Definition of CSR

1
Definition of CSR

• The duty a corporation has to create wealth by
  using means that avoid harm to, protect, or
  enhance societal assets p. 116

2
Three Basic Elements of CSR

• Market Forces
• Mandated Social Programs
• Voluntary Social Programs
• Exceed regulations (legal plus safety,
  pollution, discrimination,)
• Respond to national consensus (charities)
• Actions beyond public consensus (work to make
  changes)

3
Basic Elements of Social Responsibility
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4
The Evolving Idea of Corporate Social
Responsibility

• The fundamental idea is that corporations have
  duties that go beyond carrying out their basic
  economic function in a lawful manner.
• Over time the doctrine has evolved to require
  more expansive action by companies largely
  because
• Stakeholder groups have gained more power to
  impose their agendas
• The ethical and legal philosophies underlying it
  have matured

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5
Arguments Against CSR

• Classical Economic Argument
  Managements only responsibility is to maximize
  the profits of its owners.
• a. Role of business in our system
• b. Duty to shareholders - private property rights
• Cost of social action is passed on to consumers
• CSR decreases competitiveness (esp.
  international)
• Business already has enough power

6
Arguments For CSR

• CSR is in businesss long-term self-interest
• Must use power or lose legitimacy (social
  contract)
• Ward off government intervention regulation
• Public relations
• Ethical Imperative
• Other
• Businesses are reservoirs of skill

7
General Principles of CSR

• Corporations are Primarily Economic Institutions.
• Must follow the law.
• Managers must act ethically.
• Duty to correct the adverse social impacts they
  cause.

8
General Principles of CSR cont.

• Social responsibility varies with company
  characteristics (e.g., size, industry, location).
• Managers should try to meet the legitimate needs
  of stakeholders.
• Comply with the norms of the social contract.
• Publicly report on market, mandated, and
  voluntary actions.

9
Are Social and Financial Performance Related?

• A recent review of 95 studies over 30 years found
  that a majority (53 percent) of businesses showed
  a positive relationship between profits and
  responsibility, while only 5 percent showed a
  negative one.
• Results inconsistent and ultimately inconclusive
  due to methodological questions.
• Safe to say corporations rated high in social
  responsibility are no less profitable than lower
  rated firms.

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10
Concluding Observations

• Historically, corporations have been motivated
  primarily by the central focus on profits.
• Corporations are now being pressured to alter
  this focus.
• The idea of corporate social responsibility has
  continuously expanded in meaning.
• The power of stakeholders to define corporate
  duty has increased.
• The explosive growth of global trade and global
  corporations has created new standards and
  practices of social responsibility tied to global
  norms.

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11
Definitions

• Stakeholders
• Those who are affected by and affect the actions
  of a firm.
• Primary Stakeholders
• Those who have a formal, official or contractual
  relationship with a firm.
• E.g., stockholders, customers, employees,
  communities, governmental agencies,
• Secondary Stakeholders
• All other stakeholders
• E.g., environmentalists, media, trade
  associations,

12
Stakeholder Management

• Strategic Approach
• Views stakeholders as factors to be taken into
  consideration and managed while the firm is
  pursuing profits for the shareholders
• Multifiduciary Approach
• Management has a fiduciary responsibility to
  stakeholders just as it does to shareholders.
  Places stakeholders and shareholders on roughly
  equal footing.
• Stakeholder Synthesis
• The firm has a moral but not a fiduciary
  responsibility to stakeholders

13
Criticisms

• Not a realistic assessment of power
  relationships.
• seeks to replace force with moral duty.
• Sets up too vague a guideline.
• Who is a stakeholder? What do we owe them? How do
  we balance competing demands?
• No single, clear, objective measure of
  ethical/economic performance.

14
5 Major Questions

• Who are our stakeholders?
• What are their stakes?
• What opportunities and challenges do our
  stakeholders present?
• What responsibilities does our firm have to all
  its stakeholders?
• What strategies or actions should our firm take
  to deal with stakeholder challenges and
  opportunities?