Corporate Responsibility in Ghana: An Overview of Aspects of the Regulatory Regime

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This paper examines some aspects of the regulatory regime affecting corporate social responsibility (CSR) in Ghana. It seeks to assess the relationship between law and the actions of corporate organisations and its implications for corporate
Transcript Business and Management Research Vol. 3, No. 2; 2014  Published by Sciedu Press  31  ISSN 1927-6001 E-ISSN 1927-601X    Corporate Responsibility in Ghana: An Overview of Aspects of the Regulatory Regime Olivia Anku-Tsede 1 , PhD & Eric Worlanyo Deffor  1   1  University of Ghana Business School Department of Organisation & Human Resource Management P.O. Box LG 78 Legon, Accra – Ghana West Africa Correspondence: Olivia Anku-Tsede, PhD, University of Ghana Business School Department of Organisation & Human Resource Management P.O. Box LG 78 Legon, Accra – Ghana West Africa. Tel: 233-20-455-5346 E-mail: Received: April 16, 2014 Accepted: May 12, 2014 Online Published: May 15, 2014 doi:10.5430/bmr.v3n2p31 URL:  Abstract This paper examines some aspects of the regulatory regime affecting corporate social responsibility (CSR) in Ghana. It seeks to assess the relationship between law and the actions of corporate organisations and its implications for corporate responsibility in Ghana. Corporations are critical actors in the political, economic, -social and cultural development of all countries. Besides providing goods and services, they are a source of livelihood for many and contribute to government revenue through the payment of taxes. They also impact on the physical and socio-economic environment of a nation. CSR has over the years changed from voluntary practice to more obligatory policies due to  pressure from external stakeholders and the law. In recent times, various laws and legal standards seem to play a vital role in the development, implementation and enforcement of CSR. The law serves CSR by providing a means for CSR to adhere to some very essential practices for instance the protection of the rights of employees among others while at the same time allowing organisations to make their own decisions concerning how to give back to the community. It suggests that even though CSR is to a large extent influenced by various regulatory regimes in Ghana, its efficiency is often adversely affected by deficiencies in the enforcement of the relevant laws. It is thus suggested that the enforcement agencies should be empowered to ensure compliance with the laws to enable an effective delivery of CSR in Ghana. Keywords: Corporate Responsibility, CSR, Ghana, Regulatory regime 1. Introduction Corporations are critical actors in the political, economic, social and cultural development of all countries. Besides  providing goods and services, they are a source of livelihood for many, they pay taxes effectively, enabling governments to operate, and have an impact on the physical and social environment (Atuguba et al., 2000).  Nonetheless, firms do grapple with various challenges in the course of conducting their business as well as fulfilling their corporate obligations. Some of these challenges included how to achieve high social performance given the increasingly complex environment within which they operate. These challenges according to Nasi, et. al., (1997) often arises from the existence of a wide variety of stakeholders, many of whom vary from issue to issue. These identifiable challenges (social and environmental) will continue to play critical roles in the survival of businesses or corporations given the ever-changing expectations of stakeholders (Husted, 2000). Business corporations thus, have duty towards society, and more specifically towards identified constituents (stakeholders), especially when society’s expectations have dramatically changed or increased (Carroll, 1999; Lantos, 2001). Historically, CSR has been perceived as a means through which companies or organizations fulfilled their side of a supposed social contract between themselves and the communities within which they operate. While some theorists perceived CSR as actions taken by organizations to better the communities or environments they operate in, some defined CSR “as integrating social, environmental, ethical and human rights concerns into business operations and core strategy in close collaboration with stakeholders on a voluntary basis; commitment to behaving ethically and contributing to improving quality of life in the society in general; and organisation’s obligation to maximise its impact on stakeholders and minimise its negative impact” (E.U Commission, 2002; Ferrell et al., 2004). In other words, organizations owe a moral obligation to society. Business and Management Research Vol. 3, No. 2; 2014  Published by Sciedu Press  32  ISSN 1927-6001 E-ISSN 1927-601X    In Ghana the need for businesses to be responsible has become relevant given the gradual shift towards privatization and deregulation. This trend can strengthen the role of the private sector in complementing the public sector efforts thereby creating new hopes and responsibilities for businesses (Husted, 2000). Largely, most corporate bodies exist to make profits or satisfy shareholders value, in achieving this many may engage in illegal activities at the expense of stakeholders or shareholders of the company. In most instances these unregulated activities results in adverse effects on the environment, e.g. large companies in the mining sector might ignored the dangerous conditions under which their employees work; resulting in high incidents of physical impairment, poisoning, cardiovascular and respiratory diseases and death amongst workers. These events raises the legitimate question of whether corporations can of their own be responsible without the existence or enforcement of Law? McBarnet (2009) opines that engaging in CSR was no longer a voluntary act on the part of businesses but rather companies must practice CSR because there is legal pressure and enforcement. Although presently, the notion of corporate social responsibility (CSR) is linked with ethical and moral issues concerning corporate decision-making and behaviour; their activities vary per the dimensions they cover and their mode of implementation. These dimensions include the legal dimension which demands that companies adhere to laws that pertain to their various areas of operation. This notwithstanding many governing bodies including the EU Commission (2002) have insisted that CSR should be voluntary if companies are expected to do more than the law dictates that is, an informal type of law (Buhmann, 2006). However, in as much as firms need to be profitable, legal responsibilities requires them to carry out their activities within the confines of the society’s legal structure, derived from its agreed jurisdictions (Helmer and Ståhl, 2009). Again, the primary difficulty associated with dealing with the legal aspects of corporate social responsibility (CSR) is the lack of an identifiable and acceptable definition of the concept of CSR. Consequently, although its role in the corporate world and the business world at large cannot be denied, the contents, dimensions, and nature, of the concept remain unclear. Therefore most often companies find themselves at the wrong side of the laws because, they are not aware of the various legal provisions in relations to good corporate responsibility. Ghana has a very diverse corporate environment. There are limited liability companies; companies limited by guarantee; non-Ghanaian companies registered in Ghana as external companies; and state-owned corporations created  by statute. There are also a whole lot of associations such as partnerships and co-operatives that have corporate  personality. Then there are unincorporated businesses, such as sole proprietorships, that act more or less like corporations. All these corporate and “quasi-corporate” forms are subject to varying degrees, to principles of CSR. Even though at the global level there is a proliferation of initiatives to promote CSR in the face of public concerns about the political, economic, social and environmental impact of the activities of corporations in societies in which they operate, there is no comprehensive or readily available document on CSR in Ghana. What provides the CSR framework in Ghana are a variety of policies, laws, practices and initiatives. In other words, policies, legislation, and other forms of law regulate CSR in Ghana. Many government policies, such as the Ghana Land Policy document bear directly on CSR. Though these policies are not named as pro or anti CSR initiatives they have the potential to promote or denigrate CSR. In addition, specific laws which have a bearing on CSR regulate particular industries and sectors of the economy such as banking, insurance, mining and commerce. A number of international conventions that Ghana has ratified are also applicable, and have a bearing on CSR. In the absence of a clear CSR policy, individuals, advocacy groups and public agencies seeking to hold corporations responsible for their social responsibilities usually encounter difficulties in doing so, probably because of the absence of a readily available source document on CSR for reference, particularly in the absence of any statutory or contractual obligation imposed on such corporations. Also, companies seeking to meet their corporate social responsibilities are not sure of whether they are doing what they should be doing and are unclear as to the exact parameters of CSR. A few studies have been conducted in this area primarily in the European Union (EU). Notable among them is a study conducted in Denmark by Buhmann (2006) who sought to ascertain the role of law in corporate CSR activities. The findings showed that CSR functions as informal law, and that important principles of law function as part of a general set of values that guide CSR. The findings further suggested that aspects of law in the abstract as well as in the statutory sense and as self-regulation influence the substance, implementation and communication of CSR. It was  proposed that the current normative regime of CSR in terms of demands on multinational corporations could constitute pre-formal law. Another study by McBarnet (2009) on the linkages between CSR and the law established the existence of a widening range of governance methods being brought into play to form a new corporate accountability. Although some studies have been conducted on CSR in Ghana, (e.g. Amponsah-Tawiah and Dartey-Baah (2011); Ofori and Hinson, (2007); Kuada and Hinson (2012), none looked at the role of law in facilitating or otherwise ensuring compliance of CSR by corporate bodies in Ghana, hence making this study a Business and Management Research Vol. 3, No. 2; 2014  Published by Sciedu Press  33  ISSN 1927-6001 E-ISSN 1927-601X     pioneering study. Specifically, the study sought to address the following questions: which aspects of the regulatory regime of Ghana affect Corporate Social Responsibility (CSR) activity? What is the relationship between law and the actions of corporate organisations and its implications for corporate responsibility in Ghana? 2. Theoretical Framework 2.1 Defining Corporate Responsibility Corporate social responsibility is seen as “a commitment to improve community well-being through discretionary  business practices and contributions of corporate resources” (Kotle and Lee, 2004). Some authors hold the view that CSR is an interwoven concept between business and society rather than distinct entities hence the two work hand in hand. Others have also argued that CSR concerns how companies manage the business process to produce an overall  positive impact on society (Baker, 2003; Wood, 1991). In the Ghanaians context however, the concept is seen as  building capacity for sustainable livelihoods, respecting cultural differences and finding business opportunities in  building the skills of employees, the community and government (Amponsah-Tawiah and Dartey-Baah, 2012). These differences pertaining to what CSR is or should be, perhaps has influenced the evolving nature of the terminology. Over the decades CSR has been used interchangeably with corporate responsibility, corporate citizenship, social enterprise, sustainability, sustainable development, triple-bottom line, corporate ethics, and in some cases, corporate governance (Bassen, Hölz and Schlange, 2006). These interchangeable terminologies, have indeed, influenced the way various actors understand and by extension how CSR is defined and practiced. 2.2 The CSR Pyramid According to Carroll (1979), the concept of social responsibility business is mainly driven by the economic, legal, ethical, and discretionary expectations that society has of organizations at any given point in time. It is therefore imperative that businesses and/or corporate organisations undertake their activities in a manner that either conforms to or exceeds the ethical, legal commercial and public expectations society has of businesses. Nonetheless, Carroll (1991) posits that an important goal of a company is to provide financial return to its shareholders. However in trying to fulfil the financial returns of shareholders corporate activities must be undertaken bearing in mind people’s opinion and the legislation of a country; reason being that corporate organizations stand to lose on its financial gains in the event that it is perceived as a ‘bad’ company within its operational area or be found flouting legal requirements of its host country. The CSR pyramid developed by Carroll (1991) therefore emphasizes that a company has four different aspects of CSR that need to be taken into consideration in order to fulfil its obligations towards the society; the economical, legal, ethical and philanthropic responsibilities. The economic responsibility component of the  pyramid, according to Carroll (1991) constitutes the fundamental reason corporate organisations exist. That is to maximize shareholders value whiles remaining competitive within the market they operate. Therefore in the absence of  profit, a company cannot and will not survive (Carroll, 1991). Second to the economic responsibility identified by Carroll (1991) is the legal and ethical responsibility. Carroll (1991) explains that although firms seek to maximise shareholders value, all businesses must ensure they operate within the rules and regulation of their host countries. Differentiating the legal component from the ethical component Carroll (1991) attributed the legal responsibility to written laws and the ethical responsibility to norms, standards or expectations, of consumers, shareholders and the community. He however indicated that most often the legal requirements are derivatives of ethical aspect of CSR which then becomes written law. The last of the CSR pyramid is the philanthropic responsibility. These are mainly activities corporate organisations engage in so as to be perceived as “good corporate citizens”. The philanthropic responsibility is not required by law or interested parties. It is the means by which companies increase their reputation and goodwill (Carroll, 1991). 2.3 Stakeholder Theory of CSR The stakeholder theory holds the view that firms have a responsibility to satisfy the interests of their diverse constituents, referred to as stakeholders. Stakeholders according to Freeman (2004) are “those groups who are vital to the survival and success of the organization”. In other words the actions or inaction of these groups can make or unmake an organization. Friedman and Miles (2006) emphasizes therefore that, the efforts of organizations should be aimed at managing the interest, needs and viewpoints of these groups. Henriques and Sadorsky (1999) identified four main categories of stakeholders likely to show concern for the impacts of corporate activities. These categories include organizational, community, regulatory and media stakeholders. Organizational stakeholders are “those who are directly related to an organization and have the ability to impact its bottom line directly” (Henriques and Sadorsky 1999). These may include customers, employees, shareholders and suppliers (Clarkson, 1995). These groups are absolutely essential to the success and survival of the firm, both in the short and long term. Community stakeholders include environmental and human rights defense groups, along with other potential activists present in the areas where Business and Management Research Vol. 3, No. 2; 2014  Published by Sciedu Press  34  ISSN 1927-6001 E-ISSN 1927-601X    the firm operates. The regulatory stakeholders group is made of Governments, trade associations, and competitors. In a nutshell the stakeholders’ perspective according to (Maignan et. al., 1999) requires businesses to address the responsibilities placed on them by their stakeholders. It is therefore ethical for companies to be fair or just by giving acceptable treatment to their employees and stakeholders. For example, it would be unfair for a company that makes high earnings to pay their workers low wages or for a company to import labour from a different jurisdiction or region when there is available labour in the location of operation especially for discriminatory reasons. Businesses are expected to ensure that their actions do not deny their employees of their basic human rights. 2.4 Legitimacy Theory Suchman, (1995) considers legitimacy as “a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs and definitions”. Deegan (2002) opines that legitimacy theory posits organizations are continually seeking to ensure that they operate with the bounds and norms of their respective societies. To this end, organizations attempt to establish congruence  between “the social values associated with or implied by their activities and the norms of acceptable behaviour in the larger social system of which they are part” (Dowling and Pfeffer, 1975, p. 122).Organizational legitimacy is not a steady state, but variable. This variability is not only temporal, but also spatial or across stakeholder and cultural groups. Therefore depending on an organization’s perception of its state or level of legitimacy, an organisation may employ ‘legitimation’ strategies (Lindblom, 1993). The above reviewed theories form the theoretical framework for this study. Collectively, the pyramid theory, the stakeholder and the legitimacy theories informed us on the different reasons for which companies engage in CSR activities. The legal responsibility component of the pyramid model by Carroll (1991) and the legitimacy lay credence to the role of law and regulations in propelling companies to undertake CSR. 3. Methodology This study used qualitative method to address the objectives of the study. The use of qualitative methodology facilitated the analysis of various legal documents, judicial decisions and other publications which did not involve numerical data. It also allowed for in-depth analysis of various theories concerning the CSR phenomenon as well as the interpretation of documents and concepts used in this paper (Saunders, et. al., 2009; Starrin & Svensson, 2004; Åsberg, 2001). The sources of data used for the study was secondary in nature. Using content analysis and critical document review methodology, newspaper publications, legal documents, annual reports, government publications, organization and academic publications was critically evaluated. This methodology has been used in similar studies by Buhnann (2006) and McBarnet (2009) to address their set objectives. 4. Corporate Liability under the Labour Laws of Ghana Worldwide, companies are expected to comply with laws and regulations, set by both local and international governments. These laws try to set minimum standards for responsible behaviour in various areas of their operations. They cover issues such as human rights, treatment of labour, environmental and consumer protection, health and others all of which constitute some dimensions of the triple bottom line approach. It has been indicated that CSR activities are  becoming apparent in the operations of corporate bodies in Ghana; however, such activities are not carried on a significant scale. This, Ofori (2007) referred to as “the engagement of haphazard indulgence of corporate good works”. The responsibility of corporate organization takes on a two-fold nature that is internal and external corporate social responsibilities. The latter, over the decades have been given much prominence at the expense of the former. Internal corporate responsibility (CR) practices according to Turker (2009) are directly related with the physical and  psychological working environment of the employee. It is expressed in concern for the health and well-being of employees, their training and participation in the business, equality of opportunities and work-family relationship (Vives, 2006). In Ghana, corporate organisations are both legally and morally responsible for ensuring that the rights of employees are not violated. The observance of good labour practices is therefore essential in accessing the CSR  practices of corporations in Ghana. This includes safety at work and good working conditions, an ascertainable profit sharing systems, retrieval of benefits, employee involvement in decision making and respect for workers etc. (Atuguba et al., 2000). In 2003 the Labour Act 2003, Act 651 passed into law informed by the need to codify the then existing laws on labour which were scattered in various pieces of legislation into one common statute and to develop a law which conforms to the 1992 Constitution of the Republic of Ghana, and the International Labour Organization (ILO) Conventions to which Ghana is a signatory. Business and Management Research Vol. 3, No. 2; 2014  Published by Sciedu Press  35  ISSN 1927-6001 E-ISSN 1927-601X    4.1 Employment Protection Rights: The Labour laws of Ghana provide for various forms of employee protection rights, including a healthy and safe working environment, maternity and holiday pay, annual leave with pay as well as protection against unfair dismissal and redundancy. For instance, section 10 of the Labour Act, 2003 (Act 651) outlines clearly the various rights of employees. Sec 10(a) states that a worker or employee must work under satisfactory, safe and healthy conditions. Section 118 gives details on the issue of health and safety of the worker in an establishment and the various duties an employer must carry out to ensure the health and safety of his or her workers. Particularly, it requires an employer to  provide and maintain at the workplace, a healthy and safe system of work. This requirement extends to plant, machinery, working tools, chemicals and the environment. Accordingly, the employer is enjoined by law to provide the needed safety equipment, adequate lighting systems and an appropriate flooring etc. to ensure that employees work in a safe, hygienic and less hazardous environment. In the event that an employer who without any reasonable excuse, fails to discharge any of these obligations under subsections (1) and (2) thereof, he shall be deemed to have committed an offence and shall be liable on summary conviction to a fine not exceeding 1000 penalty units or to imprisonment for a term not exceeding 3 years or both (Sec 118(5) of the Labour Act, 2003 (Act 651). This duty of the employer to ensure a safe working environment for its employees was emphasised in the Ghanaian case of Issah v. Mim Timber Co. Ltd [1980] GLR 430. In this instance the Plaintiff was employed to fell trees, he got injured whilst felling a tall tree. In an action against the employer for damages, he argued that the employer failed to ensure that a proper warning was given as to the direction in which the tree was falling, thus breached its duty to  provide a safe system of work. The court held that the law places a high duty of care on an employer towards his servants and this duty includes a duty to his employees to take reasonable care for their safety in the course of their operation. Accordingly, an employer was enjoined by law to provide competent fellow   workmen, adequate material a  proper system of work and effective supervision. Similar views were expressed in the case of Ekem v. Wiseway Cleaners Ltd [1981] GLR 801. These duties have often times been extended to agents of employers and third parties. For instance, in Issah v. Mim Timber Co. Ltd[1980] GLR 430 the court further indicated that the duty of the employer is personal to the employer and he can’t successfully delegate it. He will be liable even if the damages were caused while another was acting in his place. Similarly, in Kuni v. State Gold Mining Corporation and Another [1978] GLR 205-211 the court was of the view that, where a person was authorised by statute or bound by contract to do a particular work, he could not escape responsibility by contracting with another person to do it. 4.2 Deduction and Payment of Pension Contributions: Prior to the enactment of the new National Pensions Act, 2008 (Act 766) the repealed Social Security Law, 1991 (PNDCL 247) regulated pensions in Ghana by the establishment of a trust which provided social protection for the working population for various contingencies such as old age, invalidity, and such other contingencies as may be specified by law. However, calls for some pension reforms which aimed at making the scheme more beneficial led to the promulgation of the Act 766. This Act seeks to establish a “three-tiered” pension scheme i.e. a mandatory basic national social security scheme; a mandatory fully funded and privately managed occupational pension scheme, and a voluntary fully funded and privately managed provident fund and personal pension scheme. The Act makes specific  provisions for the deduction and remittance of monthly contributions of a sum equal to 5.5% of the worker’s salary towards that worker’s pension scheme. The law further enjoins an employer of an establishment to pay for each month in respect of each worker, an employer’s contribution of an amount equal to 13% of the worker’s salary during the month. The total contributions are payable to the Social Security and National Insurance Trust (Trust) as well as a Trustee of a registered scheme. 4.3 Remedies for Rights Violations The relevant laws in Ghana often provide for specific remedies available to injured parties. Thus in the event of a violation of employment rights of workers, such as in cases of unfair termination or redundancy, workers have under sections 63, 64, and 65 of Act 651, been given a remedy at law. These remedies often include compensation or damages, re-instatement or re-employment in instances of unlawful or wrongful termination or dismissals. 4.4 Health & Safety In today’s competitive world, the success of most companies hinges on the ability of the company to attract, motivate and retain competent, effective and efficient employees. Occupational Health and Safety (OHS) issues are becoming one of the key ingredients to attracting and maintaining employees. It is important to point out that corporations must not view OHS issues in isolation but rather they must see them as forming an aspect of the company’s internal corporate social responsibility to its employees and by extension its customers. To avoid legal suits, it becomes
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