal policies concerning ethical practices of their employees. These policies include the use of a generalized language, or detailed policies that spells out specific behavior requirements i.e. corporate ethics code. These codes are generally made to spell out the company’s expectations of the employees and to offer assistance in dealing with the more common ethical scenarios that may occur in the line of doing business. In these companies there is more ethical awareness, consistency in applying them and avoiding ethical problems. In an effort to promote ethical behaviors some companies arrange for their employees to attend seminars concerning business conduct. These seminars may touch on aspects such as discussion of the company’s policies and the legal requirements the company have to adhere to. Some companies demand an employee to sign agreements that he or she will abide by the organization’s rules concerning organizations conduct. Many companies do take into consideration those factors that can make an employee involve in unethical behavior. In some countries, business ethical issues are not taken seriously they argue that ethical issues are better solved by letting the employee use his or her own judgment. They also consider the application of ethics as hindrance to a company’s legal ability (Jackson, Kevin 2004).

Some large businesses like multinationals contain ethical policies. For these policies to work properly, they should be given enough support by the top management, be well written and with periodic reinforcement. They should be easy for the employees to understand and follow, the management should monitor and carry out routine checks to check compliance and improvement and spell out the punishment to be accorded to the defaulters in case an employee disobeys.

Most multinational companies nowadays do undertake projects that are aimed at increasing the welfare of the community at large. They are engaged in projects like healthcare, sanitation, education, rural development, women empowerment projects, arts, culture, heritage and wild conservation. Some large companies have developed their own trusts and foundations while others channel their donations through their favorite Non Governmental Organizations. However, some multinational companies do not watch the implementation of the corporate social responsibility policy by their partners. They do not monitor whether their subsidiaries follow the laid down international rules regarding labor, human rights and environmental standards as stipulated by the law. Some of the hindrance in attaining full social responsibility includes; lack of clear government policy, a lot of bureaucracy, poor record monitoring, unclear tax system and substandard infrastructures makes attainment of corporate social responsibility a pipe dream (Bowie, Norman 1999).

However there are policy changes that have been constituted regarding competition, monopolies, regulation of trading activities by the government, price regulation, reforms in labor, explanations concerning direct and indirect taxes, fiscal deficits, issue of subsidies by the government, social expenditures, trade liberalization, foreign direct investments and market oriented driven rates have changed the business social responsibility and its approach to income inequality. However these reforms have not completely solved the problem of income inequality. The problem of unemployment persists, income inequality poses a great challenge, the disparity in regional development is high, social infrastructure development is low, low social security status and trade union activism has been as a result of disparity in income distribution.

All these issues has resulted to necessity of a proper development of a national perspective on corporate social responsibility a move expected to confidence in business activities and improvement in quality of life of the low income earning group. Companies have a great role to play in addressing inequality problem. This can be done by employing fair trade practices where by income inequality gap is minimized. This can be applicable if companies pay their employees fairly. The companies can also address this issue by raising the minimum wage rate of the junior employees while reducing the pay for top executives. This will in effect reduce the disparity between the highest paid employee and the lowest paid employee. Companies can also address this issue by taking into consideration the inequality’s consequences. The companies should have the consequences for the employee’s income and well being of its employees in middle and lower salary scale.

The dramatic rise in incomes of the top executives is usually a part of the expenses that has to be met by lower earning group obliviously through low salaries. The companies should take into consideration the well being of the low income group. This can be done as corporate social responsibility where by the company undertake to cater for the funding of social responsibilities such as in areas of education, health, security and economic mobility for the low income group. However, this is not the case, the well paid top executives always receive fringe benefits on top of their huge salaries. This super high income leads to higher consumption especially in areas such as housing and education. High spending among the well paid employees results to increase in prices of the essential commodities. This in turn makes the low earning group to spend more and more of their resources in order to keep pace with the ever rising cost of living. Companies should take it as their responsibility to see to it that the salaries of the low paid workers reflect the cost of living to help reduce the income inequality gap (Behrman, Jack, 1988).

Companies should take the issues of corporate social responsibility towards their employees by giving a minimum wage that is a living wage. This is wage enough to provide the basic necessities for life i.e. housing, food, clothing and transport. It should also cater for economic security which should cover health, retirement saving, and good child care. The wage should also be enough to cater for economic mobility such as one’s own training, enough savings for precautionally motives and savings enough to cater for children’s higher education. The business of leadership is to make the world a better place to live. The economy is supposed to cater for the interests of human beings and therefore all economic entities are answerable to the society.

Corporate social responsibility can, if well maintained, increase long term corporate profitability as it reduces business risks and inefficiencies as it offers more potential benefits such as increased product reputation and loyalty and also increased engagement of the employees. Income inequality affects the entire society’s functioning. Income inequality negatively affects education, economic growth and development, health crime, political influence and participation and civic engagement. Through corporate social responsibility the extent and benefits of the business in exercising these responsibilities differs from business to business. An organization should take measures beyond financial considerations. Businesses should consider long term financial benefits such as charitable efforts and volunteering. Corporate social responsibility should be considered within the business development, human resources and public relations (Bowie, Norman 1999).

A corporate social relationship should assist an organization in recruiting and retaining of staff. A good corporate social responsibility helps in improving the way the employees perceive the image of the company especially when undertaking fundraising or community volunteering activities. For a business that takes into account corporate social responsibility, managing of its risks becomes a core aspect. Virtues such as corruption and environmental accidents may put a business at loggerheads with the authorities or draw unwanted attention from the media. This may adversely affect the reputation of the business. Corporate social responsibility can assist a company in building strong customer loyalty based on strong ethical values. A business service organization can build a strong reputation for integrity and best practice. The problem of rising income inequality is in the rise.

This is largely fuelled by the fact that the income of the medium working age group if falling as most of the nations economic growth goes to a small number of the very wealthy population. This wealthy population consists of the well paid chief executive officers and Top level managers. If business corporations pays majority of the workers raises they deserve, raises proportionate with increases in efficiency and productivity, the lower paid group of workers would have saved more and borrowed less. Income inequality persists because these top level employees pays themselves huge salaries at the expense of lower earning group of employees. The issues of corporate social responsibility have not changed much over time. There has been more pressure from the stakeholders for corporations to be more responsible for their actions. Some corporations do not wish to be accountable to their responsibilities. To solve this problem, international corporations must consider their corporate social responsibility practices. There is need for formation of bodies such as the European Union to set standards for product and environmental regulations whereas other bodies should cater for enactment of labor regulation laws and human rights abuses (Enderle, Georges 1999).

Income inequality is on the rise, in most economies of the world and especially so in developing countries. This is more in the labor market where we have a huge and ever increasing disparity in wages and salaries and the working conditions of the top executives and the lower working group. The low and illegal wages and poor working conditions among the low earners group to the well being of the working poor and also to the health of the society in general. To alleviate this problem there is need for strong labor laws that provides for the workers in this group to form or join trade unions, coupled with strong public enforcement of labor standards. This in turn would help the low earning group champion for improvement of their working conditions as well as improvement in their pay.

Most of the poorly paid employees supply labor directly to the production process to large companies with extraordinary internal regulatory mechanisms. Labor laws should be strengthened so as to be able to encourage, shape and make organizations comply within the regulated body. The law and the society in large should take bold steps toward making firms responsible for any illegal conditions that occurs within their supply chains. More effort is urgently required to force large multinational corporations which are enjoying huge profits from globalization to take upon themselves the responsibility of offering good minimum wages and salaries and decent working conditions for the low standard workers who supplies them with direct labor inputs, if the war on income inequality is to be won (George, Richard de 1999).

Works cited

Enderle, Georges International Business Ethics. University of Notre Dame Press. 1999.

George, Richard de, Business Ethics. Prentice Hall. 1999.

Behrman, Jack, Essays on Ethics in Business and the Professions. Englewood Cliffs, NJ:Prentice Hall. 1988.

Bowie, Norman Business Ethics, A Kantian Perspective. Blackwell Publishing. 1999.

Hartman, Laura, Perspectives in Business Ethics. Burr Ridge, IL: McGraw-Hill. 2004.

Harwood, Sterling, Business as Ethical and Business as Usual. Belmont, CA: The Thomson Corporation. 1996.

Jackson, Kevin Building Reputational Capital. New York, NY: Oxford University Press. 2004.

Knight, Frank The Ethics of Competition and Other Essays. University of Chicago Press. 1980.

Rothman, Scott &Mary Companies With A Conscience. Denver, CO: MyersTempleton. 2004.

Seglin, Jeffrey L. The Right Thing: Conscience, Profit and Personal Responsibility in Today’s Business. Spiro Press. 2003.

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