2Ch. 4: Key Learning Objectives Defining corporate citizenship and global corporate citizenshipContrasting the structures and processes businesses use to manage their social responsibilitiesEvaluating how the multiple dimensions of corporate citizenship progress through a series of stagesAssessing how corporate citizenship differs among various countries and regions of the worldUnderstanding how a business or social groups can audit corporate citizenship activities and report their findings to stakeholdersRecognizing the leading-edge corporate citizenship companies and how they carry out their corporate citizenship mission4 - 2
3Introduction to Corporate Citizenship Refers to businesses putting corporate social responsibility into practiceInvolvesProactively building stakeholder partnershipsDiscovering business opportunities in serving society, andTransforming a concern for financial performance into a vision of integrated financial and social performance
4Davenport Principles of Corporate Citizenship One researcher's answer to core elements of corporate citizenshipTotal of 20 Principles with 3 performance categories: ethical business behavior, stakeholder commitment, and environmental commitmentFor stakeholder commitment -- principles define overall standards and specific standards for 5 stakeholder groupsOverarching definition and standard:Good corporate citizens strive to conduct all business dealings in an ethical manner, make a concerned effort to balance the needs of all stakeholders, while working to protect the environment
5Davenport Principles of Corporate Citizenship Exhibit 4.AaEthical Business Behavior1) Engages in fair and honest business practices in its relationship with stakeholders.2) Sets high standards of behavior for all employees.3) Exercises ethical oversight of the executive and board levels.Stakeholder Commitment4) Strives to manage the company for the benefit of all stakeholders.5) Initiates and engages in genuine dialogue with stakeholders.6) Values and implements dialogue.
6Davenport Principles of Corporate Citizenship Exhibit 4.AbCommunity7. Fosters a reciprocal relationship between the corporation and community.8. Invests in the communities in which corporation operates.Consumers9. Respects the rights of consumers.10. Offers quality products and services.11. Provides information that is truthful and useful.
7Davenport Principles of Corporate Citizenship Exhibit 4.AcEmployees12. Provides a family-friendly work environment.13. Engages in responsible human-resource management.14. Provides an equitable reward and wage system for employees.15. Engages in open and flexible communication with employees.16. Invests in employee development.
8Davenport Principles of Corporate Citizenship Exhibit 4.AdInvestors17. Strives for a competitive return on investment.Suppliers18. Engages in fair trading practices with suppliers.Environmental Commitment19. Demonstrates a commitment to the environment.20. Demonstrates a commitment to sustainable development.
9Citizenship ProfileResearch by Gardberg and Fombrun argues that corporate citizenship activities should be viewed as strategic investments (like research & development)Create intangible assets that lead to improved legitimacy, reputation and competitive advantageParticularly true of global firms where citizenship activities overcome nationalistic barriers and build local advantageImportant for global firms to choose a Citizenship Profile which matches the local settingPublic expectations vary on factors such as environmental risk, philanthropy and worker rightsCompanies that choose the right configuration of citizenship activities to match public expectations will reap strategic advantages
10Business Commitment to Citizenship – Examples of Corporate Citizenship StatementsExhibit 4.BaExxonMobil – “We pledge to be a good corporate citizen in all the places we operate worldwide. We will maintain the highest ethical standards, comply with all applicable laws and regulations, and respect local and national cultures. We are dedicated to running safe and environmentally responsible operations. (www.exxonmobil.com)Ford – “Corporate citizenship has become an integral part of every decision and action we take. We believe corporate citizenship is demonstrated in who we are as a company, how we conduct our business and how we take care of our employees, as well as in how we interact with the world at large.” (www.ford.com)Nike – “Our vision is to be an innovative and inspirational global citizen in a world where our company participates. Every day we drive responsible business practices that contribute to profitable and sustainable growth.” (www.nike.com)
11Business Commitment to Citizenship – Examples of Corporate Citizenship StatementsExhibit 4.BbNokia – “Our goal is to be a good corporate citizen wherever we operate, as a responsible and contributing member of society.” (www.nokia.com)Toyota – “With the aim of becoming a corporate citizen respected by international society, Toyota is conducting a wide range of philanthropic activities around the world. Its activities cover five major areas: education, the environment, culture and the arts, international exchange and local communities.” (www.toyota.co.jp)
12Global Corporate Citizenship Public expectation that as companies expand internationally they will behave in ways that enhance benefits and minimize risks for all stakeholdersCompanies must have an acceptable level of corporate citizenship to earn and maintain a “license to operate” in the countries where do businessDefinition of Global Corporate CitizenshipProcess of identifying, analyzing, and responding to the company’s social, political, and economic responsibilities as defined through law and public policy, stakeholder expectations, and voluntary acts flowing from corporate values and business strategies. Involves actual results and the processes through which they are achieved.
13Global Corporate Citizenship Concept is consistent with themes throughout this textManagers and companies have responsibilities to all their stakeholdersCorporate citizenship (CC) involves more than just meeting legal requirementsCC requires that a company focus on, and respond to, stakeholder expectations and undertake those voluntary acts that are consistent with its values and business missionCC involves both what the corporation does and the processes and structures through which it engages stakeholders and makes decisions
14Management Structures for Corporate Citizenship 2004 Business for Social Responsibility study found no single universally accepted design for CSR (corporate social responsibility) management systemsCould be assigned to committee of the board, senior executive committee, or single executive/group of executivesOther management structure research has foundSome companies have broadened scope of Public Affairs Offices to include corporate citizenship (see Ch. 2)Emerging trend is separate department
15Stages of Corporate Citizenship Is a developmental change process, involving new attitudes, routines, policies, programs and relationshipsModel (shown on next slide) by Mirvis and Googins shows sequence of 5 stages based onCitizenship contentStrategic intentLeadershipStructureIssues managementStakeholder relationshipsTransparency
17Transforming Stage of Corporate Citizenship Is highest stage, Stage 5Qualities of companies at this stageVisionary leaders motivated by higher sense of corporate purposePartner extensively across organizational, sector, and national borders to address social problems
18Limits to Corporate Citizenship Despite growth in many companies and countries, are some critics of corporate citizenship activitiesAn example (excerpt from Exhibit 4.D)[F]or most companies, CSR [corporate social responsibility] does not go very deep. There are many interesting exceptions—companies that have modeled themselves in ways different from the norm; often, particular practices that work well enough in business terms to be genuinely embraced; charitable endeavors that happen to be doing real good, and on a meaningful scale. But for most conventionally organized public companies—which means almost all of the big ones—CSR is little more than a cosmetic treatment. The human face that CSR applies to capitalism goes on each morning, gets increasingly smeared by day and washes off at night.--“The Good Company: A Survey of Corporate Social Responsibility,” The Economist, January 22, 2005, p. 4.
19Corporate Citizenship in Comparative Perspective How businesses interpret and act on their citizenship varies across the globTrends from current studiesCompanies in Northern America and Europe are more likely than Asian companies to have written corporate citizenship policies, Asian companies however are more likely to have written ethics policiesComparative study across the Americas showed “huge gap” between U.S. and Canada and Latin America and CaribbeanGovernments in Europe play a much more important role in promoting CSR than in the U.S.
20Corporate Social Performance Audit Is a systematic evaluation of an organization’s social, ethical, and environmental performanceDemand for social auditing has grown in Europe and U.S.In some European countries is required by lawCan take 2 formsPerformance measured against a company’s own mission statement or policiesPerformance measured against a set of established standardsLike the Davenport Principles presented earlier, or the global standards presented on the following slides
23Additional Social Audit Approaches Balanced ScorecardSet of key financial and non-financial indicatorsTriple Bottom LineFinancial, social and environmental results taken together as an integrated wholeTransparencyGrowing demand by stakeholders for companies to report publicly the results of their financial, social and environmental performance audits
24Corporate Citizenship Awards 100 Best Corporate Citizens annual ranking by Business Ethics MagazineJoint initiative with scholars and KLD Research and AnalyticsCompanies that have consistently been on the list since its inception in 2000 shown on next slide
25The Best Corporate Citizens for the Past 7 Years Exhibit 4.FThese organizations have made Business Ethics’ 100 Best Corporate Citizens list since the list began in 2000:Brady CorporationCisco SystemsCummins EngineEcolabGracoHerman MillerHewlett-PackardIntelModine ManufacturingPitney BowesProcter & GambleSt. Paul Travelers Cos.Southwest AirlinesStarbucksTimberlandWhirlpool
26Corporate Citizenship Awards Corporate reputationJoint initiative between Reputation Institute and Harris InteractiveJohnson & Johnson top rated 7 years in a rowTechnology companies were rated top industryFortune magazine annual “Most Admired” listIncludes a peer rating of social responsibilityAmong companies recognized: UPS, Public Super Markets, Starbucks, and Herman Miller