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McGraw-Hill/IrwinStrategic Management, 10/e Copyright 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Corporate SocialResponsibility and

Business Ethics

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Stakeholder Approach

According to Stakeholder Approach:

In defining or redefining the company mission,

strategic managers must recognize the legitimate

rights of the firms claimants.

These include outside stakeholders affected by the

firms actions.

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Perceived Stakeholders

Customers

Government

Stockholders Employees

Society

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Steps to Incorporate Stakeholders:

1. Identification of stakeholders

2. Understandingstakeholders

specific claims vis--vis the firm

3. Reconciliation of these claims

and assignment ofpriorities

4. Coordination of the claims with

other elements of the companymission

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Dynamics of Social Responsibility

Inside vs. Outside Stakeholders

Duty to serve society plus duty to

serve stockholders

Flexibility is key

Firms differ along:

Competitive Position

Industry

Country

Environmental Pressures

Ecological Pressures

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Inputs to the Development of

Company Mission

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The 4 Es of Marketing Strategy:

Make it easy for the consumer to be green

Empower consumers

with solutions Enlist the support

of the consumer

Establish credibility with all publics

and help to avoid a backlash

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Types of Social Responsibility

Economicthe duty of managers, as agents of thecompany owners, to maximize stockholder wealth

Legalthe firms obligations to comply with the

laws that regulate business activities Ethicalthe companys notion of right and proper

business behavior.

Discretionaryvoluntarilyassumed by a business organization.

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CSR & Profitability

Corporate social responsibility(CSR), is the idea that business has a

duty to serve society in general as well

as the financial interests ofstockholders.

The dynamic between CSR and

success (profit) is complex. They are

not mutually exclusive, and they are

not prerequisites of each other.

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Factors Complicating a

Cost-Benefit Analysis of CSR:

1. Some CSR activities incur no dollar costs at all. Infact, the benefits from philanthropy can be huge.

2. Socially responsible behavior does not come at a

prohibitive cost.3. Socially responsible practices may create savings,

and, as a result, increase profits.

4. Proponents argues that CSR costs are more thanoffset in the long run by an improved company

image and increased community goodwill.

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Sarbanes-Oxley Act of 2002

CEO and CFO must certify every reportcontaining companys financial statements

Restricted corporate control of executives,accounting firms, auditing committees, and

attorneys Specifies duties of registered public

accounting firms that conduct audits

Composition of the audit committee and

specific responsibilities

Rules for attorney conduct

Disclosure periods are stipulated

Stricter penalties for violations

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Social Audit

A social audit is an attempt to measure acompanys actual social performance against

its social objectives.

The social audit may be used for more than

simply monitoring and evaluating firm social

performance.