Topic 1

• CORPORATE SOCIAL RESPONSIBILITY (CSR)

  ·       Often referred to as “business responsibility”/”corporate citizenship”

  ·       A self-regulating business model
• Corporate Social Responsibility

  ·       With this, companies can be conscious of the impacts they have on society, including:

  ·       Economic

  ·       Social

  ·       Environmental
• Corporate Social Responsibility

  This is a strategy of large corporations.
• Corporate Social Responsibility

  It make the bond between employees & companies stronger, boost morale, and help them both feel more connected to the world.
• Corporate Social Responsibility: Key Principles

  • Sustainability
  • Accountability
  • Transparency
• Key Principles of CSR: Sustainability

  • This is concerned with the effect which action taken in the present has upon the options available in the future.

  • Thus raw materials of an extractive nature, such as coal, iron or oil, are finite in quantity and once used are not available for future use. At some point in the future therefore alternatives will be needed to fulfill the functions currently provided by these resources.

  • Resources become depleted -> increased cost of acquiring -> increased operational costs of the org.
• Key Principles of CSR: Accountability

  ·       Concerned with an organization recognizing that its actions affect the external environment, and therefore assuming responsibility for the effects of its actions.

  ·       Implies in quantification of the effects of action taken.
• Key Principles of CSR: Transparency

  ·       The external impact of the actions of the organization can be ascertained from the organization’s reporting and pertinent facts are not disguised within that reporting.

  ·       Thus all the effects of the actions of the organization, including external impacts, should be apparent to all from using the information provided by the organization’s reporting mechanism.

  ·       Telling the impact of the org through reporting truthfully w/o disguising.
• Archie Carroll

  Invented the Corporate Social Responsibility Pyramid
• CORPORATE SOCIAL RESPONSIBILITY PYRAMID

  ·       A Framework

  ·       Argues how and why organizations should meet their social responsibilities
• 4 KINDS OF SOCIAL RESPONSIBILITIES (Bottom to Top)

  • Economic Responsibility (bottom)

  • Legal Responsibility

  • Ethical Responsibility

  • Philanthropic Responsibility (top)
• 4 Kinds of Social Responsibility: ECONOMIC RESPONSIBILITIES

  • Businesses are economic entities designed to provide goods & services to societal members.

  • Profit is the primary incentive for entrep

  • Business orgs = basic economic unit

  • Profit motives became maximum profits

  • All other business responsibilities are predicated upon the economic responsibility of the firm, because without it the others become moot considerations.
• Business Organizations

  The basic economic unit
• 4 Kinds of Social Responsibility: LEGAL RESPONSIBILITIES

  • Businesses are expected to comply with the laws & regulations promulgated by federal state & local govs as the ground rules under which business must operate.

  • As a partial fulfillment of the "social contract" between business and society firms are expected to pursue their economic missions within the framework of the law.
• 4 Kinds of Social Responsibility: ETHICAL RESPONSIBILITIES

  • Embrace those acts & pracs that are expected/prohibited by societal members even though they aren’t codified to law.

  • Ethical responsibilities embody those standards, norms/expectation that reflect concern for what the community regard as fair keeping with the respect/protection of stakeholders’ moral rights.

  • Changing ethics/values precede the est. of law bec they become the driving force behind the very creation of laws/regulations.

  • Ethical Responsibilities are in dynamic interplay with the legal responsibility category.
• 4 Kinds of Social Responsibility: Ethical Responsibilities and Legal Responsibilities

  They are in a dynamic interplay.
• 4 Kinds of Social Responsibilities: Philanthropic Responsibilities

  • The icing on the cake because it portrays the four components of CSR.
• 4 Kinds of Social Responsibilities: PHILANTHROPIC RESPONSIBILITIES

  • These are corporate actions that are in response to society’s expectation that businesses be good corporate citizens.

  • It’s a more voluntary on the part of businesses even though there is always the societal expectation that businesses provide it.

  • A business is expected to be a good corporate citizen which is captured by THIS responsibility wherein businesses are expected to contribute financial & human resources to the community & improve the quality of life.
• 4 Kinds of Social Responsibilities: PHILANTHROPIC RESPONSIBILITIES

  • The icing on the cake because it portrays the four components of CSR.

  • It portrays the four components of CSR, beginning with the economic performance undergirds all else. At the same time, business is expected to obey the law because it’s society's codification of acceptable & unacceptable behavior. Next is business's responsibility to be ethical. Fundamentally, this is the obligation to do what is right, just, and fair, and to avoid harm to stakeholders.
• CORPORATE SOCIAL RESPONSIBILITY

  • Entails the simultaneous fulfillment of the firm's economic, legal, ethical, and philanthropic responsibilities.

  • Stated in more pragmatic and managerial terms, the CSR firm should strive to make a profit, obey the law, be ethical, and be a good corporate citizen.
• CLASSICAL ECONOMIC ARGUMENT

  Management has one responsibility: to maximize the profits of its owners or shareholders.
• Economist: Milton Friedman
• Milton Friedman

  • Social matters are not the concern of business people and that these problems should be resolved by the unfettered workings of the free market system.

  • Business people = no care abt social matters
• Milton Friedman

  • Posited that management is "to make as much money as possible while conforming to the basic rules of society, both those embodied in the law and those embodied in ethical custom"

  • It seems clear from this statement that profits, conformity to the law, & ethical custom embrace 3 components of the CSR pyramid: economic, legal, & ethical. Rejecting the philanthropic.
• Milton Friedman:

  Argues against the Classical Economic Argument
• Arguments in Support of CSR:

  • Business is Unavoidably Involved in Social Issues
  • Business has the Resources to Tackle Today’s Complex Societal Problems
  • A Better Society Means a Better Environment for Doing Business
  • Corporate Social Action Will Prevent Government Intervention
• ARGUMENTS IN SUPPORT OF CSR: Business is Unavoidably Involved in Social Issues

  • Social activists say businesses are either part of the solution/problem

  • Private businesses share responsibility for societal problems including unemployment, inflation, & pollution

  • Corporate citizens must balance their rights & responsibilities.
• ARGUMENTS IN SUPPORT OF CSR: Business has the Resources to Tackle Today’s Complex Societal Problems

  • With its rich stock of technical, financial, & managerial resources, they can tip the scale in favor of solving society’s problems.

  • W/o the support of soc, business couldn’t have built its resource base in the first place
• ARGUMENTS IN SUPPORT OF CSR: A Better Society Means a Better Environment for Doing Business

  • Business can enhance its long-run profitability by making an investment in society today.

  • “Today’s problems can turn into tomorrow’s profits.”
• ARGUMENTS IN SUPPORT OF CSR: Corporate Social Action Will Prevent Government Intervention

  • As evidenced by waves of antitrust, equal employment opportunity and pollution control legislation, the government will force business to do what it fails to do voluntarily.

  • Voluntarily doing things -> less gov intervention -> freedom to do almost anything in the business
• ARGUMENTS AGAINST CSR

  • Profit Maximization Ensures the Efficient use of Society’s Resources
  • As an Economic Institution, Business Lacks the Ability to Pursue Social Goals
  • Business Already has Enough Power
  • Since Managers are not Elected, They Are Not Directly Accountable to People
• ARGUMENTS AGAINST CSR: Profit Maximization Ensures the Efficient use of Society’s Resources

  • By buying goods and services, consumers collectively dictate where assets should be deployed.

  • Social expenditures amount to theft if stock holders equity.
• ARGUMENTS AGAINST CSR: As an Economic Institution, Business Lacks the Ability to Pursue Social Goals

  • Gross inefficiencies can be expected if managers are forced to divert their attention from their pursuit of economic goals.
• ARGUMENTS AGAINST CSR: Business Already has Enough Power

  • Considering that business exercises powerful influence over where and how we work and live, what we buy, and what we value.

  • Additional concentration of social power in the hands of business is undesirable.
• ARGUMENTS AGAINST CSR: Since Managers are not Elected, They Are Not Directly Accountable to People

  • Corporate social programs can easily become misguided.

  • The market system effectively controls business’s economic performance, but it is a poor mechanism for controlling business’s social performance.
• Argument in Support of CSR

  ·       Arguments range from businesses should stick to just making profits to saying that they should be more than a profit machine.
• Arguments Against CSR

  • Based on the assumption that business should stick to what it does best, pursuing profit by production of goods & services.

  • Social Goals should be handled by other institutions such as family, school, church, & gov.
• KEY FEATURES OF CARROLL’S CSR PYRAMID

  • CSR is built on the foundation of PROFIT-profit must come FIRST

  • Then comes the need for a business to ensure it complies with all laws & regulations

  • Ethical duties shall be met before considering philanthropic options
• (1ST) KEY FEATURES OF CARROLL’S CSR PYRAMID:

  • CSR is built on the foundation of PROFIT-profit must come FIRST
• (2ND) KEY FEATURES OF CARROLL’S CSR PYRAMID

  • Then comes the need for a business to ensure it complies with all laws & regulations