Week 6 - Corporate Governance and Social Responsiby

• Corporate Governance


  The system by which companies are directed and controlled
• Social Responsibility


  The obligation of an organization to act in an ethical way and benefit society
• Billion $ Bird Poop
• What is CSR
• History of CSR
• Examples of CSR
• Advantages and disadvantages CSR
• Classical View of CSR

  Economic behaviour is separate and distinct from other types of behaviour, and business organizations are distinct from other types of organizations, even if the same individuals may be involved in business and non business affairs. Business organizations do not serve the same goals as other organizations
• Issues Raised
• Moral Minimum


  The minimum level of moral behaviour that corporations must adhere to
• Power and Responsibility


  Powerful corporations need to be restrained through active CSR methods
• Helping the Government


  Corporations should help with social problems if the need is urgent, the corporation is close to the need, the corporation can respond effectively, and the need will be left unattended to unless a corporation acts
• Arguments Against CSR (Classical View)

  • CSR has no place for a businessman
  • When the corporation CEO spends money, it means he/she spends money that is diverted away from the employee
  • Prices have to be lowered for the social objective of preventing inflation; and not in the companyʼs interests of maximizing profits
  • Because of social responsibility, he may have to hire less qualified persons because of a social agenda that is not in the interest of the companyʼs efficiency goals and targets
  • Money spent in these areas take away from employees and shareholders
  • This role is 'taxingʼ employees and shareholders, a role that should be left to elected officials
• Ford Tinto Case
• Arguments For CSR (Against Classical View)


  • Business lobbies
  • Shortcomings of governments
  • Taxation argument
• Market for Virtue


  CSR is profitable for corporations because the market rewards responsible behaviour and punishes lapses in corporations
• Competitive Advantage


  CSR can be a competitive advantage because it makes socially responsible corporations standout from amongst the competition, offering a value proposition others cannot or choose to provide

  
• Choosing a Social Issue to Address
• Global Standards on CSR - UN Global Compact

  
• Global Standards on CSR ISO 26000

  
• Responsive CSR


  Being a good corporate citizen and mitigating harm from companyʼs value chain
• Strategic CSR


  Deliberate selection of a unique position from its competitors in CSR, adding the social dimension to the companyʼs value proposition
• Nauru - The Case for Social Responsibility
• Nauruʼs troubles
• The case of Nauru shows that humans tend towards greek and lack of responsibility towards others
• One might blame the corporations for fuelling Nauruʼs downfall
• However, it was ultimately government who did not practice self-restraint/regulation from their pursuit of wealth and greed
• Greed , Exploitation, Abuse of Resources
• When left unchecked, humans tend towards unsustainable exploitation
• Thus, when corporations and organizations are left unchecked, will they too display unbridled greed and abuse of resource allocation?
• What is the companyʼs obligation to customers?
• Economic responsibility


  To enhance products, seek out supplies of raw materials, discover new resources, improve current technologies
• Legal responsibility


  To manage the assets of the corporation in the interests of shareholders, be legally responsible to customers, suppliers, and regulatory authorities
• Debates over CSR started in 1950s
• Normative question


  Was CSR something that corporations were morally obliged to do?
• Milton Friedman argued corporations should not engage in CSR unless it benefited shareholders
• Others argued that corporations should be morally faulted for not being socially responsible
• Examples of CSR


  • Operating on an ethical level higher than the minimum legal requirement
  • Making contributions to civic and charitable/non-profit organizations
  • Providing benefits for employees and improved quality of life beyond economic and legal requirements
  • Paying more for a socially responsible alternative resource
  • Using corporate resources to address a major social problem
• Advantages of CSR


  • Helps balance corporate power and rights with responsibilities
  • Encourages more responsible self-regulation (than government oversight)
  • Promotes long term profits for businesses
  • Improves business value and reputation with trust and confidence building
  • Manages negative externalities caused by businesses
• Disadvantages of CSR


  • Lowers economic efficiency and short term profits
  • Costs of CSR are borne by stakeholders and customers
  • Many businesses lack expertise, knowledge in dealing with social issues
  • Individuals and governments may find little incentive to be involved in the businessʼ CSR efforts