Corporate Social Responsibility

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Corporate Social Responsibility

• Big business have always been criticized.
  Beginning around the turn of the century, the
  crusading journalists shocked the nation with
  exposes of corrupt business practices, touching
  off a wave of Government regulations. This
  followed the wake of the great depression (1930)
  and again in 1960s and 1970s. The issues of 2007
  also brought forth the American President coming
  strongly in favor of CSR

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CSR The New Paradigm

• A growing body of evidence asserts that
  corporations can do well by doing good.
  Well-known companies have already proven that
  they can differentiate their brands and
  reputations, as well as their products and
  services, if they take responsibility for the
  well-being of the societies and environments in
  which they operate. These companies are
  practicing Corporate Social Responsibility (CSR)
  in a manner that generates significant returns to
  their businesses.
• James Burke, Chairman of Johnson Johnson
  said, I have long harbored the belief that the
  most successful corporations that have delivered
  outstanding results over long period of time, are
  the one that were driven by a simple moral
  imperative, namely, serving the public (society)
  in the broadest possible sense better than their
  competitors.

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The History of CSR

• Andrew Carnegie (founder of the conglomerate US
  steel corporation) published The Gospel of
  Wealth which tried for the first time to define
  CSR. Carnegies views were based on two
  principles
• The Charity Principle Doctrine of social
  responsibility requiring more fortunate
  individuals to assist less fortunate members of
  the society
• The Stewardship Principle Biblical doctrine that
  requires business and wealthy individuals to view
  themselves as stewards, or care takers, holding
  their property in trust for the benefit of the
  whole society
• Gradually the notion of CSR became a smoke screen
  for the personal values of few powerful
  individuals

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The Two Opposing Views

• On one side there is the purely economic view
  (Milton Friedman) to maximize profits (thereby
  protecting the interests of the stake holders)
  while on the other stands the socio-economic
  position (Keith Davis an iron law of
  responsibility which states that in the long run
  those who do not use power in a manner that the
  society considers responsible will tend to lose
  it) which holds managements responsibility goes
  beyond making profits to include responsibilities
  towards the eco-system in which they operate.
• Supporters of the CSR contend that the managers
  should be concerned with maximizing the profits
  in the long run to do this they must accept some
  social costs that go with them.

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CSR how is it defined today?

• The three key definitions that have garnered wide
  acceptance and favor amongst business circles
• Philip Kotler and Nancy Lee (2005) define CSR as
  a commitment to improve community well being
  through discretionary business practices and
  contributions of corporate resources.
• Mallen Baker refers to CSR as a way companies
  manage the business processes to produce an
  overall positive impact on society.

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CSR how is it defined today?

• Archie Carroll in 1991 describes CSR as a multi
  layered concept that can be differentiated into
  four interrelated aspects economic, legal,
  ethical and philanthropic responsibilities
• Carroll presents these different
• responsibilities as consecutive
• layers within a pyramid,
• such that true social
• responsibility requires
• the meeting of all four levels
• simultaneously. The model
• probably is the most
• accepted and established.

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Arguments For And Against CSR

• Arguments for
• Public expectation
• Improved financial performance
• Ethical obligations
• Enhanced brand image reputation
• Better environment
• Reduce regulatory oversight government control
• Increased ability to attract and retain employees
• Stockholders interest
• Easier access to capital / resources
• Risk management

• Arguments against
• Violation of profit maximization
• Dilution of purpose
• Costs
• Too much power
• Lack of skills
• Lack of accountability
• Lack of broad public support

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The Global Survey

• IBMs conducted global survey to gauge just
  how deeply the CSR issue has penetrated the core
  of the corporate governance, its strategies and
  operations. They interviewed more than 250
  business executives worldwide. These were
  business leaders and strategists, not the
  executives responsible for charitable foundations
  or special corporate CSR initiatives. Their
  analysis led to three parameters that companies
  should understand and act upon in dealing with
  CSR.
• They are
• Impact on business From cost to growth
• Information From visibility to transparency
• Relationships From containment to engagement.

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How do you develop a CSR strategy

• The approach is to view a companys current
  activities and objectives against the CSR Value
  Curve, which captures the shift in thinking from
  CSR as a cost or risk mitigation effort to CSR as
  a strategic goal that brings in new revenue.
• When businesses do start to move beyond
  compliance they start their journey along a
  continuum described in the CSR Value Curve. The
  survey results showed that surprisingly few
  companies engaged in what appears to be a very
  fundamental area for reputation building
  strategic philanthropy. Strategic philanthropy
  aligns charity with business strategy, company
  skills and market needs. These efforts reinforce
  a companys social commitment with ongoing
  returns, often in the form of goodwill and
  typically indirectly from a financial
  perspective.
• Companies are finding that many CSR initiatives,
  including those that reduce energy consumption or
  benefit the environment, help reduce overall cost
  structures or increase productivity.

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Obligation Responsibility Responsiveness
The capacity of a firm to Adopt to changing and
Challenging societal conditions
Social Responsibility
Social Responsiveness
Social Obligation
The obligation of a business to meet its economic
and legal responsibilities
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Social Responsibility
Greater
Lesser
Stage 3 Constituents In specific environment
Stage 4 Broader Society
Stage 1 Owners and Management
Stage 2 Employees
To Whom Is Management Responsible
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Normative Theories Of Business Ethics (as
understood by business community)
Normative Theories Of Business Ethics
Stockholder Theory
Stakeholder Theory
Social Contract Theory
Primary and Secondary stakeholders
More or Less obsolete
1.Benefit consumers to maximize their
wants 2.Benefit employee to maximize perks and
remuneration 3.Ensure least damage to the
environment
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Societys expectation from business
1960
2010
Social Ethical Problems
Actual Business Practices
Social Responsibility and Ethics Over Time
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Conclusion

• CEOs have long been accountable to a varied
  group of stakeholders employees and
  communities, as well as investors. The nature of
  these relationships is now changing in ways that
  significantly affect corporate performance. In
  part due to the emergence of the Internet and
  continuing globalization, companies are becoming
  accountable for labor issues and working
  conditions in their partners operations as well
  as their own. In climbing the CSR Value Curve
  from compliance to growth, companies must

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An economic network
Alliance
Corporate Center
Wholly owned
Part owned
The fallout of economic upheaval is that the
evolving networks are transforming the
relationships within and between the companies.
Managing all these relationships to keep everyone
on board and avoid ethical conflicts has become
increasingly important.
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Conclusion -- Contd

• Align and incorporate CSR with business strategy
  and integrate it across all operational
  functions. Thus, making it easy to invest (not
  spend) the funds necessary to achieve its
  objectives.
• Implement an open information strategy for more
  transparent information-sharing with multiple
  stakeholders.
• Leverage transparency to increase the level of
  engagement of key constituents and customers.
• When these activities are done in combination,
  CSR can become a dimension of a companys
  successful competitive strategy. Done right, it
  offers a company improved relationships with all
  of its key constituents, more loyal customers,
  lower costs, higher revenues and an overall
  improvement of the business standing in society.

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Thoughts for NOW

• The demands on business and the expectations
  of what is considered proper conduct have risen
  faster than the ability of business to raise
  standards. Since societys expectations of its
  institutions are regularly changing, managers
  must continually monitor these expectations. What
  is ethically acceptable today may be a poor guide
  for the future