5 - 1 The Evolving Idea of Social Responsibility  The fundamental idea is that corporations have duties that go beyond carrying out their basic economic function in a lawful manner.  Over time the doctrine has evolved to require more expansive action by companies largely because:  Stakeholder groups have gained more power to impose their agendas  The ethical and legal philosophies underlying it have matured Corporate social responsibility The duty of a corporation to create wealth in ways that avoid harm to, protect, or enhance societal assets.

5 - 2 Social Responsibility in Classical Economic Theory  Throughout American history, classical capitalism has been the basic inspiration for business.  In this view, a business is socially responsible if it maximizes profits while operating within the law.  The idea that markets harness low motives and work them into social progress has always attracted skeptics.  Today the classical ideology still commands the economic landscape, but ethical theories of broader responsibility have worn down its prominences.

5 - 3 The Early Charitable Impulse  Most colonial era businesses practiced frugality, yet charity was a coexisting virtue.  The wealthy endowed social causes as individuals, not through their companies.  Steven Girard changed the climate of education in the United States by bequeathing $6 million for a school to educate orphaned boys.  John D. Rockefeller systematically gave away $550 million over his lifetime.  Andrew Carnegie gave $350 million over his lifetime to causes that would elevate the culture of a society.  Carnegie believed fortunes should not be wasted by paying higher wages or giving gifts to poor people.

5 - 4 The Early Charitable Impulse (continued)  People such as Andrew Carnegie and Herbert Spencer believed in the doctrine of social Darwinism when it came to charity.  Social Darwinism held that charity interfered with the natural evolutionary process in which society shed its less fit to make way for the better adapted.  Additionally, courts consistently held charitable gifts to be ultra vires (beyond the law) because charters granted by states when corporations were formed did not expressly permit them.

5 - 5 Social Responsibility in the Late Nineteenth and Early Twentieth Centuries  Giving, no matter how generous, was a narrow kind of social responsibility often unrelated to a company’s impacts on society.  During the Progressive era, three interrelated themes of broader responsibility emerged:  Managers were trustees  Managers had an obligation to balance multiple interests  Many managers subscribed to the service principle

5 - 6 Basic Elements of Social Responsibility

5 - 7 General Principles of Corporate Social Responsibility  Corporations are economic institutions run for profit.  All firms must follow multiple bodies of law.  Managers must act ethically  Corporations have a duty to correct the adverse social impacts they cause.  Social responsibility varies with company characteristics.  Managers should try to meet legitimate needs of stakeholders.  Corporate behavior must comply with norms in an underlying social contract.  Corporations should also accept a measure of accountability toward society.

5 - 8 Are Social and Financial Performance Related?  A recent review of 95 studies over 30 years found that a majority (53 percent) of businesses showed a positive relationship between profits and responsibility, while only 5 percent showed a negative one.  Results inconsistent and ultimately inconclusive due to methodological questions.  Safe to say corporations rated high in social responsibility are no less profitable than lower rated firms.

5 - 9 Corporate Social Responsibility in a Global Context  By the end of the twentieth century the doctrine of corporate social responsibility had been widely accepted in industrialized nations.  Recent debates over the duties of corporations in their international operations.  International law is weak in addressing social impacts of business.  Giant corporations may not be subject to strong laws and regulations in foreign countries.  In adapting to global economic growth corporations have used business strategies that distance them from direct accountability or social harms.  More national regulation of multinational corporations is unlikely.

Corporate Social Responsibility in a Global Context (continued)  Extraterritoriality – enforcement is problematic.  Nongovernmental organizations (NGOs) – voluntary organizations becoming powerful advocates of restricting corporate power outside the borders of industrialized nations.  Pushed for UN-sponsored conferences on the environment, population, human rights, social development, and gender.  Soft law – statements of philosophy, policy, and principle found in nonbinding international conventions

Global CSR: Development of Norms and Principles  Norm – a standard that arises over time and is enforced b social sanction or law  Principle – a rule, natural law, or truth used as a standard to guide conduct  Milestones in the development of norms  U.N. Universal Declaration of Human Rights  Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy  Norms on the Responsibilities of Transnational Corporations

Global CSR: Government Actions and Civil Society Vigilance  Governments advance corporate responsibility through binding regulation and by actively promoting voluntary actions.  NGOs watch multinational corporations and police actions they see as departing from emerging norms.