Prepared by Deborah Baker Texas Christian University Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Chapter 2 Prepared by Deborah Baker Texas Christian University Business and Society: Ethics and Stakeholder Management, 7e • Carroll & Buchholtz Copyright ©2009 by South-Western, a division of Cengage Learning.  All rights reserved

Chapter 2 Learning Outcomes Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Chapter 2 Learning Outcomes Explain how corporate social responsibility (CSR) evolved and now encompasses economic, legal, ethical, and philanthropic components. Provide business examples of CSR and corporate citizenship. Differentiate between corporate citizenship, social responsibility, responsiveness, and performance. Elaborate on the concept of corporate social performance (CSP). 2

Chapter 2 Learning Outcomes Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Chapter 2 Learning Outcomes Explain how corporate citizenship develops in stages in companies. Describe the socially responsible investing movement. 2

Chapter 2 Outline The Corporate Social Responsibility Concept Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Chapter 2 Outline The Corporate Social Responsibility Concept Arguments Against and For Corporate Social Responsibility Corporate Social Responsiveness Corporate Social Performance Corporate Citizenship Business’s Interest in Corporate Citizenship Social Performance and Financial Performance Relationship Socially Responsible or Ethical Investing Summary Key Terms Discussion Questions The Corporate Social Responsibility Concept Historical Perspective on CSR Corporate Social Responsibility The Four-Part Definition of CSR Arguments Against and For Corporate Social Responsibility Arguments Against CSR Arguments for CSR Corporate Social Responsiveness Ackerman and Bauer’s Action-Orients View Sethi’s Three-Stage Schema Frederick’s CSR1 and CSR2 Epstein’s Process View Other Views Measurable Dimensions of Responsiveness Corporate Social Performance Carroll’s Corporate Social Performance Model Usefulness of the Model to Academics and Managers Wartick and Cochran’s Extensions Wood’s Reformulated Model Nonacademic Research on Corporate Social Performance Social Performance and Financial Performance Socially Conscious or Ethical Investing Summary

Introduction to Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance 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? http://www.bsr.org @

Corporate Social Responsibility (CSR) Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Corporate Social Responsibility (CSR) Corporate Social Responsibility Seriously considering the impact of a company’s actions on society. Requires the individual to consider his/her acts in terms of a whole social system, and holds him/her responsible for the effects of acts anywhere in that system.

Corporate Citizenship Concepts Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Corporate Citizenship Concepts Corporate Social… Responsibility Performance Responsiveness Emphasizes… Obligation, accountability outcomes, results action, activity

Business Criticism/ Social Responsibility Cycle Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance 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 (have led to) (which has resulted in) Figure 2-1

Historical Perspective on CSR Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Historical Perspective on CSR Economic Model Legal Model Social Model

Modification of the Economic Model Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Modification of the Economic Model Philanthropy Community obligations Paternalism Motivation: Keep government at arm’s length

Acceptance and Broadening of Meaning Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance 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: corporate governance product safety honesty in advertising employee rights affirmative action environmental sustainability ethical behavior global CSR

CSR: Evolving Viewpoints Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance CSR: Evolving Viewpoints CSR considers the impact of the company’s actions on society. CSR requires decision makers to take actions that protect and improve the welfare of society as a whole along with their own interests.

CSR: Evolving Viewpoints Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance CSR: Evolving Viewpoints CSR supposes that the corporation has not only economic and legal obligations, but also certain responsibilities to society which extend beyond these obligations.

CSR: Evolving Viewpoints Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance CSR: 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.

Carroll’s Four-Part Definition of CSR Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Carroll’s Four-Part Definition of CSR The social responsibility of business encompasses the economic, legal, ethical and discretionary expectations that society has of organizations at a given point in time.

Carroll’s Four-Part Definition of CSR Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Carroll’s Four-Part Definition of CSR Responsibility Societal Expectation Examples Economic Required Be profitable. Maximize sales, minimize costs. Legal Obey laws, adhere to regulations Ethical Expected Avoid questionable practices. Do what is right, fair, and just Philanthropic Desired/ Expected Be a good corporate citizen. Give back. Figure 2-2

Legal Responsibilities Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Legal Responsibilities Law cannot address all the topics or issues that business may face Law often lags behind more recent concepts of what is considered appropriate behavior Laws are made by lawmakers and may reflect the personal interests/motivation of legislators rather than appropriate ethical justifications

Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance The Pyramid of CSR 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. Figure 2-3

+ Total Corporate CSR = The CSR Equation Economic Responsibilities Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance The CSR Equation Economic Responsibilities Legal Responsibilities Ethical Responsibilities Philanthropic Responsibilities + = Total Corporate CSR

A Stakeholder View of CSR Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance A Stakeholder View of CSR Stakeholder Group Addressed and Primarily Affected CSR Component Owners Con- sumers Employees Community Others Economic 1 4 2 3 5 Legal Ethical Philanthropic Figure 2-4

Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Arguments Against CSR Restricts the classic economic goal of profit maximization Business is not equipped to handle social activities Dilutes the primary purpose of business Increases the power of business Limits the ability to compete in a global marketplace

Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Arguments For CSR Addresses social issues brought on by business, and allows business to be part of the solution Protects business self-interest Wards off future government intervention Addresses issues by using business resources and expertise Addresses issues by being proactive The public supports CSR

Ways Firms Respond to CSR Pressure Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Ways Firms Respond to CSR Pressure Cost-benefit approach Strategic approach Innovation and learning approach Defensive approach The Civil Corporation, Simon Zadek

Corporate Responsibility in the 21st Century Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Corporate Responsibility in the 21st Century 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 and its 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 Social Responsiveness Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Corporate Social Responsiveness Responsibility Implies more of a state or condition of having assumed an obligation Responsiveness Connotes a dynamic, action-oriented condition

Corporate Social Responsiveness Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Corporate Social Responsiveness Alternative Views Sethi’s Three-Stage Schema Frederick’s CSR1, CSR2, and CSR3 Epstein’s Process View Figure 2-7

Corporate Social Performance Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Corporate Social Performance Figure 2-8

Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Corporate Social Performance: Extensions, Reformulations, Reorientations Wartick and Cochran’s CSP Extensions Wood’s Reformulated CSP Model Swanson’s Reorientation of CSP Figure 2-9

Corporate Social Performance Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Corporate Social Performance Figure 2-10

Corporate Citizenship Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Corporate Citizenship Corporate Citizenship… …embraces all the facets of corporate social responsibility, responsiveness, and performance. …serves a variety of stakeholders.

Corporate Citizenship Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Corporate Citizenship A reflection of shared moral and ethical principles A vehicle for integrating individuals into the communities in which they work A form of enlightened self-interest that balances stakeholders’ claims and enhances a company’s long-term value Charles J. Fombrum, “Three Pillars of Corporate Citizenship”

Drivers of Corporate Citizenship Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Drivers of Corporate Citizenship Internal Motivators External Pressures Traditions and values Reputation and image Business strategy Recruiting and retaining employees Customers and consumers Expectations in the community Laws and political pressures

Benefits of Corporate Citizenship Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Benefits of Corporate Citizenship Improved employee relations Improved customer relationships Improved business performance Enhanced company’s marketing efforts

Stages of Corporate Citizenship Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Stages of Corporate Citizenship Figure 2-11

Development Challenges of Corporate Citizenship Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Development Challenges of Corporate Citizenship Figure 2-12

Business’s Interest in Corporate Citizenship Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Business’s Interest in Corporate Citizenship Nonacademic Research Fortune's ranking of “Most Admired” and “Least Admired” corporations Conference Board’s Ron Brown Award for Corporate Leadership CRO Magazine Awards

Social and Financial Performance Relationship Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Social and Financial Performance Relationship 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 Figure 2-13

“Multiple Bottom Line” Perspective Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance “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 Figure 2-14

“Triple Bottom Line” Perspective Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance “Triple Bottom Line” Perspective Key Spheres of Sustainability Economic Social Environmental

Socially Responsible or Ethical Investing A technique used to screen firms for socially-responsible investment purposes Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Socially Responsible or Ethical Investing Social Screening

Reasons for Upsurge in Socially Responsible Investing Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Reasons for Upsurge in Socially Responsible Investing More reliable research on CSP Investment firms using social criteria have solid track record The socially conscious 1960s generation is making investment decisions

Selected Key Terms Business for Social Responsibility Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Selected Key Terms Business for Social Responsibility corporate social responsibility philanthropy community obligations paternalism economic responsibilities legal responsibilities ethical responsibilities philanthropic responsibilities Pyramid of CSR corporate social responsiveness corporate social performance (CSP) corporate social performance model corporate citizenship Triple Bottom Line sustainability corporate sustainability socially responsible ethical investing