Background of how organisation operate in turbulent environment
After the emerging concept of social responsibility in the corporate world. The organisations have started expanding their focus to make new initiatives for the welfare of the stakeholders. A pattern of several external conditions affects the life and development of organisation. CSR is the core activity of the business rather than a standalone program. Moreover, the Organisations have started integrating the corporate social responsibility (CSR) with the strategic management and corporate governance (Vitell, Ramos, & Nishihara, 2010).
Numerous corporates have initiated to develop mechanisms through which they can report, control, and practise the socially conscious policies. Management historians depicted various social problems such as poverty, slums, female labour, labour unrest, and child labour. In order to improve the industrial performance, the welfare schemes were associated with the problems with both social as well as business problem (Manner, 2010). These welfare schemes strived to prevent child labour. These welfare initiates forced the organisations to engage in activities such as provision of hospital clinics, profit sharing, bathhouses, and recreational facilities.
Gradually when the government made it compulsory and mandatory to accomplish the fulfilment of social responsibility while conducting the business operations. The organisation`s reports stated reflecting the social responsibility which lead to improvement in working conditions of the employees. CSR (corporate social responsibility) is a broad concept that leads the company to take various steps to make sure that they have positive social and environment impact on the surrounding (Yuen, & Lim, 2016).
CSR is valued differently in the organisational culture from the philanthropy. If organisation implement the CSR policy, it would become important ingredient in the value and culture of the organisation. A CEO should be aware of CSR models that is promoted by the organisation to benefit itself and act on the plan. A senior executive of the company and the CEO has the responsibility to manage the CSR activities of the business. The challenge faced by the CEO is the build and develop an approach that can deliver these lofty determinations. Moreover, CEO are the business leaders who has the power to influence the employee`s way of executing their work in most efficient and ethical manner. Many recent CEOs have supported innovations and smart collaborating to manage the challenge to serve the society (Open Air RGU, 2015). Any authority does not form the charismatic leaders; it is their ability to influence the behaviour and commitment that declares and position them a leader. New and effective business innovation that can lead to long g-term sustainable growth in a short time can drive the company to top position.
Moreover, smart collaborating is one of the emerging way to create value to both business as well as society. Steward approach defines the person as inclined towards the moral values and act beyond their benefits (Board works consulting inc., 2013). Undoubtedly, it is the responsibility of the CEO to follow steward approach and behave collectively both with the employees as well as the stakeholders to fulfil the mandatory CSR activities. In terms of the CSR, it is presumed that CEOs are closer to steward model because CEO has to give more importance to social responsibility and ethics. Nevertheless, the CEO promotes high level of CSR practises in the organisations. Organisations that generally ignore its social responsibility drive the risk to the bottom line and the brand (Open Air RGU, 2015).
By building a bad reputation in social and environment terms, it can cause negative effect on the overall profitability and success of the business. Although, the consumers have already started spending money on products in which they believe. Generally, consumers and stakeholders engage with companies who have high level of business performance with the adequate CSR performance. Moreover, the leaders who generally promote new CSR policies to create and impress the whole organisation by their work could not necessarily give them long-term sustainability. There are certain psychological factors, which leads them to drive the certain variables related to situational factors. These psychological factors include organisational factors, power use and work motivation. Situation factors may include management philosophy, individual or collectivism and organisational culture. Several CEOs are ranked based on independent variables (Larcker, and Rusticus, 2010).
A low score marks that a CEO can incline to behave as an agents rather than a steward. A high scorer marks that CEOs are inclined to behave as steward. Moreover, it is reported that a considerable number of the CEOs are increasing their investment in CSR. The directors of the company will approach to CEO and the senior to know what amount of finance they have reported to accomplish CSR activities (Rangan, Chase, & Karim, 2012). Directors undertakes meeting of the CEO and the senior management to explain how they should interpret the importance of CSR and where they should fit it in the company`s strategy and risk portfolio (Lubin & Esty, 2010).
CEO ensures that company prefers to treat each element of CSR activity of the company as a separate element such as employee relations, community relations, and environmental stewardship. Many CEOs prefer to more integrated and holistic approach to CSR. Organisational policies may have impact on how board should organise its company in relation to the governance of CSR. When CSR was recognised as an important component of the risk portfolio and the corporate strategy, they established the CSR committees. The manner that is followed by the board to address certain CSR activities should be reflected in the mission statement of the committee (Cho, Michelon and Patten, 2012).
Some measurements that can be used to measure leader’s success
Strategic CSR (corporate social responsibility) includes the voluntary practises of the organisation towards society and environment to satisfy the organisation`s stakeholders. The concept of relating sustainability is same as the implication of social and environmental issues, which CSR has on the long-term success of the organisation. CSR is considered as trade-off to the organisation`s financial performance. Moreover, it involves the private provision of good image in the public that is able to minimise the negative impact of external environment (Kasturi, Chase, & Karim, 2015).
In recent times, it is seen that firms that perform their CSR activities up to the mark are tend to be financially successful in their operations. The successful relationship between CSR and the financial performance is reflected in the form of customer satisfaction, corporate image and the job satisfaction. The measurement of success of the business leader or CEO can be reflected in the context to shipping, CSR can provide add advantage to the organisations that would differentiate its services in shipping goods (Open Air RGU, 2015). This advantage of performing CSR can lead to offer of license to operate in environment sensitive areas, improve the retention of efficient human resources. An organisation can also lead to cost advantage due to its CSR practises that have been benefiting and improving environmental performances (Manner, 2010).
The challenges of focusing on just financial metrics to achieve long-term goals
Most companies have been executing some form of social and environment practises for a long time with a goal to contribute to well-being of the society. Nevertheless, there is an increasing competitive pressure to cater the CSR activities of the company as a business discipline. It also expect that every initiative and step towards CSR would result in business results. The corporate world demands too much of CSR which lead to distraction from the main aim of the conduct of the business (Valentine, and Fleischman, 2008).
The challenges leaders face in balancing financial and ESG performance metrics
As per the given case study, Tim Collins who is the co-founder of intelligence-based security Services Company states that no company grows overnight. Nevertheless, by continuous effort and stuggle with a business mind a “CEO” can lead to high flywheel to company`s success. Measuring the CEOs efficiency just through the financial value of the company`s portfolio is not at all very relevant in recent era. Eliminating the role of CSR in business can lead to serious legal actions taken on the behalf of the government (Kaufman, 2008). The ranking of business leaders and CEOs is more based on the environmental, social and governance metrics. In the given case study, when judged solely on the basis of financial performance, undoubtedly One of the top business leader is Amazon’s founder Jeff Bezos (Peloza, 2009). More such examples of business leaders and CEOs from the corporate world-
Satya Nadella- The renowned present time CEO of Microsoft have a few words as blue marked such as opportunity, responsibility, and impact. He firmly believes that developers have the responsibility to make an impactful and better the world. Recently, india CSR News Network has announced that Microsoft corporation has announced the strategic partnership to help the industrial customers to create new value to with new digital solutions. Microsoft is not only creating IT solutions to support conspicuous consumption. Satya Nadella is trying to modernise its business lines and grow new business from scratch (Sorkin, 2017).
It enables all the organisations of all the sizes, which can now operate business on electronic platform considering several critical factors, customer services, relationship sales, talent processes, and field services. When CEO (Satya Nadella) headed the top-level management, he announced that Microsoft would donate more than $1.5 billion and further $149 million in the next year. Moreover, the CSR report reflects the company`s and CEO`s commitment to transparency to stakeholders to understand the work and track the changes (Sorkin, 2017).
Tim Cook- Another renowned CEO of Apple in present times is Tim Cook. Although, there are many ways to measure the performance of a CEO such as stock price, patent filed, growth rate, market share, brand equity, and valuation of the portfolio. A metric method known as AMRI (average monthly revenue increase) is used for measuring long-term impact rather than short-term (Baker, 2016). Undoubtedly, Tim Cook was in the list of high performing CEOs but for example Amazon`s Jeff Bezos is one of the achieving and a notable high tech CEO. The CEO said that in 2015 that the company plans to give most of its fortune to the charity. When Crook announced that new data entry facility in Waukee, he guaranteed that these would work fully on renewable energy. Cook has all the company`s corporate facilities in US to operate them by wind and solar energy (Baker, 2016).
Mark Zuckerberg- Mark Zuckerberg is a renowned business leader Facebook CEO. This business leader has stated some important statements regarding ESG metrics. In the wake of business world, companies have started taking a dominant role in promoting and executing CSR activities. The company promote several reasonable programs to cater their employees and executives. The concept of ESG metrics generally applies to the efforts of the organisations and executives. It helps in promoting and creating the purpose of these CSR activities to become long lasting positive, social, and environmental changes. When it comes to execute and attain CSR activities. There can be many ways that the company can serve the communities such as donations, charity, and crowdsourcing to raise the social status. The amount of charity may be minimum but its usage should affect the overall communities. The successful CSR programs are those, which are able to integrate both the concepts corporate responsibility and a true attack plan in solving the problems rather than removing them.
After relating to all the three cases of business leaders of famous companies, it has raised the importance of a leader as well as the theory of leadership in the ESG metrics. The behaviour of the leader should be highly influencing because a leader sets the CSR mission and is obliged to perform the CSR policies to improve the image of the organisation. The charismatic leaders are the one who are leaders by their deeds and behaviour. In addition to this, they have greater impact on ESG factors that influence financial performance. Moreover, the employees in the organisation are influenced by the strong personality such as behaviour to cater the society and execute the CSR activities. Despite this, the behaviour of leader is highly influencing. The role of a business leader is follows-
(Source: Leventhal, 2018)
A business leader undertakes a process to develop and execute a CSR plan. The very first step is to develop a vision to benefit the society to which he belongs. The democratic leader discuss the CSR vision to its employees to invite creative CSR plans. The leader motivates the stakeholders to commit themselves to enhance the long-term sustainability. Finally, with the overall support from all the stakeholders, a leaders steps into the shoes of ECG metrics.
There are different approaches through which a leader can perform its CSR activities with the overall support of top-level management. Transformational and transactional strategies define the moral based and motivating way of taking the CSR initiative through the organisation. One of the best method is to include financial surplus interest related with beneficiaries and pay greater attention to future beneficiaries and even non-beneficiaries. This attention can lead to attraction of more investments on the part of the public by getting impressed by the company`s good reputation. The positive impact of applying theory starts when investors start executing more contractual relationships with the required investment for the company (OECD, 2017).
Conclusion:
From the above discussion, it can be concluded that with the increasing popularity and compulsion of ECG metrics in the operation of the business. Apart from the business leaders and the successful leaders mentioned in the case study, the discussion also has the three more successful CSR leaders such as Tim Cook, Satya Nadella, and Mark Zuckerberg. They all reveal their success stories by implementing the CSR strategies in the organisation. However, the aim of the ESG metrics is to evaluate the influence of selected theory on society, environment, and governance issues.
ESG focuses on environmental, social, and governance factors and they simply adds as a tool to evaluate the companies. CSR no longer distributes or distracts the opportunity financial profit of the company but it takes time to form several CSR policies. CEOs and senior managers plays an important role in planning and executing CSR plans. The director highlights to apportion its profit to cater CSR activities to CEO in the general meetings. Moreover, CEOs started strategic collaborating with the partners who can cater the social responsibility. This would lead to save time for the CEO, which they can further use in decision making of important cost structure. To apply the theories in relation to execute the CSR activities, leaders plays an important role.
With the increasing interest in CSR, the organisations have started incorporating social activities that will improve the social and environmental condition in the society. This report brings out the importance of CEO and business leaders in executing the CSR activities of the company. CEO of the company is obliged to formulate corporate strategies to promote the image of the organisation by executing social responsibility. CEO is the key decision maker in CSR related activities. The aim of the report is to establish a link between CEO pay and company`s performance (Open Air RGU, 2015).
Further, the CEO`s incentives have linked to CSR in two different ways such as not to limit the analysis of CEO`s monetary incentive rather decide how they have actually contributed in creating value of portfolio of stock and options. Moreover, as a second way, such set of non-monetary incentives that would help the company to shape the CEOs decision to invest in CSR. The report also evaluates and differs the top CEO financial performers from the successful CSR performers. The successful organisation not only focus to increase its financial worth but also enforces the importance of CSR activities. Moreover, the activities of the top performers and business leaders were analysed through the different theories of leadership and determine how an effective business leader would make difference in the ECG (Environmental corporate and governance) metrics of the business (Environmental justice organisations, liabilities and trade, 2013).
References:
Baker, M. (2016). How Tim Cook brought corporate social responsibility to Apple. Retrieved from: https://mallenbaker.net/article/clear-reflection/how-tim-cook-brought-corporate-social-responsibility-to-apple
Board works consulting inc. (2013). The Board’s Role in Corporate Social Responsibility. Retrieved form: https://boardworksconsulting.com/the-boards-role-in-corporate-social-responsibility-2/
Cho, C.H., Michelon G. and Patten, D.M. (2012). Impression management in sustainability reports: an empirical investigation of the use of graphs. Accounting and the Public Interest, 12(1), 16-37
Leventhal, D. H. (2018). Responsible leadership and strategic CSR. Retrieved from: https://responsibility.global/responsible-leadership-and-strategic-csr-b4442456af95
Environmental justice organisations, liabilities and trade, (2013). Mapping Environmental Justice. Retrieved from: https://www.ejolt.org/2013/05/corporate-social-responsibility-csr/
Kasturi, V. R., Chase, L., & Karim, S. (2015). The Truth about CSR. Retrieved from: https://hbr.org/2015/01/the-truth-about-csr
Kaufman, S. P. (2008). Evaluating the CEO. Retrieved from: https://hbr.org/2008/10/evaluating-the-ceo
Larcker, D.F., and Rusticus, T.O. (2010). On the use of instrumental variables in accounting research. Journal of Accounting and Economics 49, 186-205.
Lubin D. A. & Esty D. C. (2010). The sustainability imperative. Harvard Business Review, 88(5), 42-50.
Manner, M. (2010). The impact of CEO characteristics on corporate social performance. Journal of Business Ethics 93(0), 53–72.
OECD (2017), Investment governance and the integration of environmental, social and governance factors. Retrieved from: https://www.oecd.org/investment/Investment-Governance-Integration-ESG-Factors.pdf
Open Air RGU, (2015). CEO and CSR: business leaders and corporate social responsibility. Retrieved from: https://openair.rgu.ac.uk/handle/10059/506
Peloza, J. (2009). The Challenge of Measuring Financial Impacts from Investments in Corporate Social Performance. Journal of Management, 35(6), 1518-1541.
Rangan, K., Chase, L. A., & Karim, S. (2012). Why Every Company Needs a CSR Strategy and How to Build It. Retrieved from: https://www.hbs.edu/faculty/Publication%20Files/12-088.pdf
Sorkin, A. R. (2017). Apple’s Tim Cook Barnstorms for ‘Moral Responsibility’. Retrieved from: https://www.nytimes.com/2017/08/28/business/dealbook/tim-cook-apple-moral-responsibility.html
Valentine, S. and Fleischman, G. (2008). , ‘Professional Ethical Standards, Corporate Social Responsibility and the Perceived Role of Ethics and Social Responsibility’, Journal of Business Ethics 82(3), 657–666.
Vitell, S. J., Ramos, E. & Nishihara, C. M. (2010). , ‘The Role of Ethics and Social Responsibility in Organizational Success: A Spanish Perspective’, Journal of Business Ethics 91(4), 467–483.
Yuen, K. F., & Lim, J. M. (2016). Barriers to the Implementation of Strategic Corporate Social Responsibility in Shipping. The Asian Journal of shipping and Logistics, 32(1), 49-57.
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