Chapter 17

Corporate Social Responsibility

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1. Articulate a stakeholder view of the firm

2. Apply the institution based view to analyze corporate social responsibility

3. Use the resource based view to better understand corporate social responsibility

4. Participate in three leading debates concerning corporate social responsibility

5. Draw implications for action

STAKEHOLDER VIEW OF THE FIRM

stakeholder - group or individual who can affect or is affected by the achievement of the organization’s objectives

corporate social responsibility (CSR) - consideration of, and response to, issues beyond the narrow economic, technical, and legal requirements of the firm to accomplish social benefits along with the traditional economic gains which the firm seeks

BIG PICTURE PERSPECTIVE

global sustainability - ability “to meet the needs of the present without compromising the ability of future generations to meet their needs”

BIG PICTURE PERSPECTIVE

primary stakeholder groups - constituents on which the firm relies for its continuous survival and prosperity

secondary stakeholder groups - those who influence or affect, or are influenced or affected by, the firm, but are not engaged in transactions with the firm and are not essential for its survival

triple bottom line - economic, social, and environmental performance that simultaneously satisfies demands of all stakeholders

INSTITUTIONS AND CORPORATESOCIAL RESPONSIBILITY

reactive strategy - response to relatively little or no support of top management to CSR causes

defensive strategy - focus on regulatory compliance with little involvement by top management

accommodative strategy - characterized by some support from top managers, who may increasingly view CSR as a worthwhile endeavor

proactive strategy - being responsible and endeavoring to do more than is required

INSTITUTIONS AND CORPORATESOCIAL RESPONSIBILITY

codes of conduct (codes of ethics) - tangible action firms often take to indicate their willingness to accept CSR

RESOURCES AND CORPORATESOCIAL RESPONSIBILITYVRIO framework

social issue participation - actions not directly related to management of primary stakeholders – may reduce value

expertise, techniques, and processes associated with the direct management of primary stakeholder groups are likely to add value

RESOURCES AND CORPORATESOCIAL RESPONSIBILITYVRIO framework

complex processes require strong management capabilities, such as negotiating with local suppliers, undertaking internal verification, coordinating with NGOs for external verification, and disseminating such information to stakeholders - valuable but common (not rare) resources

RESOURCES AND CORPORATESOCIAL RESPONSIBILITYVRIO framework

pollution-prevention technologies are more complex and integrated with the entire production chain - competitors often have a harder time imitating these complex capabilities

pollution-reduction technologies may offer no such advantage because relatively simple, “end-of-pipe” pollution-reduction technologies can be more easily imitated

RESOURCES AND CORPORATESOCIAL RESPONSIBILITYVRIO framework

process-focused best practices of pollution prevention are not in isolation and are often difficult to separate from a firm’s other organizational activities

DOMESTIC vs. OVERSEAS SOCIAL RESPONSIBILITY

Given that corporate resources are limited, resources devoted to overseas CSR, unfortunately, often mean fewer resources devoted to domestic CSR.When companies have enough resources, it would be nice to take care of domestic employees and communities. However, when confronted with relentless pressures for cost cutting and restructuring, managers have to prioritize.Paradoxically, in this age of globalization, while the CSR movement is on the rise, the great migration of jobs away from developed economies is also accelerating.

RACE TO THE BOTTOM (“Pollution Haven”) vs.RACE TO THE TOP

Because of heavier environmental regulation in developed economies, MNEs may have an incentive to shift pollution-intensive production to developing countries, where environmental standards may be lower. To attract investment, developing countries may enter a “race to the bottom” by lowering (or at least not tightening) environmental standards, and some may become “pollution havens.”Many MNEs’ voluntary adherence to environmental standards are higher than those required by host countries.Although it is difficult to suggest that the race to the bottom does not exist, MNEs as a group do not necessarily add to the environmental burden in developing countries.

ACTIVE vs. INACTIVE CSR ENGAGEMENT OVERSEAS

Active CSR engagement is now increasingly expected of MNEs. MNEs that fail to do so are often criticized by NGOs.The nonintervention principle originated from concerns that MNEs might engage in political activities against the national interests of the host country.What exactly is the “legitimate role” of CSR initiatives in host countries?