Fri, Jan 16, 2009 - Page 8 News List

Firms must be ethically and socially responsible

By Yu Yao-men 于躍門

The global financial crisis is adversely affecting Taiwan’s manufacturing industry and companies are beginning to cut costs. As a result, many employees are forced to take unpaid leave or are laid off, suddenly depriving families of their main source of income.

President Ma Ying-jeou (馬英九) has urged business owners to protect employees’ work rights and attempt to find a joint resolution to the difficulties.

Whether a company has the capacity for sustainable development can be seen by looking at its management model. A look at the damage brought by the financial crisis shows that it is related to a company’s ability to transform from a corporate governance “shareholder model” to a “stakeholder model.” The former is concerned with investors’ interests, while the latter is concerned with the interests of all parties that influence or are influenced by a company’s decisions. In addition to investors, that includes employees, consumers, suppliers, local residents and the authorities.

The stakeholder model is seen as a rational management model. While creating profit for investors, it reminds companies of their ethical and social accountability. Ethical accountability guides a company to comply with legislation, principles and standards and to act in accordance with social expectations of honesty, fairness and ethical behavior.

These expectations help companies to do more good than harm. In doing more good, a company moves in a positive direction and organizational culture will become more ethical, while moving in a negative direction will plant seeds of unethical behavior in the culture. The possibility of sustainable development depends on whether a company is heading in a positive or negative direction.

A company’s social responsibility can make it part of social networks and end its exclusion. The main consideration is how to create an intimate connection to society’s needs. I strongly believe that only by strengthening social networks it belongs to can a company build a foundation for sustainable development and preserve necessary physical and social capital for the future. Based on this understanding, the company will naturally make good use of its resources, voluntarily participate in charitable activities, create local job opportunities and assist the government in improving quality of life.

The financial crisis shows that financial corporations have made many mistakes. They only care about their own interests, while sacrificing the interests of the other parties involved. The crisis has also impacted the manufacturing industry. The failure to do more good in normal times has led to companies either closing down or ceasing business temporarily, forcing employees out of their jobs and shattering families and homes, thus creating social problems. The crisis affects not just workers and their families, but also the normal functions of communities, social groups and society as a whole.

Taiwanese companies should consider how to build a rational management model and link the sustainable concepts of ethical and social responsibility to the creation of social values and then turn this into systems and regulations to be implemented in their operations and management. Only then will they have the potential to be sustainable. Conversely, if they continue to talk about ethical and social responsibilities but do nothing, they will have learned nothing from the crisis.

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