Part A
How can Corporate Social Responsibility be meaningful if it is not based on formal binding legislation enforcement?
In answering your question, you should critically assess the ethical dimensions of a business decision from a managerial, individual and societal perspective. At the same time, you should demonstrate a comprehensive understanding of the implications of differences in business ethics systems around the world.
Part B
Proceed to a critical assessment of the Corporate Social Responsibility Report of McDonalds. In you analysis, you should critically examine the ethical environment in which McDonalds operates and consider the impact this has upon its business behaviour and performance.
Part C
As Sally Bibb suggests in our e-book (Page 8), as a manager you have a double role. The first is to ensure that you behave ethically yourself (‘bosses have more influence that they often realize in shaping others’ behavior aspe ople tend to consciously or unconsciously copy the boss’). The other role is that managers are responsible for making for making sure that those they manage do the right thing too. One way, moreover, to achieve that those they manage do the right thing, is through developing and introducing to employees a Code of Conduct .
The private enterprises look at them as little more than ploys of public relations and would favor replacing them as binding rules involving sanctions (Chell et al. 2014). The corporate behavior is to be influenced in a meaningful way. The position fails to account for the gross misconduct by companies. One of the central questions in regulatory enforcement is why the investment is too low. There should be a regulatory inspector in every factory. No rule is applicable with a policeman in every corner. Reflects the consent of individuals and organizations is reflected by a high compliance with a rule. They have agreed to comply with a given norm since they believe it to be appropriate and necessary (Scherer, 2014). Without this agreement or implied consent, it will be very difficult to comply with the norms. The problems for international business is that while consensus on business may exist on a national scale, there is very little global consensus on such norms. If there is lack of global consensus, it will be difficult to get going. The public debate and transparency associated with codes of conduct are to be seen very rapidly (Bondy et al 2012).
Observance by business enterprises for consensus is always to be kept alive. Multinational companies have thousands of employees operating all across the globe. The globe is operating many employees to observe the rules of conduct (Kolk, 2015). In order to get the incentives right, is no small challenge. The incentives are the life blood for the company. People hanker after incentives since they have put their heart and soul into it. It is very necessary that people get the right fitment. The accumulation of the management expertise in order to translate the business ethics into norms is appropriate (Vitell, 2014). The standard for commitment, management and non financial reporting standards all hold true in case of corporate governance.
It is very unlikely that managers will have expertise in the solution of social problems. There is confusion with the word social responsibility with corporations (Cavanagh, 2012). Many continue to make the word synonymous with philanthropy. The failure in communication has resulted in significant confusion. The terms social and responsibility are misinterpreted. Social means that the responsibility refers to social issues such as health, education and security. For others, social is a shortcut to society. Responsibility stands for accountability of companies’ actions, for others it is a sense of duty towards society (Ferrell and Fraedrich, 2014). The responsibilities are attributed to go beyond the purpose for which it was created, like covering some of the government’s failure. Everybody agrees that a pharmaceutical firm should produce medicines that cure ailment, but it should be cheap to help the poor.
The neo liberal perspective emphasizes the strategic benefits to be derived from a CSR approach. The CSR will rest on one of the following arguments (Carroll and Buchholtz, 2014).
Human resources: It can be of help to recruitment and retention;
Risk management: Reputations that take a long time to be built can be destroyed in hours through negligence.
Brand Differentiation: X factors are which a company strive for which can give them an edge in the market.
License to operate: Corporations are eager to avoid interference through regulations or taxation.
Diverting attention: Several big organizations who are having reputational problems indulge in social works which divert the attention of the public.
The social responsibility involves a long term view of the impact of all the activities of the organization. There are both positive as well as negative impacts. Both the impacts need to be studied. The firm is responsible to the shareholders to bring them the greatest return at the end of the year in the form of dividends (Godos-Díez et al 2011). Many argue that the responsibilities of directors are only limited to the fact of securing the biggest return to the shareholders. They do not owe anything to the society. We find multinationals engaging in many social activities like building of park, construction of buildings, etc.
The CSR concept may have to be expanded for developing countries. Weak regulations, weak governments particularly at the local level characterize some of the countries. There is no hard and fast rule that CSR has to be maintained in spite of the rules and regulations. Corporate Social Responsibility is a thing that the company owes to the society. It is well known that a company is run for the purpose of profits. Many companies resort to profiteering i.e. earning profit in whatever way they can. Most large corporations embrace the idea of corporate social responsibility. Investors widely accept it, and it ultimately implies that company indulges into operations other than profit.CSR involves at least one of the two ideas:
1) Business and Society:
The business is drawing resources from the society for the purpose of manufacturing goods and services. In return, it must give back something to the society. The people who are affected by the values of the society seeks a return from the businesses (Aguinis and Glavas, 2012).
2) Voluntary Endeavour:
There should be a voluntary initiative from the part of the company in consideration. There are no laws as to CSR.
Company donations are often aligned with the business. e.g. insurance companies are more likely to promote a safe driving campaign than an art museum.
Many CSR related initiatives are established by the government. Companies see membership as a public relations asset (Cavalieri, 2007). Examples include Business in the community award in the United Kingdom.
CSR consolidation means engagement in some kind of social or environmental related activity (Davila Gomez and Crowther, 2007).
1 ) A CSR section in the Annual Financial Report has become almost mandatory in all places.
2) It is especially for companies that entail a degree of risk, for any environmental, health or safety issues.
3) Brands have been developed by some companies based on an ethical appeal to consumers. Clothing firms, such as Patagonia and beauty product companies, such as body shop are the examples.
The Companies Act, 2006 had taken to the pressures by recognizing that community and environmental issues are to be looked for. Both the City and the Government looks at CSR as part of the best practice. The ABI, whose members own more than 20% of the companies on the London Stock Exchange, publishes guidance on CSR related issues. It was asked in 2007 to provide company’s environmental, social and governance (ESG) risks with the report. There should be a remuneration committee which should decide whether ESG issues will affect remuneration of a senior executive. The incentive structure is also to be reframed. The government sponsors a CSP website where it lays stress on CSR. Most companies argue that complying with CSR guidelines is a necessity. It is evident in the growing number of ethical investment and green funds. There is the emergence of a Corporate Responsibility Index, which seeks to measure how well the companies are performing on the CSR criteria. For bigger companies, CSR is an integral part of good governance (Peloza and Shang, 2011).
As part of the reforms, the Government has proposed that large companies provide an operating and financial review (OFR) as part of their annual report which will also contain the societal and environmental aspects. OFR’s can be viewed as the first stage towards CSR reporting.CSR requires a company to say that they are operating in an ethical way. The OFR provides an ideal opportunity to take care of all the aspects. According to the IBE report, companies with ethical commitment have 18% higher profits on average. Also, the ethical and responsible companies retain a higher proportion of the talented workforce that helps in the prosperity of the company. The reporting of non financial information by the companies are happening in a number of ways. Such reports can include:
Mcdonalds CSR
The CSR framework serves as the foundation for the report provides the structure to maintain sustainability. The framework is focused on five key areas:, people, community, food, sourcing, planet. In order to create shared value for the society, these are the pillars. Clear goals have been developed so that the report can work towards the attainment for the future (The Social Responsibility Research Network, 2011). Implementing solid data collection, infrastructure enfacements and reporting will be crucial to the success of the organization. In the recent years, they were able to develop measurable, specific goals for some of the efforts to advance in “Our Journey together for good.”
The CSR and Sustainability report have been shared with most of the stakeholders so that the, company remains transparent in the eyes of the public. Performance data generally includes performance in top nine markets, France, Germany, Japan, UK, US, Australia, Brazil, Canada, and China. Brazil and Japan are entirely operated by franchisees. Many factors such as system wide sales, revenues, operating income are reflected by top markets.70% of the revenues are given by them.
The company has got definite goals which it wants to achieve by 2020.It is not always possible to monitor the progress of all the franchisees across the globe, but efforts are being made to provide resources to all the outlets. Good faith efforts are being put up so that the company can progress towards the goals.
It is not always clear how stakeholder gives his part to the business (Trong Tuan, 2012). Obesity, climate change and water scarcity are the issues.
Food: Focus on food as the priority
Sourcing: Leverage Mcdonalds scale and market leadership
Planet: Incorporate climate change and water risk
People: Be bolder in communications, externally as well as internally
Community: Leverage employees as key driver of community strategy
Over the past decade, McDonalds had been offering more balanced choices with regards to food, changing some of the favorites’ composition. It is committed to quality food, sensible marketing and better nutrition in the available choices.
Mcdonalds developed the Clinton Global Initiative Commitment. Nutritious choices and nutrition education are being provided as part of the experience (Bice, 2015). On an average, 18.8% fewer calories are available on American foods. The company is working to reduce saturated fats, sugar, artificial transfers and sodium in the foods in order to provide a healthier experience. McDonalds serve through Happy Meal Innovation to the children by offering healthier choices. The happy Meal has evolved over the years. Water, milk and fruit juice are being featured as choices to the children. Reading and understanding nutrition information is necessary for the customers. Menu board, packaging or mobile app are the different ways in which information can be provided.
Training on certain critical food safety measures such as cooking, food handling, product internal temperatures, sanitation and, hand washing are given to the restaurant employees. Daily verification is required at the restaurant level. The suppliers of Mcdonalds are required to maintain the safety standards. The direct suppliers are audited regularly. Suppliers learn best practices and requirements for assessing and mitigating potential food safety risks. The suppliers helped the farmers to improve their farming. Global food quality strategies are led by the quality Leadership Board. The Board includes members responsible for quality assurance, supply chain and food safety. The ethical responsibility to assure the health and welfare of animals in the supply chain has been taken up.
Sustainable sourcing is important, Mcdonalds does the maximum which it can to protect oceans and other valuable ecosystems. The supply chain management is approached by three E’s- ethics, environment and economics. Innovation is encouraged at all levels (Agle, 2008). The company proposed World Wildlife Fund to examine our supply chain and lead global sustainable sourcing initiatives.WWF also interviewed experts from within our supply chain.
It involves three elements:
Collaboration with diverse stakeholders has been done. On farm field projects in environmental production is launched. Animal health and welfare is being prioritized.
Sourcing and Destination
The packaging used should be easily recyclable in the nature. The weight is to be optimized and the number of materials used is to be reduced. Recoverable packaging with viable end life options should be used. Havi Global solutions in 2007 collaborated with McDonalds to develop a packaging evaluation tool framework. The fiber base packaging can be improved by three approaches. The packaging certified t o the Forest Stewardship Council (FSC). There must be verifiable post consumer recycled fiber. Since 2012, 100% of the clamshells used by McDonalds have been certified by the FSC.
McDonalds began the process with sustainable fish in 2001, working with Conservation International to identify techniques to protect long term fish supplies. 100% of the fisheries used by Mcdonalds are verified. Marine ecosystems need to be protected since 3 billion people in the world rely on marine seafood as the primary source of protein. Marine Stewardship Council Certification fishes are used in all US and Canadian restaurants. About 25% of total coffee bean purchases were from Rainforest Alliance Certified Farms. A lot of money is invested in the Farmer Technical Assistance Program. McDonalds have collaborated with TechnoServe. The RSPO is a multistakeholder corporation whose members comprise the entire palm oil supply chain. The company has touched the milestone of using only certified palm oil in restaurants by 2015.
Environmental best practices in suppliers
The Environmental Scorecard is a platform (web based) used by more than 400 suppliers to measure energy use and emissions of green house gas, waste production and disposal. The Global Supplier Performance Index includes corporate social responsibility and sustainability along with innovation and contingency planning and helps us to evaluate suppliers. The Integrated Pest Management Institute and the National Potato council have devised ways to reduce pesticides. Growers have been self scored at basic, steward, expert or master level based on practices related to weed and pest control.
The global principles are supported by policies in all areas of the world. Food safety is the first priority. Animals were given care and respect. Five Freedoms were supported .It goes in partnership with other organizations. Communication is very important at all levels. The company has approved 598 slaughter facilities for beef, poultry and pork. If a facility fails to meet the desired requirements, it is removed from the supplier list.n order to create shared value for the society, these are the pillars.
McDonalds Europe has developed its own green building standards, in consultation with external experts. Kitchen equipments provide significant opportunity for energy efficiency since it is a sizeable portion of the energy consumption. More efficient equipments are included while less efficient equipments are discarded. McDonalds Europe had led the testing of HFC free alternatives across our system.
McDonalds aspire to be the customers’ favorite place to eat and drink. The values and standards of business conduct help the company to achieve the greatest of feats. The Board is actively engaged in overseeing the strategic actions of the company. The six standing board committees –governance, executive, audit, compensation, finance and corporate responsibility support the Board. The framework for ethical business practices is the Standards of Business Conduct. on employee members of McDonalds Corporation must abide by the Code of Conduct for Directors. The Standards do not apply to our suppliers, franchisees, etc. There are three principles central to the standards of Business Conduct, open communication, personal accountability, and responsible action. In 2012, the company further enhanced the Standards of Business Conduct to affirm the alignment with United Nations Universal Declaration of Human Rights. The Global Compliance Office oversees compliance with many other company policies. Local and business units also play a major role. There are policies and guidelines which outline the requirements and procedures for a variety of topics ranging from confidentiality to conflict of interest (Aßländer, 2011). McDonalds Global Anti Corruption Policy is the foundation for the Anti Corruption Compliance Program. The policy applies to all officers, employees and third parties to the company. The team provides anti corruption training to all employees, with priorities given to risk prone markets. The Global Anti Corruption policy has been translated to many languages. The employees are asked to put forward their views in a candid manner. McDonalds’ Business Integrity Line is a phone line specially dedicated to the purpose. Calls are free of charge, regardless of employees’ location. Employees may report anonymously without being identified. The management of McDonalds engages with policy makers at local, regional and international levels and provides education and guidance to the franchisees.
The code of ethical conduct elements:
The following are the code of ethical conduct elements, while smaller organizations may not need them.
It states the purpose of the organization and the reason for existing. It serves as a base on which all the activities of the company are formed. A reference to the organization’s values of ethics may be incorporated into the statement of mission. This will assist in absorbing strong ethical principles into the works of decision making of the company. A mission statement which is inspirational will be memorable. Throughout the code, it will be felt.
Values are acquired by an individual over a period of time. These values are present as an individual conducts himself through many actions. If the values possessed by the employees of a company are of a very high level, their actions will also carry the same. The recruitment policies and procedures are very much dependant on that.
In conjunction with the values of high level, there are ethical principles which set out expected behavior standards. They however remain broad and fundamental in nature. Everybody will be asked to abide by the principles (Vogel, 2005). The following set of principles will be applicable for a public sector organization:
Selflessness:
Public interest should be given priority.
Integrity
Nobody should come under undue influence of anybody.
Objectivity
Actions should be taken fairly and on merit.
Accountability People should accept responsibility for their actions.
Openness
People should be open in nature.
Honesty
Honesty is the best policy.
Leadership
Some leadership skills are for everybody.
For a commercial organization, the set of ethical principles can be a bit different. The code of ethics forms the starting point.
The specific behaviors must be consistent with the organizations values and ethical principles. They are organization policies that are required to be stated, and the relevant are the following:
The code should include standards of work and more standards of behavior (general), and explain which the standards to be met are (Schaefer, 2007). There should be an acceptable standard of work and behavior. It should be made clear what sort of behavior would not be tolerated.
There are various legislative and regulatory requirements which are to be complied with. The legislation and regulation specific areas should also be highlighted.eg. compliance with ant bribery legislations, data protection requirements.
The individuals are required to disclose any interests which are financial or non financial they have with the organization. They are required to be disclosed since they are in conflicts with the interest of the organization.
The persons would be required to disclose personal and professional information to the extent possible since they would be required at all stages of the work (Crowther and Capaldi, 2008). There will be times when employees would be in possession of secret information. They are required not to leak that information to outside people.
The employees must abide by the health and safety laws of the company. Everybody should maintain a certain degree of health. They must familiarize themselves with the policies of the organization.
It is any unwanted behavior that the employees feel intimidating, upsetting and embarrassing. The company does not tolerate for breaches against any other party.
This should be strictly avoided. Misconduct, if serious may damage the prospects of the employees. Any misconduct should be seriously avoided as it gives rise to malfunctioning of the organization. Any behavior which promotes gross indiscipline leads to serious misconduct.
Objectivity is likely to be included in the ethical principles. The gifts and hospitality policy should be clearly set out. The circumstances under which the receiving or giving of gifts should be carried out are done seriously.
It is assumed that the organization’s property and facilities would be used in the purpose of the company, unless prior authorization is required. In respect of internet usage, it might be appropriate.
The employees’ appointment and subcontractor’s engagement should be purely on merit basis. Such a statement is relevant to those who are seeking to make a contract with the organization.
All contractors and subcontractors must not take up any outside contracts which are contrary to the interests of the organization. If there is any doubt, specific approval should be given to the concerned employee.
Complaints should be taken seriously. The code of ethical conduct should support a speak up policy so that the complaints are investigated thoroughly.
There must be reasonable suspicions, and reports will be handled with confidence and confidentiality.
The code users may obtain clarity concerning any aspects of the code and it should be included in the code itself. In larger organizations, the giving of advice might fit in the role of a mentor.
The format, size and content of the code must be appropriate to the organization’s size and structure. The following points will help to make the code more effective:
While designing a code of conduct, there should be an absolute focus on principles. The code of ethical conduct is principles based.
It is very important to be clear about the purpose of construction. The code must be formulated with the user in mind (Corporate Social Responsibility and Ethics,2012)
When drawing up a code, the following must be considered:
Overriding purpose:
The code is intended to bring a high standard of behavior within the organization. It should not always keep up with the competitors.
Target audience:
The document should be easy to read, understand, comprehend and engage with the people for whom it is intended.
Relevance:
It must recognize issues that are relevant to the audience. No irrelevant issues are to be catered to.
Use of straight Language:
The language used should be straight and simple. No complexities should be present which are difficult to understand. The more the code is understandable, better it is for the readers (Whelan, 2013).
Resist excessive length.
The report should not be too lengthy. If the report is too long, the readers may lose interest. The code should be as much concise as possible (Rendtorff, 2010). It should convey what is required.
Accessibility:
The code must be accessible to all users. Both hard and soft copies should be maintained so that in times of need everything is available.
The major challenge is to embed the code within the organization, to imbibe an appropriate culture to the extent so that it is instilled in the hearts of all the people concerned. Once we complete the process of developing a code, the procedure starts to implement the code (Cannon, 2012). Most of the techniques discussed below are relevant to the organization.
The senior management is likely to have inputs in the code of ethical conduct. Inputs must be seeked from the stakeholders also. A broader sense of ownership of the code is involved. Views expressed by willing contributors should be nicely accepted. Introducing the code through face to face sessions provide an opportunity to explain why certain code elements were included and excluded.
A strategy will be required for introducing the code to those affected by it. Thoughts must be first given how initial awareness can be brought about. The introduction of the code should highlight the benefits of having a code: how it will enhance clarity, how it will bring reputation for the company and promote widely held values such as respect and equality. Having developed a code, it makes a lot of sense to publish it on the company’s website to illustrate to the interested third parties. A positive message would be sent to the people seeking employment with the organization.
This is an important part in the entire process. The logic behind the implementation of a code, what it is required to achieve must be explained. The code users should benefit from practical training. If employees and subcontractors have received practical training, then the process of embedding the code in the organization had already begun. Training sessions also give a chance to test the code and pick any undesired flaws. There is a need for ongoing awareness of the code.
Training will be more effective if it includes practical examples from case studies. The trainees will be asked to provide solutions to the case studies. The analytical bent of mind is tested through case study.
The company should make it clear that it would recruit only those employees who are ethically fit. Therefore, an acceptable standard of behavior will be set for all the new joinees.
The basic purpose of a code of conduct is to ensure discipline within the company. The discipline will cover products, processes and people. In a large company, discipline becomes all the more important since many people are to be managed.
There should be a space in the performance appraisal report in order to see how an individual has lived up to the ethical values of a company.
Conclusion:
There needs to be a coherence of the economic tasks with the corporate social responsibility. If there are no societies, there would be no such implications as to what would be the desired levels of activities. The societies have taken up to the needs of the modern day.CSR is being practiced by most of the companies. If CSR is not existent in some company, there should be a modern day outlook to the aspect. All the activities of the modern day are attributed to CSR. The society should feel that the company is doing something good for the society.CSR is being taken up by most of the large companies. The multinationals want to make a mark on the society. The society also responds to the varying needs of the company. The companies earn a lot of goodwill due to the aspect of CSR.
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