Corporate Social Responsibility
General Electric
GE is a services, technology and manufacturing company operating in more than 100 countries and employs 313,000 people worldwide. The company traces its beginnings to Thomas A. Edison, who established Edison Electric Light Company in 1878. In 1882, a merger of Edison General Electric Company and Thomson-Houston Electric Company created General Electric Company. GE is the only company listed in the Dow Jones Industrial Index today that was also included in the original index in 1896. GE ranks as the 5th largest U. S. company in the Fortune 500 and is ranked as the 8th largest in the world, as of 2000. GE is one of the largest and most diversified industrial corporations in the world. GE has engaged in developing, manufacturing, and marketing a wide variety of products for the generation, transmission, distribution, control, and utilization of electricity since its incorporation in 1892. Over the years, GE has developed or acquired new technologies and services that have broadened considerably the scope of its activities. GE’s products include major appliances; lighting products; industrial automation products; medical diagnostic imaging equipment; motors; electrical distribution and control equipment; locomotives; power generation and delivery products; nuclear power support services and fuel assemblies; commercial and military aircraft jet engines; and engineered materials, such as plastics, silicones, and super-abrasive industrial diamonds.
GE’s services include product services; electrical product supply houses; electrical apparatus installation, engineering, repair and rebuilding services; and computer-related information services. Through its affiliate, the National Broadcasting Company, Inc., GE delivers network television services, operations television stations, and provides cable, Internet and multimedia programming and distribution services. Through another affiliate, General Electric Capital Services, Inc., GE offers broad array of financial and other services including consumer financing, commercial and industrial financing, real estate financing, asset management and leasing, mortgage services, consumer savings and insurance services, specialty insurance and reinsurance, and satellite communications (Blacconiere & Hopkins, 2002).
Stakeholders
Organizations must recognize the rights of interests of various stakeholders – not only stockholders and employees but also outsiders affected by the company’s actions (Sims 2003). External stakeholders include customers, suppliers, governments, unions, competitors, local communities, and the general public. In general, stockholders claim appropriate returns on their investment:
- Employees seek broadly defined job satisfactions
- Customers want what they pay for
- Suppliers seek dependable buyers
- Governments want adherence to legislation
- Unions seek benefit for their members
- Competitors want fair competition; local communities want the company to be a responsible body
- The general public expects the company’s existence to improve quality of life.
Stakeholders are the people who are affected by or can affect the activities of the firm. There are two types of stakeholders – primary and secondary. Primary stakeholders are those who have formal, official, or contractual relationship with the organization. The secondary stakeholders are other societal groups who are affected by the activities of the firm. One of General Electric’s top stakeholders is the consumers.
Consumers expect General Electric to produce quality, safe and reliable products. Consumers are also becoming assertive in issues such as safety and they are becoming more concern about the impact of the product on their health and to the environment. Consumers also demand data and information about the products and the risks involve in using them. GE recognizes the importance of the consumers. They are increasingly becoming collaborators in the product development cycle. In order to make sure that the consumers are actively involved in the creation and development of products, GE established programs such as “Dreaming Sessions” which helps the organization look to the future about what the consumers need. GE is also using “Net Promoter Score”, a metric GE has adopted to tract customer perceptions of performance strengths and weaknesses (GE 2007 Citizen Report). The organization also inform and educate the consumers about product use issues. The organization makes sure that its products are safe and of the highest quality. General Electric produces products that are considered as controversial. In order to respond to the demands of the consumers to be informed GE increases transparency and addresses concerns by illuminating its approach to these products. One line of products that are controversial is GE’s nuclear-grade equipments. GE also informs the consumers about the possible health risks in its products. For example, GE produces lighting products that contain small amounts of mercury. GE in its commitment to produce risk-free products is actively engaged in research to further reduce mercury content and to develop next-generation, energy-efficient, mercury-free lighting technology (GE 2007 Citizenship Report).
Corporate Social Responsibility (CSR)
The organization has different obligations to society. Corporate social responsibility is the interaction between business and the social environment in which it exists. Corporate social responsibility according to Sims (2003) is an organization’s obligation to engage in activities that protect and contribute to the welfare of society. CSR refers to an organization’s moral obligation toward others who are affected by the organization’s actions (p. 44).
Responses to Social Demand
Corporate social responsiveness is the ability of an organization to respond to social demands. Corporate social responsiveness focuses on the individual and organizational processes for determining, implementing, and evaluating the firm’s capacity to anticipate, respond to, and manage the issues and problems arising from the diverse claims and expectations of internal and external stakeholders (Epstein 1987).
Proaction
Proaction is considered as the highest level of responsiveness to social issues where companies actively seek to improve and contribute to society. Companies with proactive philosophy will try to carry out discretionary responsibilities (Deresky 2003 cited in Harila and Petrini 2003). Proaction is an approach to corporate social responsibility that includes behaviors that improve society. Organizations that assume a proaction strategy subscribe to the notion of social responsiveness. Proaction according to Carroll (1979); Joyner and Payne (2002) involves actively addressing specific concerns of stakeholders and anticipating social problems before they arise or are officially recognized, and developing strategies to deal with these issues.
General Electric takes a proaction strategy in responding to social demands. GE actively addresses concerns of stakeholders and anticipate social problems before they arise. For example, one proaction strategy of GE is educating and informing consumers about the possible health hazards of its products. In order to solve problems that are likely to arise, GE is committed to produce risk-free products through research and development and developing next-generation, energy efficient, mercury-free lighting technology (GE 2007 Citizenship Report).
Accommodation
Accommodation is an approach to corporate social responsibility that adapts to public policy in doing more than the minimum required. Accommodation according to Joyner and Payne (2002) is doing the right thing because it is the right thing to do.
Defence
A company with a defensive philosophy will only fulfill its legal responsibilities in relation to the social issues that it faces (Deresky 2003 cited in Harila and Petrini 2003). Organizations that pursue a defence strategy respond to social challenges only when it is necessary to defend their current position. Defence according to Carroll (1979); Joyner and Payne (2002) involves doing only the minimum legally required to address stakeholder issue in order to avoid being forced to do so.
GE’s defensive approach is evident in its response to its remedial responsibilities. There are issues regarding the environmental contamination caused by Plycholrinated biphenyl (PCB) in the Hudson River. Only when the Environmental Protection Agency (EPA) required GE to dredge the Hudson River did the company take efforts to do so. The company claimed that PCBs were being broken down by microorganisms and that PCB levels in fish have decreased since 1977 (www.cleanupge.org).
Reaction
Reaction is the philosophy with the lowest responsiveness, indicating that companies simply react to eventual crises that might occur (Deresky 2003 cited in Harila and Petrini 2003). Reaction according to Carroll (1979); Joyner and Payne (2002) involves either fighting against addressing stakeholder issues or completely withdrawing and ignoring the stakeholder.
Obstruction
There are firms that take an obstructionist approach to social responsibility. Obstructionist organizations choose to push socially responsible envelope as far as they can. They consciously engage in questionable and at times illegal acts, in the hope that they will not get caught, the fine imposed will be less than the benefits incurred. These firms often work to prevent knowledge of their behavior becoming visible (Sims 2003).
GE’s obstructive strategy was evident in their response to the PCB issue in the Hudson River. GE was pin pointed as the cause of the PCB contamination in the Hudson River. It has been reported that between 1940s and 1976, GE discharged about 1.3 million pounds of PCBs into the Hudson River. The contamination had a tremendous impact on the river. The Environmental Protection Agency (EPA) proposed that GE dredge the Hudson River in order to take out the PCBs that it discharged. Federal law requires EPA to consider local opinion before it issues a final Record of Decision. In order to counter the dredging plan, GE used sophisticated, proactive, multi-layered legal, political and public relations campaign. The most visible part of the campaign have been the millions of dollars GE has spent on television commercials, a half-hour infomercial, radio ads, full page newspaper ads, billboards, bus signs, newsletters and websites (www.cleanupge.org). This can be considered as an obstruction since GE used different means in order to mislead or to hide the truth to the general public.
Social Responsibility
Corporate Social Responsibility according to Carroll (1979; 1991) encompasses the economic, legal, ethical and discretionary (philanthropic) expectations that society has of organizations at a given point in time. The figure below presents the types of social responsibility as defined by Carroll (1979; 1991):
Economic Responsibility
An organization has to make a profit in order to survive. The organization is obliged to its shareholders to maximize earnings, and operate efficiently. This forms the foundation on which all else is built (Van Dongen 2006).
Legal Responsibility
Am organization is obliged to comply with the rules and regulations that the government imposes (Van Dongen 2006).
GE is committed to investing in its employees to provide challenging opportunities to shape their careers (GE 2007 Citizen Report). GE maintains constructive statutory and contractual relationships with hundreds of employee representatives throughout its global operations. The employees representative arrangements take various forms, but can be generally described as trade unions or work councils. Relationships with these employee representatives are structured based on applicable laws in the countries in which GE operates. GE respects employees’ rights to freedom of association and to bargain collectively within the requirements of local law (GE 2007 Citizen Report).
Ethical Responsibility
Ethical responsibilities are considered important. They consist of the expectations, demands, and needs stakeholders place on an organization. Ethical responsibility is often vague and under public debate regarding its legitimacy. In essence it is the obligation to do what is right, just and fair (Carroll 1991 cited in Van Dongen 2006).
GE operates in more than 100 countries around the world. GE’s commitment the governments in which it is under starts with the local communities. GE strives to engage with local governments, communities and civil society on issues of mutual interest. Through national or regional executives, as well as through other corporate and business personnel with country, regional or international responsibility, GE provides its perspectives to local governments, communities, and civil society (GE 2007 Citizenship Report).
Discretionary (Philanthropic) Responsibility
Philanthropic act is often labeled as being socially responsible, however, compared to ethical responsibility, it is not expected from the organization to commit to a philanthropic act, in the sense that they will be found unethical when they do not reach the desired level (Vamn Dongen 2006). General Electric is committed to its philantrophic responsibilities especially in the areas of healthcare and education. GE is capable of impacting communities where employees work and live. General Electric uses its philanthropic resources to extend the impact to communities around the globe and focus on two central themes: education and healthcare. By integrating Foundation grants, product donations, Company contributions and volunteer resources, GE employees drive substantive, systematic change while fostering deep, personal connections that encourage and inspire communities (GE 2007 Citizenship Report). The general public expects that the organization contributes to the betterment of the society as a whole. The organization is expected to take the initiative in dealing with environmental and social issues. GE aims at building products and solutions that will benefit its consumers and the society. Ecomagination is GE’s vision and commitment to harness GE’s unmatched products and services to address the world’s pressing environmental issues (GE 2007 Citizenship Report).
References
Blacconiere, W. and Hoprkins, P. (2002). General Electric: Investment Accounting and Consolidations. Issues in Accounting Education, 17(3), 315+.
Carroll, A. B. (1979). A Three-Dimensional Conceptual Model of Corporate Performance. Academy of Management Review, 4, 497-505.
Carroll, A.B. (1991) The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders. Business Horizons, 34, 39-48.
Caroll, A. B. (1996). Business and Society: Ethics and Stakeholder Management. Thomson Learning.
Deresky, H. (2003). International Management (4th ed.). Upper Saddle River: Prentice Hall.
Epstein, E. M. (1987). The Corporate Social Policy Process: Beyond Business Ethics, Corporate Social Responsibility and Corporate Social Responsiveness. California Management Review, 29(3), 99-114.
GE Citizenship Report: Investing in a Sustainable Future (2007). General Electric. Retrieved May 5, 2008, from http://www.ge.com/company/citizenship/downloads/pdf/GE_2007_citizen_07rep.pdf
Harila, H. and Petrini K. (2003). Incorporating Corporate Social Responsibility: Case Studies of Four MNCs. Lulea University of Technology. Retrieved May 9, 2008, from http://epubl.luth.se/1404-5508/2003/064/LTU-SHU-EX-03064-SE.pdf
Joyner, B. E. and Payne, D. (2002). Evolution and Implementation: A Study of Values, Business Ethics and Corporate Social Responsibility. Journal of Business Ethics, 41, 297-311.
Sims, R. R. (2003). Ethics and Corporate Social Responsibility: Why Giants Fall. Westport CT: Praeger.
Toxics on the Hudson: The Story of GE, PCB’s and the Hudson River (2008). Clean up GE. Retrieved May 5, 2008 from
http://www.cleanupge.org/pcbarticle.pdf
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