A Brief Review of Research in Corporate Social Responsibility at

De La Salle UniversityDr. Benito Teehankee

Chair, Management and Organization Department, RVR-College of Business, De La Salle University

Vice-chair, CSR Committee, Management Association of the PhilippinesPresident, Pambansang Samahan sa Sikolohiyang Pilipino

Outline

1. CSR Research at DLSU: Drivers and Impacts

2. The Macro View: The institutional foundations of Philippine corporate social responsibility – vision vs. reality

3. The Micro View: Case studies and a theory of the entrepreneurial foundations of corporate social responsibility

4. Directions for Future Research

Publications“Doing Good in Business Matters”

“Essentials of Investments”Journal articles

Teaching – Continuing Education“Corporate Governance for the Common Good”

Central Bank Management Skills Enhancement Program

Public advocacy“Managing for Society” Column in Manila Times

Securities and Exchange CommissionPharmaceutical and Healthcare Association of

the PhilippinesManagement Association of the PhilippinesUnited Nations Principles for Responsible

Management Education (UN-PRME)

CSR Research at DLSU: Drivers and Impacts

Teaching – Degree programsBS-ACM, MBA,DBA students

Leadership

Dean Lydia Echauz 1990s –

Ethics in MBA

Dean Philip Juico 2000s –

Center; 2004 Conference;

Aquino professorial chair

Vision-mission

“a leading learner-centered research university,

bridging faith and scholarship in

the service of society, especially the poor.”

CSR Research at DLSU•Basis of Philippine CSR vs. Socio-economic

Realities•Entrepreneurial social responsibility

•Corporate governance•Pharmaceutical marketing ethics•Catholic Social Teachings and

business practice

The Macro View

The institutional foundations of Philippine corporate social

responsibility – vision vs. reality

From: Teehankee, B. (2008). Why should corporations be socially responsible? In V. Santos (Ed.), Doing good in business matters: Frameworks (pp. 1-29 ). Makati: Asian Institution of Management.

Institutional Foundations of Philippine CSR

The Philippine Constitution on the Social Purpose of Private Property

ARTICLE XII: NATIONAL ECONOMY AND PATRIMONY

Section 6. The use of property bears a social function, and all economic agents shall contribute to the common good. Individuals and private groups, including corporations, cooperatives, and similar collective organizations, shall have the right to own, establish, and operate economic enterprises, subject to the duty of the State to promote distributive justice and to intervene when the common good so demands.

The Philippine Constitution on the Social Purpose of Private Property

ARTICLE II: STATE POLICIESSection 9. The State shall promote a just and dynamic social order that will ensure the prosperity and independence of the nation and free the people from poverty through policies that provide adequate social services, promote full employment, a rising standard of living, and an improved quality of life for all.

The Philippine Constitution on the Social Purpose of Private Property

ARTICLE XIII, SOCIAL JUSTICE AND HUMAN RIGHTS Section 1. The Congress shall give highest priority to the enactment of measures that protect and enhance the right of all the people to human dignity, reduce social, economic, and political inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the common good.To this end, the State shall regulate the acquisition, ownership, use, and disposition of property and its increments.

The Purpose of the Corporation

“The … Code seeks to establish a new concept of business corporations so that they are not merely entities established for private gain but effective partners of the National Government in spreading the benefits of capitalism for the social and economic development of the nation.”

Explanatory Note to The Corporation Code of 1980

Figure 1: Net Sales of Top 1000 Philippine Corporations vs. Gross Domestic Product, 1988-1997

(Data from Saldaña, 2000)

799

925

1077

1248

1352

1474

1693

1906

2172

2427

465519

630

741

862

954

1178

1394

1697

1979

0

500

1000

1500

2000

2500

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

Year

Bil

lio

n P

eso

s

GDP

Net Sales

The Capital Market is Growing

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,0001

994

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

Year

Market Capitalization ( in billions)

Source: Atty. Francis LimThe Philippine Stock Exchange

The Instrumentalization of Labor through Contractualization

Cited in ADB Report

Compliance with the Labor Code

Cited by the Asian Development Bank

The Distribution

of Philippine Poverty

2003

Philippine Daily InquirerFrom NEDA MDG Report citingNSCB data

Above 30.4% PovertyBelow 30.4% Poverty

The deceptive message of economic growth: The “growing” pizza

Ben

Juan

Ben

Juan

BEFORE AFTER

Highest 10% of families earned 36% of the total family income

Philippine Corporations are Mechanisms for Concentrating Wealth for Controlling Families: An Asian Phenomenon

B

C

FAMILY60%

D

E

60%

Legal cash flow& control; share-ownership Effective cash flow

PUBLIC B40%

24%

36%

Based on Dumlao (2004)

Effective control

60%

PUBLIC C40%

22%

100%

PUBLIC D13%

60%

40%100%

60%

PUBLIC E40%

8%

100%

100%2.8X

12.5X

ACORP

PUBLIC A40%

The Lopez Group – Control of Meralco

LOPEZ FAMILY Lopez, Inc.100%

PUBLIC11.7%

Benpres Holding Corporation

(majority control)

88.3%

Manila ElectricCompany

(minority control)

First Phil. Holdings Corporation

(minority control)

62.5%

14.76%

1.64%6.3% 16.4%37.5%

Legal cash flow& control; share-ownership Effective cash flow Effective control

1.64% + 14.76%(88.3%X1.64%) + (88.3%X37.5%X14.76%)

2.58X

Sum of control rights via Benpres & First Holdings

Sum of cash flow rights via Benpres & First Holdings=

Based on Saldaña (2000) and Claessens et al. (1999)

The Social Question: Poverty amidst plenty

The Micro-view

Case studies and a theory of the entrepreneurial foundations of corporate social responsibility

From: Teehankee, B. (2008). Humanistic entrepreneurship: An approach to virtue-based enterprise. Asia-Pacific Social Science Review, 8(1), 89-110.

Community meeting basic needs of members towards

integral human development

Products & services for human development

Purchase & patronage

Capitalcommitment Fair &

attractive returns

Government

Taxes, compliance &cooperation

Legal license,infrastructure

support & law enforcement

Trust

Customers

Trustworthyservice &behavior

Investors

Community &Society

Board

Creditors

Repayment& returns

Funds

Company

Managers

Employees

Oversight Performanceaccountability

Suppliers

Environment Future

Current

Value throughproducts and services

Fair compensation

and developmentsupport

ResourcesRenewal

SustenanceRenewal

The Company and its Main Stakeholders

Decent Work: The Philippines is a signatory to the International Labour Organization (ILO) agenda

1. Opportunities for work that is productive 2. Opportunities for work that delivers a fair income3. Security in the workplace4. Social protection for families5. Better prospects for personal development and

social integration6. Freedom for people to express their concerns,

organize and participate in the decisions that affect their lives

7. Equality of opportunity and treatment for all women and men

Trends in Philippine Decent Work

http://www.bles.dole.gov.ph/download/vol10_32.pdf

Sharing Profits at San Jose

Oscar ChanGeneral Manager

San Jose Profit Sharing Plan

• Capital and labor are 50% partners and this justifies a 50% profit share.

• Before we can declare a 50-50 profit share, we need to satisfy the maintenance needs of both partners: – For employees, there should be a regular salary enough to

maintain their physical and mental health. The salary of the employee at the lowest level should however not exceed what is enough to satisfy his daily needs as stated above; otherwise, the 2nd principle will be violated. In a study made several years ago by the University of Asia and Pacific, the monthly living wage for a family of five is around Php 15,000.

– For capital, an inflation allowance shall be provided equivalent to the inflation rate multiplied by the owner's equity. This inflation allowance shall have to be deducted first before the 50-50 profit sharing is computed.

Source: San Jose Kitchen Cabinets web sitehttp://www.sanjosekitchencabinets.com.ph/about/profit_sharing_system

San Jose Profit Sharing Plan• All employees' benefits such as SSS employer's share, contribution

to retirement fund, medical assistance, etc. and other incentives such as sales commission are already considered part of the employee's 50% profit share. These do not form part anymore of the operating expenses.

• If and when the company incurs a loss or when the employee's benefits exceed the 50% share for the employees in a particular year, the losses (which include the inflation factor) will be a receivable of the company from the employees' profit share in the next profitable year(s). A maximum of 50% of the profit share for distribution shall be used to pay for the losses of the previous year(s).

• BASIS FOR PROFIT SHARING DISTRIBUTION TO EMPLOYEES: Performance and Job Levels

• RESULTS: Profitable for all of past 20 years except one year, low turnover

Source: San Jose Kitchen Cabinets web sitehttp://www.sanjosekitchencabinets.com.ph/about/profit_sharing_system

Yolanda “Yoling” Sevilla, CEOhttp://www.leathercollection.ph/

Keeping Employees Informed and Engaged: Keeping Employees Informed and Engaged: Monday Morning Assembly AgendaMonday Morning Assembly Agenda

• PananalanginPananalangin– Pagpapasalamat at pag-aaalayPagpapasalamat at pag-aaalay

• PampagisingPampagising– Stretching & aerobicsStretching & aerobics

• Pagbabalik-tanawPagbabalik-tanaw– Week review / examenWeek review / examen

• Paglilinaw at pagpapaliwanagPaglilinaw at pagpapaliwanag– Week’s PrioritiesWeek’s Priorities

Source: Y. Sevilla

Dealing with with global competition and business downturns

• German training for employees on premium leather work to German training for employees on premium leather work to combat cheap substitutes from Chinacombat cheap substitutes from China

• Retained earnings as buffer during lean yearsRetained earnings as buffer during lean years

– Rightsized only after retained earnings had been Rightsized only after retained earnings had been exhaustedexhausted

• Voluntary pay reduction as an alternative to rightsizingVoluntary pay reduction as an alternative to rightsizing– 1 day leave + 1 day no pay; 20% pay cut for managers1 day leave + 1 day no pay; 20% pay cut for managers

• Right sizing as the only means for the enterprise to surviveRight sizing as the only means for the enterprise to survive

– Compassionate executionCompassionate execution– Separation benefitsSeparation benefits

Source: Y. Sevilla

A Theory of the Entrepreneurial Foundations of Corporate Social Responsibility

OutcomesAntecedentsProcess

mediators and moderators

Entrepreneur’s ethical development and virtues

Entrepreneur’s culture leadership

skills

Organization’s financialviability

Employees’ integral human development

Industry and institutional support for ethical business practices

Entrepreneur’s business

skills & creativity

Organization’s ethical culture development

VIRTUOUSCYCLE

H1H2

H3

H4

H5

H6

H7 H8

v v

The Spreading of Capitalism’s Benefits through Decent Work

v

v v vvvv vv

The Threshold forIntegral Human Development

Philippine society and its members

Directions for Future Research

1. The role of Catholic Social Teachings in CSR

2. Transformational practices of business leaders towards CSR