Corporate Social Responsibility

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Corporate Social Responsibility

• A corporation should be held accountable for any
  of its actions that affect people, their
  communities, and their environment.
• Requires companies to balance the benefits to be
  gained against the costs of achieving those
  benefits.
• Iron Law of Responsibility
• In the long run, those who do not use power in
  ways society considers responsible will lose it.
  

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Figure 3.1
Foundation principles of corporate social
responsibility
Charity Principle Stewardship Principle
Definition Business should give voluntary aid to societys needy persons and groups Business, acting as a public trustee, should consider the interests of all who are affected by business decisions and policies
Type of Activity --Corporate philanthropy --Voluntary actions to promote the social good --Acknowledging business and society interdependence --Balancing the interests and needs of many diverse groups in society
Examples --Corporate philanthropic foundations --Private initiatives to solve social problems --Social partnerships with needy groups --Enlightened self-interest --Meeting legal requirements --Stakeholder approach to corporate strategic planning
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Figure 3.3
The pros and cons of corporate social
responsibility
Arguments for Corporate Social Responsibility
Balances corporate power with responsibility.
Discourages government regulation.
Promotes long-term profits for business.
Improves business value and reputation.
Corrects social problems caused by business.
Arguments against Corporate Social Responsibility
Lowers economic efficiency and profit.
Imposes unequal costs among competitors.
Imposes hidden costs passed on to stakeholders.
Requires social skills business may lack.
Places responsibility on business rather than individuals.
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Should Companies Care?

• Colvin asserts companies today are doing more of
  what corporate-citizenship activists want than
  they have ever done before, because theyre
  listening to markets
• Product-market decisions by consumers
• Labor-market decisions by employees
• Q To what extent do consumers or employees make
  decisions based on corporate social
  responsibility?
• Source Fortune, 6/11/01

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Two views of corporate social responsibility

• The shareholder view
• The only social responsibility of business is to
  create shareholder wealth legally and with
  integrity.
• Corporate management cannot decide what is in the
  social interest.
• The costs of social responsibility which do not
  increase the value of stock, will be passed on to
  consumers by way of higher prices, or to
  employees as lower wages, or to shareholders as
  lower returns.
• The multiple stakeholders view
• All customers and employees are treated with
  dignity.
• Investor trust must be honored.
• Relationships with suppliers must be based on
  mutual respect.
• Belief in fair economic competition.
• Business can contribute to social reform and
  honor human rights.

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Evolving Phases of Corporate Social Responsibility
Figure 3.5