[A paper presented by Dr. Arega Yirdaw, Chief Executive Officer, as a guest speaker
at a business forum organized by the Addis Ababa Chamber of Commerce
at Sheraton Addis on April 7, 2005.]

In the world of physics it is well proven that for every action there is an equal and opposite reaction. In a business world, each corporation, company or institution exists as a legal entity empowered with the necessary right, and authority to pursue its interests, generate wealth and innovate change. From such privilege comes the responsibility to operate within the law of the land and with the prime objectives of adding value to society. In other words, a corporation’s social responsibility emanates from its privilege to exist as a legal entity.

A corporation by its nature is similar to an individual citizen. Just like an individual, a corporation in any country has the right to exist as legal entity, operate, grow, expand, pay tax, sue and be sued and even seize to exist or dissolve.

An individual citizen is expected to live within the socially accepted norm of the neighborhood, community and country. This, he or she takes as a given without any if’s or but’s. Likewise, and in our present world, corporations are also expected to demonstrate social responsibility as corporate citizens of the country in which they operate. Any business organization or corporation is, therefore, expected to be, as a minimum, a good citizen.

Corporations as entities and people as individuals share certain characteristics. In due course, both will develop personalities which define their style, philosophies and relationships with society. Absent a vision, mission and value, both a person and a company will flounder or become unsuccessful in their efforts to excel. It is, therefore, imperative that each corporation maintains a set of values which describes what the corporation stands for.

These values are the collective principles or ideas, which guide the thoughts and actions of an individual. They also define the characteristics of an organization that can serve as the basis for establishing the “rule of conduct”. Corporations, therefore, shall consider their values as part of their core objectives and include “Corporate Citizenship” as one of their social responsibilities.

Historically, at the turn of the 20th century, people were concerned about their employment, financial security and economic welfare. However, with high technology making it possible for people to quickly get access to worldwide information, about the environment, health and the like, people’s social consciousness has increased.

Furthermore, owners and leaders of corporations, being a part of society, are more aware of social issues and their effect to the success or failure of business. Corporations, if they choose to survive, must therefore, adjust to the needs of society with added responsibility - in other words, they must be socially responsible.

The debate between those who advocate that the prime objective of corporations is to “make money”, by maximizing profit on one hand; and those who take the position that any business is a social institution that should consider the impact of its operation to society, is slowly being won by the latter. In line with this, a socially responsible corporation must be organized to satisfy the following five stakeholders.

The Government (indirectly society, in a form of tax payment), the Owners or shareholders (return on their investments), the Employees (Compensations for their efforts), the Company (Fund for growth & expansion of the corporation) and the Community (Meet social responsibility as corporate citizen)

Of all the above, a corporation’s responsibility to the community requires a paradigm shift by owners, business leaders, executives as well as regulatory agents. It is worthwhile to mention that the word “Community” includes customers, employees and their family members and others who are responsible for the survival of corporations. It is through quality products and proper services that corporations tend to sale satisfaction as commodity to the community. Community includes individuals, group of individuals, institutions and others who deserve to be assisted by socially responsible corporations which are determined to add value to society by meeting their “Corporate Citizenship” obligations.

To become a well rounded, socially responsible corporate citizen, a corporation must provide assistance within and without its domain. Within its organization, a socially responsible corporation is expected to deal with assistances such as:

• Promoting the skills of employees
• Enhancing awareness and knowledge about the individual’s health
• Promoting quality life for employees and their family members.

In addition, a socially responsible corporation is expected to:

• Focus on using technology to develop products & services that would improve the lives of customers and others.
• Participate in the growth and development of the country.
• Contribute to the social welfare of the community, by constructing schools, health centers and the like.

By constructively engaging with numerous other social institutions, any corporation can become an acceptable and useful partner in the social and economic amelioration of individuals, community and society at large.

The bottom line in business must not be “better profit” instead must be “better business performance” since the former is just a subset of the latter. This is due to the fact that the latter includes the intangibles such as fame and recognition, industrial peace and a sense of belongingness to the community. The satisfactions that a corporation gets from “better business performance” endure far beyond monetary rewards, for it provides a sense of legitimacy, acceptance and importance.

Maintaining good “corporate image” is one of the values of a socially responsible corporation. Nowadays, corporations not only are responsible in providing quality products & services at a reasonable price but also are expected to exercise their responsibilities by participating in the growth of the community by making respectful contributions to the welfare of society. This will establish the corporation’s good name and image amongst the people who have interest in the corporation's products & services.

Every corporation, therefore, must be aware of the reputation that it gets as a result of its participation in the growth and prosperity of society.

The highest challenge is making sure that the natural bias toward making profit and the responsibility for effective engagement in corporate citizenship activities, become part of the fabric of any corporation. Quite honestly, none of the corporation efforts is worth doing if the contribution that the corporation making is not adding value to the standard of living of the employees in particular and the community in general.

When owners and employees of a corporation start feeling good enough about their corporation to want to be identified in public as owners, and to want to be seen wearing its identification in a form of logos, badges etc, the management of the corporation can claim that they are on the right track to be a part of a socially responsible corporation.

There is nothing like new ideas to shake things up. But it needs a considerable paradigm shift in our country to accept every visible good idea. Corporate citizenship is one of the ideas that must be developed and nurtured in this country for it is simply just, for just companies, run by just leaders, to bring just solutions for unjustly affected communities and the environment.

To sustain profitability, growth and maintain moral responsibility, corporations must play by set of rules and ethics with the goal of treating members of the community with fair and uncorrupted approach.

Business related corruptions, i.e. corruptions not adulterated by skewed and self-serving political interference, have a devastating impact to the moral responsibility of a corporation. It can create the corporations’ demise. Irresponsible and corrupt corporations will lose their place in the modern and socially conscious peoples of the world. The world has learned from the socially irresponsible activities conducted by companies like Shell in Nigeria and Union Carbide in Bhopal, India as well as the irresponsible acts of top business leaders or CEO’s of ENRON and others in the USA in the recent past.

Corporate leaders, such as Board Members, CEOs and Executives are at the center of governance issues. Their core responsibility is to ensure that management operations or services are conducted consistently in the best interest of all stakeholders including the community. This, however, is not adequate if such operations and services are performed with a misplaced focus of not conducting the same in a socially responsible manner.

In our present time, one has to also be aware of the effect of transnational corporations as opposed to national or home-grown corporations. The unscrutinized acceptance of globalization, liberalization and privatization have propelled Transnational Corporations (TNC) to a power position so strong that they literally write their own rules and regulations for their presence in any country. Relatively speaking and mildly put, Transnational Corporations have demonstrated less focus on their social responsibility than the national corporations.

It is also proper to mention, at this stage, that organizations owned and run by philanthropic individuals behave quite different from the Transnational Corporations described above. Owners with intense interest to add value to people’s life and to promote the growth of nations, spend their money and energy with grace and generosity to the betterment of us all. As an insider and a close friend, I submit to you that our beloved Dr. Sheik Mohammed Hussein Ali Al-Amoudi, the Chairman of MIDROC Ethiopia, is one of those great philanthropic people who are out there to make a positive impact in the lives of our fellow Ethiopians.

At this junction, it is fitting to share the corporate governance and the activities surrounding social responsibility that are being exercised by the MIDROC Group of Companies in Ethiopia.

These companies are led with defined visions, missions and corporate values as well as policies & procedures that create conducive atmosphere for both management and employees.

Out of the twelve values , the following three are the ones used to promote the social responsibility of the companies.

1. Customer satisfaction
2. Integrity & Ethics and
3. Social responsibility and corporate citizenship

In practical terms, the MIDROC Group companies have used the above to:

• Established HIV/AIDS Corporate Intervention Team to promote awareness, provide financial help, avail counseling service and provide free medicine to HIV Positive employees.
• Establish and coordinate three annual get-togethers known as: Employee/Company day, Family day and Customer day.
• Participate in sponsorships, donations, contributions and the like.
• Participate in construction and other activities geared towards adding value to the community.

These activities and their associated finance do not include the generous contributions of the owner of MIDROC Ethiopia who, often, makes personal contributions to promote growth & development in this country.

In conclusion, I would like to raise the following remarks.

1. It is only proper to mention the fact that business leaders have the moral and social responsibility to exercise extreme caution in making decisions that have social implications.

2. Depending on their ownership, management, country and the like, corporations can be viewed along two extremes – those with no social responsibility except the bottom line of making “profit” and those who are champions of all social causes.

3. Corporations, because of their potential impact on society, are expected to assume great social responsibilities.

4. For the good of both corporations and society, the partnership between the two should be strengthened and encouraged.

5. It is helpful to recognize that the increased social consciousness of society has left corporations with no choice but to operate in a socially responsible environment to ensure their existence.

6. Social responsibility has many forms of expressions. It can be seen as the responsibility of corporations to pay equitable compensation to employees; engage in fair and legal market competition; avoid product liability, participate in community development activities, meet tax and other legal obligations, provide reliable products & services to customers, promote a healthy working environment, contribute to the maintenance of natural resources and the like.

7. The business community, as promoters of wealth and prosperity, are expected to develop their personal philosophies with sensitivity and attention to “corporate citizenship” for the welfare of society.

8. Business leaders are expected to rise above the moral climates of our time and promote fair and transparent practices in their effort to satisfy employees, customers and the society at large. Unethical and corrupt practices to snatch quick profit will not last. At the end of the day good name will pay better. We, as leaders in the business community, are all expected to opt for higher standards of conduct for society deserves more social responsibility by corporations and indeed demands it.