It is now that CSR have to prove its value

Cover of "Too Big to Fail: The Inside Sto...

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Europe and the US is standing on the brink of bankruptcy. Countries like Greece, Spain and Ireland have already over exceeded the boundaries for what can be accepted as good governance by any standard and the US is struggling with internal political issues that have the potential of destabilising the whole world. Unemployment is staggering high with Spain leading at over 21% unemployment and with a situation among younger people, which is even worse at over 40% having problems finding work. Together with the Greek currency bond being rated as junk by some of the big international rating companies the basic outlook bleak if not hopeless.

If the problems were only confined to a few countries it would not have matter that much but in a globalised world we are all interconnected and if these states fall into national bankruptcy we will all suffer. First of all will countries like Italy and Ireland be some of the first to go under a and these will be closely followed by others in the European region. And with 11 of the Euro 27 countries having unemployment rates in excess of 10 % (4 over 15%) there is little or nothing to buffer any kind of downturn.

There are of cause some economies that are doing better than others but in general economies are strained and there have been little in terms of economic recovery since the crisis in 2008. Basically the states have used up all or close to all their resources in order to cope with the last crisis and they will have close to zero chance of making it through another.

So why should companies care? Their obligations are not to the state or the currently sitting Government so why should they bail out the results of irresponsible economic practices.

Well first of all there will be a direct impact on business if they do nothing. A state in bankruptcy will not be ale to uphold its trade agreement with companies meaning potential huge losses. They will try to find similar products at a cheaper rate such as copy-medicine or they will stop treatment all together. There will be little or no investment in infrastructure in areas like energy, roads and water meaning that the ability to conduct an efficient business operation will be reduced.

On a longer term basis it will mean increased corruption and poor governance as countries will be unable to effective police its own laws. A bankrupt state will also men that the country will be less able to educate their own population which have a effect on business as they will be unable to recruit qualified people.

So what can business do? First of all they can start by paying tax in the countries were their operations and customers are. A significant number of companies in Europe and the US are not paying the tax that they should if companies like Google, IBM, Morgan Stanley, DHL and Apple. Companies that have gotten millions in government hand-outs or stimulus money as it’s called should start paying back and not continue to hide money away in tax havens. If they just paid the tax, as they should have done in the first place all our trouble would basically be over. Companies should not be overtaxed but they should at least pay the basic rate in the country that they are situated in. Transfer prising and other trick of the trade have to be governed in a way that will allow countries whom are providing the educated labour, markets, infrastructure and social systems benefits also gets the funds to maintain these systems. Tax systems have for too long been a competitive advantage and this issue have to be effectively resolved.

The biggest of the corporations need to live what it means to have economic power, which is bigger than most countries. Big multinational companies like Shell, Wal-Mart, Exxon Mobile, AXA, General Electric, IBM, Citigroup and Bank of America that are bigger economic entities than countries like New Zealand, Vietnam and Morocco have to live up to this responsibility. One cannot continue to act like a “normal” business when ones impact on demographics and society is so great. These entities are outside our democratic control and while I do not believe that they would willingly be engaged in wrongdoing I do believe that we need to increase transparency to the level that we have on governmental level in order for stakeholder to truly evaluate the performance of these companies. As Andrew Ross Sorkin so adequately put it these companies are simply “Too Big To fail” and in 2007-08 we saw what happens when they doo. Still today we have a hard time believing that companies like Enron and Lehmann Brothers do not exist.

Third corporations have to integrate their CSR. A quick look at CSR reporting will show that most corporation still view their impact and responsibility to society as part of their everyday thinking. When managers and executives take decisions in big transnational companies we have too often seen that they do not have the necessary understanding and comprehension of the effect that their actions will have on society. Time and time again we have witnessed how highly professional business leaders have created situations which they themselves could not comprehend or even fully understood that had significant implication for a much wider group of people than original anticipated. Therefor the “Responsibility of the Businessman” as Bowen describes it needs to be embedded in the very basics of business thinking and education. We cannot keep on having CSR as a add-on to other activities that corporations are engaged in it has to be like Visser so will put it embedded in the corporate DNA.

Some might claim that these proposals are more or less communism or at least socialism in disguise. But I think that the facts speak for themselves when I say that the current way we are handling capitalism is not working to our advantage. I do not speak against people making money of their hard efforts or that some people are just smarter and better at doing business than others and should be rewarded as such. What I’m working for is business done on the basis of having talent and knowledge, which is hard if not impossible for others to duplicate. Not as it seems to be the case today that who ever is the one with the lowest moral and willingness to exploit the ability to withhold information to others that come out on top.

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