Chapter 3 Corporate Social Responsibility and Citizenship Copyright

Chapter 3 Corporate Social Responsibility and Citizenship Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education.

Corporate Power and Responsibility § Corporate Power: Capability of corporations to influence government, the economy, and society, based on their organizational resources. § The tremendous power of the world's leading corporations has both positive and negative effects. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 -2

Comparison of Annual Sales Revenue and the GDP for Select Transnational Corporations and Nations, 2014 Figure 3. 1 Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education.

Corporate Power and Responsibility § Iron law of responsibility says in the long run, those who do not use power in ways that society considers responsible will tend to lose it. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 -4

The Meaning of Corporate Social Responsibility • Act in a way that enhances society and its inhabitants and be held accountable. • Acknowledge any harm to people and society and correct it if possible. • May forgo some profits if its social impacts hurt its stakeholders or if its funds is usable for a positive social impact. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 -5

Four Dimensions of Social Responsibility Stages Examples Stage 1: Financial Viability Starbucks offers investors a healthy return on investment, including paying dividends Stage 2: Compliance with Legal and Regulatory Requirements Starbucks specifies in its code of conduct that payments made to foreign government officials must be lawful according to the laws of the United States and the foreign country Stage 3: Ethics, Principles, and Values Starbucks offers healthcare benefits to part-time employees and supports coffee growers by offering them fair prices Stage 4: Philanthropic Activities Starbucks created the Starbucks Foundation to award grants to eligible nonprofits and to give back to their communities 6 © 2016 by Mc. Graw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This. Mc. Graw-Hill document may not be. Allcopied, scanned, No duplicated, forwarded, distributed, or the posted a website, in of whole or part. Education. Copyright © 2017 Education. rights reserved. reproduction or distribution without prioron written consent Mc. Graw-Hill

Corporate Citizenship § Corporate Citizenship: the actions they take to put their commitments to corporate social responsibility into practice. § The term global corporate citizenship, similarly, refers to putting these commitments into practice worldwide. § Companies demonstrate their corporate citizenship by: § proactively building stakeholder partnerships § discovering business opportunities in serving society § transforming a concern for financial performance into a vision of integrated financial and social performance Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 -7

Balancing Multiple Responsibilities § Multiple responsibilities of business include § Economic responsibilities § Social responsibilities § Legal responsibilities § Challenge is to balance all three. Economic responsibilities Social responsibilities Legal Responsibilities § Successful firm is one which finds ways to meet each of its critical responsibilities and develops strategies to enable the obligations to help each other. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 -10

The Corporate Social Responsibility Debate Figure 3. 3 Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 -9

Business Reputation § Reputation refers to desirable or undesirable qualities associated with an organization or its actors that may influence the organization’s relationships with its stakeholders. § The Reputation Index measures a company’s social reputation. § It evaluates critical intangible assets that constitute corporate reputation. § Rating Research, a British firm, distributes the index and ratings to interested parties. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education.

Assessing and Reporting Social Performance § Social audit: a systematic evaluation of an organization’s social, ethical, and environmental performance. Benefit of Social audits (by Simon Zadek): 1. Help businesses know what is happening within their firm 2. Understand what stakeholders think about and want from the business 3. Tell stakeholders what the business has achieved 4. Strengthen the loyalty and commitment of stakeholders 5. Enhance the organization’s decision making 6. Improve the business’s overall performance Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 -11

Social Audit Standards Three different ways: 1. Companies can develop standards designed to set expectations of performance for themselves or their suppliers or partners. Example: Apple 2. Companies within an industry can agree on a common industry-wide standard. 3. Can be developed by global nongovernmental organizations or standard-setting organizations. Example: International Organisation for Standards, United Nations Global Compact, The Global Reporting Initiative and others. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 -12

Social Reporting § When a company decides to publicize information collected in a social audit. § Transparency: When companies clearly and openly report their performance—financial, social, and environmental. Example: Australia, New Zealand § An emerging trend in corporate reporting is the integration of legally required financial information with social and environmental information into a single integrated report. Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 -13

Trends in Corporate Social Reporting Figure 3. 6 Copyright © 2017 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 -14