CORPORATE SOCIAL RESPONSIBILITY

CSRa) EMPHASIS ON FAIRNESS  b) HISTORICAL OVERVIEW

c) POLITICAL CONTINUUM: stakeholder---------------------------------------------minimalist

[left] [right]

ISN’T THIS WHAT WE HAVE LAWS FOR?THE LAW IS NECESSARY BUT

INSUFFICIENT  a) THE LAW IS REACTIVE

 b) THE LAW IS SLOW

 c) BUSINESS IS CHANGE-

ORIENTED &FASTER

Economic Responsibilities

Legal Responsibilities

Social Responsibilities

Ethical Responsibilities

CORPORATE SOCIAL

RESPONSIBILITY IN CONTEXT

•Community in a pre-modern, modern and postmodern world

•Why we expect more from business and how “the game is played”

PRE-MODERN 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 RULESi) BUREAUCRATICii) SCIENTIFIC MANAGEMENTiii) RELIANCE ON "EXPERTS"iv) COMPREHENSIVE RULESPower goes to those who make the rules.

Relies on expertiseAuthority goes to those who can enforce their

rules Reach for the topEthics are based on “fairness’ and programs

based on rules

POSTMODERN COMMUNITY OF FLEETING EXCHANGES i) NEED TO INTERPRETii) NEED TO BUILD CONSENSUSiii) LOOSE CONNECTIONSiv) SUSPICION OF AUTHORITYPower 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

CSR MODELS

Position Responsible to therefore…

Minimalist Stockholders/owners

Maximizing profit

Self interested Stockholders/ owners/ cost “controllers”

Do good when furthers quest for growth and profit

Social contract Those with social and legal contract

Goes beyond law to spirit of commitment

StakeholderManagement

Those who influence direction and fortunes

Develop responsive strategies

Stakeholderstewardship

Society as whole / future

Solutions for social problems

THE CASE FOR THE MINIMALIST

MINIMALIST CSR Traditional stockholders model,

fundamentalism, Libertarian Friedman

PREMISES-Shareholders are the st priority -Obey the laws-Private vs. Public [MINIMAL STATE]

MINIMALIST CRITIQUES OF OTHER MODELS

THEY DISTRACT FROM PROFIT MOTIVE THEY ARE SOCIALISTIC "PUBLIC GOOD" IS SUSPECT

SELF-INTERESTDefining “Me”

SELF-INTERESTED CSR

PREMISES

GOOD MOTIVES NOT ENOUGH PROFITS & COMMUNITY CULTIVATING PHILANTHROPY REPUTATION

CRITIQUES OF OTHER PERSPECTIVES

MINIMALIST IS TOO RIGID  ALL OTHERS IGNORE PROFIT

FORD:“we endeavor to become a leading contributor to a

more sustainable world”…”The Ford Motor Company Fund supports many local and national programs to affect change, provide for those in need, and improve quality of life.”

“Are consumers, especially in North America, truly interested in and willing to pay for new technology?”

http://www.ford.com/en/ourCompany/corporateCitizenship/ourLearningJourney/strategicIssuesUpdate/climateChange.htm

SOCIAL CONTRACT

SOCIAL CONTRACT CSRPREMISES CORPORATION AS "MORALPERSON"  IMPLICIT & EXPLICIT CONTRACT WITH

SOCIETY WITH POWER COMES RESPONSIBILITY

CRITIQUE OF ALTERNATE 1ST 2 MODELS FOCUS TOO MUCH ON

PROFIT

EXAMPLE LEAKY" CONDO PLAYERS LACKED A

SENSE OF "IMPLICIT" CONTRACT WITH SOCIETY

… developers “put a lot of money into marble countertops and fancy kitchens because that’s what sells the product.  And consequently they don’t spend a lot of time thinking about how it looks [and functions] from the outside.  It’s designing inside out.”

http://www.myleakycondo.com/com020601.htm

STAKEHOLDER MANAGEMENT

3 STAKEHOLDER GROUPS:

*PRIMARY [ECONOMIC]

*SECONDARY [SOCIO POLITICAL]

* TERTIARY [POWERLESS]

CRITIQUES OF ALTERNATIVES 1ST 2 MODELS TOO PROFIT-FOCUSED -S-C MODEL IS TOO VAGUE

EXAMPLES CITIZENSBANK SHELL

STAKEHOLDER STEWARDSHIP

STAKEHOLDER STEWARDSHIPPREMISES -CARING FOR TERTIARY -HELP NON-BENEFICIAL PARTIES -HOLD IN TRUST -ASPIRE TO HIGH IDEALS

*ALL OF THIS PRESUPPOSES TIME & MONEY

CRITIQUES OF ALTERNATE -1ST 2 MODELS TOO PROFIT-FOCUSED -S-C MODEL TOO VAGUE STAKEHOLDER MODEL NOT AMBITIOUS

ENOUGH

EXAMPLE

Ben and Jerrys “Ben & Jerry’s Head of Social Mission

has returned from a two-week mission in Cote d’Ivoire and Mali on the subject of alleged child trafficking in West Africa”

http://www.benjerry.com

ISSUES OF TRUST AND CHANGE: MINIMALIST

Participants Investors/

stockholders Owners /

managers

Change Issues Hyper

competition globalization

Trust

Trust grows when performance meets expectation;

Distrust if fails to meet expectation

ISSUES OF TRUST AND CHANGE: SELF INTERESTED MODEL

Participants Program

advocates Owners /

managers

Change Issues Competition Reputation

enhancement

Trust

Trust grows when program advocates deliver enhanced corporate reputation;

Distrust if do not

ISSUES OF TRUST AND CHANGE: SOCIAL CONTRACT

Participants Those with

contracts with firm

Owners / managers

Change Issues Need for

flexibility internationaliz

ation

Trust

Trust grows when keeps legal and social contracts over time;

Distrust if do willing to violate them

ISSUES OF TRUST AND CHANGE: STAKEHOLDER MANAGEMENT

Participants Primary and

secondary Owners /

managers

Change Issues Information

access to firm increases

Systems open to scrutiny

Trust

Trust grows when stakeholders feel included in decision making

Distrust if feel excluded

ISSUES OF TRUST AND CHANGE: STAKEHOLDER STEWARDSHIP

ParticipantsSpokesperson

s for tertiaryOwners /

managers

Change Issues Pressure to

include tertiary

Worry about environment

Trust

Trust grows when firm willing to negotiate with spokespersons for tertiary

Distrust if feel excluded

MODELING THE CONTEXT Pre modern

MinimalistSelf Interested

ModernThe social contract

PostmodernStakeholder (management and

stewardship)

Economic Responsibilities

Legal Responsibilities

Social Responsibilities

Ethical Responsibilities

CORPORATE SOCIAL RESPONSIBILITY (CSR)

AND ETHICS

DEFINITIONS AND RELATIONSHIPS

Corporate social responsibility (CSR) is the process by which businesses negotiate their role in society

In the business world, ethics is the study of morally appropriate behaviors and decisions, examining what "should be done”

Although the two are linked in most firms, CSR activities are no guarantee of ethical behavior

Companies can engage in CSR activities even while they are acting in unethical ways. For example, Enron was a champion of community involvement, but used off-balance-sheet partnerships to bilk investors and eventually ruin the company.

Companies can say one thing and do another.

REASONS FOR CSR ACTIVITIES

CSR activities are important to and even expected by the publicAnd they are easily monitored worldwide

CSR activities help organizations hire and retain the people they want

CSR activities contribute to business performance

Maximize firm’s profits to the exclusion of all else

Balance profits and social objectives

Do what it takes to make a profit; skirt the law; fly below social radar

Fight social responsibility initiatives

Comply; do what is legally required

Integrate social objectives and business goals

Lead the industry and other businesses with best practices

Do more than required; e.g. engage in philanthropic giving

Articulate social value objectives

Corporate Social Responsibility Continuum

CSR ARE GROUNDED BY OPPOSING OBJECTIVES (MAXIMIZE PROFITS TO BALANCE PROFITS WITH SOCIAL RESPONSIBILITY) AND SO ACTIVITIES RANGE WIDELY

Do what it takes to make a profit; skirt the law; fly below social radar

Fight CSR initiatives Comply with legal requirements Do more than legally required, e.g.,

philanthropy Articulate social (CSR) objectives Integrate social objectives and business goals Lead the industry on social objectives

BUSINESSES CSR ACTIVITIES

Philanthropy give money or time or in kind to charity Integrative philanthropy—select beneficiaries aligned with company

interests Philanthropy will not enhance corporate reputation if a company

fails to live up to its philanthropic image or if consumers perceive philanthropy to be manipulative

These may be activities you’ll see in your firms.

Integrative philanthropy—Avon Products Inc. “The company for women" donates funds to breast cancer research.

In Seattle, FareStart partners with Consolidated Restaurants; Pharma companies align with Operation Smile, AIDs donations.

INTEGRATE CSR GLOBALLY Incorporate values to make it part of an

articulated belief system Act worldwide on those values

Cause-related marketingCause-based cross sector partnerships

Engage with stakeholdersPrimary stakeholdersSecondary stakeholders

Incorporate values in belief statements: McDonald's: “We believe that being a good corporate citizen means treating people with fairness and integrity, sharing our success with the communities in which we do business, and being a leader on issues that affect customers” (McDonald's Corporation, 1992).

Act on values: Starbucks put resources into integrating values. Primary stakeholders are internal to the company such as owners,

employees, labor unions, customers and suppliers (Clarkson, 1995). Secondary stakeholders operate external to the firm; they could be nongovernmental organizations, social activists, community groups, and governmental organizations.

REI definition of social responsibility: “Achieving commercial success in ways that honor ethical values and respect people, communities, and the natural environment” includes ethics, community investments, corporate governance, environmental health and safety practices, sustainability, sourcing practices. Matt Hyde, Sr VP of Merchandizing and Logistics at REI said the only way we can be CSR is if we pursue commercial success—it’s a given that you have to make money (November 1, 2004).

BUSINESS ETHICS DEVELOPMENT

The cultural context influences organizational ethics

Top managers also influence ethics The combined influence of culture and top

management influence organizational ethics and ethical behaviors

If national practice is bribery, then most companies in that nation will use bribery.

If a top manager is unethical, then he/she sets a lead that others follow.

When managers behave unethically, employees can be demoralized, lose faith in the organization, and even leave their jobs. Others might follow-the-leader themselves and engage in unethical behaviors.

High demands for performance and profitability led Enron employees first to cut ethical corners and finally to break laws as well. According to one Enron controller, the logic was as follows: "If your boss was [fudging] and you have never worked anywhere else, you just assume that everybody fudges earnings. Once you get there and you realized how it was, do you stand up and lose your job? It was scary. It was easy to get into 'Well, everybody else is doing it, so maybe it isn't so bad.'"

 

THE EVOLVING CONTEXT FOR ETHICS

From domestic where ethics are shared To international where ethics are not

shared when companies:Make assumptions that ethics are the sameEthical absolutism—they adapt to us Ethical relativism—we adapt to them

To global which requires an integrative approach to ethics

Most firms are developed within a nation, borrowing their ethical practices from them.

When they go international, they face new ethical challenges.

NIKE Inc. was "founded on a handshake" with implicit belief that "business with all of our partners [would be] based on trust, teamwork, honesty and mutual respect. We expect all of our business partners to operate on the same principles."

Nike discovered that their overseas subcontractors were not treating workers with respect, and this suggests that Nike's view of these principles and what they meant did not result in desired subcontractor behavior.

EMERGENCE OF A GLOBAL BUSINESS ETHIC

Growing sense that responsibility for righting social wrongs belongs to all organizations

Growing business need for integrative mechanisms such as ethics Ethics reduce operating uncertainties Voluntary guidelines avoid government impositions

Ethical conduct is needed in an increasingly interdependent world—everyone in the same game

Companies wish to avoid problems and/or be good public citizens

Create a cohesive ethical program that meets multiple and sometimes conflicting demands.

WAYS COMPANIES INTEGRATE ETHICS

Top management commitment in word and deed

Company codes of ethics Supply chain codes Develop, monitor, enforce ethical behavior Seek external assistance

Fundamental honesty and adherence to the law. Product safety and quality, workplace health and

safety precautions Conflicts of interest Employment practices Fair practices in selling and marketing products or

services Financial reporting Supplier relationships Pricing, billing, and contracting Trading in securities and/or use of insider

information Payments to obtain business Acquiring and using information about others Security and political activities Environmental protection Intellectual property or use of proprietary

information (Business Roundtable, 1988).

EXTERNAL ASSISTANCE WITH ETHICS

Industry or professional codes Certification programs, e.g., ISO 9000 Adopt/follow global codes

Caux Round Table Principles

Accountants have a professional code of ethics that companies rely on.

REASONS FOR BUSINESSES TO ENGAGE IN DEVELOPMENT OF A

GLOBAL CODE OF BUSINESS ETHICS

Create the same opportunity for all businesses if there are common rules

Level the playing field They are needed in an interconnected

world They reduce operating uncertainties If businesses don’t collaborate, they may

not like what others develop

A. Maintaining or creating the opportunity for business activities.

b. All firms should be operating according to the same principles; this produces the "level playing field" upon which many organizational leaders prefer to play.

c. Ethical codes are needed and are possible in a world that is interdependent on many other dimensions of business activities.

d. They reduce operating uncertainties and, e. Growing public interest in a global code of ethics

suggests that if businesses don't develop such codes, they will be developed by other bodies that may be unfavorable to business interests.

FOUR CHALLENGES TO A GLOBAL ETHIC

Global rules emerge from negotiations and will reflect values of the strong

Global rules may be viewed as an end rather than a beginning Rules can depress innovation and creativity Rules are static but globalization is dynamic

Global rules are likely to emerge from a negotiation process; they are unlikely to reflect values and habits consistent for all cultures. To the extent that these rules are developed by firms from the Westernized countries, they may not incorporate concerns for much of the world. Second, global ethics may be viewed as an end point rather than a beginning point for developing global ethics. Organizations may hide behind global codes, claiming that the absence of rules means that all behaviors are acceptable as conditions change. Organizations may/will find loopholes then use the rules in defense.

A global code of ethics also may serve to depress innovation, since some will hesitate to act in the absence of clear guidelines. However, a static set of guidelines is unlikely to keep pace with globalization.

INDIVIDUAL ETHICS IN ORGANIZATIONS Ethics

An individual’s personal beliefs regarding what is right or wrong or good or bad.

Ethical Behavior Behavior that is acceptable in the eye of

the beholder. However, it also refers to behavior that conforms to generally accepted social norms.

Examples of Unethical Behavior “Borrowing” office supplies for personal

use. “Surfing the Net” on company time.

DETERMINANTS OF INDIVIDUAL ETHICS

Family Influences

Family Influences

SituationalFactors

SituationalFactors

Values andMorals

Values andMorals

Experiences

Experiences

PeerInfluences

PeerInfluences

Individual EthicsIndividual Ethics

ORGANIZATIONAL ETHICS Organizational Ethics

moral values, beliefs, and rules that establish the appropriate way for an organization and its members to deal with each other and people outside the organization

MANAGING ETHICS IN ORGANIZATIONS

Managing Ethical Behavior Begins with top management which

establishes the organization’s culture and defines what will and will not be acceptable behavior.

Includes training on how to handle different ethical dilemmas.

Developing a code of ethics. A written statement of

the values and ethical standards that guide the firm’s actions.

SOCIAL RESPONSIBILITY AND ORGANIZATIONS Social Responsibility

The set of obligations (to behave responsibly) that an organization has to protect and enhance the social context in which it functions.

Areas of Social Responsibility Stakeholders: customers, employees, and

investors. The natural environment: environmentally

sensitive products, recycling, and public safety. The general social welfare: charitable

contributions, and support for social issues such as child labor and human rights.

ARGUMENTS FOR AND AGAINSTSOCIAL RESPONSIBILITY

APPROACHES TO SOCIAL RESPONSIBILITY

Source: Barney, Jay B. and Ricky W. Griffin, The Management of Organizations. Copyright © 1992 by Houghton Mifflin Company. Used with permission.

Obstructionist Stance

Accommodative Stance

Defensive Stance

Proactive Stance

Highest Degree of Social

Responsibility

Lowest Degree of Social

Responsibility

MANAGING SOCIAL RESPONSIBILITY:FORMAL ORGANIZATIONAL DIMENSIONS Legal Compliance

Extent to which the organization conforms to local, state, federal, and international laws.

Ethical Compliance Extent to which members of the organization

follow basic ethical/legal standards of behavior. Philanthropic Giving

Awarding of funds or gifts to charities or other social programs.

MANAGING SOCIAL RESPONSIBILITY:INFORMAL ORGANIZATIONAL DIMENSIONS Organizational Leadership and Culture

Leadership practices and the culture of the organization can help define the social responsibility stance an organization and its members will adopt.

Whistle Blowing The organizational response to the disclosure by an

employee of illegal or unethical conduct on the part of others within the organization is indicative of the organization’s stance on social responsibility.