Corporate Social Responsibility And Malaysia


For many companies today, success requires being adept at meeting corporate social responsibility goals. These goals are created for a variety of reasons. For instance, one definition of corporate social responsibility is participating in activities that are designed to benefit society as a whole. From a simplistic standpoint, this is absolutely correct. However, businesses define corporate social responsibility differently. Corporate social responsibility is “a business system that enables the production and distribution of wealth for the betterment of its stakeholders through the implementation and integration of ethical systems and sustainable management practices.” Therefore, corporate social responsibility is designed to promote the use of ethical and sustainable behaviors from businesses, as well as improve society.

Corporate social responsibility began in the 1950s and has continuously changed since that time. During the 1950s, the focus of corporate social responsibility was to do best for society in general. During the 1960s, the focus of corporate social responsibility was to address social changes. During the 1970s, the focus of corporate social responsibility was on the activities of business leaders, particularly within management. During the 1980s, corporate social responsibility began integrating business and social interests as one. During the 1990s, corporate social responsibility became universally accepted and expected. Today, corporate social responsibility is not just accepted and expected, it is demanded by customers and other companies alike. Thus, corporate social responsibility has become a true strategic tool for success. Based on the varying definitions of corporate social responsibility, the basic concepts that are utilized relate to “production and distribution of wealth, stakeholder management, ethical systems, [and] sustainable management practices”. However, during the 1990s, specific corporate social responsibility principles were developed: human rights and anti-corruption. Thus, corporate social responsibility has evolved from solely benefiting the company, but also benefiting human beings.

Corporate philanthropy is utilized to develop competitive advantage. In fact, corporate philanthropy “encourages companies to play a leadership role in social problem solving by funding initiatives that incorporate the best thinking of governments and nonprofit institutions”. However, corporate philanthropy is declining. It has been found that within the past 15 years, “corporate giving as a percentage of profits has dropped by 50%”. Despite this, many companies feel it is important to contribute to charities. This has been found to be for eight specific reasons: awareness of need, solicitation, costs and benefits, altruism, reputation, psychological benefits, values, and efficacy. In contrast, other studies have noted that “in the wake of the most recent financial crisis, corporations have been criticized as being self-interested and unmindful of their relationship to society”. Corporate philanthropy is, in essence, how corporate social responsibility began. Thus, it is possible to see how the two distinct concepts can be joined to create one comprehensive concept that better meets the needs of both corporations and society.

Corporate social responsibility has several tiers. For instance, the base is economic responsibilities (being profitable). The second tier is legal responsibilities (respect the law). The third tier is ethical responsibilities (being ethical). The top tier is philanthropic responsibilities. Due to societal and environmental expectations, the social responsibilities of businesses have increased. As a result, philanthropic corporate social responsibility has increased as well. To encompass philanthropic corporate social responsibility, a different definition is used. In this case, philanthropic corporate social responsibility is defined as “the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time—where discretionary is defined as all the other expectations society has of the responsibilities of a company that go beyond economic, legal, and ethical”. Thus, philanthropic corporate social responsibility is linked to innovative activities conducted by modern businesses. In contrast, some do not view philanthropic corporate social responsibility as a necessity. One study, for example, shows that altruistic philanthropic corporate social responsibility is not legitimate in terms of business responsibilities. Therefore, philanthropic corporate social responsibility goals varies dependent upon organizational beliefs.

There are different motivations for engaging in philanthropic corporate social responsibility. For instance, motivation may be from a financial standpoint or an ethical standpoint. Ultimately, philanthropic corporate social responsibility is designed to meet different obligations and responsibilities. These are economic, legal, ethical, and philanthropic. The economic obligation is to the business and involves making money. It is, essentially, the business version of the survival instinct. The legal obligation is to adhere to applicable laws and regulations. To businesses that participate in philanthropic corporate social responsibility, this means that adhering to this obligation is considered to be a proactive duty. The ethical obligation is “to do what’s right even when not required by the letter or spirit of the law. The philanthropic obligation is to “contribute to society’s projects even when they’re independent of the particular business”. Thus, a strong motivation for philanthropic corporate social responsibility is sustainability. Sustainability is the “long-term maintenance of balance,” which is achieved through economic, social, and environmental constructs. These constructs result in long-term sustainability, which can increase the life expectancy of the company.

Since 2004, philanthropic corporate social responsibility in Malaysia has increased. It is also noted that especially within developing countries, it is increasingly important to be involved in philanthropic corporate social responsibility because it can “ensure long-term business success”. However, there are other motivations for developing countries, such as Malaysia, to utilize philanthropic corporate social responsibility tactics. For example, it is believed that “by having social responsibilities, suppliers, business associates, and customers would have more confidence in the organisation and therefore, increases sales and lead to profit maximization”. This refers back to creating long-term sustainability and increasing life expectancy for companies.

There is a relationship that exists between “perceived value and customer attitude, considering this variable an important determinant of customer loyalty”. Philanthropic corporate social responsibility can influence this perceived value. Customer attitude varies based on the type of business and the services/products received. This can have an effect on what philanthropic corporate social responsibility activities that the company partakes in.

Customer awareness influences philanthropic corporate social responsibility. One study notes that “corporate social responsibility and firm value are positively related for firms with high customer awareness, as proxied by advertising expenditures. For firms with low customer awareness, the relation is either negative or insignificant. In addition, we find that the effect of awareness on the corporate social responsibility–value relation is reversed for firms with a poor prior reputation as corporate citizens”.

Significantly, one particular study noted “the importance of personal qualities of the manager and also the manager’s role in promoting community development corporate social responsibility”. The reverse can also be true. Customer attitude (a personal quality) can play a significant role in philanthropic corporate social responsibility activities. This, too, can be reversed to hypothesize that philanthropic corporate social responsibility activities can impact customer attitude. In Thailand, for instance, one study found that there is “perceived service quality is positively associated with brand effect mediated by trust. CSR initiatives play an important role in perceived service quality, which in turn, influences trust and brand effect”. As such, it can be concluded that there is a positive impact on customer attitude of mobile phone network providers in Kuala Lumpur due to philanthropic corporate social responsibility.

Theoretical Framework

One of the most common theories relating to corporate social responsibility is the stakeholder theory. This theory states that “organizations are collections of several different parties, each with its own goals and objectives. While the goals of some parties may be in competition with the others, each party has an interest in the organization succeeding. The key to the organization’s success depends on bringing these disparate objectives and parties together to create the maximum benefit for all involved”. Stakeholders do not refer to only stockholders, but also other parties related to the business, such as suppliers, customers, employees, and/or distributors. This also includes society (the community in which the company exists). As a result, philanthropic corporate social responsibility is based on the viewpoint that business needs and societal needs can be reconciled. However, it is also believed that “stakeholder theory provides a vehicle for connecting ethics and strategy”. Thus, the stakeholder theory is based on implicit beliefs, rather than explicit beliefs. In this situation, implicit beliefs refer to workplace culture and the values of the company. Therefore, stakeholder theory is related to the goals of the company. Another study notes that “there is an ‘ideal’ level of corporate social responsibility, which managers can determine via cost-benefit analysis, and that there is a neutral relationship between corporate social responsibility and financial performance”. This goes back to the stakeholder theory and the principles of philanthropic corporate social responsibility, particularly regarding the economic obligation, which requires that the company earn a profit.

The utilitarian theory “is a normative ethical theory that places the locus of right and wrong solely on the outcomes (consequences) of choosing one action/policy over other actions/policies. As such, it moves beyond the scope of one's own interests and takes into account the interests of others”. This can be contributed to philanthropic corporate social responsibility because the company must decide what activities it will undertake to better society, yet meet the company’s goals. Thus, according to the utilitarian theory, “the corporation is intended as a maximizing ‘black box’ where problems of externalities and social costs emerge”. However, the utilitarian theory also considers “the corporation a part of the economic system”. This fits another obligation of corporate social responsibility. As a result, the utilitarian theory is embedded in philanthropic corporate social responsibility. Another reason for this is the utilitarian theory is focused on society and what activities must occur in order to better society.

Managerial theory is associated with philanthropic corporate social responsibility due to the contributions of strategic management in relation to the decisions made within the company. Thus, under the managerial theory, the company is associated with corporate social performance; social accountability, auditing, and reporting; and social responsibility of multinationals. Thus, under managerial theory, “problems of responsibility are approached from inside the firm (internal perspective)”. This can be associated again with strategic corporate management. Therefore, a major part of philanthropic corporate social responsibility is related to the company’s strategy for success. That is, in today’s society, corporate social responsibility activities are expected from companies by consumers. Without these activities, the company is less likely to survive. However, this theory focuses on the measurement of corporate activities, which cannot be measure solely through financial performance. Rather, corporate activities must be measured in relation to the effect these activities have on the environment and society. Ultimately, the importance of the managerial theory in relation to corporate social responsibility is to provide “the tool for making common values clear and understandable to the firm’s various components to social accountability”. Therefore, the managerial theory is crucial to corporate social responsibility because it intertwines the values of society with the values of the company.

The relational theory considers how the company and environment interact, specifically within society. That is, the relational theory is based on “the type of relations between the firm and the environment”. This is explained further when considering the relational theory as it is associated with psychology. In psychology, the relational theory “brings relationships to the forefront of human psychology. It examines the complexity of human relationships, using concepts of connection and disconnection, as well as recognizing and exploring the social implications of psychological theory. The cultural aspect brings into focus the influence of larger culture and power differentials on the quality and nature of relationships and the subsequent effects on healthy coexistence”. This definition shows the influence of the relationship between the company and environment. The relational theory is divided into several parts: “ business and society; stake-holder approach; corporate citizenship; and theory of social contract”. All four of these components show the relationship that the company has with different aspects of society.

Conclusion

This chapter addressed the background of the study, the theoretical framework, the conceptual framework, definitions, and variables. The background of the study is based on corporate social responsibility, philanthropy, philanthropic corporate social responsibility, motivation for philanthropic corporate social responsibility, philanthropic corporate social responsibility in Malaysia, customer attitude, customer awareness of philanthropic corporate social responsibility, and the impact of philanthropic corporate social responsibility on customer attitudes on mobile phone network providers in Kuala Lumpur. Following this, the theoretical frameworks – stakeholder theory, utilitarian theory, managerial theory, and relational theory – are explored. This leads to the conceptual framework, research questions, definition of the components of the conceptual framework, and the variables are named.

Corporate social responsibility is important to company success in today’s business world. In this situation, corporate social responsibility is the voluntary participation in activities that benefit society. However, there are other definitions of corporate social responsibility. For instance, some defines corporate social responsibility as a business system that is designed to create ethical and sustainable processes and systems that will positively impact stakeholders. Thus, ethical behaviors and sustainable processes are emphasized by utilizing corporate social responsibility.

Corporate social responsibility has changed since the 1950s. During the 1950s, the focus was doing the best for society. During the 1960s, the focus was addressing social changes. During the 1970s, the focus was on management and business leaders activities. During the 1980s, the focus was on integrating business and social interests. During the 1990s, corporate social responsibility practices were universally accepted and expected. Currently, these activities and practices are demanded by society as a whole. As a result, these activities and practices have become a strategic tool designed to help companies succeed. The basic concepts of corporate social responsibility include wealth management (production and distribution), stakeholder management, ethical systems, and sustainable practices. Thus, corporate social responsibility practices do not just benefit the company, but also society as a whole.

Corporate philanthropy is important for competitive advantage, allowing companies to focus on leading roles in resolving problems in society. However, this has declined in the past 15 years by 50%. Despite this, charities are contributed to due to awareness of need, solicitation, costs and benefits, altruism, reputation, psychological benefits, values, and efficacy. In contrast, some people believe companies have become ignorant of their relationship with society, especially after the financial crisis. Despite this, corporate philanthropy was the starting point for corporate social responsibility.

Despite the tiers of corporate social responsibility, some believe that corporate social responsibility is not necessary. However, societal expectations have caused the social responsibilities of businesses to increase. Therefore, philanthropic corporate social responsibility goals varies dependent upon organizational beliefs.

Some companies engage in philanthropic corporate social responsibility due to financial benefits or an ethical standpoint. However, the goal of philanthropic corporate social responsibility is to meet different obligations and responsibilities, also considered to be the ‘survival instinct’ of the company. Thus, one of the strongest arguments for philanthropic corporate social responsibility is sustainability achieved through economic, social, and environmental constructs. Finally, these constructs result in long-term sustainability, increasing the life expectancy of the company.

In Malaysia, philanthropic corporate social responsibility has increased since 2004. However, studies show that within developing countries, it is crucial to engage in philanthropic corporate social responsibility activities. Thus, these activities increase public perception of the company.

It is believed that philanthropic corporate social responsibility influences value that is associated with customer attitude. Customer awareness influences philanthropic corporate social responsibility. Therefore, it is noted that high customer awareness results in increased philanthropic corporate social responsibility and vice versa. However, customer awareness of philanthropic corporate social responsibility does not necessarily create customer loyalty to brands or the company. Philanthropic corporate social responsibility activities influences customer attitude. As such, it can be concluded that there is a positive impact on customer attitude of mobile phone network providers in Kuala Lumpur due to philanthropic corporate social responsibility.

The stakeholder theory is related to corporate social responsibility. Stakeholders do not refer to only stockholders, but also other parties related to the business, such as suppliers, customers, employees, and/or distributors. This also includes society (the community in which the company exists). Thus, the stakeholder theory connects ethics and strategy and is related to the goals of the company. Finally, it is found that the stakeholder theory and the principles of philanthropic corporate social responsibility, particularly regarding the economic obligation, which requires that the company earn a profit, influence the activities that the company partakes in.

The utilitarian theory focuses on the outcome of choosing a particular activity over another. This can be contributed to philanthropic corporate social responsibility because the company must decide what activities it will undertake to better society, yet meet the company’s goals. As a result, the utilitarian theory is embedded in philanthropic corporate social responsibility. Another reason for this is the utilitarian theory is focused on society and what activities must occur in order to better society.

Managerial theory is associated with philanthropic corporate social responsibility due to the contributions of strategic management in relation to the decisions made within the company. Thus, under the managerial theory, the company is associated with corporate social performance; social accountability, auditing, and reporting; and social responsibility of multinationals. Therefore, a major part of philanthropic corporate social responsibility is related to the company’s strategy for success. That is, in today’s society, corporate social responsibility activities are expected from companies by consumers. Without these activities, the company is less likely to survive. However, this theory focuses on the measurement of corporate activities, which cannot be measure solely through financial performance. Rather, corporate activities must be measured in relation to the effect these activities have on the environment and society.

Therefore, the managerial theory is crucial to corporate social responsibility because it intertwines the values of society with the values of the company.

The relational theory considers how the company and environment interact, specifically within society. This definition shows the influence of the relationship between the company and environment. The relational theory is divided into several parts: “business and society; stake-holder approach; corporate citizenship; and theory of social contract”. All four of these components show the relationship that the company has with different aspects of society.

The conceptual framework of the study is based on corporate philanthropy. This is defined as voluntary activities completed to better the lives of those in the community or environment in which the organization exists. The framework for corporate social is the assertion of business obligations to employees, society as a whole, and shareholders followed by obligation to uphold the law of the land in which the organization resides. As previously noted, the philanthropic component of corporate social responsibility is voluntary, allowing the company to dismiss this activity as being unnecessary. This would have no ill effects towards the organization as a whole. However, this does not show what benefits can be associated with performing philanthropic activities. The conceptual framework measures customer attitude and perception as the result of philanthropic corporate social responsibility.

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