Emerging Issues in Management (Mgmt 440) Implementing Corporate Social Responsibility (Chapter 6) Professor Charles H. Smith Spring 2010

Case Study – The Bill and Melinda Gates Foundation Read the case study on pages on your own before class and discuss the following questions with small groups in class What was Bill Gates’ road to success? What was his initial belief regarding CSR? His current approach to CSR includes what parts and what pair of “simple values”? What are the criticisms of his practice of CSR?

Managing and Leading the Responsive Company Top management sets the tone for a company’s social response. A few companies have been founded by progressive visionaries who make social responsibility central to their business model; e.g., Ben & Jerry’s Ice Cream – founded to promote social causes like world peace (expansive response). Although based on traditional business models, some companies have cultures emphasizing voluntary social responsibility in one or more dimensions because of the influence of founders; e.g., Bertelsmann AG – primary goal of founder was to make society better. Most companies have no CSR agenda outlined by its founders; instead, their ethical path is marked by the law (narrow response). See Figures 6.1 and 6.2 on the next two slides.

Managing and Leading the Responsive Company cont.

Corporate Philanthropy Large philanthropic contributions by American companies are a relatively recent phenomenon. Until about 50 years ago courts held that corporate funds belonged to shareholders and, therefore, managers had no right to give away money, even for noble motives. However, the law in this area started to change in the 20 th Century; examples of these changes include The first major break from narrow legal restrictions on corporate giving was the Revenue Act of 1935, which allowed charitable contributions to be deducted from taxable earnings up to 5 percent of net profits before taxes (raised to 10 percent in 1981.) Case study – A.P. Smith Manufacturing Co. v. Barlow (page 169). Small group discussions – what are arguments for and against permitting company management to make decisions about giving company money to charity instead of paying out profits to ownership?

Patterns of Corporate Giving Charitable giving is now a traditional dimension of corporate social responsibility. But, corporate philanthropy is only a small part of overall private philanthropy in the U.S. and only a tiny portion of overall welfare spending. The basic motives for corporate giving are Response to pressure. Belief that it will bring monetary profit. Desire for reputational gain. Altruism. Student examples of each.

Strategic Philanthropy As corporations gained experience with philanthropy, many concluded that the traditional approach of giving to a broad spectrum of worthy causes was noble but flawed. Many firms decided to change their philosophy of giving from one of pure generosity (aka “checkbook philanthropy”) to one that aligned charity with commercial objectives; see examples on page 172. Student examples of both.

Cause-Related Marketing Cause-related marketing is a marketing method linking a corporation or brand to a social cause so that both benefit. Corporations realize that if their brand is connected to a social cause or charity, this appeals to the conscience of a consumer. Cause-related marketing raises big sums of money for worthy causes but its mixture of altruism and self-interest attracts criticism. See examples on pages Student examples.

“Philantro-Capitalism” “Philanthro-capitalism” uses the profit motive and market incentives; see examples on pages Student examples.

Case Study – Mark Kasky vs. Nike, Inc. Read “Marc Kasky versus Nike Inc.” on pages on your own before class and then discuss the questions on page 185 with small groups in class.