quiz #3

• CSR (corporate social responsibility)


  the voluntary actions that a corporation takes in society that address social and environmental areas/issues
• philanthropic- be a good corporate citizen. contribute resources to the community.
• ethical- be ethical. obligation to do what is right, just, and fair.
• legal- obey the law. law is society's codification of right and wrong.
• economic- be profitable. the foundation on which all the others are built.
• different forms of CSR:

  • corporate giving
  • corporate voluntarism
  • corporate sponsorship
  • social venture philanthropy
  • social enterprise
  • community investment
• corporate giving: donations, charitable foundations, cause-related marketing, and strategic giving
• corporate voluntarism: the time and talent employees commit to community organizations with support and/or consent from employers who recognize the value of such efforts to society.
• corporate sponsorship: a partnership, which has been established for mutual benefit between a business sponsor and a event or non-profit.
• social venture philanthropy: the investment of human and financial resources by corporations in non-profit community development agencies to generate a social return instead of only a financial one.
• social enterprise: a model of business operation where some or all profits are deliberately used to further social aims
• two kinds of social enterprise:

  full non-profit- all funds go to social causes

  for-profits- funds are split between social causes and shareholders
• social entrepreneurship: involves activities undertaken to enhance social wealth in innovative ways.
• early vs. current debate in CSR

  early: should businesses engage in CSR at all?

  current: is CSR enough to address the pressing social and environmental issues facing society?
• friedman's view on CSR

  • managers are agents, not principles, therefore CSR is spending the shareholder's money against their will
  • corporations are not equipped to decide what's best for society
  • CSR reduces efficiency and personal freedom
• the case for CSR

  -legitimacy: the existence of the business system depends on its acceptance by society

  -the business case: reduces costs, increases reputation, reduces risk - a win-win
• CSR takes the societal needs out of public hands(i.e. government) and places it into private hands(i.e. corporations)
• voluntary CSR isn't enough, mandatory measures are necessary.
• legitimacy crisis (in CSR):

  firm responses to CSR -

  1. denial
  2. accommodation
  3. defiance (we set regulations, they didn't comply)
  4. decoupling (cutes ties with them)
• zizk argument

  CSR is not the only solution - we have to do other stuff. we must address the route of the problem.
• stakeholders: persons or groups that affect, or are affected by, an organization's decisions, policies, or operations.
• what are some examples of stakeholders?

  board of directors, employees, customers, local communities, lenders/creditors, suppliers, government, NGOs, owners/shareholders
• market(primary) stakeholders vs. nonmarket (secondary) stakeholders


  • not mutually exclusive
• market(primary) stakeholders

  engage in economic transactions with a company
• market(primary) stakeholders

  customers, employees, shareholders, suppliers
• non-market(secondary) stakeholders

  do not engage in economic transactions with a company, but can still affect and be affected by a company's actions
• non-market(secondary) stakeholders

  communities, government, media, NGOs
• the shareholder view

  shareholders advance capital to a company's managers, who are supposed to spend corporate funds only in ways that have been authorized by shareholders
• the stakeholder view

  managers have a duty to both the corporation's shareholders and individuals and constituencies that contribute, either voluntarily or involuntarily to a company's wealth creating capacity and activities and who are therefore its potential beneficiaries and/or risk bearers
• freeman's view on the shareholder vs stakeholder debate

  if we take care of our stakeholders, then shareholder are taken good care of too

  • best for everyone
• distinction between true stakeholder theory and freeman's view

  the true stakeholder theory demands that interests of all stakeholders be considered even if it reduces company profitability.

  freeman's theory states that stakeholders are viewed as a means to an end
• why does shareholder value dominate in north america?

  1. it's what we are taught
  2. incentives for shareholder maximization
  3. executive compensation tied to share price
  4. it's the law
  5. the laws give primacy to shareholders over stakeholders
  6. market discipline
  7. markets will force managers into embracing shareholder value since not doing so will lead to their removal.
• how can businesses become more stakeholder focused? (according to smith)


  changing the language

  • maximizing out company's value instead of shareholder value

  changing attitudes and beliefs

  • CEOs should have more freedom to pursue a stakeholder value approach given that the board approves it.

  clear communication in the organization (of which approach being used)
• Approved ideas to how businesses can become more stakeholder focused


  • Changes in corporate board structure and composition
  • Make the board more diversified
  • Have a system of codetermination where stakeholders (i.e. employees) have seats on the board
  • Changes in organizations themselves
  • Co-ops aim to be more stakeholder focused by making the stakeholders of the company also the shareholders
  • Board requirement to consider stakeholder interests
  • Directors are able to look to long-term interests and act in the best interests of the corporation, viewed as a good corporate citizen
  • Broader structural changes in laws and regulations