Corporate Social Responsibility

BOM 120

Corporate Social Responsibility

Is the concern businesses have for the welfare of society.

There are 3 categories to by which we can judge the social performance of a company.

1) Corporate philanthropy 2) Corporate responsibility 3) Corporate policy

Corporate Philanthropy

Includes: Charitable donations to non-profit

groups of all kinds. Amounts to billions of dollars in

charitable donations each year. Strategic philanthropy: involves

companies making long-term commitments to one cause.

(For example: Ronald McDonald House.)

Corporate Responsibility

Is all encompassing because it includes:

Hiring minority workers Making safe products Minimizing pollution Using energy wisely Providing a safe work environment.

It scrutinizes the actions a company takes that could affect others.

Corporate Policy

Refers to the position a company takes on social and political issues and internal business ethics.

For example, it is the corporate policy of companies like Xerox, IBM and Wells Fargo to promote Social Service Leave for their employees.

Social Service Leave

Allows employees to leave for up to a year to work for a non-profit organization.

While on Social Leave, employees get full salaries and benefits, including job security.

Responsibility to Stakeholders

Customers: one responsibility of business is to satisfy customers by offering them goods and services of real value.

One of the surest ways of failing to please customers is by not being totally honest with them.

Customers

For example, in 1988 a consumer magazine reported that the Suzuki Samurai was likely to roll over if a driver swerved violently in an emergency.

When Suzuki executives denied there was a problem, sales plummeted.

Customers

The payoff for socially conscious behaviour could result in new business as customers switch from rival companies simply because they admire the company’s social efforts.

Consumer studies show that socially conscious companies are more likely to viewed favourably than less socially responsible competitors.

Investors

Ethical behaviour is good for shareholder wealth.

Many people believe that it makes financial as well as moral sense to invest in companies that are planning ahead to make.

Employees

Businesses have several responsibilities to employees. These include:

Creating jobs – it has been said that the best social program in the world is a job.

Fair compensation Hope for a better future through

upward mobility. Respect and integrity. Pension plans and health benefits.

The cost of replacing employees Given that the cost of replacing an

employee is approximately 150% of their annual salaries, retaining workers is good for business as well as for morale.

When employees feel they have been mistreated, they often strike back.

Getting even is one of the most powerful incentives for good people to do bad things.

It makes good sense for a company to be socially responsible to its employees.

Society and the Environment

One of business’s major responsibilities to society is to create new wealth.

They are also partially responsible for promoting social justice.

For its own well being, business depends on its employees being active in politics, church groups, arts, charities, etc…

Cont.

Businesses are also clearly taking responsibility for helping make their own environment a better place.

Environmental efforts may increase a company’s costs, but they also might allow the company to charge higher prices or increase market share

Environmental quality is a public good. Everyone gets to enjoy it regardless of who pays

for it. The trick is for companies to find the right public

good that will appeal to their target market.

Enron

Formerly a member of the Fortune 500 and the 6th largest energy company in the world.

Reported annual revenue in 2000 = 100 billion.

With the help of its accounting firm, Arthur Anderson, overstated shareholder equity by 1.2 billion dollars.

They had devised a vast web of fake investors and partnerships to hide Enron’s massive debt.

Enron

In 2001, the company declared bankruptcy, the largest company in the U.S. to do so, at that point.

Stock prices dropped from $90 to $1 in a matter of months.

Both Enron and Arthur Anderson were forced to close, putting thousands out of work.

CEO’s of both companies were sentenced to prison terms.

Stockholders lost billions.

Enron

http://www.youtube.com/watch?v=CFk4ivlvvrw

http://www.youtube.com/watch?v=Uxd9AeXft64

Sarbanes-Oxley

The downfall of Enron led to the creation of the Sarbanes-Oxley act.

Also known as the Corporate and Criminal Fraud Accountability Act, was passed in the United States in 2002.

Sarbanes-Oxley

SOX requires all public corporations to provide a system that allows employees to submit concerns regarding accounting and auditing issues both confidentially and anonymously.

Whistle-blowing Legislation in Canada

Bill C-11 was passed in November 2005.

It provides for significant powers to investigate wrongdoing; it contains clear legal prohibition of reprisal against those who make good-faith allegations of wrongdoing; and it proposes measures to protect the identity of persons making disclosures.

http://www2.parl.gc.ca/Sites/LOP/LegislativeSummaries/Bills_ls.asp?Parl=38&Ses=1&ls=c11#dpromotingethicalpractices

Other points to ponder

Every scenario is different. Take time to reflect on your actions. http://

www.youtube.com/watch?v=l-nz0kojLv8&feature=related