1. 1 CBEB3101 Business Ethics Lecture 4 Semester 1, 2011/2012 Prepared by Zulkufly Ramly 1

2. Topic 3 Corporate Social Responsibility 22

3. 3 Contents of Topic 3 Definition of stakeholders Stakeholders groups Ownership theory versus stakeholder theory Definition of CSR Arguments for and against CSR CSR Analysis Corporate social responsiveness 3

4. 4 Topic 3 Learning Outcomes 5.Contrast the ownership theory with stakeholder theory 6.Explain the arguments for and against CSR 7.Assess a firm’s CSR using the four-part definition 8.Explain the concept of corporate social responsiveness 1.Define stakeholders 2.Identify and explain a firm’s primary and secondary stakeholders 3.Explain the importance of identifying stakeholder groups 4.Apply the typology of stakeholder attributes in classifying stakeholders

5. 5 Stakeholder Any group that has a claim or interest in the operations of a company that can affect or be affected by the policies or activities of the company

6. 6 Primary stakeholders Have a direct stake in the company and its success Seconday stakeholders Have a public or special interest stake in the company 6

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9. 9 A Typology of Stakeholder Attributes The perceived validity or appropriateness of the claim The ability of a stakeholder to produce an effect The degree to which the claim demands immediate atttention Legitimacy Urgency

10. Company is property of its owners Objective: To maximize returns to shareholders Shareholders’ interests are supreme and take priority 10 Ownership theory

11. Company serves a broader objective Must make profit for owners to survive, however, creates other kinds of value too Companies have multiple obligations All “stakeholder” groups must be considered 11 Stakeholder theory 11

12. To understand potential sources of risk, disruption and tension to its business activities or projects – can assess them To evaluate source of influence over objectives and results for business– can identify stakeholders with most power and interest Morally right for firms to find out how a company’s decisions affect people 12 Importance of Knowing Stakeholders

13. Obligations to maximise the company’s positive impact on stakeholders and to minimise its negative impact Company should be held accountable for any of its actions that its stakeholders Requires companies to balance the benefits to be gained against the costs of achieving those benefits 13 Corporate Social Responsibility

14. 14 Addresses social issues brought on by business The public supports CSR Addresses issues by using business resources and expertise Discourages future government intervention Protects business reputation CSR is good because … 14

15. 15 Restricts the classic economic goal of profit maximization Creates powerful business Limits the ability to compete in global marketplace Dilutes the primary purpose of business Business is not equipped to handle social activities CSR is bad because … 15

16. 16 Economic Be profitable and think long term survival Legal Philanthropic Ethical “giving back’ to society Avoid questionable practices Obey laws and government regulations CSR Analysis

17. 17 REQUIRED of business by society Society sanctions the beneficial existence and operations of businesses In return the society requires firms be financially effective Dramatically impact shareholders and employees – return, jobs, goods and services Economic Responsibilities

18. 18 REQUIRED of business by society Law is society’s codification of right and wrong Law prescribes ground rules for conducting businesses – ensure fair practices Businesses expected to honour all contractual obligations Legal Responsibilities

19. 19 EXPECTED of business by society Obligation to do what is right, fair and avoid harms Be mindful of activities and practices that are expected or prohibited by the society – althought not covered by law Ethical Responsibilities

20. 20 DESIRED/EXPECTED of business by society Reflect current expectations of business by the public Guided by business’s desire to engage in social activities – but not mandated If companies do not wish to participate then it is not considered unethical Society expected businesses to ‘give back’ Philanthropic Responsibilities 20

21. 21 If philanthropic activities are actually voluntary why include in the corporate social responsibility? Philanthropy is a responsibility because it is expected of business by society However, it is not required, as are the economic and legal responsibilities Can forego philanthropic activities without suffering sanctions from society Has discretion in what causes it supports and how it contributes to those causes Discretionary - managers are given freedom and flexibility to make proper judgment on the need to fulfill this part of CSR Voluntary but responsible? 21

22. Characteristics of Socially Responsible Firms Makes product that are safe Does not pollute air or water Promotes honest/ethical employee behavior Does not use misleading/deceptive advertising Protects employees against sexual harassment Recycles within company  Responds quickly to customer problems  Maintains waste-reduction programme  Helps displaced workers with placement  Gives money to charitable/educational causes  Tries to continually improve quality 22

23. A more proactive and action oriented concept Firms anticipate social expectations Meet them before they are imposed as a new responsibility E.g. child care benefits to its working parents 23 Corporate Social Responsiveness

24. 24 Is corporate social responsiveness an improvement of CSR? Obligations and accountability implied that business should do only the minimum that would satisfy the duties imposed on it by society Focus of CSR Using this approach both encourages social performance by business and allows it more freedom in what actions it will take Focus of corporate social responsiveness A proactive, dynamic and action orientation Actively seek to meet social needs before they become a duty imposed by society YES! 24