Premier Oil Corporate Social Responsibility in Indonesia

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Table of Contents

Community Centered Responsibility
Impact of This Engagement
Resource Centered responsibility
Critics to These Undertakings
Conflict of Course
Limited Repatriations
Institutional Interference
Reference List

Premier Oil Company put in significant efforts in carrying out activities aimed at improving the nature and conditions of the societies that form its environment through out the world.

The different nature of the various environments this multinational company operates in, provide for unique approaches in playing this vital role as a corporation. In Indonesia, this company engaged in various activities. Their aim was to improve the general welfare of the society for the year 2009.

Community Centered Responsibility

Premier Oil believes in empowering people. Hence, its corporate social responsibility policy provides for consideration and adoption of approaches that seek to promote this worthy course.

To be specific, it took part in development of infrastructure in the Palmatak sub- district through the construction of health facility, supporting the education programme of the people of Indonesia through construction and maintenance of such learning facilities as kindergartens as well as setting up of sponsorship programmes for locals especially in various institutions of higher learning.

In conservation matters, the company was involved with turtle conservation efforts in Durai Island. Furthermore, it was also involved with provision of relief aid after the devastating earthquake that struck the country in 2009.

Impact of This Engagement

By choosing to invest in the various sectors in Indonesia, Premier Oil places the interests and the future of the people of that country on a path that is to guide them realise their potentials. The government and the people of this country are the biggest beneficiaries, since they directly gain from the infrastructure and other facilities that are put up.

Scholarships enable students that would not have otherwise been able to attain degrees and other professional qualifications due to financial constraints to do so.

This translates to bigger trained and qualified workforce for the country; with invaluable contribution in the various sectors of the economy contribute to positive economic growth in the long run. Its conservation measures ensure that nature’s gifts to the country are well taken care of for posterity and promotion of other industries such as tourism (Blomstrom, 1975).

An educated public is also more informed, and is better placed to make informed decisions and participate effectively in promoting the activities of the company, by virtue of its involvement in improving the welfare of the people. The company’s image is greatly enhanced in Indonesia as a result of the kind of support it offers to the people of that country.

A positive image translates to preferential treatment by the consumers of oil and gas products which are its main areas of concern. This ensures that sales volume is on the increase, and as thus the profit margins. The company is therefore better placed to get involved in even more activities aimed at assisting the community (Crane and Matten, 2007).

Resource Centered responsibility

Premier Oil being a commercial entity requires a workforce to enable the entity carry out its responsibilities in its day to day operations. There is therefore the prospect of exploitation of the country’s resources to achieve this purpose. Reports for 2009 show that majority of the company’s employees were Indonesians.

This is further reinforced by the fact that the company was interested in and did give scholarships to students in universities within its proximity, understandably with a view of recruiting qualified personnel from these institutions.

In addition to employment, there are training programmes and deliberate efforts geared towards personal development for existing employees to ensure they remain current and relevant to the requirements of the industry in their respective departments. Low turnover of employees reflects the company’s fair treatment of the workers at their work stations as well as remunerations (Schmidpeter, 2005).

To the government, hiring of the citizens reduced the unemployment numbers while at the same time increasing the purchasing power of the people. Remittance of income related taxes to the government also benefits it as it contributes to increased revenues. This has a positive effect on the overall gross domestic product of the country denoting economic growth.

The living standards of the people that get employed are also improved, leading to contribution in reduction of the poverty levels in Indonesia. The employees are motivated to put their best efforts in their respective duties, enhancing efficiency in performance and output for the company.

This greater efficiency is reflected in the company’s profits in the long run since it operates at its optimum in terms of labor efficiency and relevance (Saether, 2008).

Critics to These Undertakings

There are numerous arguments that question the relevance and business sense of Premier Oil’s involvement in meeting its social responsibilities in Indonesia with respect to the types of activities it was undertaking. The general outlook by external critics is mainly focused on the priorities of the company as a multi national rather than the role it has to play by virtue of being part of the society.

Critics also argue that the company is not doing enough of corporate social responsibility work. They say that such a big company should be seen to engage in bigger projects. The motive behind this work should be pure good causes rather than an attempt to woo more market share. This is because it kills the very essence of the work.

It is also notable that premier oil is facing major criticisms as concerns its handling of various commodities. Many critics argue that despite hard efforts aimed at helping the public, the company is also doing so much harm to it. The net effect cancels out or even leans to negative. This means that the public is seen to miss out instead of gain.

The company should have policies that duly govern the essence of its corporate work. This should be in line with many other corporate endeavors to ensure that it is not an act in futility. This is what many critics say. On the other hand, there are those who highly laud the company for its hard efforts in its CSR (Buchholtz, 2006).

Conflict of Course

As a business, Premier Oil’s ultimate goal is ideally maximizing profits by enhancing efficiency and reducing operational costs. This calls for limiting outward cash flows especially if such out flows are not related to the operations of the firm.

By diverting some of its revenues towards numerous social courses, Premier Oil is viewed to veer from the purpose of being in business in the first place since the overall effects of such diversions is proportional reduction of the company’s net profits.

In addition, engagement in social responsibility activities is likely to divert the attention of the management thus affecting the company’s efficiency in performance since too much time and effort would be diverted to the non business aspects of the company in the form of social responsibility (Branco, 2007).

However, this is not necessarily the case since the company’s long term sustainability is not only dependant on its volumes of output, but also the command it would have in the environment it operates in. By being part of the Indonesian community, the company has to play its roles that transcend beyond its areas of operation to encourage a cordial coexistence with the various elements of its environment.

The level of involvement is not defined due to the uniqueness of the environment it is in, in terms of need and capacity to respond. Indonesia is a relatively poor country with low literacy levels, strained public utilities and poor infrastructure. These therefore form the stress points that can be addressed albeit in smaller capacities and in the process improving the general conditions (Crowther, 2000).

Limited Repatriations

As a multinational, the company is expected to make its repatriations of part of the earnings it makes to the parent company’s country. These repatriations are usually a percentage of the earnings for a specific period of time.

This means that the amounts sent to the parent company are directly proportional to the earnings for that particular period. Since engagement in social responsibility limits the profit levels for the company, the amounts repatriated are also limited in the process.

The existence of the company in another country such as Indonesia does not guarantee returns of the parent company’s expectations irrespective of its performance there. Sustainability is vital to existence in this country in the first place, thus the need to take measures that are aimed at ensuring that the future of Premier Oil Company in Indonesia is catered for.

This is one of the long term purposes of corporate social responsibility for any firm. Besides, the company’s social responsibilities in the country seek to build the image of the entire corporation all over the world. Goodwill and a respected brand is in themselves an asset to the parent company. By hiring citizens of a country, the firm cuts the extra costs that come with hiring and maintenance of expatriates (Kytle, 2005).

Institutional Interference

Some activities that constitute social responsibility are such that they take the form of the host country’s government responsibility. Provision of social amenities and construction of infrastructure are a good example of what should be left to the government especially because taxes are paid for the same purpose.

When a company like Premier oil gets involved in provision of the same, it is viewed to interfere with the duties and responsibilities of the government in this case of Indonesia. This may lead to punitive measures should there be legislation that provide for action against multinationals that get involved in such activities.

Alternatively, where such moves are permitted, the requirements and procedures to be followed may be very expensive to the company, further decreasing the already reduced profits (Jill, 2008).

For a company like premier oil to be involved with such responsibilities that are essentially the duty of the government, it must have established beyond reasonable doubt that it would get the necessary support and cooperation from the authorities.

For instance, Premier oil was involved in the construction of the health centre with conjunction with the local government of Anambas which had presented the request for development of the projects (Kytle, 2005).

Reference List

Blomstrom, R. (1975) Business and Society: Environment and Responsibility. New York: Blackwell Publishing Ltd.

Branco, M.C. (2007) Positioning Stakeholder Theory within the Debate on Corporate Social Responsibility. Electronic Journal of Business Ethics and Organization Studies, 12: 5-15.

Buchholtz, A. (2006) Business and Society: Ethics and Stakeholder Management. Ohio, Thomson/South-Western Publishers.

Crane, A. & Matten, D. (2007) Business Ethic. Oxford: Oxford University Press.

Crowther, D. (2000) Social and Environmental Accounting. London: Financial Times Prentice Hall.

Jill, S. (2008) Corporate Governance and Accountability. London: John Willey and Sons LTD.

Kytle, B. (2005) Corporate Social Responsibility as Risk Management: A Model for Multinationals. Harvard. Web.

Kytle, B. (2005) Corporate Social Responsibility as Risk Management: A Model for Multinationals: Social Responsibility Initiative Working Paper. Cambridge, MA: John F. Kennedy School of Government, Harvard University.

Saether, K. (2008) Corporate Social Responsibility in a Comparative Perspective: The Oxford Handbook of Corporate Social Responsibility. Oxford: Oxford University Press.

Schmidpeter, R. (2005) Corporate Social Responsibility across Europe. Oxford: Blackwell Publishing Ltd.

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