Introduction
Financial strategies of a company are the key components in the success of any company. These strategies are formulated by a number of aspects which depend on the overall strategy of the company. Sometimes it is difficult for the organization to be able to tackle these strategies whey they go wrong for the company (Tai & Chuang, 2014). It can lead to diverse effects, which can be caused within the workplace or even outside the firm. Corporate Social Responsibility (CSR) and corporate governance are two main elements in the financial growth of the company. Although, there are certain financial strategies to grow the profit of the business, these two elements are of great importance when it comes to developing a multidimentional departments in the organization to increase their sales and revenue for the company (Tai & Chuang, 2014). The key issues for this case write up are the CSR and corporate governance strategies which are not considered an importance factor for companies in some cases and situations.
KEY ISSUES
There is an ethical obligation for every company which is needed to be performed by the company. If it does not meet the requirement of their ethical standards, it becomes a problem for the company in the longer run (Tai & Chuang, 2014). However, the case provided descriptions about the lack of companies response to these issues and how the financial performance is impacted by it.
Corporate Social Responsibility (CSR)
CSR aims at the response of a company to its stakeholders. Most of the time, CSR focuses on environment, employees, and customers but stakeholders are not oftenly discussed in CSR, because companies do not pay interest in this field (Carroll, 2015). Also, there is a financial obligation to meet its CSR activities in terms of shareholders and stakeholders. Including shareholders and stakeholders in the CSR activities is as important as considering employees and meeting other obligations (Carroll, 2015). Stakeholder’s engagement in a company can be formal or informal and it is core responsibility for the company to stay in contact with their stakeholders. Shareholders have the potential to impact a company and lead to success or failure at different levels of the organization. The main focus of the company and the stakeholder is to create a relation and understand the needs and wants of the stakeholders in CSR context (Carroll, 2015). As a part of a company, there is a high risk factor of financial loss if the CSR activities are not undertaken with the stakeholders. Being the finance provider for the companies, if the CSR is not implemented in the company there is a big risk that their stakeholders might tend to move away. These stakeholders can be termed primary or secondary, where the obligation remains the same. Whether the customers are not entertained or the people who are providing money for the company, if they are not socially reliable to the company, it cannot produce financial results (Carroll, 2015). Ethics and financial performance are closely with each other, especially in this modern world where the need of effective ethical standards has to be maintained in a company to increase their sales and enhance the revenue of the company.
Corporate Governance
Corporate Governance can be explained as the set of rules and regulations which are made to direct and control a company. These rules and regulations are the core objectives of a company to maintain a good flow of the organization, which are linked with the suppliers, customers, distributers, stakeholders, shareholders, and management (McCahery, Sautner & Starks, 2016). Companies manage their workflow and the settle in to their corporate governance which is needed to meet the reason why the company has started. In order to achieve targets in every department, it is important that the certain rules should be defined and followed with the company (McCahery, Sautner & Starks, 2016). There are risks associated with the wrong doing of these rules and not following them. The company cannot meet the market competition and will not be able to produce results, if the workplace environment does not have any rules defined for it. A bad corporate governance can create a a doubtful mindset on a firm’s integrity, reliability, and obligations towards their shareholders and stakeholders (Armstrong et al., 2015). It directly has an impact on the financial health of the company, which might reduce in a large number. Encountering illeagal activities in the firm, and supporting such cases have shown in the past that it encountered bad results on the company portfolio. For some companies, there is an obligation of testing the product before launching it. In such cases, it becomes a bad image if the firm does not under passes these processes and in result displays a huge loss for the company (Armstrong et al., 2015).
Recommendations
It is important for companies that they meet the ethical and moral standards along with the daily processes. In cases, where a company does not follow their own standards set by themselves, it becomes a problem for a company to stay in the market. CSR provides all standards which need to be set across the departments of the company and further acknowledgment for the stakeholders (Armstrong et al., 2015). As the financial condition of a company depends mostly on the stakeholders of the company, so proper ethical and inhouse rules should be observed, to ensure that the purpose of making the company is being observed or not. Setting up appropriate rules and defining individual roles in the departments will help in achieving tasks more effectively and in an efficient manner. Today, in this modern world it has been a big issue that if a company is not being ethical or pursuing laws, it might not earn well and can result in bad conditions.
References
Armstrong, C. S., Blouin, J. L., Jagolinzer, A. D., & Larcker, D. F. (2015). Corporate governance, incentives, and tax avoidance. Journal of Accounting and Economics, 60(1), 1-17.
Carroll, A. B. (2015). Corporate social responsibility. Organizational dynamics, 44(2), 87-96.
McCahery, J. A., Sautner, Z., & Starks, L. T. (2016). Behind the scenes: The corporate governance preferences of institutional investors. The Journal of Finance, 71(6), 2905-2932.
Tai, F. M., & Chuang, S. H. (2014). Corporate social responsibility. Ibusiness, 6(03), 117.
