¶ … strong sense of external community correlate with exceptional company performance?
Large multinationals are well-known for their involvement in supporting the community they work in and also for their support for sports, humanitarian and social causes. The profitability and high visibility of these companies in external community activities certainly makes one believe that external community involvement and exceptional company performance go hand in hand.
A closer analysis of the community relation exercise shows that in many cases such involvement is an extension of business activities. The multi-billion dollar profits, of course give the exceptional performers the ability to buy the goodwill of political parties, news media, and the community in general to look after their present and future interests.
Whatever the motives, external community involvement shows that the company is performing well and has greater ambitions. External community involvement is also a result of increased social awareness and there are cases where profitability of good performers allows them to be generous for purely humanitarian reasons.
Introduction
Multinational companies take pride in advertising how they are looking after the environment in fields such as offshore exploration. Steps being taken by a mining company to restore the site to its original natural beauty are often the subjects of powerful documentaries telecast on international channels. This public information campaign is necessary to enhance the companies' reputation. In fact, interaction with the community influences companies' success [Pawlowski, 2005].
The Corporate Social Responsibility has always been not strongly felt. Not so long ago the same multinational, and local companies too, were involved in raping the resources and the environment to a point beyond redemption. Increased awareness, regulatory restrictions and global media coverage have done a great deal in activities that were previously not considered the responsibility of the corporate sector. Now communities, non-governmental activist groups and governments expect companies to follow consistent standards throughout the world. Donnely et al. [Donnely et al., 2000] report the public interest agendas of companies in two countries and compare how the internal structures of the companies' are constituted by particular political understandings of the public interest. Studies of this kind show the corporate sector that general public monitors their involvement in the community.
Importers of goods from developing countries are demanding the new standards for social accountability. It is no longer acceptable to use child labor in carpet and sport-manufacturing industries in Pakistan. The carpet-weaving companies have had to involve themselves in community projects such as supporting local education to satisfy foreign buyer. Thus, the business requirements of local companies are making it necessary to open schools for workers, pay decent wages to female employees and follow environmental standards, which do not harm the community and workers.
The large multinationals are also expected to play a positive role in the community they are working in. The high performing businesses are expected to measure up to higher standards. Huselid's study [Huselid, 1995] confirms that investment in high performance practices results in lower employee turnover, greater productivity and better corporate financial performance.
. The benefits from the community-related activities directly impact the company business. They allow the companies to expand into new markets, improve their brand image and increase goodwill of the communities. Community activities also give companies' access to more skilled and better-educated labor and help to retain employees [Global Community Investment, 2005]. All of these activities directly impact the profitability of a company and help the local community help itself. [Lesser & Storck, 2001] found that in some companies communities are recognized as a valuable asset to their organizations.
Australian mining companies found out that it was to their advantage to work with the aboriginal community to exploit the mineral resources of the Reserves. Cusack, the CEO of Rio Tinto, Australia, recognized that their operations in aboriginal land could only continue to operate with the Aboriginal community's support and sanction [CEO Forum, 2005]. It was a very clear business imperative for them to support the local community to operate in that part of Australia. Rio Tinto's positive policies in one aboriginal reserve, of course, made it more acceptable to other aboriginal communities and helped it expand to other mining sites. It is good business for larger companies to have the community on their side!
In order to look after their interests, businesses, do not just support local development projects. They also like to have legislatures on their side and support powerful individuals as well as political parties to have a sympathetic economic...
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