The Difference There Is and the Difference That Makes in Global Settings

Patricia H. WerhaneUniversity of Virginia and DePaul University

“Corporate Social Responsibility”as a Fig Leaf

CSR “is the obligation of decision makers to take actions which protect and improve the welfare of society as a whole along with their own interests.” (Davis and Blomstrom, 1975, 23)

“The social responsibility of business encompasses the economic, legal, ethical and discretionary expectations that a society has of organizations at a given point in time.” [Carroll, 1979, 500]

Problems:Focuses

externallyReactiveDiscretionaryCan be a cover-

upEnron, etc.

CSR as an Umbrella…The responsibility

of a company for the totality of its impact.” (Chandler, 2001) To primary

stakeholders To other stakeholders To culture and society To those affected by

externalities To the public sector To Government(s) NGOs Ecosystem The Globe! ?

CSR defined by PoliteiaThe common way of thinking about CSR

emphasizes the moral obligations of the corporation toward various stakeholders…”

So here CSR = CMR: normative obligations – What companies ought to do.

?Which stakeholders?Reciprocal nature of these obligations

(Goodstein & Wicks, Bowie, et.al.)

“Globalization has now shifted into warp drive.”

That is, “the World is [becoming] Flat.”

Tom Friedman

So…..IF CSR = CMR,

How do we prioritize stakeholders in a global economy?

What are the relationships between business and society?

“Musts?” Obligatory – “oughts”? Discretionary?

And IF “the world is flat” (the globalization thesis),How should we think or rethink about ideas of

CSR/CMR in a global economy?

Company

Mass media

Special interestGroups

Privatesector

Politicalparties

InternationalOrganizations

Pressuregroups

Localcommunities

NGOs

Customers

Professionals

Employees

Governments

Suppliers

Corporatemanagement

Shareholders

• Slide Compliments of Klaus Leisinger, Novartis Foundation

SYSTEMS THINKINGA truly systemic view considers how a set of

individuals, institutions, and process operates in a complex network of relationships, an array of individual and institutional actors with conflicting interests and goals, and a number of feedback loops. (Wolf, 1999)

MNEs are complex open interactive enterprises embedded in larger political, economic, legal, and cultural systems that are able to affect and be affected by various interactions and unpredictable events. (Werhane, 2008)

CommunitiesCommunities

Local Local employeesemployees

CorporationCorporation

NGOsNGOs

Social Social Norms & Norms & CustomsCustoms

CustomerCustomer Local Governments & Local Governments & Political SystemsPolitical Systems

SuppliersSuppliers

Global Global employeeemployee

s s

ShareholderShareholderss

Partners &Partners &CompetitorCompetitor

ss

Religiousinfluences

TierTier 11

Tiers 2-3Tiers 2-3

Tier 4Tier 4

Tier 5Tier 5

The Four “Ps” Global Challenge

The Bottom of the The Bottom of the Pyramid (BOP): Pyramid (BOP): Poverty, Poverty, Pollution and Pollution and PandemicsPandemics

PopulationPopulation: 75-100 million: 75-100 millionPurchasing power: > Purchasing power: > $20,000 USD$20,000 USD

1,500-1,750 1,500-1,750 millionmillion$1,500-20,000 $1,500-20,000 USDUSD

$1,500 USD$1,500 USD

4,000 4,000 millionmillion

< $1,500 < $1,500 USDUSD

Adapted from: C.K. Prahalad and Stewart Hall, 2002. Adapted from: C.K. Prahalad and Stewart Hall, 2002. The Fortune at the Bottom of The Fortune at the Bottom of the Pyramidthe Pyramid

CSR as an Umbrella Again? What are the limits of

CSR and/or CMR, that is, Corporate Responsibility in a global economy?

Are companies responsible for EVERYTHING and EVERYONE they affect internally and externally worldwide??

And what are the reciprocal stakeholder obligations in this context?

NOVARTIS: We want to discover, develop and successfully market innovative products to prevent and cure diseases, to ease suffering and to enhance the quality of life.

Novartis

Novartis and reciprocal obligationsMUSTS: adherence to their mission, respect for

professionalism, patient responsibility, researcher and employee commitment, shareholder input

SHOULDS: Global citizenship, human rights, UN Global Compact guidelines, etc.

DISCRETIONARY: 5 year window for self-sufficiency for philanthropic ventures having to do with health care

NIKE …[W]e would build our business with all

of our partners based on trust, teamwork, honesty and mutual respect. We expect all of our business partners to operate on the same principles.

     At the core of the NIKE corporate ethic is the belief that we are a company comprised of many different kinds of people, appreciating individual diversity, and dedicated to equal opportunity for each individual.

NIKE’S Code of ConductFor Nike and its business partnersEmployee rights; to health, safety,

compensation, work hours & benefitsMinimize environmental impactDignity of individual and equal opportunityAnti: forced labor, child labor under 15Minimum wages, benefits, pay for overtime

Limits: 60 hrs/week; 6 day work week maximum

Employee informationTransparency to inspection

Mission& Code

of Conduct

Nike’s Alliance ModelBoard of Directors

Customers

Suppliers & Sub-Contractors

Franchises

Nike

Nike Management & Employees

Country(s) & Local Traditions

Off-shore workers

Model Courtesy of Mary Ann Leeper, COO, Female Health Company

Other SportsClothing cos.

Communities

Media

Home country (U.S.)

Environment NGOs

CONCLUSION

Globalization weakens the ability to “outsource”—Fewer externalities

Globalization increases the need to prioritize corporate responsibilities: Integration of Mission and code throughout“MUSTS” Do what company does bestOUGHTS: follow guidelines of international codes of

ethics and be good corporate citizensDiscretionary: philanthropy in areas of corporate

expertise

Acknowledgement of parallel stakeholder reciprocal responsibilities

CMR CRCSR