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Corporate Corporate Citizenship: Citizenship: Social Social ResponsibilityResponsibility, , ResponsiveneResponsiveness, ss, and and PerformancePerformance

Search the WebOne of the leading organizations promoting corporate responsibility is Business for Social Responsibility : www.bsr.org.

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Chapter Two 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• Describe the socially conscious investing

movement

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• The CSR Concept• Arguments For

and Against Corporate Social Responsibility

• Corporate Social Responsiveness

• Corporate Social Performance (CSP)

• Nonacademic Research on CSP

• Social Performance and Financial Performance

• Socially Conscious or Ethical Investing

• Summary

Chapter Two Outline

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Introduction to Chapter Two

Search the WebOne of the leading corporations promoting corporate responsibility is Proctor and Gamble: www.pg.com/about_pg/corporate/corp_citizenship_main.jhtml

This chapter’s focus is on corporate social demands, and responsibilities outside of making a profit and asks:

• Does business have a social responsibility?

• What is the extent and type of their responsibility?

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Corporate Social Responsibility

Definitions of CSR• To understand the impact of a

company’s actions on society• Demands that management be

responsible for their acts and consider these actions as part of the social system

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Corporate Social Responsibility Corporate Citizenship Concepts• Corporate social responsibility –

emphasizes obligation and accountability

• Corporate social responsiveness – emphasizes action and responsibility

• Corporate social performance – emphasizes outcomes and results

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Corporate Social Responsibility

Business Criticism/ Social Response CycleFactors in the Societal Environment

Criticism of Business

Increased concern for Social

Environment

A Changing Social Contract

Corporate Social Responsibility

Social Responsiveness/Performance, Corporate Citizenship

A More Satisfied Society

Fewer Factors Leading

to Business Criticism

Increased Expectations Leading to More Criticism

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Corporate Social Responsibility (CSR)

Historical Perspective• Economic model – the

marketplace protected societal interest

• Legal model – laws protected societal interests

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Corporate Social Responsibility (CSR)

Historical Perspective• Modified the economic model

– Philanthropy– Community obligations– Paternalism Search the Web

Milton Hershey was a leading example of an individual who employed philanthropy, community obligation and paternalism To learn more about Milton Hershey and the company, school and town he built, log on to: http://www.miltonhershey.com/

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Corporate Social Responsibility

Historical Perspective• The motivation was to keep

government at arm’s lengthSearch the WebBusinesses 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/

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Corporate Social Responsibility

Historical PerspectiveFrom the 1950s to the present, the concept of CSR has gained considerable acceptance and additional components

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Corporate Social Responsibility

Evolving Viewpoints• CSR considers the impact of the

company’s actions on society (Bauer)• CSR requires decision makers to

take action to protect and improve the welfare of society as well as their own interests (Davis and Blomstrom)

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Corporate Social Responsibility

Evolving Viewpoints• CSR mandates that the

corporation has not only economic and legal obligations, but also social responsibilities (McGuire)

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Corporate Social Responsibility

Evolving Viewpoints• CSR relates primarily to achieving

outcomes from organizational decisions, which have beneficial rather than adverse effects upon corporate stakeholders. The normative correctness of the products of corporate action have been the main focus of CSR (Epstein)

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Corporate Social Responsibility

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

Corporate Social Responsibility (CSR)

CARROLL’S FOUR PART DEFINITIONUnderstanding the Four Components

Responsibility

Societal Expectati

on

Examples

Economic Required Maximize sales, minimize costs, increase profits

Legal Required Obey laws and regulations.

Ethical Expected Do what is right, fair and just.

Discretionary(Philanthropic)

Desired/Expected

Be a good corporate citizen.

Business and Society: Ethics and Stakeholder Management, 5E • Carroll & Buchholtz

Copyright ©2003 by South-Western, a division of Thomson Learning.  All rights reserved

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Pyramid of CSR

Philanthropic ResponsibilitiesPhilanthropic ResponsibilitiesBe a good corporate citizen.

Ethical ResponsibilitiesEthical ResponsibilitiesBe ethical.

Legal ResponsibilitiesLegal ResponsibilitiesObey the law.

Economic ResponsibilitiesEconomic ResponsibilitiesBe profitable.

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Corporate Social Responsibility 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)

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Corporate Social Responsibility

Stakeholder View Stakeholder Group Addressed and Affected

CSR Component

Owners

Con-sumers

Employees

Community

Others

Economic 1 4 2 3 5

Legal 3 2 1 4 5

Ethical 4 1 2 3 5

Philanthropic

3 4 2 1 5

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Corporate Social Responsibility Arguments Against• Restricts the

market goal of profit maximization

• Business is not equipped to handle social activities

• Limits the ability to compete in a global marketplace

• Dilutes the primary aim of business

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Corporate Social Responsibility Arguments For• Addresses

social issues caused by business

• Protects business self-interest

• Limits future government intervention

• Addresses issues by using business resources and expertise

• Addresses issues by being proactive

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Corporate Social Responsibility: Business Responsibilities in the 21st Century• Demonstrates a commitment to

society’s values through involvement.

• Insulates society from the negative impacts of company operations.

• Share benefits with key stakeholders and shareholders.

• Demonstrates more profits by doing the right thing.

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Corporate Social Responsiveness

Evolving Viewpoints• Ackerman and Bauer’s action view• Sethi’s three stage schema• Frederick’s CSR1, CSR2, and CSR3

• Epstein’s process view

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Corporate Social Performance

Extensions and Reformulations

• Wartick and Cochran’s extensions

• Wood’s reformulations• Swanson’s Reorientation

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Corporate Social PerformanceNonacademic Research• Fortune's most and least

admired corporations• Council on Corporate

Conscience Awards• Business Ethics Magazine

Awards• Walker’s Research on the impact

of social responsibility

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Corporate Citizenship

Corporate citizenship embraces all the facets of corporate social responsibility, responsiveness, and performance

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Social—and Financial—Performance

Good CorporateSocial Performance

Perspective 1: CSP Drives the Relationship

Good Corporate Financial Performance

Good CorporateReputation

Good CorporateFinancialPerformance

Perspective 2: CFP Drives the Relationship

Good CorporateSocial Performance

Good CorporateReputation

Good CorporateSocial Performance

Perspective 3: Interactive Relationship Among CSP, CFP, and CR

Good CorporateFinancialPerformance

Good CorporateReputation

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Socially Conscious or Ethical Investing?

Social screening is a technique used to screen firms for investment purposes

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Selected Key Terms• Business for Social

Responsibility• Community

obligations• Corporate

Citizenship• Corporate social

responsibility and responsiveness

• Corporate social performance

• Economic, legal, ethical, and discretionary responsibilities

• Paternalism• Philanthropy• The CSR Pyramid• Socially conscious

investing