Critical Analysis of the Carroll’s Four-Part Model of CSR in British Airways
Corporate social responsibility (CSR) refers to organisational objectives to achieve tangible outcomes on decisions concerning pertinent issues which, by normative standards, portend beneficial rather than adverse effects on key stakeholders of a corporate entity (Carroll, 1979). With globalisation, the world has gradually transformed into a single economy and consequently, a trend has emerged where companies are expanding their markets to all corners of the world. As a result both domestic and international business environments are becoming increasingly interdependent. Technology has transformed communication to instantaneous levels, making competition for markets stiffer, thus increasing the need for organisations to adopt strategic and pragmatic measures in order to remain competitive (Doyle, 2001). Doyle is categorical that the strength of any organisational is largely reflected through its goals and objectives, and the ability to create conducive business atmosphere both within and outside the organisations (2001, p. 27).
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The success of any business organization relies not only on the performance capacity of its functional areas but also on the corporate responsibility of the organisation. While the functional and structural arrangements in organisations are important determinants of day to day administration of business organisations, corporate responsibilities have a direct bearing on the long-term aspirations of the organisations (Carroll, 1979). Clear definition and differentiation of the corporate responsibilities of an organisation goes along way in ensuring cohesion in the execution of tasks and achievement of the overall objectives in the organisation. This calls for proper planning, setting out of clear corporate responsibility descriptions and formulation of sound corporate governance policies by business organisations (Carroll 1979).
The concept of corporate responsibility was meticulously summarised by Archie B. Carroll in a four-step pyramid that was contained in his 1979 CSR paper on corporate social performance. The four-step pyramid has since been referred to as Carroll’s four-step model of CRS and it consists of four layers identified as economic responsibilities, legal responsibilities, ethical responsibilities and philanthropic responsibilities. Economic responsibility refers to the profitability prospects of the organisation and Carroll identifies this aspect as the foundation up which all the other responsibilities rest. The aspect of legal responsibilities takes into account the necessity of a business organisation to obey the law, with respect to law as the society’s codification of right and wrong. On the other hand, ethical responsibilities refers to the need of the organisation to observe the obligation to do what is right and fair and avoid doing harm in any way whatsoever. The philanthropic responsibility is discretionary in nature and simply encourages business organisations to be good corporate citizens and strive to contribute to the well being of the society by volunteering resource contributions without expecting financial profits from such actions.
All in all, the four categories of organisational corporate responsibilities demonstrate that business organisations emphasize on economic aspects, followed by legal and ethical aspects of their organisations with concerns for the discretionary aspects being the least in the order of preference (Carroll, 1979). However, the four components of corporate responsibility are not mutually exclusive, with the design only serving as a demonstration to the senior management of organisations on how much the different components of corporate responsibility are always in constant tension and competing mode. Carroll has since transformed the four-step model in the numerous journals that he has published and today, the model reflects the economic situation as is in the world today. Carroll’s latest modification in the four-step model is contained in his 2004 journal publication in which he takes into account the globalisation perspective in the model, to include global capitalism and global stake holders among the key elements of the four-step model.
Background information of the British Airways
British Airways is a public limited company with registered offices at Waterside, Hammondsworth, Great Britain. Founded in 1924 as Imperial Airways, the airline underwent numerous transformations that culminated to the formation of British Airways Group in September 1972 following the merger of British Overseas Airways Corporation (BOAC) and British European Airways (BEA). The British Airways Group is made up of several subsidiaries that include the British Airways PLC and the British Airways Holidays. British Airways Plc is the largest Airline and flag carrier with international schedules in the United Kingdom. The airline serves more than 550 different destinations both the domestic and international levels. London Heathrow and London Gatwick serve as the main hubs for the British Airways. The airline is regulated by the United Kingdom Civil Aviation Authority and operates under the type A Operating Licence. The British Airways carries passengers, mail and cargo in aircrafts with capacities of 20 seats or more. British Airways is a founder member of the One World Airline Alliance. The airline recently unveiled its latest subsidiary, the OpenSkies, which will commence its operations in June 2008 to take advantage of the liberalised transatlantic air traffic rights which provide for non-stop flights between Europe and the United States.
Basis for operations
British Airways is public limited company managed through a clearly defined corporate governance system composed of rules and guidelines for controlling and determining performance of the organization. The Executive Board and the Non-Executive Board are the top decision making bodies of the organization.
British Airways is run through a centralized decision making system that is based on a hierarchical structure. The Managing Director is the Chief Executive Officer of the company and he works closely with other Executive Directors and Non-Executive Directors of the company. The Board of Directors is the top decision making body of the organization. The executive wing of the organization is responsible for developing and monitoring the deployment of strategic plans, marketing plans, annual operating plans and budgets once approved by the Board of Directors. The Board has further established three Board Committees, each with clear terms of reference, to which the Board delegates certain elements of its powers. The three committees are: the Audit Committee, the Remuneration Committee and the Nominations Committee. The Audit Committee is charged with the responsibility of ensuring that appropriate financial standards are established and maintained throughout the group. The committee also reviews the effectiveness of the internal control systems, risk management and financial reporting processes and make appropriate recommendations to the Board. The committee further considers the objectivity and independence of external auditors, the authenticity of their services and the scope of audit work relative to the applied fees and reported findings. The Remuneration Committee is comprised of all the Non-Executive directors who serve under the leadership of the company’s chairman. The remuneration Committee is charged with the responsibility of reviewing the contractual and remuneration arrangements of the senior management based on their appraised performance. The Remuneration Committee also performs numerous other functions that include: approval of grants of options over the shares of the company; determination of the terms of service and contracts of employment of Executive Directors; reviewing and approving the disclosures of executive remuneration in the annual report; making recommendations to the Board as to the remunerations of the senior management of the company, including directors; management of the company’s overall remuneration policy and frequent review of the policies as may be deemed necessary; and advising the Board on all matters that appertain remuneration. The administration team of British Airways is further split to numerous departments that are designed to compliment each other. The departments include the sales and marketing department, logistics department, human resource department, customer care department and finance department. The functional departments have clearly defined responsibilities, accountability and authority.
British Airways is a people driven organization. The functions and duties of all operational units and departments in British Airways are integrated with strategic business planning initiatives of the company. The company encourages team work and inter-departmental cooperation among employees in the efforts aimed at creating customer satisfaction through provision of excellent services. The management of British Airways always prioritizes the needs of customers above anything else.
British Airways boasts well established organisational infrastructures that support its integration of strategic and business planning initiatives. The airline emphasizes the crucial link between strategy, performance management and development in its overall strategic planning measures. British Airways has demonstrated success in implementing human resources strategies that are geared towards provision of guiding frameworks for staff management, welfare and development. British Airways encourages comprehensive customer care practices and implements internal control and risk management measures that serve to ensure the smooth running of all the departments in the airline. According to the British Airways website, the company listens to views of over 600,000 customers through its surveys and research.
Broad description of the industry
An understanding of the industry plays an important role of demonstrating the environment in which a business organization operates (Porter, 1980). In analyzing the industry that defines the business prospects of British Airways, the main areas of focus involve the market size and product life cycle. The market size is important in determining the scope potential market services. The utility market of the company consists of all consumers who utilize the company’s mail services both within the United Kingdom and around the world. According to the company’s website, British Airways has been successful in creating a base for meeting the challenge of full competition in air transport market both at the domestic level in the United Kingdom and the international markets. The company’s pragmatic business strategy has won it some key percentage of the global market share and has enabled it to gain increased volumes of new customers. The emergence of online flight bookings has enabled the company to expand its market base. As for the product life cycle, the air transport sector is a relatively pragmatic industry that is undergoing constant technological innovations and advancements. The market capitalization in the international transport and communication industry has grown tremendously throughout the world in the 21st century as a result of globalisation, and these changes are fully reflected in the growth and expansion of British Airways.
Critical evaluation of Carroll’s four-part model in British Airways
Carroll’s four-part model has become synonymous with the management of corporate and social responsibilities in organisations throughout the world, and the British Airways is no exception. Carroll’s four-part model provides the best mode of analysis for evaluating the corporate and social responsibilities in British Airways because the model has an intuitively appealing logic that is simple and easy to understand. Moreover, Carroll has assimilated various competing themes into the model, making it suitable to analyse companies of varying sizes, values and business specialisations. The fact that the four-part model identifies the economic dimension as the key aspect of CSR that provides foundation to all the other aspects of corporate social responsibilities, many business organisations find it convenient to determine the responsibilities of their firms using the model. Carroll’s four-step model also draws confidence from the fact that the model has been empirically tested and supported by findings by different surveys carried out in leading companies around the world in different periods. As stated in the 2008/2007 Annual report and Accounts of the company, the Corporate Responsibility Board is the guardian of British Airways’ commitment to being a responsible company and it oversees the company’s performance in the area. The company’s Annual Report and Accounts further confirm that British Airways is a member of Business in the Community (BITC), a non-profit organisation that promotes corporate responsibility. British Airways has consequently adopted BITC’s framework as a basis for its standing instruction, ‘the BA way of Business’. The BITC four-part framework identifies corporate governance in terms of the market place, the work place, the environment and the community. According to the company’s 2006/2007 Financial Report and Accounts, British Airways is further expanding its corporate responsibilities strategies so as to take account of the globolised nature of business today. Therefore, the critical analysis of the corporate social responsibility in the British Airways subjects the company into a step by step analysis of the four-part model aspects of economic responsibilities legal responsibilities, ethical responsibilities and philanthropic responsibilities.
Profit generation is ultimate objective of British Airways in the company’s pursuit of success. The economic responsibility aspect of British Airways encompasses issues such as service line description, customer base, resources, competitive strengths, customer care, cost control and partnerships. The service line description is the specific unit in the business unit upon which the strategy is focused (Cohen, 1988). The British Airways recognises the sustainable aviation and the economy. Therefore, the company is pursuing within competitive and commercially viable limits so as to ensure that the interests of all stakeholders are respected and observed. According to the company’s website, British Airways contributes a whopping £11.4 billion annually to the country’s economy, thereby supporting more 500,000 direct jobs and 200,000 indirect jobs. The customer base refers to the scope of the markets served by a business organization (Doyle, 2001). The British Airways evidently provides vital worldwide for both cargo and passengers. The international nature of the company’s business provides it with wide and adequate markets. The British Airways serves both individual and corporate customers. In terms of resources, the British Airways possesses abundant resources that match the size of the company. According to Fifield & Gilligan “resources refer to the skill set within an organization that can be leveraged and they include: human resources; financial resources, informational resources, and relationships with suppliers and regulators” (1996, p. 73). British Airways is a source for both direct and indirect jobs for hundreds of thousands of people both in the United Kingdom and worldwide. The competitive strengths of British Airways remain unmatched and have enabled the company to position itself strategically relative to its competitors. Quality customer service, operating efficiencies, and close partnerships with the government and other regulators have provided British Airways with a relatively favourable status over its competitors, a situation that enables the company to reap maximum profits from the aviation market. According to the 2006/2007 Annual Report and Accounts of British Airlines, the company’s profits went up by 3.4% to £8,492,000 and made after tax profits of £260 million.
The aspect of legal responsibilities ranks high among the priorities of the British Airways. The British Airways is itself a legal corporate entity, having been founded and registered as a business entity according to the laws of the United Kingdom. The British Airways prides in the strict adherence and observation of the country’s laws. The company runs its operations within the regulatory framework of the country that include employment laws, environmental laws, aviation laws and immigration laws. British Airways also honours its tax obligations to the government of United Kingdom and the company records all its profits before taxation and profits after taxation in the Annual Report and Accounts. British Airways sources its products with integrity in line with the country’s sourcing and supply regulations. All the domestic and international suppliers of the airline regulatory contracts that include corporate, legal clauses demonstrating compliance to safety, health, environmental and labour standards of the United Kingdom.
The aspect of ethical Responsibilities emphasizes the need for companies to demonstrate obligation to do what is right and fair and avoid doing harm in any way whatsoever. British Airways demonstrates unquestionable commitment to environmental preservation, and is determined to keep on check issues such as climate change, noise, air quality and waste management. The airline’s environmental performance ranks among the key priorities. The British Airways website is categorical that following the company’s realisation of the fact that the noise and emissions from the aircrafts and ground operations have impact on the local communities, the company is targeting to achieve a 5% reduction in ground fleet mileage by the end of 2008 and 10% by 2010. In the recent past, the airline has demonstrated its commitments to reducing waste by employing electronic technology in place of paper work for most of its employee and customer services such as electronic payslips, development of online manuals and archives, use of online surveys and use electronic approval forms. As a result, the company website notes, the total amount of waste handled by the British Airways waste management contractors had reduced by 9% in comparison to 2005.
Just as stipulated by the concept of philanthropic responsibility, the British Airways is a true corporate citizen. The British Airways supports local communities and conservation organisations not only in the United Kingdom but also in other parts of the world. British Airways Supports more than 130 communities and conservation organisations throughout the world through provision of free flights and also by allowing member of the organisations to carry excess baggage. The British Airways also allows assists philanthropic organisations in transportation of cargo as well as through donations such as blankets to orphanages, hospices, animal sanctuaries and old people’s homes.
This critical analysis has demonstrated clearly that the British Airways is business organisation that fully recognises and appreciates the value and potential of other stakeholders ranging from local communities, employees, customers to shareholders. The company is fully compliant to the four-part model as espoused by Carroll. The willingness of the British Airways to observe the Carroll four-part model has clearly enable the company to address both social and economic issues caused by it business activities in its pursuit of fair corporate social responsibilities. By demonstrating practical commitments to key tenets of corporate social responsibilities as advanced by Carroll’s four-part model, the British Airways has been able to address company issues proactively while protecting business self interest at the same time.
British Airways, 2006/2007 Annual Report and Accounts, (2007), retrieved on April 28, 2008 from http://www.batraveltrade.com/travel/csr-corporate-responsibility/public/en_gb
British Airways, British Airways environment report, (2007), retrieved on April 28, 2008 from http://www.batraveltrade.com/travel/csr-corporate-responsibility/public/en_gb
Carroll, B.A. (1979), ‘The Pyramid of corporate responsibility: Toward the moral management of organisational stakeholders,’ Business Horizons.
Carroll, B.A. & Buchholtz, M., (2003), Ethics and stakeholder management, (5th ed), South-Western: Division of Thomson Learning.
Cohen, W. A. (1988), The practice of marketing management: Analysis planning and implementation, New York: McMillan.
Doyle, P. (2001), Marketing management and strategy, London: Prentice Hall.
Fifield, P. and Gilligan, C.T. (1996), Strategic marketing management: Planning, control analysis and decisions, Oxford: Butterworth-Heinemann.
Porter, M.E. (1980), Competitive strategy, New York: Free Press