An investigation into the probability of a tabacco company to be a socially responsible corporate citizen
Thesis (MBA)--Stellenbosch University, 2014.
There are diverse, however mostly negative views as well as different regulations to adhere to within the tobacco industry. Given the controversy around the tobacco industry and the latest tendency of investors to move to more reputable investments, the research project explored to what extend a tobacco company can adhere to the criteria to be a socially responsible corporate citizen and therefore still attract socially responsible investors. The research identified and discussed the concerns that put the reputation of the tobacco industry for socially responsible behaviour at risk. Furthermore, the research investigated corporate governance and reporting frameworks to evaluate the tobacco industry’s corporate citizenship behaviour to be able to conclude if a tobacco company can be regarded a good corporate citizen. This study was based on a literature review and critically discussing the findings. The information obtained in this research assignment was based on secondary data collected through analysing the company’s records, corporate governance codes and socially responsible investment indices in South Africa, United Kingdom and the United States of America. The research focused on information already in the public domain so there was no need to consider the confidentiality of the information. The research identified what it entails to be a socially responsible corporate citizen in the modern era. The definition of corporate governance was discussed with special reference to the corporate governance codes within the jurisdictions of South Africa, the United Kingdom and the United States of America. Furthermore, the background to the development of the different socially responsible investment indices was investigated, together with the selection criteria for inclusion on the Johannesburg Stock Exchange Socially Responsible Investment, FTSE4Good and the Dow Jones Sustainability Index. The FTSE4Good is the only index, which specifically excludes tobacco producers. The assignment identified some conflicting views when looking at social responsibility within the tobacco industry. It can be argued that corporate social responsibility is nothing other than a “marketing” tool for business to gain respect within the market and from government. Companies gain legitimacy and the right to do business; thus to be profitable and grow economic value. When reviewing steps taken by the industry case study it is evident the company focused a lot on addressing their consumers’ expectations to grow economic value. This seems to be a very one-sided approach, but also a very reactive approach, as the company’s sustainability agenda appears to be driven due to external pressures than being part of the core strategy of the company. It can therefore be argued that the company uses corporate social responsibility as a form of promoting the use of tobacco products and not due to being socially responsible corporate citizen. It was thus concluded that a tobacco company cannot be recognised as a socially responsible corporate citizen.