Chapter 2-1 Chapter 2 BUSINESS & SOCIETY Ethics and Stakeholder Management Carroll & Buchholtz 6e Business and Society: Ethics and Stakeholder Management, 6e Carroll & Buchholtz Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved Prepared by Deborah Baker Texas Christian University  CORPORATE CITIZENSHIP: SOCIAL RESPONSIBILITY, RESPONSIVENESS, and PERFORMANCE

Chapter 2-2 Chapter 2 Learning Outcomes 1. Explain how corporate social responsibility (CSR) evolved and encompasses economic, legal, ethical, and philanthropic components. 2. Provide business examples of CSR and corporate citizenship. 3. Differentiate between corporate citizenship, social responsibility, responsiveness, and performance. 4. Elaborate on the concept of corporate social performance (CSP).

Chapter 2-3 Chapter 2 Learning Outcomes (continued) 5. Provide an overview of studies relating social performance to financial performance. 6. Describe the socially responsible investing movement.

Chapter 2-4  The CSR Concept  Arguments Against and For Corporate Social Responsibility  Corporate Social Responsiveness  Corporate Social Performance  Business’s Interest in Corporate Social Performance  Corporate Citizenship  Social Performance and Financial Performance  Socially Responsible or Ethical Investing  Summary Chapter 2 Outline

Chapter 2-5 Introduction to Chapter 2 Business allegations…  Little concern for the consumer  Cares nothing about the deteriorating social order  Has no concept of acceptable ethical behavior  Indifferent to the problems of minorities and the environment What responsibility does business have to society?

Chapter 2-6 Corporate Social Responsibility (CSR) Corporate Social Responsibility The impact of a company’sactions on society.Requires the individual to considerhis/her acts in terms of a wholesocial system, and holds him/herresponsible for the effects of actsanywhere in that system.

Chapter 2-7 Corporate Citizenship Concepts Corporate Social… Responsibility Performance Responsiveness Emphasizes… obligation, accountability outcomes, results action, activity

Chapter 2-8 Business Criticism/ Social Responsibility Cycle Factors in the Societal Environment Criticism of Business Increased Concern for the Social Environment A Changed Social Contract Business Assumption of Corporate Social Responsibility Social Responsiveness, Social Performance, and Corporate Citizenship A More Satisfied Society Fewer Factors Leading to Business Criticism Increased Expectations Leading to More Criticism

Chapter 2-9 Historical Perspective on CSR Economic Model Legal Model Social Model

Chapter 2-10 Modification of the Economic Model Philanthropy Community obligations Paternalism Motivation: Keep government at arm’s length

Chapter 2-11 Acceptance and Broadening of Meaning  From the 1950’s to the present, the concept of CSR has gained considerable acceptance and the meaning has been broadened to include specific issues, such as:  product safety  honesty in advertising  employee rights  affirmative action  environmental sustainability  ethical behavior  global CSR

Chapter 2-12 CSR: Evolving Viewpoints  CSR considers the impact of the company’s 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 Evolving Viewpoints

Chapter 2-13 Evolving Viewpoints  CSR mandates that the corporation has not only economic and legal obligations, but also certain responsibilities to society which extend beyond these obligations. --McGuire CSR: Evolving Viewpoints

Chapter 2-14 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: Evolving Viewpoints

Chapter 2-15 Carroll’s Four-Part Definition of CSR  The social responsibility of business encompasses the economic, legal, ethical and discretionary (philanthropic) expectations that society has of organizations at a given point in time.

Chapter 2-16 Carroll’s Four-Part Definition of CSR Understanding the Four Components Responsibility Societal Expectation Examples Economic Required Be profitable. Maximize sales, minimize costs Legal Required Obey laws and regulations Ethical Expected Do what is right, fair, and just Philanthropic Desired/ Expected Be a good corporate citizen

Chapter 2-17 The Pyramid of CSR Philanthropic Responsibilities Be a good corporate citizen. Ethical Responsibilities Be ethical. Legal Responsibilities Obey the law. Economic Responsibilities Be profitable. Philanthropic Responsibilities Be a good corporate citizen. Ethical Responsibilities Be ethical. Legal Responsibilities Obey the law. Economic Responsibilities Be profitable.

Chapter 2-18 The CSR Equation Economic Responsibilities Legal Responsibilities Ethical Responsibilities Philanthropic Responsibilities = Total Corporate CSR

Chapter 2-19 A Stakeholder View of CSR Stakeholder Group Addressed and Affected CSR Component OwnersCon- sumers EmployeesCommunityOthers Economic14235 Legal32145 Ethical31245 Philanthropic34215

Chapter 2-20 Arguments Against CSR  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

Chapter 2-21  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 Arguments For CSR

Chapter 2-22 Ways Firms Respond to CSR Pressure Cost-benefit approach Strategic approach Innovation and learning approach Defensive approach The Civil Corporation, Simon Zadek

Chapter 2-23  Demonstrate a commitment to society’s values and contribute to society’s 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. Corporate Responsibility in the 21 st Century

Chapter 2-24 Corporate Social Responsiveness Alternative Views Frederick’s CSR1, CSR2, and CSR3 Epstein’s Process View Sethi’s Three-Stage Schema

Chapter 2-25 Corporate Social Performance

Chapter 2-26 Corporate Social Performance Extensions, Reformulations, Reorientations  Wartick and Cochran’s CSP Extensions  Wood’s Reformulated CSP Model  Swanson’s Reorientation of CSP

Chapter 2-27 Corporate Social Performance

Chapter 2-28 Business’s Interest in CSP Nonacademic Research  Fortune's ranking of most and least admired corporations  Conference Board’s Ron Brown Award for Corporate Leadership  Business Ethics Magazine Awards  WalkerInformation’s Research

Chapter 2-29 Corporate Citizenship Corporate Citizenship… …embraces all the facets of corporate social responsibility, responsiveness, and performance. …embraces the functions of business interaction with nonprofit organizations, citizen groups, and other community stakeholders.

Chapter 2-30 Benefits of Good Corporate Citizenship  Improved employee relations  Improved customer relations  Improved business performance  Enhanced company’s marketing efforts

Chapter 2-31 Social and Financial Performance Perspective 1: CSP Drives the Relationship Perspective 2: CFP Drives the Relationship Perspective 3: Interactive Relationship Among CSP, CFP, and CR Good Corporate Reputation Good Corporate Social Performance Good Corporate Financial Performance Good Corporate Reputation Good Corporate Financial Performance Good Corporate Social Performance Good Corporate Reputation Good Corporate Social Performance Good Corporate Financial Performance

Chapter 2-32 A Multiple Bottom-Line Perspective Consumer Stakeholders’ “Bottom Line” Employee Stakeholders’ “Bottom Line” Community Stakeholders’ “Bottom Line” Owner Stakeholders’ “Bottom Line” Other Stakeholders’ “Bottom Line” Corporate Social Performance

Chapter 2-33 Socially Responsible or Ethical Investing Social Screening A technique used to screenfirms for socially-responsibleinvestment purposes

Chapter 2-34 Reasons for Upsurge in Socially Responsible Investing 1. More reliable research on CSP 2. Investment firms using social criteria have solid track record 3. The socially conscious 1960s generation is making investment decisions

Chapter 2-35 Selected Key Terms  Business for Social Responsibility  community obligations  corporate citizenship  corporate social performance (CSP)  corporate social performance model  corporate social responsiveness  corporate social responsibility  corporate sustainability  economic responsibilities  ethical responsibilities  legal responsibilities  paternalism  philanthropic responsibilities  philanthropy  Pyramid of CSR  socially responsible or ethical investing  sustainability  Triple Bottom Line