The Globalization and Corporate Social Responsibilities

Prof. Stephen Cheung

Department of Economics and Finance

City University of Hong Kong

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Globalization

“Since 2001 the pay of the typical worker in the United States has been stuck, with real wages growing less than half as fast as productivity.….. If you look back 20 years, the total pay of the typical top American manager has increased from roughly 40 times the average--the level for four decades--to 110 times the average now.… In China each person now produces four times as much as in the early 1990s. Having joined the global labour force, hundreds of millions of people in developing countries have won the chance to escape poverty. Hundreds of millions more stand to join them.… But in the rich world labour's share of GDP has fallen to historic lows, while profits are soaring.” (Economist, 2007)

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Contents

• Globalization• Importance of partnerships• What is corporate social responsibility (CSR)?• CSR in Hong Kong• Drivers for Organizations• Obstacles in running socially responsible

businesses• Role of Government• Incentives

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Globalization

• Increase competition

– Encourage specialization

– Consumers gain from lower prices and

greater variety

• Increase in trade and investments

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World Trade

Source: 2005 Annual Report, Federal Reserve Bank of Dallas

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Assets Aboard

Source: 2005 Annual Report, Federal Reserve Bank of Dallas

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Globalization

• Price stability– Lower inflation– Seven largest developed nations: U.S., U.K.,

Canada, Italy, Germany, France and Japan– Average annual inflation

• 10.2% (During 1973-1893)• 1.8% (Since 1995)

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GDP per Capita

Source: IMF, Morgan Stanley Research

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Shares of National Income: G7+ Economies

Source: National Sources, Morgan Stanley Research

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Participation in the Global Economy - Importance of Partnership

• The Government– Competitive and flexible workforce– Redistribution– Education and Retraining

• Industrial Corporations– Technical and managerial skills– Aspects of international best practices

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Participation in the Global Economy - Importance of Partnership

• Civil Society Organizations– Ensure proper investments

• Research Institute– Provide technical training and diagnostic

studies

• Multinational Organizations– Policy advocacy– Watchdog

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What is Corporate Social Responsibility (CSR)

• Old ideas of doing business– Profit maximization– Concern on shareholders interest

• Today’s new standard– NOT only pay tax and comply with national

regulations– Sustainable development– Consider interest of all stakeholders and are expected

to take greater responsibilities in running a business– Corporate social responsibilities (CSR)

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What is Corporate Social Responsibility (CSR)?

• Major trends in international business in recent years

• Business’s contribution to sustainable development

• Related to basic business activities• Impacts on stakeholders:

– Social; – Economic; and– Environmental

• Create additional value and strategic advantage

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McDonald’s – A Case on Child Labor

• “City Toys Ltd in Shajing, Shenzhen, employs children as you

ng as 14 who work from 7am until as late as midnight for 24 y

uan (about HK$23) a day, packing toys for McDonald's.”

• “The minimum wage was on the basis that a worker does eigh

t hours a day, five days a week.”

• "All people aged under 16 are forbidden to work in China."

South China Morning Post, 28 August 2000

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How to Measure?

Four possible indicators

• Dow Jones Sustainability Index (DJSI)

• Global Reporting Initiative (GRI)

• Carbon Disclosure Project (CDP)

• ISO 14001 Certifications

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CSR in Hong Kong

Corporate Governance Scorecard Project• Survey results based on publicly available information• HSI, HSHKCI, HSCCI, and HSCEI constituent stocks• 2002: 168 companies are covered• 2005: 174 companies are covered

Section/ Year 2005 Mean 2002 Mean

Role of Stakeholders in Corporate Governance

40.21 54.32

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Drivers for Organizations

• Enhance image and reputation• Increase shareholders value• Reduce business risk• Legislative requirements• Customer loyalty • Employee loyalty• Improve business operation• Control of legal risks

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Obstacles in Running Socially Responsible Businesses

• Management practice

• Increasing cost?

• Monitoring and enforcement

• Sustainable development

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Role of Government

• Enforcement strategies and legal and regulatory risk management

• Tax initiatives

• Contribution to compliance expertise

• Moral suasion

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Incentives

• CSR index– Brand name

• CSR investment fund– Investment communities

• Education

→ 發財立品

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Thank You!