Corporate Social Responsibility: Transparency, Ethics and Governance in Emerging Markets

Abstract

In managing business in emerging markets, Corporate Social Responsibility [CSR] is an issue of growing worldwide concern. It adds to the complexity of the management task in this environment, contributing to risks faced in all business transactions – although it may not be seen in this precise terminology. Indeed, the concepts of CSR, Business Ethics and Corporate Governance – as discussed by Western governments, donor agencies and MBA students, for example – may be almost unknown in some of the countries where they pose a major problem. The way that businesses in emerging markets cope with these challenges – both effectively and ineffectively – reveal many of the “new dynamics of management” discussed in this conference. The damage caused by the many corporate scandals in the West – Watergate, Enron, WorldCom in the USA, Rupert Murdoch and News International, parliamentary expenses in the UK – has been well-publicised, and in many cases perpetrators are brought to justice. Corporate governance and transparency issues have increasingly moved to centre-stage. CSR abuses and business ethics transgressions in the BRICs and beyond may be more widespread and more tolerated, less obvious and more part of the ‘normal’ business scene – although the situation is impossible to quantify, especially within local regulatory frameworks and where there are few active and independent journalists. This situation may be changing, with globalisation and greater scrutiny of governance matters by investors... yet CSR issues remain one of the greatest concerns and major risks for the Western business person involved in globalizing their operations. Businesses from some Western countries such as the USA are particularly anxious to avoid prosecution at home when tempted to be more flexible in the BRICs and beyond, due to the Foreign Corrupt Practices Act and other legislation. Which particular CSR issues are of most interest and importance for Western executives trying to avoid compromise and possible business loss? Corruption, the abuse of human rights, a lack of data protection, financial fraud, copyright piracy, low levels of transparency and high levels of anonymity, workplace discrimination, oppressive economic colonization, an absence of fair competition, poor levels of corporate governance, no respect for intellectual property, the perpetration of monopolies and the tolerance of leaders of dubious accountability and respectability. The list is endless, and can include local practices unknown to the Western executive – although he or she will have their own personal experiences after first-hand exposure. Many relate to institutional voids – a lack of the kind of business infrastructure of which Westerners are usually familiar and expect. Corruption may be seen as one of the most important issues, and may be a way of life in countries with low salaries but powerful officials – and greedy business people. Human rights abuse is an ongoing issue, and is seen as especially negative by individualistic and freedom-enjoying Westerners, with their insistence on privacy and data protection issues. Financial scandals and fraud have been sending shock waves throughout the BRICs and beyond, with billions of dollars simply going missing. Copyright piracy is not unknown in the West, but the scale in some BRICs and beyond can be alarming, together with the issue of transparency and ease of doing business in entering several emerging economies, often related to governance. Prospects of equal opportunities for members of different races are an important issue for countries with a mixed population, such as South Africa – but it would seem that discrimination is still the norm. Economic dominance by some Western countries – and China – in many emerging countries is seen as an example of the economic colonization of one country by another, raising several CSR issues, including protection or the matter of unfairly excluding competition. The concept of corporate governance used to be a preserve of the West, but is gradually impacting developing countries, especially those trying to attract foreign investment, and is especially concerned with ensuring independent management control. Intellectual property or IP is another concern, and so are state-endorsed monopolies.