1. Social Responsibility and Stakeholder Perspective
Dr. Gordon Liu

2. Who are Stakeholders?

3. Stakeholders
A stakeholder in an organisation is any group or individual who can affect, or is affected by, the achievement of the organisation’s objective
A corporation has the obligation not to violate the right of others
Corporations are responsible for the effects of their actions on others

4. Stakeholder Approaches: International
Business Perspective
International Investors
Domestic Boundary
International Activists
Foreign Financial Community
Shareholders
Interest Group
Creditors
International Consumes
Foreign Government
Government
Customers
Business Units
Suppliers
Overseas
Subsidiaries
Foreign Suppliers
Firms
Competitors
Employees
Foreign Competitors
Community
Nonprofits
Overseas Employee Group
Functional Departments
Globe Community
Foreign Nonprofits
International Scope
International NGOs

5. Why Stakeholders Matter
Milton Friedman – Businesses should only be run in the interests of their owners
Reasons why other groups also have a legitimate claim on the corporation
Legal perspective
Legally binding contracts
Economic perspective
Externalities
No contractual relations
Agency problem

6. Stakeholder Theory
Stakeholder theorists view the organisation as a collection of internal and external groups who have the legitimacy and power to affect the operation of organisation
The major theme of stakeholder theory is to study an organisation’s behaviours towards identified stakeholders and its strategy to manage the relationship (both voluntary and involuntary) with them
this concept can use to explain organisational behaviour because organisation, under stakeholder theorists’ impression, bounds to make managerial choices for its operation to meet its stakeholders’ demands for maintaining its legitimacy

7. Organisational Legitimacy
Its central premise is that organisations—firms in this context—can maintain their operations only to the extent that they have the support of the community.
The expectations that society has with regard to how a firm or other institution should act are embedded in the social contract between firms and the relevant social group.
The theory proposes that an organisation’s financial success and long-term survival will be threatened if society perceives that a firm has breached its social contract

8. Descriptive Aspect of Theory
Used to describe, and sometimes to explain, specific corporate characteristics and behaviour
This concept takes for granted that managers should bear in mind of stakeholder interests about the behaviour of the organisation
Organisation identity
Best understood as contested and negotiated through iterative interactions between managers and stakeholders
managers’ and stakeholders’ reflection on the meaning of organisational events, policies, and actions

9. Instrumental Aspect of Theory
Used to identify the connections, or lack of connections between stakeholder management and the achievement of traditional corporate objectives
Attempts to explore the relationship between the performances of organisation in associate to its stakeholder management
It can simply put as “if X, then Y”, where X is an instrument for achieving Y, this kind of cause and consequence relationship
If firm contracts (through their manager) with their stakeholders on the basis of mutual trust and co-operation, they will have a competitive advantage over the firms that do not.

10. Normative Aspect of Theory
Used to interpret the function of the corporation, including the identification of moral or philosophical guidelines for the operation and management of a corporation.
Can be considered as the forms of duty that managers are owed to the stakeholder: positive duties, duties to groups and duties to stakeholder equality.
Legitimacy balancing stakeholders’ interests will make the organisation more morally appealing.

11. What are Business Ethics?

12. Business Ethics
Business ethics covers the study of business situations, activities and decisions where issues of right and wrong are addressed

13. Why are Business Ethics Important?

14. This is important because….
Power and influence of business in society
Potential to inflict harm
Increasing demands from stakeholders
Lack of business ethics education or training
Continued occurrence of ethical infractions
Evaluating different ways of managing business ethics
Interesting and rewarding

15. Globalisation and Business Ethics
Culture issues
Legal issues
Accountability issues
Globalization can affect all stakeholders of the corporation

16. Sustainability
Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs
Sustainability refers to the long-term maintenance of systems according to environmental, economic and social consideration

17. Triple Bottom Line
Bottom line thinking suggests sustainability as a goal
Three dimensions
Environmental perspectives
Economics perspectives
Social perspectives

18. What is a Corporation?

19. Corporations
A corporatation is essentially defined in terms of legal status and the ownership of assets
Corporations are typically regarded as “artificial persons” in the eyes of the law
Corporations are notionally “owned” by shareholders, but exist independently of them
Managers and directors have a “fiduciary” responsibility to protect the investment of shareholders

20. Can a Company Have Social Responsibilities?

21. Arguments….
Milton Friedman 1970 classic article “The social responsibility of business is to increase its profits”
Main arguments:
Only human beings have a moral responsibility for their actions
It is managers’ responsibility to act solely in the interests of shareholder
Social issues and problems are the proper province of state rather than corporate manager

22. Reasons…. Business reasons Moral reasons
Extra and/or more satisfied customers
Employees may be more attracted/committed
Forestall legislation
Long-term investment which benefits corporation
Moral reasons
Corporations cause social problems
Corporate should use their power and resources responsibly
All corporate activities have social impacts of one sort or another
Corporations rely on the contribution of a wide set of stakeholders in society rather than just shareholders

23. Pyramid of CSR
Philanthropic Responsibilities Be a good corporate citizen.
Ethical Responsibilities Be ethical.
Legal Responsibilities Obey the law.
Economic Responsibilities Be profitable.
Source: Archie B. Carroll, “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders,” Business Horizons (July-August 1981). © 1991 by the Foundation for the School of Business at Indiana University. Used with permission.

24. Corporate Responsibility
Economic approach
The business case of CSR
Managerial approach
Getting along with stakeholders
Ethical approach
Doing the right thing
Political approach
Being a good corporate citizen

25. Why Citizenship?
Citizenship addresses issues of power and responsibility in society
More commercial opportunities for corporations
Creation of new markets
Increase in cross border activities
Wider debates on role of corporations in societal governance
Citizenship provides established and legitimate framework for thinking about
Status
Entitlements
Process

26. Accountability
Corporate accountability refers to whether a corporation is answerable in some way for the consequences of its actions
Firms have begun to take on the role of “political actors” – taken up many of the functions previous undertaken by government because:
Governmental failure
Increasing power and influence of corporations

27. Issues
Central question is who controls corporations and to whom are corporations accountable
Transparency is the degree to which corporate decisions, polices, activities and impacts are acknowledged and made visible to relevant stakeholders

28. Consumers and CSR

29. Consumers as Stakeholders
Commonplace argument that businesses are best served by treating their customers well
Consumer rights rest upon the assumption that consumer dignity should be respected and that producers have a duty to treat consumers as ends in themselves, and not only as means to the ends of producer

30. Ethical Issues in Marketing Management – Product policy
At the most basic level, consumers have a right to products and services which are safe, efficacious, and fit for the purpose for which they are intended
Manufacturers ought to exercise due care in establishing that all reasonable steps are taken to ensure that their products are free from defects and safe to use
Consumers right to a safe products is not an unlimited right
Safety also a function of the consumer and their actions and precautions

31. Ethical Issues in Marketing Management – Marketing Communication
Criticisms of advertising broken down into 2 levels
Individual  Concerned with misleading or deceptive practices that seek to create false beliefs about specific products or companies in the individual’s consumers’ mind
Social  concerned with the aggregate social and cultural impacts, such as promoting materialism

32. Ethical Issues in Marketing Management - Pricing
Pricing issues are central to the notion of a fair exchange between the two parties, and the right to a fair prices
Fours types of pricing practices where ethical problems my arises:
Excessive pricing
Price fixing
Predatory pricing
Deceptive pricing

33. Ethical Issues in Marketing Strategy
Criticisms when there is a perceived violation of the consumers right to be treated fairly (duty of care)
Targeting vulnerable customers
Vulnerable customers are:
Lack sufficient education or information to use products safely or to fully understand the consequences of their action
Are easily confused or manipulated due to old age and senility
Are in exceptional physical or emotional need due to illness, bereavement, or some other unfortunate circumstance
Lack the necessary income to competently maintain a reasonable quality of life for themselves and their dependents
Are too young to make competent independent decision

34. Cause-Related Marketing

35. Cause-Related Marketing
Cause-Related Marketing is about using marketing money, techniques and strategies to support worthwhile causes at the same time building the business.
A company promotes its image, products and services in conjunction with a good cause, raising money for the cause at the same time:
Enhancing its reputation
Demonstrating its values,
Enlisting consumer loyalty and purchase of its own products and services

36. What is Cause-Related Marketing?
Corporation
Cause
Cause
Business in the Community
Establish in 1982 to against high level of unemployment
In 1985 Prince of Wales accepted the presidency of BITC since then
Member of 700 UK top companies
Further 1600 companies participate in the program and event
Goal – improve the positive business image in the society
Corporate self-interest
Mutual Benefit (Corporation and Non-profit)
Marketing Purpose
Looking for Return on Investment
Capitalize on Corporate social performance
Increases corporate reputation and employee performance
Overall, CRM is the partnership between the corporation and non-profit organization
Adkins, Sue (1999) “Cause Related Marketing: Who Cares Wins”
Director of Business in the Community’s Cause Related Marketing Campaign
Public
Public
Public

37. Why corporations want to use CRM? Motives?

38. Sales Promotion, Voucher Donation
Motives
Sales / Revenue
Sales Promotion, Voucher Donation
Corporate Reputation
Sponsorship, Social Advertising
Employee Performance
Volunteer, Community Service
There are five motives in the summary of literature review
Profitability
Sale promotion type
Long run view
Corporate Image
Sponsorship
Advertising
Employee Performance
Volunteer
Customer Relation
Donation
Stakeholder Connection
Donation to local community
Improve the community facility
Customer Relation
Public Relation, Donation
Community Connection
Community Service, Facility

39. What Types of CRM Do Enterprise Tend to Use?

40. Types Transactions-Base Event Sponsorship Joint Advertising/Promotion
Sales Promotion, Give as You Earn, Voucher, Percentage Club
Event Sponsorship
Handout for the 4 types section
Event Sponsorship
Special Olympic
London Marathon
Local Fundraising
Transaction-Base
Tesco Computer to school
HSBC Art Credit Card
Joint Promotion
Drinking and Driving
No Smoking
Donation in Kind
Employee Volunteer
Products Donation
Donate a Building
Joint Advertising/Promotion
In-Kind Contribution
Fundraising, Sport, Art, Community Event
Licensing, Advertising, Public Relation
Volunteer, Product, Service, Facilities

41. How do Enterprise Select Causes?

42. Selection Image / Reputation Product / Service Strategy
Fitting, Improve Reputation
Product / Service
Relation to Business
Strategy
In literature there five major ways to select the charity
Mission/Strategy
Expend to a new location
Image
Improve the image, against bad corporate image
Product/Service
Product or Service Relate
Employee Membership
Employee or management who has a membership in it
Local Community
Business location
Marketing, International Expansion
Employee Membership
Employee Involvement
Local Community
Business Location

43. Case Study: Retail Industry

44. Who are a retail store’s stakeholders?
Class Exercise
Who are a retail store’s stakeholders?

45. Regulatory Authorities
Retail Stakeholders
One provides source of capital under the assumption the business will return principal and interest
These groups represent the interest of their members and may have influence on particular issue
Individuals or companies legally own part of business ownership
Shareholders
Individual or households that purchase goods and service
Interest Group
Creditors
Government agency that regulates an area of business activity by codifying and enforcing rules and regulations
Regulatory Authorities
Customers
One supplies , distributes or transports the retail products to the store
NGOs
Suppliers
a legally constituted organization created by private persons or organizations with no participation or representation of any government
Firms
Competitors
Employees
Contributes labour and expertise to an endeavor
Community
Activist
Landlords
Direct and indirect opponents in business
One tries to persuade organization to change its behavior directly or indirectly, by raising the awareness on particular issue
A group of interacting people and organizations live in a common environment or location
Owner of real estate which rented or leased to the business

46. Primary Stakeholders Business stakeholders
One without whose continuing participation the corporation cannot survive as a going concern
Failure to retain the participation of a primary stakeholder group will result in the failure of that corporation system
Typically are comprised of investors (shareholders and creditors), employees, customers and suppliers

47. Regulatory Authorities
Retail Stakeholders
One provides source of capital under the assumption the business will return principal and interest
Individuals or companies legally own part of business ownership
Shareholders
Individual or households that purchase goods and service
Interest Group
Creditors
Regulatory Authorities
Customers
One supplies , distributes or transports the retail products to the store
NGOs
Suppliers
Firms
Competitors
Employees
Contributes labour and expertise to an endeavor
Community
Activist
Landlords
Direct and indirect opponents in business
Owner of real estate which rented or leased to the business

48. Secondary Stakeholders
Public stakeholders
As those who influence of affect, or are influenced or affected by, the corporation, but they are not engaged in transactions with the corporation and are not essential for its survival
Political Stakeholders
Governments* (central or local), regulatory authorities, political activists, NGOs and so on.
Social Stakeholders
Community, charities, social activists and so on

49. Regulatory Authorities
Retail Stakeholders
These groups represent the interest of their members and may have influence on particular issue
Shareholders
Interest Group
Creditors
Government agency that regulates an area of business activity by codifying and enforcing rules and regulations
Regulatory Authorities
Customers
NGOs
Suppliers
a legally constituted organization created by private persons or organizations with no participation or representation of any government
Firms
Competitors
Employees
Community
Activist
Landlords
Direct and indirect opponents in business
One tries to persuade organization to change its behavior directly or indirectly, by raising the awareness on particular issue
A group of interacting people and organizations live in a common environment or location

50. Integrated Stakeholder Strategy
Corporate Legitimacy
Legitimacy Gap:
Lack of correspondence between how society believes an organization should act and how it is seen to act.
A legitimacy gap may appear when:
A firm or the media discloses information about the firm that changes (for the worse) how society perceives it
Society’s expectations changes
A firm fails to show (through disclosure) how it is complying with society’s expectations.
Management
Standpoint
Stakeholders’ Expectation
Integrated Stakeholder Strategy

51. References
Adkins, S. (1999), Cause Related Marketing: Who Cares Wins, London: Elsevier Ltd.
Benioff, M. and Adler, C. (2007), The Business of Changing the World: 20 Great Leaders on Strategic Corporation Philanthropy, New York: McGraw-Hill
Branson, R. (2008), Business Stripped Bare: Adventure of Global Entrepreneur, London: Virgin Books
Crane, A. and Matten, D. (2004), Business Ethics: A European Perspective, Oxford: Oxford Press
Wickham, P. A. (2006), Strategic Entrepreneurship 4th Ed., Harlow, Essex: Pearson Education