Changing paradigms of corporate social responsibility

Jayashree Sadri and Sorab Sadri 1

CHANGING PARADIGMS OF

CORPORATE SOCIAL RESPONSIBILITY

Professor Jayashree Sadriand

Dr Sorab Sadri


BASIS

This program is an extension of the argument in Sadri, Jayashree and Ajgaonkar Geometry of HR (2002) and extended in Jayashree, Sadri and Dastoor Theory and Practice of Managerial Ethics (2008).

It has borrowed from sopme doctoral work conducted under the guidance of Dr Sadri between 2004 and 2008


SOME BASICS

Theory is an abstraction of reality that seeks to explain reality. If a theory does not explain reality it is a quasi theory, a meta theory or not a theory at all.

The distinction between theory and practice thus disappears.


PARADIGM

The noted philosopher Thomas Kuhn gave this word its contemporary meaning when he adopted it to refer to the set of practices that define a scientific discipline during a particular period of time

His work The Theory of Scientific Revolutions (1962) in truly path breaking.


SHIFTING POSITIONS

Paradigm shift is the term first used by Thomas Kuhn in his book The Structure of Scientific Revolutions to describe a change in basic assumptions within the ruling theory of science. It is in contrast to his idea of normal science.


ELEMENTS OF A PARADIGMKuhn defines a scientific paradigm as:

what is to be observed and scrutinized, kind of questions that are supposed to be asked and

probed for answers in relation to this subject, how these questions are to be structured, how the results of scientific investigations should be

interpreted


OUR INQUIRY

Based on a detailed review of published literature and some on going doctoral research, we examined the various elements of the paradigm of CSR.

This led us to conclude that there was a visible shift.


UNDERSTANDING C. S. R.

Corporate Social Responsibility is not the latest bullet or business fad, it is not a philanthropic idea. It is an international imperative for both business and the countries we are operating in.

Maureen C. Shaw, President & CEO (2005) IAPA (Industrial Accident Prevention

Association)


Some Concepts in Business Society Interface

Corporate Social Responsibility (Bowen, 1953) Corporate Social Performance (Carroll, 1979)

Corporate Citizenship (Altman,1998)

Corporate Social Responsiveness (Frederick, 1986)

Triple Bottom Line & Sustainability (Elkington,1998)


Linkages in Corporate Management

Source: CSR Quest


CONCEPT OF CSR

The concept of CSR has its origins in the Book by Harold Bowen – Social Responsibilities of the Businessman whom Carroll (1999) takes to be the father of CSR

CSR concept is primitive to all other concepts in

business society interface field (Carroll,1999).


VARIED PERCEPTIONS OF CSR

CSR means something, but not always the same

thing to every body. To some it conveys the idea of

legal responsibility or liability ; to others it means

socially responsible behavior in the ethical sense ;

to still others the meaning transmitted is that of

'responsible for' in a causal mode ; many simply

equate it with charitable contributions ;a few see it

as a sort of fiduciary duty imposing higher

standards of behavior on businessman than on

citizens at large (Votow, 1972 )as quoted by Elisabet

Garriga et al (2004)


VARIED PERCEPTIONS OF CSR An eclectic field with loose boundaries;

broadly than focused, multidisciplinary; wide breadth; brings in wider range of literature ;and interdisciplinary (Carroll, 1994)

The very nature of CSR has led to a plethora of approaches and definitions of the concept.


SOME DEFINITIONS OF CSR "decisions and actions taken for reasons at least partially

beyond the firm's direct economic or technical interest." Davis (1960)

"problems that arise when corporate enterprise casts its shadow on the social scene, and the ethical principles that ought to govern the relationship between the corporation and society" Eells and Walton (1961) .

"The basic idea of corporate social responsibility is that business and society are interwoven rather than distinct entities; therefore, society has certain expectations for appropriate business behavior and outcomes." Wood (1991)


SOME DEFINITIONS OF CSR

Situations where the firm goes beyond compliance and engages in ‘actions that appear to further some social good, beyond the interests of the firm and that which is required by law’ McWilliams and Siegel (2001)

"The CSR firm should strive to make a profit, obey the law, be ethical and be a good corporate citizen.” Carroll (1999).


IMPORTANT APPROACHES TO CSR ‘Government’s job is not business, and business’s job is not

government’ Theodore Levitt (1958). The neo-classical view of the firm that essentially states that

maximizing shareholder value is pre-eminent and CSR is irrelevant. Milton Friedman (1962)

The stakeholder view espoused by R Edward Freeman (1984) that managers must satisfy a variety of constituents (e.g. workers, customers, suppliers, local community organizations) who can influence firm outcomes.

Donaldson and Davis, (1991) proposed the stewardship theory based on the idea that there is a moral imperative for managers to ‘do the right thing’, without regard to how such decisions affect firm financial performance.

Archie Carroll (1999) took a community service view of CSR Recent theories of CSR (Baron (2001), McWilliams and Siegel (2001),

Bagnoli and Watts (2003) assert that firms engage in “profit-maximizing” CSR


IMPORTANT APPROACHES TO CSR

Stakeholders outside the stockholder group are viewed as means to the ends of maximizing shareholder wealth (Kenneth Goodpaster, 1996).

The idea is that while being socially responsible often entails short-run sacrifice and even pain, it usually ultimately results in long-long-gain. Expenditures on strategic CSR activities should properly be viewed as investments in a “Goodwill Bank” (Vaughn, 1999) which yields financial returns (McWilliams and Siegel, 2001).


THE LOGIC

Scholars have traditionally disassociated ethics from business (both philosophically and empirically) while stressing that the practice of business ethics is a management option based on a given value system of the corporate entity.

We have questioned this position.


OUR DEFINITIONAL PREMISE

WE HAVE SOUGHT TO DEFINE OUR POSITION BASED ON THREE PREMISES

Approach : Shareholder Primacy Vs Stakeholder Management

Nature: Voluntary / Obligatory / Mandatory Motive: Moral Duty (Altruistic) Vs Competitive

advantage (Strategic)


TWO FUNDAMENTAL APPROACHES

CSR is defined as a voluntary verifiable continuing commitment by business to contribute to development of the quality of life of the stakeholders and society at large.

CSR elements Social Welfare Stakeholder management Voluntary Nature

It is the moral duty of business regardless of the impact it would have on the firm profitability (Normative Altruistic approach)

CSR helps corporations gain some competitive advantage and can be strategically used to gain competitive advantage (Positive Strategic Approach)


ALTRUISTIC APPROACH Corporate constitutionalism focusing on a responsible use of

business power. Social responsibilities of businesses arise from the amount of social power that they have Davis (1960, 1967)

Integrative Social Contract Theory Assumes that a social contract between business and society exists Donaldson and Dunfee (1994, 1999)

Corporate (or business) citizenship where a firm is understood as being like a citizen with certain involvement in the community Wood and Lodgson (2002), Matten and Crane (2005)

CSP theories Search for social legitimacy and processes to give appropriate responses to social issues Carroll (1979), Wartick and Cochran (1985), Wood (1991)

Stakeholder normative theory Considers fiduciary duties towards stakeholders of the firm. Its application requires reference to some moral theory (Kantian, Utilitarianism, theories of justice, etc.) Freeman (1984, 1994), Evan and Freeman (1988), Donaldson and Preston (1995)


STRATEGIC APPROACH

Maximization of shareholder value, Long-term value maximization Friedman (1970), Jensen (2000)

Social investments in a competitive context Porter and Kramer (2002)

Strategies based on the natural resource view of the firm and the dynamic capabilities of the firm Hart (1995)

Strategies for the bottom of the economic pyramid Prahalad Prahalad and Hammond (2002), Prahalad (2003)and Hammond (2002), Prahalad (2003)

Cause-related marketing Altruistic activities, socially recognized, used as an instrument of marketing Varadarajan and Menon (1988), Murray and Montanari (1986)

Strategic CSR Baron (2001), McWilliams and Segel (2000)


DEFINING ALTRUISTIC CSR

According to Lantos (2001) the term altruistic or humanitarian CSR suggest genuine optional caring, even at possible personal or organizational sacrifice.

Humanitarian CSR is Carroll’s “fourth face” of CSR—philanthropic responsibilities—to be a “good corporate citizen” by “giving back” to society, furthering some social good, regardless of whether the firm will financially reap what it has spiritually sown. It demands that corporations help alleviate “public welfare deficiencies” (Brenkert, 1996)

The most basic justification for Altruistic CSR is the social contract argument that “Business is a major social institution that should bear the same kinds of citizenship costs for society that an individual citizen bears” (Davis, 1983)

Unlike strategic CSR, where it is believed that the money put into good works will yield a return on investment for the business, with altruistic CSR this is not the motive (although the firm could conceivably benefit as a byproduct).


DEFINING STRATEGIC CSR

Strategic CSR or “strategic philanthropy” (Carroll, 2001) is done to

accomplish strategic business goals—good deeds are believed to be

good for business as well as for society. With strategic CSR,

corporations “give back” to their constituencies because they believe

it to be in their best financial interests to do so. This is “philanthropy

aligned with profit motives” (Quester and Thompson, 2001) social

goals might be profitable in the long run since market forces provide

financial incentives for perceived socially responsible behavior.


STRATEGIC VS ALTRUISTIC CSR

What distinguishes Strategic CSR and Altruistic

CSR is the motive of the managers adopting

CSR. If the motive is gaining some kind of

advantage for the company, it is strategic CSR

and absence of any such motive would classify

the CSR programmes as altruistic CSR.


SHIFTING PARADIGMS:FROM ALTRUISTIC TO STRATEGIC: Evidences in Literature

Review of literature suggest globally there is a strong trend towards strategic CSR.

Indian CSR has traditionally been altruistic in nature but there are indications of a shift towards strategic intent. The Indian CSR approach has been shifting from the purely normative philanthropic CSR to stakeholder engagement and strategic use of CSR (Chahoud et al ,2007)

Boatright (2000) States that the wisdom of strategic CSR is seen in the fact that some of the most successful corporations are also among the most socially responsible.


SHIFTING PARADIGMS:FROM ALTRUISTIC TO STRATEGIC: Further Evidences in Literature

Carroll (2001) argues that due to belt tightening and increased pressure on accountability for expenditures, the trend will likely be towards funding those good works expected to financially benefit the companies.

Geoffrey P Lantos (2001) while making a case or strategic CSR argues that in view of the rising public expectations for corporate good works, returns to strategic CSR should rise. He strongly emphasized the need to identify critical stakeholders and CSR practices which would further the strategic interests of the companies


CHANGING PERSPECTIVES ON CSR

Author Perspective Year

1953 Bowen Altruistic

1970 Davis Altruistic

1984 Freeman Altruistic

1991 Wood Altruistic

1995 Donaldson and Preston Strategic and Altruistic

1995 Jones Strategic

1995 Hart Strategic

2001 Baron Strategic

2001 McWilliams and Siegel Strategic

2003 Bangoli and Watts Strategic


SHIFTING PARADIGMS:

FROM ALTRUISTIC TO STRATEGIC (Evidences from Industry)

CSR Survey 2002 India ITC's e-Chaupal initiative HLL's ( HUL) Packaging revolution Gramin Bank, Bangladesh


THE CONTINUUM OF CSR FROM ALTRUISTIC TO STRATEGIC

Corporate Charity Corporate Philanthropy The Good Corporate Citizen CSR as a select strategy Strategic CSR

Charity Strategic CSR

Company ($) Society Company ($) Society($)


REASONS FOR THE SHIFT

Legitimacy Sustainability Efficiency and Effectiveness


Conclusions

Given the changing form and content of market competition, CSR is no longer a management option but a strategic imperative.

Corporate strategists have realized this and are integrating CSR in their core business strategy.

The distinction between ethics and business disappears with the advent of strategic CSR.


So

What role do you like to you can play in promoting CSR?

What role do you feel you can play in promoting CSR?

What occasions this gap?

Thank You