Evaluating The Role of Multinational Companies And Their Social Responsibilities

EVALUATING THE OF ROLE MULTINATIONAL COMPANIES AND THEIR SOCIAL RESPONSIBILITIES (A CASE STUDY OF CHEVRON PLC PORT-HARCOURT)

Literature review is the critical study of the previo9us and related works of studies done in the researchers area of interest or concern. Through such a critical study the contributions made in the researchers area of concern one unveiled, there by affording him the opportunity to make a head way in his endeavour.

THE ISSUE OF CORPORATE SOCIAL RESPONSIBILITY

An organization cannot exist in isolation from the society which it exists and operates. An organization provides goods and services for the community which turn provides it with inputs resources for the actualization of this objective to ensure its survival and growth. No management can ignore the environment in which it operates. The success of any organization depends to a large extent on it’s ability to build good public image. The attitudes of the organization to share holders, employees, customers, host communities etc. forms fate of the corporate image. Through history management has been influenced by the social concept.

Looking back, the attitude of managers towards social responsibility seems to have gone through two historical phases.

Phase 1: Which lasted until the 1930’s emphasizes the belief that a business manager had one objective, that is maximize profit alone.

Phase 11: From the 1930’s to the early 1960’s stress that manages are not responsible only for profit maximization but also for involving itself in social issues. The answer is simply because a society which was able to achieve a high level of influence by making use of air, land, water, manpower and economic resources which they use some are converted and brings about the improvement in the standard of living. In the real sense, business organization have bought about situations in which they live what we see one social problems like crime, discrimination, pollution traffic congestion and a series of ills many of which appear to be  directly correlated with the pace and pressure of today’s industrial activities. All these calls for social demand by the society on businesses.

According to Stober (1999), the demand made on a firm can generally be categorizer into two groups:

1. Expectation regarding the forms economic operations eg industrial pollutions, hiring and promotion activities inadequate produce information, unsafe and unhealthy or tedious working conditions.
2. Expectation not related to a firms economic function eg. Urban development, training, hardcore employment and contribution to charitable causes. Stober (1999) went further to state that the manager has a number of issues he must address within the realm of social responsiveness or social responsibility including how to:-

a        Define social responsibility

b       Philosophically justify social responsibility of firm

c        Identity the appropriate social responsibility of firm

d       Realistically evaluate the company’s social performance many multinational companies exhibit social responsibilities when they voluntarily contribute funds, equipment and managerial talent to worthy causes such as the united achievement fund, art museum, and other community social activities. Other social responsibilities of multinational companies is that they may sponsor employee training or install low polluting production machinery ahead of legal time table or take extra step to protect women and minority employee from job discrimination.

In this case, multinational companies go beyond society’s minimum requirement for socially responsive behavior. They expand the ideal of corporate social responsibilities.

Having highlighted on the above, Drucker (1999) suggested two ways by which the demand for social responsibilities arises. In the first place, it arises form the social impact of business organizations. In other words, the negative consequences of business activities like rapid urbanization, rural-urban drifts traffic jams, environmental pollution, deceptive advertising and detective products offered for sale in a sellers market, tax evasion and avoidance. All create disenchantment and demand for social responsive behaviours. Secondly social responsibility arises from the problem of society itself, ranging from falling standard of living, poor infrastructural facilities and growing disenchantment with government and its in ability to solve major social problem.

Hence the society expects business with successful operation to solve a major part of these problems by developing effective social responsibility objectives and strategies.

Furthermore, business cannot escape and neglect the problems of the society for as Uzoaga (1992) rightly observed the need of the society, if unattended turns to social disease, and no institution whether business or government agency is likely to thrived in a disease society.

Business executives can no longer ignore with impunity the suffering of the human society with the slogan that the objective of business is only profit maximization. Business organizations that fails to be society responsible may face several penalties.

THE EXTENT OF CORPORATE SOCIAL RESPONSIBILIITES IN NIGERIA

It is unfortunate that in the twenty first century, most multinational companies in Nigeria still act in terms of profit and loss alone. This however is not so strange since corporate organizations in Nigeria are hardly familiar with the concept of communities relations nor are they aware of what their corporate social responsibilities are. The few ones which have come across the concepts sees community relations as an affairs of multinational companies alone, especially the oil companies operating in the Niger-Delta region. This perception is moving in its entirely, re-orientation of corporate organization in Nigeria towards the conduct of business is urgently needed. The problem emanates from the fact that companies are ignorant of social responsibilities to their host communities and the Nigeria. Society in general. In developed societies, it is fashionable for business which hope to survive in today’s global economy to engage on socially responsibly marketing, it is a different tale for Nigerian business.

Most multinational companies still operate under the sales philosophy where the ultimate goal is to make profit through aggressive selling while their counterparts on developed economies are moving towards striking a balance between in marketing philosophy, and the social marketing philosophy.

Most multinational companies shy away from their social responsibilities to the host communities because they see it as an act of charity. They do not see community relations from a profit making angle or as a standing element which promotes a stable environment for business to thrive. The truth is that community relations programmes subsumes under it, a corporate entity’s recognition of its social responsibilities.

According to Zisch (1991) a company Civil responsibilities includes “participation as a good neighbor and the promotion of a healthy outlook on public affairs by the company” this is invariably what the societal marketing philosophy preaches. The concept holds that all marketing efforts should be carried out in a way that preserves or enhance the consumers and society’s well being community relations as a way of contributing to this marketing philosophy encourages companies to be good industrial citizen. To generalize good industrial citizen must go hand-in-hand with the production end of the business.

A business scholar Bowen (1986) also noted that companies are to direct attention to solving problems that are important to their host communities future welfare. It should be noted that business objectives of creating community goodwill between itself and the community has not always been the case. Kottler (1989) wrote that in the early 70’s questions were asked whether the marketing concept is an appropriate philosophy in an age of environmental deterioration, resources shortage, explosive population growth, world hunger and poverty, neglected social services etc. this is why it is necessary to come back to Nigeria and examine the social responsibilities of multinational companies to their host communities.

For business operating in a society to become developed the multinational companies must analyze the attitudes of communities with the view of setting of policies and programmes that will provide solutions to these social problems. Every business small, medium or large scale must now wake to its social responsibilities. Business cannot continue to grow while the communities are neglected. A proportion of the company’s budget should be set aside for community development irrespective of where the company is located. The challenges are enormous but cooperating with them effectively ensures lasting community goodwill towards the company, thereby enhancing the environment for the continued thriving of the business.

THE CORPORATE SOCIAL RESPONSIBILITIES CONTROVERSY

The demand on business organizations have broadened but the argument still rages on how socially responsive they should be. The argument for social responsibility related to potential benefits to the society and the business organizations as well on of these arguments is that social responsibilities will lead to consequences which will be favourable to the business on the long run these social actions well prevent government regulations and create a better community-relations which on the long-run be beneficial to the business.

Nader (1991) stated his belief by asserting that business should not only take responsibility of product quality and safety which one legitimate business responsibilities for performance and contribution, but that it should assume responsibility in multitude of area beyond products & service.

Dahi (1998) opined that every large corporation should be thought of as a social enterprise that is as an entity whose existence and decision be justified in so far as they serve public or social purpose.

Furthermore, some writers noted the following.

1. Long run project: Social responsibility brings about better community development which on the long-run is likely to result to increase its profit as a result of this harmonious relationship.
2. Society expects business to assume responsibility.
3. Moral and Ethical obligations: Business has a social conscience and therefore, it is right to be socially responsible for its own sake.
4. Better Social environment: Business involvement can help to solve difficult problems help create a better quality of life and more desirable community relationship which helps to attract and keep satisfied workers. The ethnic crisis in Warri environs (1996) is a case in point.
5. Discouragement of federal government Regulations: If business is socially responsible, it will discourage a strict regulation of the economy by the government which adds to economic cost and restricts management decision making.

6        Balance of responsibility with power: Business has a large amount of social power which affects the environment, consumers community and many other areas of he society. Responsibility is a necessary reciprocal of power – in the words of Beck (1999) a company president “we are a socio-economic institutions and must recognize the responsibility of power” He sees business organizations as simply an economic institution which should not be entangled with social affairs. The argument against social responsibility can be summarized as follows.

1. There is need for profit maximization as posited by the classical school of economic though. Simply put, business functions is economic not social and economic values should be the criteria for measuring success.
2. Dilution of purpose resulting to goal confusion: The pursuit of social goal dilute business main purpose, that is, economic activity, the combination of economic and social pursuit will create a house divided against itself that collapses from its internal conflict and confusion of goals.
3. Cost: Many social proposals do not pay their own way in an economic sense. In view of the principle of opportunity cost which is the alternative forgone to obtain a want. Consequently business must absorb cost or pass it on to the consumes by way of higher price.
4. Business already have enough power: If it pursues social goals, it would have been more.
5. The business of business is not a social issue those, the outlook and objectives of business leaders are oriented primarily towards economic consequently corporate leaders are poorly qualified to achieve social goals.

Aahil (1988) argues that business has no nascent lines of social responsibility to the people so it is abnormal to allow business activities in area where business is not accountable.

Smith (1990) in his doctrine explains that business produces a public good when it reduces cost and improves efficiency in-order to maximize profit.

According to Friedman (1997). There is only one social responsibility of business that is to use its resources and engage in activities designed to increase its profits. As long as it stays within the rules of the games, which is to say indulging in an open and fair competition without deception or frauds few trends would so thoroughly under mine the very foundation of our free enterprise as the acceptance by corporate officials of social responsibilities other than to make as much money for their share holders as possible. Friedman (1997) said that social responsibility has implication for these group when business interacts with it, it is emphasized in his own words as follows “in a free enterprise private property system the corporate executives is an employee of the owners of the business, has directly responsibility is to conduct the business in accordance with their desires which generally will be to make as much money as possible while conforming to the basic values of the society. In so far as his actions is in accordance with their desires. This action raises the prices to thee consumers and lower the ways of the employees.

This implies that corporate executive will be imposing taxes as deciding how such taxes are to be spent. If they make use of the available resources for social responsibility. The philosophical debate over social responsibility continues the actual pressure on business to respond to social demand built on every side and on fair competition without deception or fraud. Business hers a chorus of social voices asking for action without waiting for the debate to the formally settled. The society has pushed business to respond to it’s the demand for this reason, the emphasis has shifted towards corporate social responsibilities.

The new social responsibility contract that is being forged, seeks to place both business and society in a cordial relationship that builds a better quality of like for business and its host communities.

BUSINESS HAZSARDS ON ENVIRONMENTS

Albert (1990), noted that no one issue has raised so much controversy and attention as to the issue of pollution and its impact upon the environment more than any other issue has been identified as responsible for the significant deterioration of the nations land, air and water resources while automobile emissions and smoke stacks have been feeding the pollutant in to the air. Many multinational companies have been quilt of throwing high quantity of pollutants into the nations lakes and rives.

Albert (1990) noted that for the sake of emphasis the following are areas in which business owes most of its social responsibilities to the society.

1. POLLUTION PROBLEMS: Air, water, solid waste, noise, automobile emission, ozone depletion, global warming, protection of endangered species, climate changes etc. business organization must understand that there is an indicative and significant inter-relationship of industrial activities and the natural world. He further noted the following point.
2. a) Air pollution: Air pollution results when a combination of factors combines to lower air quality. Large amount of chemicals, like carbon monoxides emitted by automobiles contributes to air pollution. Smoke and other chemicals emitted by manufacturing plant also create air pollution burring fossil fuels such as coal introduces carbon-monoxide which collects in the atmosphere altering heat / leading to green house effect which keeps the earths atmosphere warm enough to support life.

However, during this century, the amount of carbon monoxide in the atmosphere ahs soared as people have burned increased amount of fossil fuels. Many scientists fears that this could result to global warning with disastrous consequences.

1. b) Water pollution: Water can also become polluted by dumping chemicals and waste into it. For years business and municipalities dump their waste into rives, streams, lakes without regards to the effects on human lives for instance the Texaco oil company was sued by a group of coastal shrimp and oyster fisherman for damaging their means of livelihood, this was because the company in the gulf of mexico caught fish and caused oil spillage into the sea, causing damages to the fishermen that was detrimental to lives in the society.
2. c) Land pollution: There are actually two keys issues associated with land pollution the first issue is how to restore the quality of the land damaged and used in the past. This is particularly in area where mining has jeopardized the safety of nearby residents. The second issue is how to prevent such problems in the future. Land pollutions occurs every time some are throws away a plastic box newspaper. Bottle etc into the land.

A special controversial problem centers on toxic waste disposal. Toxic waste are dangerous chemicals and radio-active bye-product of various manufacturing process. An important solution is recycling, that is resprocessing used materials for re-use.

2. CONSUMERISM: Product safety, misleading advertising consumer complaint, smugglings etc. the steady increase and important of consumerism in our society in recent years is based on the judgement that business has not done its job well conclusively therefore Nwachukwu (1988) commented on the issue that Nigerian consumerism in our society in recent years is based on the judgment that business has not done its job well conclusively therefore, Nwachukwu (1988) commented on the issue that Nigerian consumerism have been relatively inactive or even isolated themselves from the problems peculiar to the areas into which they have for our society to survive the hazardous effects of business must be compensated through social responsibilities, No lip but practical importance must be paid to business social responsibilities, unless the same importance that is attached to profit maximization by organization is attached to social responsibilities, the society will decay.

PRESSURE GROUPS AFFECTING THE CORPORATION

Business organizations contends with several and varied pressure groups. These groups have implications for the decisions which managers take concerning it. The relationship are represented diagrammatically in figure below:

Source: Lawal (1993:196)

The business organization must be socially responsible to these different pressures groups for the business organization to have good public image, it must perform its major roles to them.

David (2000) noted that business must interact with each of these groups in the following ways.

1. Creditors: These are the people whole money are used to run the business, they can best be described as the owners of the company eg. share holders and debenture holders allowed their money to be used by the company if such obligation are not honored, future capital would be hard to obtain and unemployment may result. The following are the ways in which business displays its responsibilities to its creditors.
2. a) Improper financial management: Occasionally organizations are quilt of illegal financial management. In some causes, executives have been quilt of paying themselves jumbo salaries, spending huge amount of company’s money for their own personal comfort and similar practices the creditors can do nothing.
3. b) Insider Trading: Another area of illegal and socially irresponsible behavior by firms towards their investors is the practice of insider trading. Insider trading occurs when could be to the detriment of others stock holders.
4. c) Misrepresentation of finances: Irresponsible and unethical behavior regarding financial misrepresentation is also illegal. All corporations conform to generally accepted accounting practices in maintaining and reporting their financial statements. Sometimes managers, projects far in access of what they truly expects to earn. When the truths comes out, the investors are usually very bitter about it. Most multinational companies are found to be illegally misrepresenting their finances to their creditors
5. Employees: The attitudes of management towards the employees are at the core of goals of responsibility of the management. Employees contribute to the organization profit, therefore salaries and wages paid to them should be commensurate with what is obtained in the industry both private and public sectors. In addition to good salary structure, employees should enjoy good welfare service like the provision of scholarships to their children, training facilities to workers, good working environment and attractive retirement scheme equal employment opportunities etc. any environment and attractive retirement scheme equal employment opportunities etc. Any company that provides its employees with equal opportunities for rewards and advancement without regards to sex. Race or other irrelevant factors is meeting its social responsibilities.
6. Consumers: The consumers who are receptors the company’s goods and service have a right not to be exploited by the organization which depends on the community in many ways Okoye (1997:201) was of the view that consumers are the center focus of marketing. Public demand business to considers its needs in making its decisions.

Consumerism and former president John Kennedy identifies these as the right to be safe products. Secondly consumers have the right to be informed about all relevant aspect of the provide. Food products must list their ingredients cloth manufactures must label the cloths with information about its qualities and banks must tell you exactly how much interest you are to pay on loan.

Thirdly, consumers have the right to choose what they want to buy, general to this right is free and open competition, among companies in time pas, gentleman agreement were offer used to avoid competition to divide up a market and firms do not really compete against each other. Such practices are illegal today and any attempt by business to block competitor can result to fines or other penalties.

Finally consumers have a right to be heard.

4. The public: The responsibility of business to their host communities and to general public includes dealing with the public health issues, protecting the environment and developing the quality of the work force.

The challenges of corporate social responsibilities: The prime purpose of including corporate social responsibilities in corporate business is to make the corporate business activities as well as the corporate culture both sustainable in the three ways: economic, social and environmental. Paying equal amount of attention to all the three dimensions, but many companies thinks that corporate social responsibility is a much exterior part of their business whereas most think it to be an irrelevant issue for their business as satisfying their customers / clients is more important for them. If is further felt that customers satisfaction is only about price and service but concentrating on only these aspects of business makes them blind folded towards other important changes talking place world wide that could blow the business out of the water. The change is named as social responsibility which is an opportunity in itself for the business.

1)      Inefficiency of the government: In the past governments have relied only on legislation and regulation to deliver social and environmental objectives in he business sector which has lead to certain field initiatives.

2)      Demands for greater disclosure: there is a growing demand for corporate disclosure from stake holders, including customers suppliers, employees, communities investors and activist organization.

3)      Increased customer interest: It has been seen and prove through a survey conducted in the year 2002 in 25 countries by environies international it was found that more than one third of surveyed consumers believed that large companies “should do more than give money to solve problems”.

The same study found that almost 50 percent of consumers had considered punishing a company based on its social actions and that nearly 30 percent had on its social actions and that nearly 30 percent had actually avoided a company for that reason-further it was proved that the ethnical conduct of companies have a growing influence on the purchasing decisions of customers.

4)      Increased pressure form the investor: Investors are changing the way they analyze companies performance, and are making decisions based on ethical concerns too.

5)      Change in employee behavior: Employees are increasingly looking beyond paychecks and benefits and seeking out employers whose operating practices match their own principles. In order to hire and retain skilled employees companies are being forces to improve working conditions.

Advantages of making corporate social responsibility a part:

There is an urgent need to address the various corporate social responsibility initiatives and also a need to build a mechanism through which such effort one recognized and regard. It would be wrong in saying that transparency and dialogue can help to make a business appear more trust worthy, and push up the standards of other organizations of the same time. Some of the positive outcomes that can arise when businesses adopt a policy of social responsibility include:

1        Improved financial performance

2. Lower operating costs
3. Enhanced brand image and reputation

4        Increased sales and customers loyalty

5        Greater productivity and quality

6        More ability to attract and retain employees

7        Reduced regulatory oversight

8        Access to capital

9        Workforce diversity

10      Product safety and decreased liability

Corporate social responsibility and its implications corporate social responsibility (CSR) has become increasingly popular in the past two decades whether it has been used as a way to bridge a gap between development and the private sector, or used as a marketing tool to clean up a company’s image after media fiascos, the benefits of a corporate social responsibility practice is up for debate. Such was the case for coca-cola and Colombia workers Bps oil spill in the Gult of Mexico in 2010. It would be unfair to day that all corporate social responsibility initiatives are the same for better or for worse but it is important to look at some corporate social responsibility initiatives from major corporations mostly from developed countries and examine how such initiatives might be resulting in additional barriers for developing countries. Labour and environ mental standards are being globalized, and this is perceived by some as “protectionism with a human face” first it is important to discuss that corporate social responsibility might be a form of protectionism.

Secondly who is being protected the corporations or the developing country? Thirdly what impact corporate social responsibility has had on labour and environmental standards in the developing world finally, in this article 1 raise the debate whether corporate social responsibility is merely a marketing apparatus or it is or can be an effective tool for development.

The corporate social responsibilities barrier global labour and environmental standard have been agreed to through signing of agreement like the international labour organization (ILO) periodically revised agreements between its members. However, the question arise, what is actually being protected through these agreements? Bakhshi and Kerr argue in this article labor standards as a justification of trade Barriers: Consumer concerns, protectionism and the evidence that “Lower or poorly enforced. Labour standards, can endow a country with an “unfair” international competitive advantage”. In other words labour standard and its poor enforcement in developing countries can lead to job losses in developed countries.

By large the aspect of labour agreements seems to have been left on the onus of the Ilo. While the ilo can lead to agreement among its members, it cannot ensure or monitor implementation by itself. Thus,. Increasingly consumers and social advocacy groups seem to be taking the lead in advocacy of corporate social responsibility standards, with or without realizing that these are creating trade barriers. This might be best exemplified by the mass by cutting of coca-cola products in the USA when it came to light that the labour in the factory which produces its goods were being mishandled. As access to information is now more readily available, and so consumers are able to learn more about work and environmental impacts of their consumption habits, they have started to voice legitimate concerns, Mazurkiewicz in a 2003 world bank report stated that “in the emerging global economy, where the internet, the news media and the information revolution shire light on business practices around the world, companies are more and more frequently judged on the basis of their environmental stewardship partners in business and consumers want to know what is inside a company. This transparency of business practices means that for many companies, corporate social responsibility corporate social responsibility is no longer a luxury but a requirement.

The aim of this article was to show that while the mainstream argues for corporate social responsibility to be the bridge between business and development, there are a large number of case which show that corporate social responsibility might only be about business mostly through marketing. It is not to say that countries want to be waste fills for corporations or more developed countries, but it is not an easy political or economic position to take for many governments and the producers in these governments countries with laws such as those implemented by the us on child labour any non-compliance by developing countries could lead to a disastrous situation of lack of further development, it is not point of this article to say that corporate social responsibility is always bad, or that it makes no significant impact, corporate social responsibility can also make a lot of business sense, but that is the point, not to forget that it is a business. Even Milton Friedman believed that “social responsibility of business beings and ends with increasing profits”.

There are many corporations that have a clear mission and vision statements which include corporate social responsibilities components. However, as has been shown, there are many who only include the components, not implement.

The point is that if corporate social responsibility is more of a marketing tool for powerful multinational corporations they can use it to create forms of protectionism directly or by some political power. Good thing can and should result from corporate social responsibility, but before that happens we must come clean about truly being altruistic or not. As consumers we should continue to put pressure on companies but not settle for a marketing strategy or protectionism with a human face. Corporate social responsibilities was formulated for the creation of a socially responsible economy not merely economy for those already in high economic.

Benefits to the host community and the general public

1. Charitable contributions
2. Employee volunteer programmes
3. Corporate involvement is community

4        Education employment and homelessness programmes

5        Products safety and quality.

BENEFITS TO THE ENVIRONMENT

1        Greater material recyclability

2        Better product durability and functionality

3        Greater use of renewable resources

4        Integration of environmental management

5        Tools into business plans, including life-cycle assessment and costing, environmental management standards, and eco-labeling.

It would certainly not be wrong to say that the leading global companies of 2020 will be those that would provide their customers and clients with goods and services and even reach out to them in a manner and with approach that accommodates solutions to world major challenges such as poverty, climate charge, resource duplication, globalization and demographic shift.

2.3     SUMMARY OF LITERATURE REVIEW

An enterprise and its immediate environment are closely interdependent. The host communities can be a source of labour, capital, raw materials, and customers interest can be enhanced by making a close and harmonious relationship with the general public. This, the business organization should show social responsibilities to their host communities by providing basic amenities and infrastructure. This includes roads, scholarships should be giving to deserving indigenes and donations should be made to clarity homes and orphanages.

Furthermore, efforts should be made in reducing pollution such air, water, noise, etc proper means should be made available for disposal of sewages which is very dangerous to human health.

Business organization should incorporate the ideals of end means ethics, that is not using a mean to achieve their aid.

More so, making social responsibility a part is of great advantages, because it enhance brand image and reputation, increased sales and customers. Loyalty, proved financial performance, lower operating costs and greater produce trinity and quality.

Finally, for the purpose of this research work any multinational company that carries out the mentioned programmes and social responsibilities can be said to be socially responsible and of benefits to the environment because that will be greater use of renewable resources, better product durability and functionality greater material recyclability and integration of environmental management.

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