CORPORATE SOCIAL RESPONSIBILITY “A company’s intention beyond its legal and economic obligation to do the right things and act in ways that are good for society.” --

Corporate Image A composite of knowledge, feelings, ideas, and beliefs associated with a company as a result of the totality of its activities. (W. H. Brockmann) - exists in the minds of people. - a loose structure of knowledge, belief, and feelings - it may be vague or clear, weak or strong—differs from person to person, from company to company.

Understanding the Importance of Corporate Image Started during the U.S. depression of the 1930s when established values and loyalties were being corroded. The growth of great industrial complexes after W W II made competing products became nearly identical. -- Many companies felt that reputation and integrity of the producer are decisive factors in sales. The emergence of the super-corporation has created social and sociological problems related to their size and complexity rather than simply selling their products.

Corporate Images for Corporate “Publics” The essence and purpose of the corporation are not found in its economic performance or in its formal rules, but in the human relationships both between the members of the corporation and between the corporation and the citizens outside of it. – (Peter Drucker)

Two Points of View: 1.Corporate powers are powers in trust for stockholders. --The modern corporation is an instrument for conducting a profitable business enterprise through the pooling of venture capital. -- The Board of Directors’ responsibility is to return a profit on the investment and that all other responsibilities are purely secondary.

Two Points of View (continued) 2. Corporate powers are powers held in trust for the entire community -- Business Corporation is an economic institution which has a social service and a profit-making function. -- Business is permitted and encouraged by the law primarily because it is of service to the community, rather than because it is a source of profit to the owners.

COMPARING THE TWO VIEWS: Lesser Social Responsibility Greater To Whom Mgt is Stage Responsible Owners Employees Stake- Broader & Mgt holders Society

HOW CORPORATIONS CAN BE SOCIALLY RESPONSIBLE 1.Doing the things they are supposed to do – adding economic value, creating new wealth – to secure their viability and long-term sustainability. 2.Corporations need to be strong in order to serve effectively. –CAMELS ratings to monitor over-all performance: Capital adequacy Asset quality Management capability Earnings: quality and level Liquidity and its adequacy Sensitivity to market risk.

HOW CORPORATIONS CAN BE SOCIALLY RESPONSIBLE (continued) 3.Safeguarding, promoting, and serving the interests of those who save and invest in productive economic activities – shareholders and creditors. 4.Creating new jobs and caring for the people who work for them. 5.Putting the utmost care in serving the needs of their customers with products and services. 6.Adding economic value and creating new wealth for the economy and society.

FROM OBLIGATIONS TO RESPONSIVENESS TO RESPONSIBILITY SOCIAL OBLIGATIONS - when a firm engages in social actions because of its obligation to meet certain economic and legal responsibilities. SOCIAL RESPONSIVENESS – when a firm engages in social actions in response to some popular social need. In other words, making social choices. SOCIAL RESPONSIBILITY – when a firm goes beyond its legal and economic obligations to do what it can to help improve society because it is the right thing to do.

Social Responsibility vs. Social Responsiveness SocialSocial Responsibility Responsiveness –Major Consideration EthicalPragmatic –FocusEndsMeans –EmphasisObligationResponses –Decision FrameworkLong TermMedium and Short term

ARGUMENTS FOR AND AGAINST SOCIAL RESPONSIBILITY Arguments FOR Public ExpectationBalance of responsibility Long-run profits and power Ethical ObligationStockholder interests Public imagePossession of resources Better environmentPrevention vs. cures Discouragement of further govt. regulation

ARGUMENTS FOR AND AGAINST SOCIAL RESPONSIBILITY Arguments AGAINST Violation of profit maximization Dilution of purpose Cost Too much power Lack of skills Lack of accountability