Proceedings of 9th Asian Business Research Conference
20-21 December, 2013, BIAM Foundation, Dhaka, Bangladesh ISBN: 978-1-922069-39-9
Corporate Social Responsibility Ombudsman: A Proactive
Perspective
Sarangapani Nivarthi, Ali Quazi and Md. Abu Saleh
The economic development of a society largely vests on the businesses and the
governments who are supposedly responsible for individuals in the society. The
conduct of these actors in context is largely influenced by the regulations
governing the action rather than moral duty towards autonomous individuals.
Ethical CSR initiatives directed towards the society lacks the strength to
penetrate the societal social fabric of unethical practices, compliance, and lack
of institutional and government legitimacy and support. These issues are astute
to successful CSR agendas by businesses and the governments and thus draw
researchers’ attention towards strengthening the CSR agendas by proposing
ombudsman system. This study specifically examines the drivers of CSR
ombudsman system through the theoretical constructs and postulates the
outcomes on the social fabric of the society and the nation. Based on the
theoretical underpinning, the study proposes a conceptual framework which can
further be tested and established through empirical research.
Key words: Economic development, Governments, Businesses, Individuals, Society,
System
Introduction
The reciprocal relationships between businesses, government, society and
stakeholders’ have often led to confusion, distrust, and unrest raising questions on
moral and ethical conduct of businesses and governance shaped by socio-political
values (Dunfee and Smith and Ross, 1999). The unwritten rights extended to the
governments and the businesses to conduct for the welfare of the society have often
been misused by the governing bodies and have lead to distrust and insurgency in the
society (Darwall, 1999). The growing trend in societal expectations from the businesses
alongside their economic contributions to the community calls for social and ethically
responsible behavior. A worldwide cross-sectional study of firms across 42 countries
over a period of 7 years by Ioannou and Serafeim (2010) have clearly established
social, governance, and environmental performance as the drivers of corporate social
performance (CSP). Public sectors and businesses are currently facing a critical set of
governance challenges surrounding questions on compliance, accountability, reporting
standards, code of conduct, public policies, occupational health and safety,
environmental management systems, legal practices to state a few and have been
strongly criticised by the stakeholders in different ways (Drumwright, 1994). Businesses
are completely aware that in order to compete effectively in a competitive environment;
they need to clearly define business practices with a sound focus on the public interest
in the markets (Werther, and Chandler, 2005) through visible CSR programs. These
challenges have fundamentally shifted the way we think about and understand the
relationship between firms, their institutional environment, and important stakeholders,
such as employees, suppliers, communities, national governments and the global
Proceedings of 9th Asian Business Research Conference
20-21 December, 2013, BIAM Foundation, Dhaka, Bangladesh ISBN: 978-1-922069-39-9
society (Ioannou and Serafeim, 2010). The calls witnessed in the developed nations
have been with issues related to the company codes of conduct which are heavily
concentrated in sectors where brand reputation and export orientation are important
(Werther, and Chandler, 2005). Few other areas include fair work, EEO, health and
safety, media and communications, extraction, armed forces deployment, immigrant’s
treatment and safety concerns, education, empowerment and employment. Whereas,
the calls in developing nations in particularly has been in relation to human rights,
women empowerment, bureaucracy, legal systems, state policies, corruption, ethical
standards, and intervention programs (Bardhan, 1997; Keith, 1973; Maon, Lindgreen
and Swaen, 2008). These expectations encompass socially and ethically responsible
behavior of the businesses and governments, and the areas are further impacted by the
cultural values and practices deeply rooted in the social systems of different nations
worldwide (Prieto-Carroni et al, 2006).
In the face of such a challenging proposition, CSR ombudsman system could catalyse
the process of capability and capacity building of a nation (Gregory and Giddings,
2000). Such a study in particular is vital for the global CSR practices to strengthen their
understanding of the important role of institutional and governance mechanisms in
determining the significant impact of corporate and the states support to the businesses
in sustaining global competition, industry competition, labour market competition,
market forces (domestic/international), achieved through building relationships.
Particularly the calls from western world and the nations mutually interested in building
relationships are for improved governance, capacity building, investment in people,
economic growth and poverty reduction, the pursuit of peace and security, increased
bilateral understanding and fair trade practices (Prieto-Carroni et al, 2006; Kanji and
Chopra, 2010; Aguinis and Glavas, 2012). This study explores the possibilities for
successfully combating governance challenges through the theoretical forceps of the
virtue ethics, social contract, and stakeholder’s perspectives petitioning the inclusion of
CSR ombudsman system to enhance visibility of the firms CSR programs. In this paper,
we propose a conceptual framework in which CSR ombudsmen system is considered
as part of an organisational structure in adoption, operation and management of
capabilities building and measures for practices.
Literature Review - Ethical Perspectives
Kantian deontology postulates; that intention behind an action rather than its
consequences make an action good is based on categorical imperative determined by
universalisability, respect for people and respect for autonomous beings (Macdonald
and Beck-Dudley,1994). Normative approaches to ethics identify moral principles and
methods of moral reasoning that justify judgments of what is right and wrong. It is
normative ethics that is concerned with what ‘ought to do’ by the practicing managers
compared to the descriptive ethics, where attempts could be made to describe or model
ethical decision making (Ferrell and Gresham 1985; Hunt and Vitell 1986). This
argument provides the grounds for virtue ethics which suggest that character is the
basis rather than rules that govern people’s actions, but lacks a theoretical foundation. It
is the fulfilment of duty by individuals in question towards others which is the focus and
Proceedings of 9th Asian Business Research Conference
20-21 December, 2013, BIAM Foundation, Dhaka, Bangladesh ISBN: 978-1-922069-39-9
not the rules that regulate the process. Virtue ethics from the Aristotle days is grounded
by teleological basis. Proponents of virtue ethics have developed the capabilities
approach pioneered by Sen (1999) as a way for understanding the success of
developmental programs undertaken by the governments and businesses. Nassbaum
(2000) works explicitly holds that the role of an institution is to provide opportunities for
individuals to develop capabilities to function at a level worthy of human dignity. In the
same vein ethical relativism holds subjectivity at the core of ethical practice (Donaldson
and Dunfee, 1994; Harschman, 1970). Ensuring the consequence of actions and
distribution of good things available raises the issue of Justice and Rights. These issues
are concerned with standards of fairness and are embedded in ethical decision making
(Weed and McKeown, 1998).Thus, it is imperative that an individual’s development is
governed by the standards set by institutions, rather by the capabilities and free choice
of living that should disseminate human dignity and integrity.
Social Contracts
Jean Jacques Rousseau and John Locke were both instrumental in developing the
notion of social contract. Rousseau developed the concept of the social contract, or
principles of political right in which he argued that the government is based on the idea
of popular sovereignty. John Locke (1632-1704) argued that a citizen's obligation to
obey the law can be grounded only in that citizen's personal consent to the authority of
the law (Simmons, 1992 cited in Klosko, 1994).Thus it is the will of the people as a
whole that offer power and direction to the state. The notion of social contract is
introduced to put to use the theory of legitimacy (Sen, 2000), which explains the social
obligation of a firm and the state (Maak, 2008). It contains the implicit and explicit
expectations of society about how the organisation and governments should conduct
themselves in discharging their responsibilities (Bertland, 2008). Explicit terms (laws)
are made up of legal requirements while other non-legislated societal expectations
represent the implicit terms of the contract. Explicit conditions reflect societal norms and
values as these issues are raised by the society and are analysed through the public
statements of policy arena and if deemed necessary, enacted into laws and statutes
(Patten, 1992). The social contract allows society to monitor the activities of
corporations and governments to ensure that they are operating in an acceptable
manner (Bertland, 2008). The contract can be viewed as an agreement between
corporations, governments and the wider community who provide or merely allow these
bodies the right to use various resources and in exchange society expects the benefits
to exceed the costs to stakeholders (Mathews, 1993). This means that an organisation
and the government are allowed to continue its operations to the extent that it complies
with the social contract. If an organisation is involved in an event that causes some sort
of environmental damage that is deemed unacceptable by the community, it implies that
the organisation has failed to testify the relevance of the contract (Sethi, 1975). Such an
outcome could impact on the cultural, economic, political and social benefits of the
society, from which it derives its right and power to operate (Beauchamp and Bowie and
Arnold, 2004). These issues could also impact on the legitimacy of corporations
operating within the same industry due to the high social and ecological impact on the
surrounding environment and the community.
Proceedings of 9th Asian Business Research Conference
20-21 December, 2013, BIAM Foundation, Dhaka, Bangladesh ISBN: 978-1-922069-39-9
Legitimacy
Derived upon the basis of social contracts, organisational legitimacy is not a universal
concept (Burtland, 2008, Sen, 2000). Rather, the judgments whether an organisation
and the government and its actions are perceived as legitimate is socially constructed –
and therefore subject to change depending on the social environment in which the
organization and the governments are based (Murphy and Laczniak and Wood, 2006).
This becomes particularly susceptible in the case of multinational entities that span over
a number of countries and hence simultaneously face multiple social systems
(Rosenzweig and Singh, 1991). Further these MNC businesses with a set of
differentiated structures and processes influencing the subunits of the organization pose
different challenges. The challenges faced are the pressure for conformity to conditions
in the local environment and an imperative for consistency within the multinational
enterprise (Rosenzweig et al., 1991). To ensure compliance in this situation, it is
directed that these MNCs follow well established findings of the field of international
business strategy (Ghoshal and Bartlett, 1990). Further, to heighten our understanding
of this theory a practical explanation of the legitimacy theory could be derived from the
study of the UN Global Compact’s ten principles that are backed by universal
declarations such as the UN Declaration of Human Rights or ILO Labour principles, and
refers to global values. However, even the most basic human rights have been subject
to interpretation (Darwall, 1999). This can be illustrated by the longstanding debate
around Asian values and the reluctance to embrace individual human rights in a number
of Asian countries (Sen, 1999). Even if individual human rights are generally endorsed
by a given society, there may be different perceptions about the human rights situation
within this society in general. In this regard, results of the World Values Survey (WVS,
2006) can serve to illustrate differing perceptions about the human rights situation in a
number of European and South Asian countries.
CSR Ombudsman System – Conceptual Framework
Based on the strong underpinning of the theories discussed, it is observed that the call
for businesses and governments in both the developed and the developing nations
globally comprises exclusively of the practice of virtue, duty, rights, justice, social
contracts, and legitimacy. These components affect the relationships between the
businesses, governments, stakeholders, and individuals in a given society both
positively and negatively. Based on these arguments, we present the conceptual
framework as the contesting grounds for CSR Ombudsman system which has an
impact on the performance of the businesses and the governments.
Proceedings of 9th Asian Business Research Conference
20-21 December, 2013, BIAM Foundation, Dhaka, Bangladesh ISBN: 978-1-922069-39-9
Drivers of CSR Ombudsman
Outcomes
Performance
Visibility
Competence
Compliance
Cost effectiveness
Accountability
Sustainability
Accessibility
Jurisdiction
Virtue ethics
Social contracts
Legitimacy
Ombudsman
System
Operational
Scale of operations
Impartiality and
equal rights
Power of
investigation
Resolution of
complaints
Remedial actions
Improvements in
administration
Discussions
CSR relates to the activities of businesses, particularly in terms of their contribution to
achieving economic, social and environmental sustainability (Jenkins and Yakovleva,
2006). As a result, there has been an exponential increase in corporate social
responsibility (CSR) activities and reporting (Scherer and Palazzo, 2007).The evolving
CSR agenda is thus driven by a global shift in the way that business is perceived. In
fact, CSR has become a universal phenomenon in both research and business practice.
The increasing corporate and government scandals in recent years have triggered a
broad discussion on the role of business and governments in society invariably
impeding social development programs which strengthen a society, that is to say, on its
legitimacy, obligations and responsibilities (Maak, 2008). Responding to these changes
in order corporations have started to explain why and how they care about a sustainable
future and what they do for their employees and stakeholders both at home and abroad
(Maak, 2008; Prahalad and Hammond, 2002; Prahalad, 2005). There is arguably a
heightened public awareness and scrutiny by critical stakeholders as to how the
organizations and the state run their businesses and what constitutes legitimate
business behavior (Schlegelmilch and Oberseder, 2009). Overseeing the need for
transparency would lead to not being able to control the misuse of bureaucratic power,
and the balance of power proposition; which is destructive of democratic values
(Burtland, 2008). Such a scenario inevitably leads to civil unrest and large social
movements exemplified in the case of India most recently. Indian has been
experiencing the renewed reflection of these societal values in recent time in form of a
social movement raising their voice for ensuring social justice, good governance and
Proceedings of 9th Asian Business Research Conference
20-21 December, 2013, BIAM Foundation, Dhaka, Bangladesh ISBN: 978-1-922069-39-9
business conduct which are currently being organized by a number of social leaders at
the national level. In the era of big governments and MNCs with the activities of large
and complex bureaucracies adversely effecting the lives and livelihoods of individuals,
the problem of exercising effective control over the officials or practicing managers has
become acute and intractable (Sen, 1979, 2000; Darwall, 1999).
The theoretical underpinnings have presented the study with a clear demarcation of
how these percepts interact and call for the ombudsman system. CSR ombudsman
system practice would enable wider appeal against the corrupt, unjust practices, and
infringements of human rights of the businesses and the governments (Gregory and
Giddings, 2000). Most importantly CSR ombudsman would become an effective catalyst
in the redirection of public administration to a more public service oriented CSR
initiatives. The operational issues including the connectivity, procedures, and
conversions of policies into administrative programs, and the disposal of the businesses
and the governments in solving the social issues becomes an end objective rather than
service to the society. CSR ombudsman could also form the bridge between the
businesses, governments, international governing bodies, stakeholders and the
individuals. Such an approach could lay the path for the justification of the conduct of
the businesses, governments in their pursuance for fulfilling the societal obligation, legal
recourse, rights, justice and respect for autonomous individuals, where-by relationships
could be strengthened and mutual respect will shape trust (Porter and Karmer, 2002).
Conclusions
This paper revisited the key concepts and relevant theories to set up the stage for
discussion and analysis of the emerging issues surrounding ombudsman discourse with
a special reference to the conduct of businesses and the governments. The findings
suggest that there is a pressing need for paying increased attention to the issue as
ombudsman is considered to be an alternative solution to the so called governance
remedies to many social problems. The issues are of particular relevance to developing
nations as they witness lack of adequate legal provision and also the issue of
noncompliance in terms of violation, manipulation and buying mentality. This is why
societies in the developed economies are finding ombudsman as the most effective tool
in bringing the corporate and the public sectors to justice though developing
accountability mechanism. In a country like India for example this mechanism is
currently attracting a great deal of attention of politicians, researchers, social leaders
and the public at large. The main reason leading to this state of affairs is rooted in the
lack of implementation of laws and regulations and reluctance of the government and
the barons of the boardrooms. Therefore, the public has ended up with no alternative
but to mobilize their social power in an organized way to exert pressure on the system.
The study presents a conceptual framework arising from the theoretical literature review
and lacks the strength of empirical findings. Further each of these areas could
potentially be researched using quantitative and qualitative techniques.
Proceedings of 9th Asian Business Research Conference
20-21 December, 2013, BIAM Foundation, Dhaka, Bangladesh ISBN: 978-1-922069-39-9
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