Corporate Social Responsibility 2 11 Chapter Objectives Explain

Corporate Social Responsibility 2 -11

Chapter Objectives • Explain corporate social responsibility (CSR) • Provide business examples of CSR • Differentiate social responsibility and responsiveness • Explain corporate social performance (CSP) • Relate social performance to financial performance 2 -22

What is CSR? CSR is the obligation of decision makers to take actions which protect and improve the welfare of society as a whole along with their own interests. ” 2 -3

According to Stoner & Others, ” Management”, 1996, “Corporate social responsibility focuses on what an organization does that affects the society in which it exists. ” According to the EU Commission (2002) “CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis. ” 2 -4

Profit is all that matters Some writers have taken the view that a corporation should not be concerned with social responsibility and you are certain to come across the statement from Milton Friedman, made in 1970: “there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or 2 -5

Equally some people are more cynical in their view of corporate activity. So Drucker (1984) had the opinion that: “Business turns a social problem into economic opportunity and economic benefit, into productive capacity, into human competence, into well-paid jobs, and into wealth”. 2 -6

• Its annual revenue in the fiscal year ending January 31, 2010, was $405 billion. Comparing this to statistics for 2009 provided by the International Monetary Fund, if Walmart were a country, it would, in terms of GDP (gross domestic product) rank between Sweden (22 nd largest economy, $406 billion GDP) and Austria (23 rd largest economy, $382 billion GDP). 2 -7

Short case on Walmart üWalmart, the world’s largest retailer, achieves low prices by “leveraging its buying power as the world’s largest retailer” and “controlling labor costs. ” 2 -8

• The company has 8300 “facilities” worldwide (4300 in the United States, 4000 in other countries). • Walmart employs 2. 1 million people worldwide, including more than 1. 4 million people in the United States. They are the largest private employer in Mexico and one of the largest in the US and in Canada. 2 -9

• The company’s core values are captured in what Sam Walton, the company’s founder, called his “basic beliefs”: “respect for individuals, service to customers, and striving for excellence. ” 2 -10

Corporate Social Responsibility (CSR) Corporate Citizenship Concepts • Corporate social responsibility – emphasizes obligation and accountability to society • Corporate social responsiveness – emphasizes action, activity • Corporate social performance – emphasizes outcomes, results 2 -11

Corporate Social Responsibility (CSR) Business Criticism/ Social Response Cycle Factors in the Societal Environment Criticism of Business Increased concern for the Social Environment A Changed Social Contract Business Assumption of Corporate Social Responsibility Social Responsiveness, Social Performance, Corporate Citizenship A More Satisfied Society Fewer Factors Leading to Business Criticism Increased Expectations Leading to More Criticism 2 -7

Corporate Social Responsibility (CSR) Historical Perspective • Economic model – the invisible hand of the marketplace protected societal interest • Legal model – laws protected societal interests 2 -13

Corporate Social Responsibility (CSR) Historical Perspective • Modified the economic model Search the Web – Philanthropy Milton Hershey was a leading example of an – Community obligationsindividual who employed philanthropy, community obligation and paternalism To learn more about Milton Hershey and the company, – Paternalism school and town he built, log on to: http: //www. miltonhershey. com/ 2 -14

Corporate Social Responsibility (CSR) Historical Perspective • What was the main motivation? – To keep government at arms length Search the Web Businesses are interested in CSR and one leading business organization that companies can join is Business for Social Responsibility. To learn more about BSR, visit their web site at: : http: //www. bsr. org/ 2 -15

Corporate Social Responsibility (CSR) Historical Perspective From the 1950’s to the present the concept of CSR has gained considerable acceptance and the meaning has been broadened to include additional components 2 -16

Corporate Social Responsibility (CSR) Evolving Viewpoints • CSR considers the impact of the company’s actions on society (Bauer) • CSR requires decision makers to take actions that protect and improve the welfare of society as a whole along with their own interests (Davis and Blomstrom) 2 -17

Corporate Social Responsibility (CSR) Evolving Viewpoints • CSR mandates that the corporation has not only economic and legal obligations, but also certain responsibilities to society that extend beyond these obligations (Mc. Guire) 2 -18

Corporate Social Responsibility (CSR) Evolving Viewpoints • CSR relates primarily to achieving outcomes from organizational decisions concerning specific issues or problems, which by some normative standard have beneficial rather than adverse effects upon pertinent corporate stakeholders. The normative correctness of the products of corporate action have been the main focus of CSR (Epstein) 2 -19

Corporate Social Responsibility (CSR) Carroll’s Four Part Definition • CSR encompasses the economic, legal, ethical and discretionary (philanthropic) expectations that society has of organizations at a given point in time 2 -20

Corporate Social Responsibility (CSR) Carroll’s Four Part Definition Understanding the Four Components Responsibility Societal Expectation Economic Required Be profitable. Maximize sales, minimize costs, etc. Legal Required Obey laws and regulations. Ethical Expected Do what is right, fair and just. Discretionary Desired/ (Philanthropic) Expected Business and Society: Ethics and Stakeholder Management, 5 E • Carroll & Buchholtz Copyright © 2003 by South-Western, a division of Thomson Learning. All rights reserved Examples Be a good corporate citizen. 2 -16

Pyramid of CSR Philanthropic Responsibilities Be a good corporate citizen. Ethical Responsibilities Be ethical. Legal Responsibilities Obey the law. Economic Responsibilities Be profitable. 2 -22

Corporate Social Responsibility (CSR) CSR in Equation Form Is the Sum of: Economic Responsibilities (Make a profit) Legal Responsibilities (Obey the law) Ethical Responsibilities (Be ethical) Philanthropic Responsibilities (Good corporate citizen) CSR 2 -23

Corporate Social Responsibility (CSR) Stakeholder View Stakeholder Group Addressed and Affected CSR Component Owners Con- Employees Community Others sumers Economic 1 4 2 3 5 Legal 3 2 1 4 5 Ethical 4 1 2 3 5 Philanthropic 3 4 2 1 5 2 -24

Corporate Social Responsibility (CSR) Arguments Against • Restricts the free • Increase business market goal of power profit maximization • Limits the ability to • Business is not compete in a global equipped to handle marketplace social activities • Dilutes the primary aim of business 2 -25

Corporate Social Responsibility (CSR) Arguments For • Addresses social issues • Limits future government business caused and intervention allows business to be • Addresses issues by part of the solution using business resources • Protects business selfand expertise interest • Addresses issues by being proactive 2 -26

Corporate Social Responsibility (CSR) Business Responsibilities in the 21 st Century • Demonstrate a commitment to society’s values and contribute to society’s social, environmental, and economic goals through action. • Insulate society from the negative impacts of company operations, products and services. • Share benefits of company activities with key stakeholders as well as with shareholders. • Demonstrate that the company can make more money by doing the right thing. 2 -27

Corporate Social Responsiveness • • Evolving Viewpoints Ackerman and Bauer’s action view Sethi’s three stage schema Frederick’s CSR 1, CSR 2, and CSR 3 Epstein’s process view 2 -28

Corporate Social Performance Carroll’s CSP model integrates economic concerns into a social performance framework 2 -29

Corporate Social Performance Extensions and Reformulations • Wartick and Cochran’s extensions • Wood’s reformulations • Swanson’s Reorientation 2 -30

Corporate Social Performance 2 -31

Corporate Social Performance Nonacademic Research • Fortune's ranking of most and least admired corporations • Council on Economic Priorities Corporate Conscience Awards • Business Ethics Magazine Awards • Walker. Information’s Research on the impact of social responsibility 2 -32

Corporate Citizenship Corporate citizenship embraces all the facets of corporate social responsibility, responsiveness and performance 2 -33

Social—and Financial— Performance Perspective 1: CSP Drives the Relationship Good Corporate Social Performance Good Corporate Financial Performance Good Corporate Reputation Perspective 2: CFP Drives the Relationship Good Corporate Financial Performance Good Corporate Social Performance Good Corporate Reputation Perspective 3: Interactive Relationship Among CSP, CFP, and CR Good Corporate Social Performance Good Corporate Financial Performance Good Corporate Reputation 2 -34

Social and Financial Performance A Multiple Bottom-Line Perspective 2 -35

Socially Conscious or Ethical Investing Social screening is a technique used to screen firms for investment purposes 2 -36

Selected Key Terms • Business for Social Responsibility • Community obligations • Corporate Citizenship • Corporate social responsibility Corporate social responsiveness • Corporate social performance • Economic, legal, ethical and discretionary responsibilities • Paternalism • Philanthropy • Pyramid of CSR • Socially conscious investing 2 -37