1. 1 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Business and Society: Ethics and Stakeholder Management, 7e Carroll & Buchholtz Copyright ©2009 by South-Western, a division of Cengage Learning. All rights reserved Prepared by Deborah Baker Texas Christian University Chapter 2

2. 2 Chapter 2 Learning Outcomes 1. Explain how corporate social responsibility (CSR) evolved and now encompasses economic, legal, ethical, and philanthropic components. 2. Provide business examples of CSR and corporate citizenship. 3. Differentiate between corporate citizenship, social responsibility, responsiveness, and performance. 4. Elaborate on the concept of corporate social performance (CSP).

3. 3 5. Explain how corporate citizenship develops in stages in companies. 6. Describe the socially responsible investing movement. Chapter 2 Learning Outcomes

4. 4 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 @

5. 5 Corporate Social Responsibility (CSR) Corporate Social Responsibility Seriously considering the impact ofa company’s actions on society.Requires the individual to considerhis/her acts in terms of a wholesocial system, and holds him/herresponsible for the effects of actsanywhere in that system.

6. 6 Corporate Citizenship Concepts Corporate Social… Responsibility Performance Responsiveness Emphasizes… Obligation, accountability outcomes, results action, activity

7. 7 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

8. 8 Historical Perspective on CSR Economic Model Produce and services at a Fair Market price “The Invisible hand of the Market”. Legal Model Rules and Laws business were Expected to follow Legal Model Rules and Laws business were Expected to follow Social Model A stakeholder model Social Model A stakeholder model

9. 9 Modification of the Economic Model Philanthropy Community obligations Paternalism Motivation: Keep government at arm’s length

10. 10 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

11. 11 CSR: Evolving Viewpoints 1. CSR considers the impact of the company’s actions on society. 2. CSR requires decision makers to take actions that protect and improve the welfare of society as a whole along with their own interests.

12. 12 3. 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

13. 13 4. 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. CSR: Evolving Viewpoints

14. 14 Carroll’s Four-Part Definition of CSR Responsibility Societal Expectation Examples Economic Required Be profitable. Maximize sales, minimize costs. Legal Required 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

15. 15 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

16. 16 The Pyramid of CSR Philanthropic Responsibilities Be a good corporate citizen. Ethical Responsibilities Be ethical. Legal Responsibilities Obey the law. Economic Responsibilities Be profitable. Philanthropic Responsibilities Be a good corporate citizen. Ethical Responsibilities Be ethical. Legal Responsibilities Obey the law. Economic Responsibilities Be profitable. Figure 2-3

17. 17 The CSR Equation Economic Responsibilities Legal Responsibilities Ethical Responsibilities Philanthropic Responsibilities + + + = Total Corporate CSR For CSR Companies Go to http://money.cnn.com/magazines/fortune/fortune_archive/2006/10/30/8391850/index.htm

18. 18 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 Arguments Against CSR http://www.corporatewatch.org/?lid=2688

19. 19  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 Arguments For CSR

20. 20 Ways Firms Respond to CSR Pressure Cost-benefit approach Strategic approach Innovation and learning approach Defensive approach The Civil Corporation, Simon Zadek

21. 21  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 Responsibility in the 21 st Century

22. 22 Corporate Social Responsiveness Responsibility Implies more of a state orcondition of having assumedan obligation Responsiveness Connotes a dynamic,action-oriented condition

23. 23 Corporate Social Responsiveness Alternative Views Frederick’s CSR 1, CSR 2, and CSR 3 Epstein’s Process View Sethi’s Three-Stage Schema Figure 2-7

24. 24 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

25. 25 Corporate Social Performance Figure 2-10

26. 26 Corporate Citizenship Corporate Citizenship… …embraces all the facets of corporate social responsibility, responsiveness, and performance. …serves a variety of stakeholders.

27. 27 Corporate Citizenship Charles J. Fombrum, “Three Pillars of 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

28. 28 Drivers of Corporate Citizenship Traditions and values Reputation and image Business strategy Recruiting and retaining employees Customers and consumers Expectations in the community Laws and political pressures Internal Motivators External Pressures

29. 29 Benefits of Corporate Citizenship  Improved employee relations  Improved customer relationships  Improved business performance  Enhanced company’s marketing efforts

30. 30 Stages of Corporate Citizenship Figure 2-11

31. 31 Development Challenges of Corporate Citizenship Figure 2-12

32. 32 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

33. 33 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 Good Corporate Reputation Good Corporate Financial Performance Good Corporate Social Performance Good Corporate Reputation Good Corporate Social Performance Good Corporate Financial Performance Figure 2-13

34. 34 “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

35. 35 “Triple Bottom Line” Perspective Key Spheres of Sustainability 1.Economic 2.Social 3.Environmental 27,800,000 for sustainable development. Retrieved 1/13/2010 Is Sustainability Development the next new buzz word?

36. 36 Socially Responsible or Ethical Investing Social Screening A technique used to screenfirms for socially-responsibleinvestment purposes

37. 37 Reasons for Upsurge in Socially Responsible Investing 1. More reliable research on CSP 2. Investment firms using social criteria have solid track record 3. The socially conscious 1960s generation is making investment decisions