© 2010 Cengage Learning. All rights reserved. CHAPTER 14 GLOBAL t PENG © 2010 Cengage Learning. All rights reserved.

Chapter 14 LEARNING OBJECTIVES After studying this chapter, you should be able to: Articulate a stakeholder view of the firm Apply the institution- and resource-based view to analyze corporate social responsibility Identify three ways you can manage corporate social responsibility © 2010 Cengage Learning. All rights reserved.

CORPORATE SOCIAL RESPONSIBILITY (CSR) The consideration of, and response to, issues beyond the narrow economic, technical and legal requirements of the firm to accomplish social benefits. Goal: global sustainability – meet the needs of the present without compromising the ability of future generations to meet their needs. Why do firms exist? Many would argue that the social responsibility of firms is to make a profit. Free market advocates argue that if firms attempt to attain social goals, managers will lose their focus on profit maximization, losing their identity as capitalist organizations and becoming socialist organizations. The CSR movement has emerged against this viewpoint, arguing that a free market system that takes self-interest and profit as its guiding light may be in practice fail to constrain itself, breeding greed, excesses and abuses. © 2010 Cengage Learning. All rights reserved.

LO1: STAKEHOLDER VIEW OF THE FIRM At the heart of CSR is the stakeholder – “any group or individual who can affect or is affected by the achievement of the organization’s objectives. Shareholders are an important, but not only group of stakeholders in a firm, including customers, communities, suppliers and governments. Technically known as non-shareholder stakeholders, these groups will be referred to here as stakeholders. Stakeholders can be divided into two principal groups: Primary stakeholder groups are constituents on which the firm relies for its continuous survival and prosperity. They include shareholders, managers, employees, suppliers, customers, governments. Secondary stakeholder groups are those who influence or affect, or are influenced or affected by, the corporation but who are not engaged in transactions with the corporation. An example of is fair labor groups. A leading debate on CSR is whether managers’ efforts to promote the interests of these other stakeholders are at odds with the fiduciary duty to safeguard shareholder interests. © 2010 Cengage Learning. All rights reserved.

LO1: STAKEHOLDER VIEW OF THE FIRM Firms should pursue a triple bottom line: Economic Social Environmental © 2010 Cengage Learning. All rights reserved.

LO2: INSTITUTIONS AND CORPORATE SOCIAL RESPONSIBILITY Reactive strategy: indicated by little or no support by top management of CSR. Firms do not feel compelled to act outside of disasters and outcries. Defensive strategy: focuses on regulatory compliance. Top management involvement is piecemeal, at best, and the general attitude is that CSR is an added cost or nuisance. Accommodative: characterized by some support from top managers, who may increasingly view CSR as a worthwhile endeavor. Proactive: A firm constantly anticipates responsibility and endeavors to do more than is required. Top management not only supports and champions CSR but also view it as a source of differentiation. © 2010 Cengage Learning. All rights reserved.

LO2: RESOURCES AND CORPORATE SOCIAL RESPONSIBILITY Do CSR-relates resources and capabilities add value? CSR-relates resources are not always rare. Are CSR resources imitable? Does the firm have organizational capabilities to do a good job on CSR? © 2010 Cengage Learning. All rights reserved.

DEBATE: DOMESTIC vs. OVERSEAS SOCIAL RESPONSIBILITY MNEs increase employment in host countries and help developing economies. However, this expansion often comes at the cost of domestic employees and communities. MNE may shirk their CSR by increasing social burdens in their home countries. © 2010 Cengage Learning. All rights reserved.

LO3: THREE WAYS TO MANAGE CSR © 2010 Cengage Learning. All rights reserved.