Can we consider the mayor’s request to finance a new primary school as part of JEXTRA stores CSR? Do such practices fit into the theory of shared value?
Corporate social responsibility is an issue that has attracted widespread debate over its impact on the social, cultural, and political aspects of the target society. Of particular importance are the legal aspects of corporate social responsibility, corporate ethics, and the impact each of these issues has on each other. While the law seeks to provide a good ground for business, it comes into conflict with CSR where companies seek to give back to the community in exchange for a good relationship between the organization and the community in which the business operates.
While Jextra Stores Company’s Corporate Social Responsibility includes funding social welfare associations and organizations such as schools, hospitals, development projects, and others, it equally has its code of ethics (Jextra’s Business Conduct Code) to guide its employees and leaders when conducting business on behalf of its business and social dealings. From its code of ethics, it outlines that every member of the company must be committed to conduct business in a manner that is ‘both ethical and legal’. In this context, the company’s code of ethics outlines that it is unethical and illegal for any member to provide gifts, entertainment, or any other form of bribery to government officers, agents or employees, and officers from other companies in a manner that is most likely a breach of the law and the company’s code of business.
On the other hand, the company’s CSR allows its managers and representatives to provide minor gifts to suppliers and guests as long as this is legal and consistent with the company’s good practices and more importantly, does not appear to be an improper or corrupt act.
Considering these issues, it is possible to determine if actually the request to fund the school project at Klang for the exchange of a quick land valuation and zoning. First, it is appropriate for the company to use a considerable amount of its resources in funding social projects in the area Jextra operates or is planning to operate. This is one of the main areas that corporate focus on in their CSR. Provided the funds are channeled directly to the social project and not to individuals or unintended groups, then the company’s CSR justifies the funding. Secondly, it is within the laws of Malaysia and the local authorities for companies to fund social projects to build the community, but this should be upon their will to do so. The law herein allows the companies to enter into negotiations with the local authorities and the community to consider how a company wishing to operate in an area is going to benefit the community.
Thirdly, it is within the Jextra’s Business Conduct Code (code of ethics) for Chong, as a manager, to involve in negotiations with the community leaders and leaders of the local government at Klang and find out how they can use the company’s resources to fund those projects identified in the company’s CSR. Provided the project is legal, proper, and justified, then Chong has the mandate to enter into negotiations and to fund the project.
However, it is worth noting that the said project has several legal, ethical, and moral issues affecting it. Jextra needs to fund a project of its choice or the choice of the local authority. However, it is equally important to note that how business is conducted at the local authorities not only shows an improper conduct of business but also a possibility that the Mayor and his family could be involved in illegal and unethical dealings with companies wishing to operate in the area. Considering that Tom Chong realizes that the mayor could be misleading more than one company to fund a single project without their due knowledge, the mayor may have some vested interests in the project. Secondly, it is important to consider the rumors and past cases where the local leaders in Malaysia are involved in improper dealings, bribery, and breach of the law and corporations’ CSR.
For instance, the fact that the Mayor’s sister sits on the school board and that the planning of the flyover started months earlier are clear indications that the mayor has some personal or political interests in these projects. It is important to consider that it is in the contrast to the Jextra’s Business Conduct Code for an employee or manager/director to enter into a contract with a local authority, government agent, or other companies where the business is inappropriate, unethical, illegal, or that may taint the image and reputation of the company. From this, it is worth concluding that the funding of the two projects must not take place within the current context, as they have the possibility of involving Jextra in dealings that may breach its Business Conduct Code or the law, even though it is within the company’s CSR to fund such projects. As such, the current issues affecting the project make it impossible for the company to fund.
According to Porter and Kramer (6), shared value involves the policies and operating practices that improve a company’s degree of competitiveness while simultaneously enhancing the societal and economic conditions of the society where the company wishes to operate. Within the theory of shared value, the funding of the two projects is justified by the fact that they will help the society in which Jextra wishes to operate and at the same time, improve the connection or relationship between the company and the society. When the school is funded and established, the community will benefit from an additional source of education for their children. With the funding of the flyover, the community will benefit from reduced risks of accidents. Besides, the probability of more companies coming to invest in the area is high after the establishment of a flyover and the school. On the other hand, the school and the flyover will increase the probability of more people coming to reside in the area, thus providing Jextra Stores with a pool of potential customers and workers. Therefore, it is worth arguing that funding the school and the flyover is within the theoretical aspects of shared value (Porer and Kramar 12).
Applying ethical theories in Tom Chong’s ethical dilemma
Utilitarianism: Utilitarianism, an ethical theory in normative ethics that started by philosopher Jeremy Bentham, supports the ideology that the proper course of action in any society is the one that aims at maximizing the overall happiness of the members of that society and the whole society in general. In the current philosophical context, the term Utilitarianism is a form of consequentialism, which holds that the moral worth of action must be determined by the resulting outcomes, the foreseen consequences, and the anticipated consequences of that action (Loptson 23).
Applying Utilitarianism, in this case, implies that Chong has to consider some issues that could result from any action he undertakes. The moral worth of Chong’s action must be determined by their consequences, whether they are good or bad for both the society and the company. In this context, applying CSR principles by funding the primary school and the flyover project or investigating Alam over his bribery accusations must be done if Chong is sure that the results of his actions will not affect the company and the society. First, by funding the two projects, the outcomes may show that more than one company was involved in the project; that the mayor had some vested personal and political interests; his wife was involved in the projects or that Chong failed to investigate and report these situations to his boss at Hong Kong. In case the media or business community at Klang becomes aware of the involvement of the company and the local authority in illegal or unethical dealings, the reputation of the company might be tainted. Secondly, investigating Alam and his dealings is a noble idea. However, Chong needs to consider the possible consequences of investigating him. He must consider that if the investigations are done and actually, Alam is found guilty of the accusations, what will happen to the image of the company? Will the company’s reputation be destroyed or will this lead to his demotion and consequent saving the company of losses or destruction of its reputation?
Kantianism: Kantianism theory was developed by Immanuel Kantian and describes the contemporary positions in the philosophy of the human mind, epistemology, and ethics. In business and moral ethics, Kantianism is a deontological theory that revolves around the duty of an organization or person in an organization about the interest of the society in general. It focuses on the duties rather than the emotions of the end goals of the given society. The philosophy of ethics holds that all actions must be done by at least some underlying principle or maxim that is different from each other by a large margin. Accordingly, the moral worth of action must be determined based on the view of rationality as the decisive good.
Applying this theory in the case of Chong would mean that he does not need to consider the consequences of the actions he takes; rather he must consider the moral worth of the action he takes within the context of his responsibility. In this case, a Kantian philosopher would advise Chong to take the action of questioning the mayor on whether other organizations are involved in funding the bridge, why his wife has some interest in the school and why he would force companies to fund the projects he initiates. Secondly, it would be advisable, under the Kantian school of thought, for Chong to inform the government and the media as well as his boss in Hong Kong, regardless of what would happen to the parties involved. Thirdly, Kantianism would advise Tom Chong to investigate Alam and his dealings in addition to the companies he deals with. He has the responsibility of ensuring that Alam is not involved in improper, illegal, or unethical dealings, regardless of any loss or gain Jextra may undergo.
If Chong decided that he would go ahead and pay for the school, would he be breaching his duty as a director?
According to the theories of ethics and shared values, it is right to say that Chong would be breaching his duty and responsibility as a director at Jextra. Arguably, while both Kantianism and Unitarianism schools of thought would argue that there is a need for investigations and termination of funding in case Chong finds some evidence of improper business in the local authorities; the theory of shared value argues that if the project is to continue, then it must benefit both the society and the company simultaneously. Looking at the case, it is clear that if the rumors that the mayor and his family have interest in the project or that the mayor has involved other companies in the flyover funding list, Chong would be breaching his duty and responsibility because the company may end up losing money and its reputation, even though the society will gain.
Discuss the divergence of US and UK takeover regulation, defenses, and Mandatory offers
Each of the systems of corporate governance in the United Kingdom and the United States of America features dispersed share ownership. In both cases, however, there is a hostile takeover with its operation closely working as a disciplinary mechanism for managing the institutions. While the Delaware law in the USA allows corporate managers to somewhat maneuver, the UK laws strictly prohibit defensive tactics by managers. Secondly, in the United Kingdom, self-regulation of takeovers had evolved, producing a regime that is predominantly regulated and driven by the investors’ interests. On the other hand, the dynamics of the law-making in the US judiciary normally benefit the managers because it makes it difficult for the corporate shareholders the have a significant impact on the rules and regulations. Also, the City of London normally allows easy privatization of corporate, which in turn necessitates takeovers. However, in the case of the United States, it is difficult for Wall Street to privatize corporations as the American federal legislation initially preempted self-regulation as well as restricted the ability of the investors to have and coordinate influence on the institutions.
What works in securities law?
According to LaPorta and Loez-de-Silanes (2), there is little evidence to support the hypothesis that stock markets benefit significantly from public enforcement. However, the two researchers argue that laws that make it mandatory for markets to have disclosure as well as facilitation of private enforcement using liability rules significantly benefit the stock markets, as opposed to public enforcement. The researchers employed empirical research in which they examined the security laws of some 49 countries in various parts of the world. Within the study, the researchers attempted to discover the impact of public and private enforcement on stock markets by empirically analyzing the specific provisions in each set of security law for each nation. Such were the laws that govern IPOs in each country taken for the study. Besides, the researchers examined the relationship between the legal provisions and several numbers of measures of the development in the stock market. Finally, they attempted to interpret the evidence of these findings in the light of the prevailing theories in-laws of securities.
The results of the study indicated that securities law matters in the development of the stock markets in most countries. According to the researchers, they found that financial markets market forces could not enhance the growth and development of financial markets without the involvement of securities laws. Secondly, they found that these laws significantly facilitate private contracting, while at the same time, appearing to discourage public enforcement. The study indicates that several aspects associated with public enforcement have a less significant impact on the development and growth of the stock markets. For instance, having a focused regulator, criminal sanctions or even an independent regulator produces little, if any, impact on the growth and development of the stock markets.
On the other hand, the study reveals that standards of liability and requirements for disclosure have a massive impact on the stock markets. For instance, it was found that large stock markets occur in countries where there are strong requirements for liability standards and/or requirements for disclosure. These results indicate that in countries where private enforcement is emphasized, large stock markets prevail, which in turn indicate the economic potentials of such countries.
In addition to these findings, the study indicates that it is important for regulation of the conflicts involved in a stock market, which normally occurs between the urge to control shareholders and external investors to develop and grow the capital markets. Such findings seem to point to the need for reforms in the laws governing these issues in a capital market to ensure that financial development in the market prevails. Also, it facilitates the process of casting any doubt investors and analysts have on the competence of purely private methods of bridging the gap between nations with stronger protection of the investor and those that have relatively weak laws to protect investors. It is equally important to note that the findings of the 49-country analysis of stock markets and equities law provide clarification on how and why the development of stock markets is predicted within the context of the legal aspects of the country. Enough, it is justified to argue that common law in equities regulation benefits the stock market based on the emphasis of the common law on private litigation as well as the discipline in the stock market. Therefore, countries need to consider private contracting and standardized disclosure when making securities laws. Such nations are better off if they minimize the influence of private enforcement in the stock market if their stock markets are to grow. Moreover, they need to note that there is a need for reliance on the resolution of private disputes with the use of standards liabilities that are not only market-friendly but also able to protect the parties involved.
LaPorta, Rafael, Florencio Lopez-de-Silanes and Andrei Shleifer. What Works in Securities Laws? Journal of finance 57 (2004): 1147-1170. Print.
Loptson, Peter. Theories of Human Nature. London: Broadview Press, 2008. Print.
Porter, Michael and Mark Kramer. Creating shared value: How to reinvent capitalism and unleash a wave of innovation and growth. Harvard business review 2.3 (2011): 2-17. Print.