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MNEs management of CSR in subsidiaries

A multiple case study in Business Management

Written by E. Khoushaba, S. Agebratt

Paper category

Master Thesis

Subject

Business Administration>Management

Year

2019

Abstract

Master Thesis: Multinational Enterprise (MNE) In the framework of this paper, a multinational enterprise will be defined as a complex organization that operates in different locations, including headquarters and subsidiaries, and carries out activities in different contexts, requiring different levels of Management (Jacqueminet & Trabelsi, 2018). They operate on a global scale and expand by expanding their business to all parts of the world (Kostova & Roth, 2002). 2.1 The history of CSR When social responsibility began to become important, it was based solely on economic contribution to society (Farcane & Bureana, 2015). This concept continues to evolve, and soon some people think that the company is not only responsible for legal and economic obligations, but also for political obligations, welfare, employees, and education. This development has been criticized by others, who believe that social responsibility makes people no longer pay attention to profitability, which has a negative impact on the company's success. However, the problem with this concept is that social responsibility has a different meaning for everyone, and the existing definition does not include any basic aspects. Therefore, Carroll proposed another definition, stating that “corporate social responsibility involves leading a company in a way that is economically profitable, legally sustainable, and helpful to ethics and society. Social responsibility means profitability. Competence and perseverance in law enforcement are prerequisites for discussing corporate ethics" (Carroll, 1983, p. 604, cited in Carroll, 1999). The definition of corporate social responsibility has not been fully perfected (Dahlsrud, 2008), and whether it is considered an ethical obligation (Jones, 1980; Carroll, 1979) or voluntary behavior (Kotler & Lee, 2005) is still in conflict). 2.2 The corporate social responsibility management strategy of the subsidiaries of multinational corporations The corporate social responsibility strategy of multinational corporations is very complicated due to its global operation (Husted & Allen, 2006), and many studies (eg Cruz & Boehe, 2010; Jamali, 2010) ; Muller, 2006) tried to explain the strategic significance of corporate social responsibility in multinational companies. Even though it is difficult to determine the strategic implications of CSR, the literature still successfully covers the basic parts. First, multinational companies with subsidiaries in multiple countries/regions need a corporate social responsibility strategy that can satisfy multiple stakeholders in different locations (Hah & Freeman, 2014). Therefore, it is the link between corporate social responsibility and stakeholder governance, because the management of corporate social responsibility requires close cooperation with all stakeholders (Jacqueminet & Trabelsi, 2018). Second, how multinational corporations prioritize corporate social responsibility activities is related to the organization's value proposition to different stakeholders (Freeman, 1984). However, when the needs of multiple stakeholders are included, there may be inconsistent needs that managers need to deal with (Jacqueminet & Trabelsi, 2018). When studying the CSR management of subsidiaries, it is important to consider this dislocation. When it comes to the subsidiary company deciding which needs to solve, the misalignment will lead to the consequences of CSR implementation. Therefore, if there is a misalignment between the needs, the implementation will be weak. Dislocations are more common among multinational companies because they operate in multiple countries and need to meet the needs of local and global stakeholders (Hah & Freeman, 2014). Therefore, multinational companies often encounter difficulties in managing effective corporate social responsibility strategies in their subsidiaries. The stakeholder theory holds that shareholders are just one of multiple influential stakeholders in an organization (Freeman, 1984; Freeman, Harrison, Wicks, Palma, and Deker, 2010). This is contrary to the shareholder theory proposed by Milton Friedman, which believes that shareholder demand is the only influential stakeholder organization that needs to be considered (Friedman, 1970). Stakeholders are defined as individuals who are affected or able to influence the activities of the organization (Freeman, 1984; Hah & Freeman, 2014; Yang & Rivers, 2009), such as employees, consumers, suppliers, society, investors, governments, and Competitors (Freeman, Harrison, and Wicks, 2007; Freeman et al., 2010). Stakeholders will be discussed from the perspective of subsidiaries, both local and global (Jacqueminet & Trabelsi, 2018). If the stakeholder is part of the subsidiary, it is a local stakeholder, such as society. The parent company is a global stakeholder (Jacqueminet & Trabelsi, 2018). For any subsidiary, the parent company is an important stakeholder (Ghoshal & Bartlett, 1990). Both theories agree. Because the parent company owns a large part of the subsidiary and has a great influence on the subsidiary (Jacqueminet & Trabelsi, 2018), it implies that the parent company is a shareholder. Therefore, if the subsidiary fails to manage its CSR activities, the parent company will suffer losses (Kostova and Zaheer, 1999; Jacqueminet and Trabelsi, 2018). In addition, Freeman et al. (2010) It is recognized that financiers are the main stakeholders, but the stakeholder theory also recognizes other equally important stakeholders, such as customers, suppliers, local communities and employees. According to the research of Jacqueminets and Trabelsis (2018), the stakeholder theory is more in line with how multinational companies prioritize their subsidiaries' initiatives. Multinational companies tend to determine priorities by identifying several local stakeholders (such as national governments, customers, suppliers, and local authorities). Read Less