Introduction to Corporate Social Responsibility Module Eight Lesson

Introduction to Corporate Social Responsibility Module Eight | Lesson One 1

Lesson One | Introduction CSR is both critical and controversial 2 l It is critical because the for-profit sector is the largest and most innovative part of any free society’s economy. l It is controversial because some see CSR as a distraction from the economic purpose of a business.

Lesson One | Introduction Business & Society People create organizations to leverage their collective resources in pursuit of common goals. As organizations pursue these goals, they interact with others inside a larger context called society. 3

Lesson One | Introduction CSR is controversial l Do companies have obligations beyond the benefits their economic success already provides? l Two opposing views

Lesson One | Introduction The Business View Milton Friedman l “the only social responsibility of business is to increase its profits” l

Lesson One | Introduction Social responsibility: A corporate responsibility? Friedman: l “Profit, as a result of the actions of the firm, is an end in itself. ” l “A firm does not need to have any additional justification for existing. ” l “Social value is maximized when a firm focuses on pursuing its self-interest in attempting to maximize profits. ” l

Lesson One | Introduction l Friedman: “Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible. ”

Lesson One | Introduction Friedman’s arguments CSR is against capitalism: a “fundamentally subversive doctrine in a free society” l CSR is a waste of the firm’s resources, which legally belong to the firm’s owners, its shareholders, and the executives. l Social matters are not the concerns of business people and that problems should be resolved by the other social actors. l

Lesson One | Introduction The Societal View l 9 No one group of stakeholder has a priority over other groups, and that corporations must balance the interests of all stakeholders.

Lesson One | Introduction Stakeholders defined 10 l As Freeman defined them, a firm’s stakeholders include those who affect or are affected by the firm’s goals l Simply put, they include those groups that have a stake in the firm’s operations

Lesson One | Introduction “CSR includes all stakeholder and constituent groups that maintain an ongoing interest in the organization’s operations. ” 11

Lesson One | Introduction CSR = A company's relationships with its stakeholders l The success of a firm is directly related to its ability to incorporate stakeholder/constitute concerns into its business model. l Conflicting/competing stakeholder interests 12

Lesson One | Introduction Underlying Arguments for CSR Moral l Ethical l Rational l Economic l 13

Lesson One | Introduction A Moral Argument for CSR 14 l CSR = the relationship/interdependence between a company & the wider society within which it operates. l ‘for profit’ entities do not exist in a vacuum: they need to be congruent with societal values

Lesson One | Introduction A Rational Argument for CSR l. Businesses seek to maximize their performance by minimizing restrictions on operations. l. In today’s globalizing and wired world, CSR is a means of anticipating and reflecting societal concerns to minimize operational and financial limitations on business l “The Iron Low of Social Responsibility” – 15 If you abuse your power, you will face societal sanctions—such as laws, fines, prohibitions, boycotts, or social activism—impact the firm’s strategic goals.

Lesson One | Introduction An Economic Argument for CSR Economic self-interest for business l CSR provides l – – – l 16 a point of differentiation competitive market advantage and avoid moral, legal and other sanctions a reflection of the needs and concerns of their various stakeholder groups By doing so, a company is more likely to retain its societal legitimacy, and maximize its financial viability, over the long term.

Lesson One | Introduction Case Study: An Ethical Perspective to Competing Stakeholder Interests The Case: Howard Schultz Responds to Anti. Gay-Marriage Starbucks Shareholder 17

18

19

20

Lesson One | Introduction “If you feel, respectfully, that you can get a higher return than the 38 percent you got last year, it’s a free country. You can sell your shares of Starbucks and buy shares in another company. Thank you very much. ” 21

Lesson One | Introduction What is CSR? “A responsibility among firms to pursue goals in addition to profit maximization and a responsibility among a firm’s stakeholders to hold the firm accountable for its actions. ” 22

Lesson One | Introduction Archie B. Carroll, 1979 “The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time. ” 23

Lesson One | Introduction The Pyramid of CSR to benefit the firm & society more proactive & strategic Discretionary Responsibilities Ethical Responsibilities Legal Responsibilities Economic Responsibilities to do no harm to its stakeholders/ environment to act within legal framework to produce acceptable returns on investments Source: Archie B. Carroll, (1991) The Pyramid of Corporate Social Responsibility

Lesson One | Introduction Relationships & Responsibilities 25 Relationships affect future success of the business: l. Good leadership l. Developing key relationships l. Pro-active engagement in emerging issues l. The establishment of understanding and trust

Lesson One | Introduction In Summary: CSR is. . . A dynamic, fluid concept l An integral element of ethics l Both a means and an end l – – 26 How a firm operates to gain societal legitimacy How well a firm has been able to navigate stakeholder concerns while implementing its business model