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Corporate Social Responsibility

Objectives:

1.

Define Corporate Social Responsibility (CSR)

It is also referred as corporate citizenship or corporate conscience

Corporate citizenshipis implying that the organization is a responsible citizen in

meeting all its obligations

Corporate conscienceis implying that the organization is run with an awareness of its

obligations to society

Thus, Corporate Social Responsibilityis the actions of an organization that are

targeted toward the achievement of a social benefit over and above maximizing for its

shareholders and meeting all its legal obligations It assumes that the corporation is operating in a competitive environment and

that the managers of the corporations are committed to an aggressive growth

strategy while complying with all of its obligations.

2. Distinguish between the instrumental and social contract approaches to corporate

management

Instrumental Approachis the perspective that the only obligation of a corporation is

to maximize profits for its shareholders in the provision of goods and services that

meet the needs of its customers; Management without conscience. Miton Friedman argues that it would be unethical for a corporation to do

anything other than deliver the profits for which its investors have entrusted

the corporation

Friedman view of the corporate world supports the rights of individuals to

make money with their investments provided that it is done honestly and it

recognizes the clear legality of the employment contract

Social Contract Approachis the perspective that a corporation has an obligation to

society over and above the expectation of its shareholders; Management by inclusion.

It argues that since the corporation depends on society for its existence andcontinued growth, there is an obligation for the corporation to meet demands

of a targeted group of customers

Henry Ford II said that the actions of a corporation impact their customers,

their employees, their suppliers and the community in which they produce and

deliver their goods and services

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3. Summarize the five driving forces behind CSR

Transparency:

We live in an information-driven economy where business practices have

become increasingly transparent.

Information like this easy, fast, and free is making it far more practical for

individuals to make split second decisions based on social and environmental

criteria.

Knowledge:

The transition to an information-based economy also means that the

consumers and investors have more information at their disposal than at any

time in history.

The internet enhanced the public's access to information, including

information about social issues and the social & environmental performance

of companies.

Sustainability:

The earths natural systems are in serious and accelerating decline.

Sustainability and responsibility in our systems of production and

consumption is highly encouraged by making purchase decisions based on

social and environmental criteria.

As technology improves, costs for renewable energy and "green" technology

will fall, becoming more attractive to buyers from a cost-benefit perspective.

Globalization:

It represents a new stage of capitalist development, this time without publicinstitutions to protect society by balancing private corporate interests against

broader public interest.

Globalization has also forced domestic companies to compete like never

before, often with foreign firms that have different core competencies,

resources, and strengths.

Individuals and groups inside and outside of these companies are recognizing

this opportunity and are pressuring firms to carry out this bidding in order to

apply their social values overseas.

The Failure of the Public Sector: Citizens arguably expect less of government than they used to, having

confidence in the public sector as the best or most appropriate venue for

addressing a growing list of social problems.

Individual citizens or well-organized advocacy groups are turning their

attention to companies, who have the potential to solve many social and

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environmental problems directly, without the lag and bureaucracy of

government.

4. Distinguish between the three types of CSR

Ethical CSR

Organizations pursue a clearly defined sense of social conscience in managing

their financial responsibilities to shareholders, their legal responsibilities to

their local community and society as a whole and their ethical responsibility

to do the right thing for all their stakeholders.

This is founded on the belief that the relationship between companies and

their consumers did not have to be an adversarial one and that corporations

should honor social contract with the communities in which they operate and

the citizens they serve.

Altruistic CSR

Organizations take a philanthropic approach by underwriting specific

initiatives to give back to the companys local community or to designated

national or international programs.

This giving back is done with funds that rightly belong to shareholders.

Giving back is at the discretion of the corporation, which places the individual

shareholders in the awkward position of unwittingly supporting caused they

would not support on their own.

Strategic CSR

Philanthropic activities are targeted toward programs that will generate the

most positive publicity or goodwill for the organization.

Companies can claim to be doing the right thing and on the assumption that

good publicity brings more sales, they also can meet their fiduciary

obligations to their shareholders.

5. Understand the key component of a successful CSR initiative

If an organization commits to CSR initiatives then they must be real commitments

rather than short term experiments.

Customers will not settle for second rate services or product just because there is acharitable cause involved. Therefore, the companies product and service must meet

and ideally exceed the expectations of their target market, and if they continue to do

CSR for the long term and assuming they have a reasonably competent management

team, the needs of their stakeholders should be well taken care of.