The Globalization and Corporate Social Responsibilities Prof. Stephen Cheung Department of Economics and Finance City University of Hong Kong

2 Globalization “Since 2001 the pay of the typical worker in the United States has been stuck, with real wages growing less than half as fast as productivity.….. If you look back 20 years, the total pay of the typical top American manager has increased from roughly 40 times the average--the level for four decades--to 110 times the average now.… In China each person now produces four times as much as in the early 1990s. Having joined the global labour force, hundreds of millions of people in developing countries have won the chance to escape poverty. Hundreds of millions more stand to join them.… But in the rich world labour's share of GDP has fallen to historic lows, while profits are soaring.” (Economist, 2007)

3 Contents Globalization Importance of partnerships What is corporate social responsibility (CSR)? CSR in Hong Kong Drivers for Organizations Obstacles in running socially responsible businesses Role of Government Incentives

4 Globalization Increase competition –Encourage specialization –Consumers gain from lower prices and greater variety Increase in trade and investments

5 World Trade Source: 2005 Annual Report, Federal Reserve Bank of Dallas

6 Assets Aboard Source: 2005 Annual Report, Federal Reserve Bank of Dallas

7 Globalization Price stability –Lower inflation –Seven largest developed nations: U.S., U.K., Canada, Italy, Germany, France and Japan –Average annual inflation 10.2% (During ) 1.8% (Since 1995)

8 GDP per Capita Source: IMF, Morgan Stanley Research

9 Shares of National Income: G7+ Economies Source: National Sources, Morgan Stanley Research

10 Participation in the Global Economy - Importance of Partnership The Government –Competitive and flexible workforce –Redistribution –Education and Retraining Industrial Corporations –Technical and managerial skills –Aspects of international best practices

11 Participation in the Global Economy - Importance of Partnership Civil Society Organizations –Ensure proper investments Research Institute –Provide technical training and diagnostic studies Multinational Organizations –Policy advocacy –Watchdog

12 What is Corporate Social Responsibility (CSR) Old ideas of doing business –Profit maximization –Concern on shareholders interest Today’s new standard –NOT only pay tax and comply with national regulations –Sustainable development –Consider interest of all stakeholders and are expected to take greater responsibilities in running a business –Corporate social responsibilities (CSR)

13 What is Corporate Social Responsibility (CSR)? Major trends in international business in recent years Business’s contribution to sustainable development Related to basic business activities Impacts on stakeholders: –Social; –Economic; and –Environmental Create additional value and strategic advantage

14 McDonald’s – A Case on Child Labor “City Toys Ltd in Shajing, Shenzhen, employs children as young as 14 who work from 7am until as late as midnight for 24 yuan (about HK$23) a day, packing toys for McDonald's.” “The minimum wage was on the basis that a worker does eight hours a day, five days a week.” "All people aged under 16 are forbidden to work in China." South China Morning Post, 28 August 2000

15 How to Measure? Four possible indicators Dow Jones Sustainability Index (DJSI) Global Reporting Initiative (GRI) Carbon Disclosure Project (CDP) ISO Certifications

16 CSR in Hong Kong Corporate Governance Scorecard Project Survey results based on publicly available information HSI, HSHKCI, HSCCI, and HSCEI constituent stocks 2002: 168 companies are covered 2005: 174 companies are covered Section/ Year2005 Mean2002 Mean Role of Stakeholders in Corporate Governance

17 Drivers for Organizations Enhance image and reputation Increase shareholders value Reduce business risk Legislative requirements Customer loyalty Employee loyalty Improve business operation Control of legal risks

18 Obstacles in Running Socially Responsible Businesses Management practice Increasing cost? Monitoring and enforcement Sustainable development

19 Role of Government Enforcement strategies and legal and regulatory risk management Tax initiatives Contribution to compliance expertise Moral suasion

20 Incentives CSR index –Brand name CSR investment fund –Investment communities Education → 發財立品

21 Thank You!