BUSM4692 – Global Corporate Responsibility

1. Introduction:

In its original form, one of the most important applications of stakeholder theory was as a counterbalance to shareholder theory. Accordingly, Freeman (2010) discusses the governance concept of  “managing for stakeholders” in contrast to the dominant Managerial View of Business with shareholders at the center. In comparison, Banerjee’s study (2018) focused on providing a critical perspective on governance in the context of global corporations and limitations of contemporary CSR from perspectives of vulnerable stakeholders. This essay will briefly summarise both papers as well as compare and contrast both authors’ arguments from their studies. 

2. Brief overview of  Article by Freeman (2010)

According to Freeman (2010), a new way of thinking about business is “managing for stakeholders,” which fundamentally implies that firms and the executives should and do produce value for consumers, suppliers, staff, communities, and investors (or shareholders). The author contends that the executive’s key role is to maximize value for stakeholders and that no stakeholder interest can stand independently from the other ones. Managing for stakeholders is providing as much value to them as feasible while avoiding trade-offs.

Moreover, the paper investigates why the culture’s dominant concept or model of business is no longer viable. The prevalent paradigm of business activity, according to Freeman, is for enterprises to be operated entirely for the benefit of shareholders, with any additional advantages or damages provided as an afterthought. It is resistant to change, does not follow the law, and, for the most part, ignores ethical issues. Freeman then goes on to explain how “managing for stakeholders” works and why it overcomes some of the flaws with the current paradigm. Freeman examines how using “stakeholder” as a fundamental unit of analysis makes it more difficult to overlook moral issues. The study also presents three main ethical rationales for selecting “managing for stakeholders,” including the Argument from Consequences, from Rights, and from Character. Furthermore, Freeman ends with a fourth “pragmatist argument,” which proposes that we view managing for stakeholders as a new business story that allows us to enhance the way we now generate value for one another. According to this viewpoint, capitalism is largely a system of social cooperation and collaboration, rather than a system of competition.

3. Brief overview of  Article by Banerjee (2018)

Banerjee’s study begins with a short briefing of the extractive industries, then proceeds to exist literature analysis on businesses’ political role in a globalized society. It then goes through fundamental presumptions of political corporate social responsibility (CSR) and deliberative democracy, as well as the limitations of both methods to solve environmental and social concerns, especially in underdeveloped countries. Banerjee, in particular, presents a pivotal discussion of the politics of CSR and claims that CSR is a technique that allows multinational companies (MNCs) to exert power in the global political economy.  Banerjee’s study, which takes the global extractive industries as a theme, focuses on disputes that occur between communities, the government, and MNCs as a result of the severe social and environmental consequences of mining and extraction. Banerjee examines the accountability of political CSR and multi-stakeholder initiatives (MSIs) in conflict resolution, arguing that these programs do not take vulnerable stakeholders’ interests into consideration. Power imbalances between major characters in the political economy, according to Banerjee, could harm the wellbeing of populations affected by extraction. This study outlines a variety of governance difficulties that occur as a consequence of these power imbalances, as well as a translocal governance paradigm that might promote a more radical approach to MNC social governance considering the interest of susceptible stakeholders. Banerjee wraps up by discussing the ramifications of the proposed framework and suggesting study options for the future.

4. Comparison of arguments in two articles

According to Freeman (2010), no single stakeholder creates value on their own. Each stakeholder group’s interests are diverse and inextricably linked to one another. Banerjee (2018), meanwhile, explores the interactions of stakeholders while offering a critical viewpoint on global collaboration. As market players play a greater role in societal governance in a globalizing world, the function of the state has altered, possibly even decreased. There is a mismatch between multinational corporations (MNCs) flexibility in spreading their value chain activities across nations and civil society and nation-states’ limited capacity to appropriately control corporate conduct across borders (Rasche et al., 2017, p.3). MNCs that wield power without accountability are frequently as strong as governments while being less responsible (Newell, 2000, cited in Vogel, 2010, p.73). As a result, if businesses are to execute activities previously reserved for governments, the processes and results of corporate participation in political and social spheres must be examined (Banerjee 2010).

The executive’s or entrepreneur’s role, according to Freeman, is to manage the general condition of the company, as well as keep the various stakes going in the same direction and in balance. Meanwhile, according to Banerjee’s article (2018), modern forms of CSR have a flaw in that potentially transformational governance processes might have unintended consequences that harm the populations they were designed to help. Because of the vastly diverse cultural, social, and political situations in non-European nations, CSR limits itself within the Anglo-American framework in which it was formed, and some core presumptions of CSR and stakeholder theory begin to unravel. Banerjee’s paper aimed to overcome this shortcoming by presenting a more solid method: governance should and may be shared by those who rule and those who are governed. From the standpoint of disadvantaged groups, it is vital to establish a locally grounded bottom-up governance framework that can bridge the gaps that result from a top-down political CSR governance initiatives (Banerjee 2018).

One of the most solid arguments, in my opinion, is that Banerjee critically analyzes theoretical perceptions from the emerging literature on political CSR to address the question of why the extractive industry finds itself incompatible with the local society despite its stakeholder’s commitment and CSR schemes. Banerjee also makes a valid point about political CSR, which does not protect the stake of vulnerable groups in poor countries and may potentially harm their well-being.

5. Conclusion:

In conclusion, Banerjee adds to theoretical growth in the politicization and political role of businesses, notably in the burgeoning domain of political CSR, as compared to Freeman’s “managing for stakeholders” concept. While political CSR recognizes multinational businesses’ political significance, there is little understanding of how MNCs and their constituents exercise power in the political economy, and Banerjee’s work presents a more comprehensive description of power dynamics in CSR discourse. As a result, the research expands to include the development of translocal governance framework with an explicit normative explanation from the standpoint of marginalized stakeholders.