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

Business Allegations… Little concern for the consumer Cares nothing about the deteriorating social order Has no concept of ethical behavior Indifferent to the problems of minorities & the E. 1. Does business have a responsibility to society? 2. How much? What kind? Chapter 2-

Corporate Social Responsibility Began as- Consideration of the impact of a company’s actions on society. Evolved into- The social responsibility of B. to meet the economic, ethical, legal, & philanthropic expectations society has of organizations at a given point in time. Other definitions in text. Chapter 2-

Since the 1950’s, the concept of CSR has gained considerable acceptance & the meaning has been broadened to include specific issues: product safety honesty in advertising employee rights affirmative action environmental sustainability ethical behavior (precedes laws) global CSR- how to behave abroad Chapter 2-

Definition of CSR The Four Components Responsibility Societal Expectation Examples Economic Required Be profitable. Produce valuable G/S at fair price Legal Obey laws & regulations (that represent society’s values) Ethical Expected Do what is right, fair, & just Philanthropic Desired/ Expected Be a good corporate citizen How? Chapter 2-

The Pyramid of CSR Components are inseparable & cause conflict Chapter 2 The Pyramid of CSR Components are inseparable & cause conflict Philanthropic Responsibilities Be a good corporate citizen. Ethical Responsibilities Be ethical. Legal Responsibilities Obey the law. Economic Responsibilities Be profitable. Source: Archie B. Carroll, “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders,” Business Horizons (July-August 1981). © 1991 by the Foundation for the School of Business at Indiana University. Used with permission. Chapter 2-

Stakeholder View of CSR Stakeholder Group Addressed & Affected CSR Component Owners Con- sumers Employees Community Others Economic 1 4 2 3 5 Legal Ethical Philanthropic Chapter 2-

They withdraw their support! If society (SH) do not view business at legitimate, what happens? They withdraw their support! --What makes a B. legitimate? Create value for SH Follow the ‘rules’ set forth by society Chapter 2-

Arguments Against CSR Restricts profit maximization Business is not equipped to handle social activities Dilutes the primary aim of business Business already has enough power Limits the ability to compete in a global marketplace (CSR increases costs). Chapter 2-

Arguments For CSR Business caused the social problems & should be responsible for the solution Limits future government intervention & regulation Better to be proactive than reactive Addresses issues only business has resources & expertise to control Safe product Safe working conditions Protects business self-interest Healthy climate Reputation Chapter 2-

Ways Firms Respond to CSR Pressure Cost-benefit approach Do it if benefits > costs Strategic approach Recognize E. changing; build ethics into strategy Innovation & learning approach Look for CSR opportunities to gain competitive advantage Defensive approach Do bare minimum to avoid pressure Chapter 2-

CSR in the 21st Century Corporations are expected to: Demonstrate commitment to society’s values & contribute to society Insulate society from the negative impacts of company operations & G/S. Share benefits of company activities with SH Demonstrate that the company can make more money by doing the right thing. Chapter 2-

Corporate Citizenship Corporate Social… Responsibility (CSR) Performance (CSP) Responsiveness (CSR2) Emphasizes… Obligation to society, accountability Accomplishments, outcomes, results (of adopting CSR/CSR2 philosophy) Willingness to take action (in response to society’s demands) Chapter 2-

Corporate Social Performance Chapter 2-

Corporate Citizenship …combination of CSR, CSR2, CSP …commitment to ethical business practices, protecting the environment & balancing the needs of SH  Triple Bottom Line Chapter 2-

Benefits of Good Corporate Citizenship Improved employee relations Improved customer relations Improved business performance Enhanced marketing. Chapter 2-

Relationship Between CSP & Financial Performance Perspective 1: Socially responsive firms are more profitable Perspective 2: The financial performance of a firm drives its social performance Perspective 3: Social performance, financial performance & reputation are interrelated & we can’t determine what drives what. Virtuous circle Chapter 2-

Socially Responsible Investing Social Screening Investors screen firms’ levels of CSR, CSR2 and CSP before making investment decisions Why now more than ever? Chapter 2-

For next class Read Martha Stewart Case Make a list of stakeholders Chapter 2-