RELATED LITERATURE

5.2. RELATED LITERATURE

In microeconomics, one of indications of what factors might be important in deciding in a leaders-follower situation is price. The game theory approach indicates the strategic interaction in these cases form a sequential game, while a simulation game is evident in which the players could each simultaneously choose price. In supply chain industry, a firm which dominates the factor markets manages to find the best condition in which the marginal revenue from hiring an extra unit of the factor should equal the marginal cost of that unit (Varian, 2008).

The signals of market prices as main indications for the decision of the leader normally provide are either absent or fail to reflect the true opportunity cost of the resource involved. Moreover, while the mining resources are high level of uncertainty for certain time, financial criteria such as the internal rate of return rule, benefit-cost ratio and the payback period need to be enhanced with net social benefit (total benefit less total cost), valued according to the opportunity cost and willingness to pay principles, is positive rather than negative. ISO 26000 is one of international standards which set guidance on social responsibility and try to encourage corporate leadership in their efforts to operate in the socially responsible manner that society increasingly demands. Many feel that more legislation and regulation is the key to dealing with deficient social responsibility. Although this is certainly justified in some cases, it is rarely the only method of dealing with the problem. Regulation can be considered to be static and comes from the top-down, standardization works from the bottom up, is dynamic in nature and simplifies development.

Based on transformational leadership theory, the role of CEOs in determining the extent to which their firms engage in corporate social responsibility (CSR) is found to be significantly associated with the propensity of the firm to engage in 'strategic' CSR, or those CSR activities that are most likely to be related to the firm's corporate and business-level strategies (Waldman et al, 2006). Angus-Leppan et al (2010) indicated that explicit CSR is linked to an autocratic leadership style, whereas implicit CSR is more closely aligned with emergent and authentic styles. Although our results reinforced key aspects of the explicit and implicit CSR Based on transformational leadership theory, the role of CEOs in determining the extent to which their firms engage in corporate social responsibility (CSR) is found to be significantly associated with the propensity of the firm to engage in 'strategic' CSR, or those CSR activities that are most likely to be related to the firm's corporate and business-level strategies (Waldman et al, 2006). Angus-Leppan et al (2010) indicated that explicit CSR is linked to an autocratic leadership style, whereas implicit CSR is more closely aligned with emergent and authentic styles. Although our results reinforced key aspects of the explicit and implicit CSR

It is enormous challenge for a mining industry to deal with their limited responsibility in community development. Dealing with short term uncertainty, mining industry is tempted to define CSR as a tool for risk management. Vargas-Hernandez (2007) shows that formulation and implementation of foreign mining companies tend to avoid damage to the environment, biodiversity, and health of population. Esteves (2008) emphasized the uncertainty and complexity commitment of senior manager in mining companies to long-term social project. Dubbink (2008) pointed out that CSR reporting likewise developed purely driven by market forces, which indicating the embedment of the information. The efforts of a mining company to conduct CSR are also triggered by business strategy to boost the financial performance. Jong- Seo et al (2010) find it is statistical significant that corporate financial performance and the stakeholder-weighted CSR index are positive relationship. The analysis of Arx and Ziegler (2008) also indicates that environmental and social activities of firm compared with other firms within the industry in are valued by financial markets.

Both profit interest and risk management have raised biased CSR doctrines based on mistaken presumptions about recent economic developments. Henderson (2009) indentifies that mistaken presumption of enterprises would make the world poorer and more over- regulated. A standard regulation is not enough. Appelbaum et al (2009) suggest that organizations require more than ethical safeguards to ensure ethical conduct, such as perceived ethical congruence which positively affects an individual's affective commitment to an organization, and reduces turnover intent. It is the role of CEO leadership to deserve sustainable development, as Waldman et al (2004) mention that CSR activities are most likely to

be related to the firm's corporate and business-level strategies. Unless mining development forces community and local government to deal with potential issue, the role of business never goes beyond philanthropy and toward sustainable community development.

The corporate community involvement in the mining industry refers to negotiation between a powerful company and poor communities. Seelos (2004) show that the experimenting with unfocused CSR often is a zero sum game for society, and CSR without an explicit social compliance framework is lack credibility. It appears that participation in social corporate social responsibility program is not merely a question of rational choosing the right decision in value-free manner, as Berkhout et al (2003) explore contest between competing interests in public policy.

In the less developed countries there existed a great deal of pessimism about the ability of the non-industrialized countries to develop properly in the context of open economic relationship with economically advanced countries. Under developed nations often lack of institutions that are able to protect buyer and sellers in a efficient market, check corrupt behavior, establish property rights, manage the risk, hold their government accountable, provide incentive for long-term investment, and promote the sustainable use of natural resources (Wydick, 2008, p 3-4). If an entrepreneur believes that the way he will get a business permit is to pay a bribe, then he will probably bribe. If an inspector believes that entrepreneurs will be forthcoming with bribes, then he will probably solicit them. It is called strategic independence.

It is acknowledged that mineral industry is under imperfect market, so negotiations are arduous, especially while states do not comply with agreed measures, monitoring is poor and effective sanctions are rarely put in place. In other cases, CSR regimes have a number of indirect positive effects, such as attention to a shared understanding about causes and effects, and lead to the improvement of institutional structures. Berkhout et al (2003, p 15) regards that effective policy making cannot solely be a matter of governments negotiating with governments to produce new international legal instruments. Fuller (2009) demonstrates the efforts of integration between local knowledge and scientific knowledge which have to deal with a problem of mismatched places with a series of attached practice differences instead of a lack of power such as influence and resource.