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Welcome to CSR Masterclass

Regents College July 11-12th 2011
Instructor: Sean Flynn One 4 All CSR Managing Director MBA International Business MA International Non-governmental Organizations
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Introduce Yourself
Name Occupation Nationality Why you choose to take the course?

Key Terms
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Outline
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Corporate Citizenship Social Responsibility Responsiveness Performance

The CSR Concept Arguments For and Against Corporate Social Responsibility Corporate Social Responsiveness Corporate Social Performance (CSP)

Nonacademic Research on CSP Social Performance and Financial Performance Socially Conscious or Ethical Investing Summary

The Evolving Idea of Social Responsibility

The fundamental idea is that corporations have duties that go beyond carrying out their basic economic function in a lawful manner. Over time the doctrine has evolved to require more expansive action by companies largely because: Stakeholder groups have gained more power to impose their agendas The ethical and legal philosophies underlying it have matured
Corporate social responsibility The duty of a corporation to create wealth in ways that avoid harm to, protect, or enhance societal assets.

Social Responsibility in Classical Economic Theory

Throughout American history, classical capitalism has been the basic inspiration for business. In this view, a business is socially responsible if it maximizes profits while operating within the law. The idea that markets harness low motives and work them into social progress has always attracted skeptics. Today the classical ideology still commands the economic landscape, but ethical theories of broader responsibility have worn down its prominences.

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The Early Charitable Impulse

Most colonial era businesses practiced frugality, yet charity was a coexisting virtue. The wealthy endowed social causes as individuals, not through their companies. Steven Girard changed the climate of education in the United States by bequeathing $6 million for a school to educate orphaned boys. John D. Rockefeller systematically gave away $550 million over his lifetime. Andrew Carnegie gave $350 million over his lifetime to causes that would elevate the culture of a society. Carnegie believed fortunes should not be wasted by paying higher wages or giving gifts to poor people.

The Early Charitable Impulse (continued)

People such as Andrew Carnegie and Herbert Spencer believed in the doctrine of social Darwinism when it came to charity. Social Darwinism held that charity interfered with the natural evolutionary process in which society shed its less fit to make way for the better adapted. Additionally, courts consistently held charitable gifts to be ultra vires (beyond the law) because charters granted by states when corporations were formed did not expressly permit them.

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Social Responsibility in the Late Nineteenth and Early Twentieth Centuries

Giving, no matter how generous, was a narrow kind of social responsibility often unrelated to a companys impacts on society. During the Progressive era, three interrelated themes of broader responsibility emerged: Managers were trustees Managers had an obligation to balance multiple interests Many managers subscribed to the service principle

Social Responsibility in the Late Nineteenth and Early Twentieth Centuries (continued)
Henry Ford touted citizenship but was ultimately unconcerned about the welfare of his employees. General Robert E. Wood believed in responsibility to customers, the public, employees, suppliers, and finally stockholders. 1920s and beyond, organized charities began forming to which corporations contributed: Community Chest Red Cross Boy Scouts

1950The Present
Contemporary understanding of corporate social responsibility formed during this period. Social Responsibilities of the Businessman Dissenters to this theory were conservative economists who claimed that business is most responsible when it makes money efficiently, not when it misapplies its energy to social projects. 1971 Bold statement by the Committee for Economic Development outlining three concentric circles of responsibilities. 1981 Statement on Corporate Responsibility from the Business Roundtable.
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Corporate Social Responsibility (CSR)

Preliminary definitions of CSR The impact of a companys actions on society Requires a manager to consider his acts in terms of a whole social system, and holds him responsible for the effects of his acts anywhere in that system

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Corporate Social Responsibility (CSR)

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More Definitions
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Corporate Citizenship Concepts Corporate social responsibility emphasizes obligation and accountability to society Corporate social responsiveness emphasizes action, activity Corporate social performance emphasizes outcomes, results

CSR means addressing the legal, ethical, commercial and other expectations society has for business, and making decisions that fairly balance the claims of all key stakeholders. (Business for Social Responsibility) CSR is the continuing commitment by business to behave fairly and responsibly, contributing to economic development while improving the quality of life of workers, their families, the local community, and society at large. (European Commission's Green Paper).

Why CSR?
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Consequences of Bad CSR

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To meet federal regulations To meet publics cries for ethical behavior To provide an assurance to socially responsible investors To prevent unethical conduct which can have serious reputation and financial costs

Consider Martha Stewart, Enron, WorldCom etc. etc. In all cases, companies are suffering bad publicity Others have to pay fines Evidence that unethical behaviors hurt companies in the long run

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Critics of (CSR)

Believers of CSR:
CSR stands for dawning of a new era of capitalism, when business, government, and citizens join forces for greater good to do something about water shortage, air pollution, and 1,2 billion people who live on less than a dollar a day.
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CSR is nothing more but big business cynical response to charges of greed and corruption indented to mollify those who say corporations have too much power.
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What do you think??

What do you think??

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Other Arguments Against CSR

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Why are businesses being criticized?

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Social issues are not the concerns of businesses

Most Society is pluralistic

Managements role is to make as much money as possible while conforming to the basic rules of society, both of those embodied by law and ethics
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-Prevents power being concentrated in the hands of a few There are diverse institutions pursuing their own interests
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Managers do not have the expertise to make social decisions they are oriented towards finance and operations Business already have enough power if given decision making power in the social domain, businesses will be given too much power

Businesses have to satisfy all of the autonomous groups Businesses have to make all stakeholders happy

Does it pay to be good?

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Business Importance of CSR:

Improved Financial Performance Reduced Operating Costs Enhanced Brand Image and Reputation Increased Sales and Customer Loyalty Increased Productivity and Quality Increased Ability to Attract and Retain Employees Access to Capital

Lets find out...

Improved Financial Performance

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Enhanced Brand Image & Reputation

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A recent longitudinal Harvard University study has found that "stakeholder balanced" companies showed four times the growth rate and eight times employment growth when compared to companies that focused only on shareholders and profit maximization.

A company considered socially responsible can benefit -both by its enhanced reputation with the public, as well as its reputation within the business community, increasing a company's ability to attract capital and trading partners. For example, a 1997 study by two Boston College management professors found that excellent employee, customer and community relations are more important than strong shareholder returns in earning corporations a place an Fortune magazine's annual "Most Admired Companies" list.

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Increased Sales and Customer Loyalty:

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Increased Ability to Attract and Retain Employees

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A number of studies have suggested a large and growing market for the products and services of companies perceived to be socially responsible. While businesses must first satisfy customers' key buying criteria - such as price, quality, appearance, taste, availability, safety and convenience. Studies also show a growing desire to buy based on other value-based criteria, such as " sweatshop-free" and child labor-free clothing, products with smaller environmental impact, and absence of genetically modified materials or ingredients.

Companies perceived to have strong CSR commitments often find it easier to recruit employees, particularly in tight labor markets. Retention levels may be higher too, resulting in a reduction in turnover and associated recruitment and training costs. Tight labor markets as well the trend toward multiple jobs for shorter periods of time are challenging companies to develop ways to generate a return on the consideration resources invested in recruiting, hiring, and training.

Reduced Regulatory Oversight

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Easier Access to Capital

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Companies that demonstrate that they are engaging in practices that satisfy and go beyond regulatory compliance requirements are being given less scrutiny and freer reign by both national and local government entities. In many cases, such companies are subject to fewer inspections and paperwork, and may be given preference or "fast-track" treatment when applying for operating permits, zoning variances or other forms of governmental permission.

The Social Investment Forum reports that, in the U.S. In 1999, there is more than $2 trillion in assets under management in portfolios that use screens linked to ethics, the environment, and corporate social responsibility. It is clear that companies addressing ethical, social, and environmental responsibilities have rapidly growing access to capital that might not otherwise have been available.

CSR = SD ?
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Corporate Social Responsibility (CSR)

Business Criticism/ Social Response Cycle
Factors in the Societal Environment Criticism of Business Increased concern for the Social Environment A Changed Social Contract

Sustainable Development (SD) in the spirit of the 1987 Brundtland report is a framework in which not only environmental, but also economic and social indicators are interlinked

Business Assumption of Corporate Social Responsibility Social Responsiveness, Social Performance, Corporate Citizenship A More Satisfied Society Fewer Factors Leading to Business Criticism Increased Expectations Leading to More Criticism
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CSR: Just Good Business ?

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Corporate Social Responsibility (CSR) Historical Perspective

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The Feelgood Factor

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Philanthropic giving
n Donating

to charitable causes help

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Helping other to help your self

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Social Responsible Investing

n Environmental

matters and climate change

Economic model the invisible hand of the marketplace protected societal interest Legal model laws protected societal interests

Corporate Social Responsibility (CSR) Historical Perspective

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Corporate Social Responsibility (CSR) Evolving Viewpoints

CSR considers the impact of the companys actions on society (Bauer) CSR requires decision makers to take actions that protect and improve the welfare of society as a whole along with their own interests (Davis and Blomstrom)

What was the main motivation?

To keep government at arms length

Corporate Social Responsibility (CSR) Evolving Viewpoints

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Corporate Social Responsibility (CSR)

Evolving Viewpoints CSR relates primarily to achieving outcomes from organizational decisions concerning specific issues or problems, which by some normative standard have beneficial rather than adverse effects upon pertinent corporate stakeholders. The normative correctness of the products of corporate action have been the main focus of CSR (Epstein)

CSR mandates that the corporation has not only economic and legal obligations, but also certain responsibilities to society that extend beyond these obligations (McGuire)

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Corporate Social Responsibility (CSR)

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Pyramid of CSR
Philanthropic Responsibilities Be a good corporate citizen. Ethical Responsibilities Be ethical. Legal Responsibilities Obey the law. Economic Responsibilities Be profitable.

Carrolls Four Part Definition CSR encompasses the economic, legal, ethical and discretionary (philanthropic) expectations that society has of organizations at a given point in time

Modeling the context

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Pre-modern
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Premodern
Minimalist - Self Interested
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Modern
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The social contract

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Postmodern
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Stakeholder (management and stewardship)

TRADITIONAL ENTREPENEURIAL Power goes to those who succeed in the jungle Authority resides in those with legitimacy size; wealth; longevity confers authority Ethics based on individual responsibility and programs minimized

Modern
COMMUNITY OF RATIONAL RULES i) BUREAUCRATIC ii) SCIENTIFIC MANAGEMENT iii) RELIANCE ON "EXPERTS" iv) COMPREHENSIVE RULES Power goes to those who make the rules. Relies on expertise Authority goes to those who can enforce their rules Reach for the top Ethics are based on fairness and programs based on rules
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Postmodern
COMMUNITY OF FLEETING EXCHANGES i) NEED TO INTERPRET ii) NEED TO BUILD CONSENSUS iii) LOOSE CONNECTIONS iv) SUSPICION OF AUTHORITY Power goes to those who can make the deal through networking and can handle uncertainty Authority goes to those who see and can sell coalitions and deals regardless of other levels of authority Ethics are situational; programs emerge to be responsive

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Position Minimalist Self interested

Responsible to Stockholders/ owners Stockholders/ owners/ cost controllers Those with social and legal contract Those who influence direction and fortunes

therefore Maximizing profit Do good when furthers quest for growth and profit Goes beyond law to spirit of commitment Develop responsive strategies

Minimalist CSR
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a.k.a.- traditional stockholders model, fundamentalism, Libertarian

Social contract

Stakeholder Management Stakeholder stewardship

PREMISES -Shareholders 1st -Obey the law -Private vs Public [MINIMAL STATE]
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Society as whole / Solutions for social future problems

Minimalist critiques of other models

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Self-Interested CSR
-PREMISES
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THEY DISTRACT FROM PROFIT MOTIVE THEY ARE SOCIALISTIC "PUBLIC GOOD" IS SUSPECT

GOOD MOTIVES NOT ENOUGH PROFITS & COMMUNITY CULTIVATING PHILANTHROPY REPUTATION

Critiques of other perspectives

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SOCIAL CONTRACT CSR

PREMISES l CORPORATION AS "MORALPERSON" l IMPLICIT & EXPLICIT CONTRACT WITH SOCIETY l WITH POWER COMES RESPONSIBILITY

MINIMALIST IS TOO RIGID ALL OTHERS IGNORE PROFIT

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Critique of alternate
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3 STAKEHOLDER GROUPS:
*PRIMARY [ECONOMIC] *SECONDARY [SOCIO POLITICAL] * TERTIARY [POWERLESS]

1ST 2 MODELS FOCUS TOO MUCH ON PROFIT

Stakeholder Stewardship
PREMISES l -CARING FOR TERTIARY l -HELP NON-BENEFICIAL PARTIES l -HOLD IN TRUST l -ASPIRE TO HIGH IDEALS
*ALL OF THIS PRESUPPOSES TIME & MONEY
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Critiques of alternate
-1ST 2 MODELS TOO PROFITFOCUSED -Social Contract MODEL TOO VAGUE

Corporate Social Responsibility (CSR) CSR in Equation Form Is the Sum of:
Economic Responsibilities (Make a profit) Legal Responsibilities (Obey the law) Ethical Responsibilities (Be ethical) Philanthropic Responsibilities (Good corporate citizen) CSR

Corporate Social Responsibility (CSR) Stakeholder View

Stakeholder Group Addressed and Affected CSR Component Economic Legal Ethical Philanthropic Owners Con- Employees Community sumers 1 3 4 3 4 2 1 4 2 1 2 2 3 4 3 1 Others 5 5 5 5

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Corporate Social Responsibility (CSR) Arguments Against

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Corporate Social Responsibility (CSR) Arguments For

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Restricts the free market goal of profit maximization Business is not equipped to handle social activities Dilutes the primary aim of business

Increase business power Limits the ability to compete in a global marketplace

Addresses social issues business caused and allows business to be part of the solution Protects business self-interest

Limits future government intervention Addresses issues by using business resources and expertise Addresses issues by being proactive

Corporate Social Responsibility (CSR) Business Responsibilities in the 21st Century

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Corporate Social Responsiveness

Evolving Viewpoints Ackerman and Bauers action view Sethis three stage schema Fredericks CSR1, CSR2, and CSR3 Epsteins process view

Demonstrate a commitment to societys values and contribute to societys social, environmental, and economic goals through action. Insulate society from the negative impacts of company operations, products and services. Share benefits of company activities with key stakeholders as well as with shareholders. Demonstrate that the company can make more money by doing the right thing.

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Corporate Social Performance

Carrolls CSP model integrates economic concerns into a social performance framework
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Corporate Social Performance Extensions and Reformulations

Wartick and Cochrans extensions Woods reformulations Swansons Reorientation

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Corporate Social Performance

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Corporate Social Performance Nonacademic Research Fortune's ranking of most and least admired corporations Council on Economic Priorities Corporate Conscience Awards Business Ethics Magazine Awards WalkerInformations Research on the impact of social responsibility

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Corporate Citizenship
Corporate citizenship embraces all the facets of corporate social responsibility, responsiveness and performance

Social and Financial Performance A Multiple Bottom-Line Perspective

Spectrum of CSR
Good CSR
Taking care of workers Low dependence on non renewable resources High awareness about CSR initiatives Land compensation Increased monitoring system Environment responsibility

Socially Conscious or Ethical Investing Social screening is a technique used to screen firms for investment purposes

Poor CSR
No employment No concern for indirect effect (land, water, air) Destruction of agricultural land Not willing to listen to other stakeholders Appropriate of land not being compensated Non compliance of rule of land

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CSR Watchdogs
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CSR Auditing & Reporting

Examples of emerging CSR standards include:
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CSR Watchdogs include Labor Unions, Consumer Groups, Environmentalists, NGOs and all Stakeholders watching over their interest as opposed to Shareholder value only

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AccountAbilitys AA1000 standard (triple bottom line reporting) Dow Jones Sustainability Index FTSE Groups FTSE 4Good index Global Reporting Initiative (GRI) ISO 26000 Social Responsibility Standardization Social Accountability Internationals SA8000 standard UN Global Compact

Selected Key Terms

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Optional Course Literature -See Case Studies for evening reading

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Business for Social Responsibility Community obligations Corporate Citizenship Corporate social responsibility Corporate social responsiveness Corporate social performance

Economic, legal, ethical and discretionary responsibilities Paternalism

Blowfield, Michael & Alan Murray (2008) Corporate Responsibility. A Critical Introduction. Oxford: Oxford University Press.

Devinney, Timothy (2009) Is the Socially Responsible Corporation a Myth? The Good, the Bad, and the Ugly of Corporate Social Responsibility, Academy of Management Perspectives, Vol. 23, No. 2, pp. 44-56. May, Steve, George Cheney & Juliet Roper eds. (2007) The Debate over Corporate Social Responsibility. Oxford: Oxford University Press.l Boatright, John R. (2003) Ethics and the Conduct of Business. Upper Saddle River, NJ: Prentice Hall. Zadek, Simon (2001) The Civil Corporation. The New Economy of Corporate Citizenship. London: Earthscan.

Philanthropy Pyramid of CSR Socially conscious investing

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