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CSR and SMEs theory: From large to small organizations

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1 CSR and SMEs theory: From large to small organizations
Laura J. Spence

2 Thomas Holloway (22 September 1800 – 26 December 1883) . Family of bakers, lived in France for a time, finally in 1836, he set himself up as a foreign and commercial agent in London. A philanthropic and somewhat eccentric donor (he had an unconcealed prejudice against doctors, lawyers and parsons), Thomas Holloway was a self-made multi-millionaire whose fortune had been made in patent medicines. He founded Royal Holloway College in 1879 after initiating a public debate inviting suggestions as to 'How best to spend a quarter of a million pounds or more'. It was his wife Jane who suggested a college for women as the means by which Holloway's money might effect 'the greatest public good'. Holloway's first great philanthropic enterprise, the Sanatorium at Virginia Water opened in The second, Royal Holloway College, largely inspired by the Chateau  Chambord in the Loire Valley, was opened by Queen Victoria in Built around two quadrangles, today it continues to impress as much by its size as by the exuberance of the roofline with its many towers and turrets. As solid as it is extravagant, it epitomises the wealth, optimism and spirit of philanthropy so characteristic of the Victorian age. It continues to provide a home for the the Royal Holloway Collection - a Picture Gallery of Victorian paintings by Millais, Frith and Landseer among others -  that was the final touch to Holloway's generous endowment. Testimonials to the value of the pills can be found in newspapers all over the British Empire, including Indian, Australia and the North American colonies

3 inspired by the Chateau of Chambord in the Loire Valley
One of the first to offer higher education for women. Royal Holloway admitted male undergraduates for the first time in 1965

4 Classic Small Business (C)SR in SMEs?
Classic MNC Classic Small Business (C)SR in SMEs? Ownership and control Shareholderprincipal CEO agent Owner-manager as principal and agent Personal and family influence Discretionary SR implicit. Responsibility to family and self Governance and reporting Formalized and codified. Professionalization of mgt Informal and personal No language or codification for SR Transactions (internal and external) Contract based. Profit & shareholder value max. Relationship based in embedded community networks. Reputation, status and legacy Personal trust Integrity Honesty Power structures Hierarchical Role orientated Flat, flexible, multi-tasking. O-M responsibility for and reliance on employees FROM EMPIRICAL RESEARCH Business Ethics – the moral rules-in-use in organizations CSR - consideration of, and response to, issues beyond the narrow economics, technical and legal requirements of the firm to accomplish social (and environmental) benefits along with the traditional economic gains which the firm seeks’ Aguilera et al, (2007, p.836-7). Focus on achievement of positive social change. EG: community involvement, stakeholder engagement, accountability, fair treatment of suppliers, fair marketing, fair competition etc

5 CSR Theory 1: CSR Pyramid
Economic Legal Ethical Phil- anthropic Be a good corporate citizen. Contribute resources to the community; improved quality of life Be ethical. Obligation to do what is right, just and fair. Avoid harm. Obey the law. Law is society’s codification of right and wrong. Play by the rules of the game. Be profitable. The foundation on which all others rest. Carroll’s model of Corporate Social Responsibility does not apply convincingly to small firms Deep ethnographic studies will reveal different and more credible information about small business social responsibility than quantitative surveys The ethics of care rather than more traditional ethical theories may provide a more suitable lens for understanding the motivations for small business approaches to social responsibility Influencing CSR in SMEs will best be achieved by targeting: Trade associations (Appealing to) individual integrity Family Community Business partners and networks Acting with social responsibility in small businesses may in some instances exclude complete compliance with the law Carroll’s (1991) Pyramid of Corporate Social Responsibility 5 5

6 Four-part model of SME social responsibility
Personal Integrity Survival Ethical Phil- anthropic Personal integrity Philanthropic Personal integrity (a) To self and family (b) To employees (c) To the local community (d) To business partners Survival Ethical Personal integrity Phil- anthropic (1) To self and family (2) To employees Four-part model of SME social responsibility In summary, Archie Carroll’s CSR pyramid is useful for understanding social responsibility in small business when: Responsibility ‘to society’ is made relevant for small business by breaking it down into meaningful categories such as the self and family; employees; the local community and business partners Key categories of social responsibility are survival (economic and legal); personal integrity of the owner-manager; ethical and philanthropic. The order of priority within the CSR pyramid is differentiated according to the group to whom responsibility is orientated. (4) To business partners (3) To the local community 6 6

7 CSR Theory 2: Stakeholder theory
Theory developed by Edward Freeman (1984) A stakeholder in an organization is…any group or individual who can affect, or is affected by, the achievement of the organization’s objectives (Freeman 1984:46) Primary stakeholders are those stakeholders that have a direct stake in the organization and its success Secondary stakeholders are those that have a public or special interest stake in the organization 7

8 Stakeholder Theory: SMEs
Business Partners The small business is more likely to be defined by their role as a stakeholder of other organizations than as a central organization in its own right. The inside of the black box of the firm, is best represented by the owner-manager(s) of the business. The key stakeholders for small businesses are likely to be employees, small local competitors, suppliers, local community, family and customers. Stakeholder salience is influenced by proximity, which adds a new dimension to the ‘urgency’ perspective. ‘The self’

9 Explaining the SME Difference: An ethic of care
Feature Reasoning Meeting the needs of others for whom we take responsibility Caring for a child at the fore-front of moral concerns. Vulnerable human beings are dependent on others. Claims of particular others are compelling regardless of universal principles. Valuing emotions Sympathy, empathy, sensitivity, and responsiveness are the kinds of moral emotions that are valuable for implementing reason. Accepts impartiality The compelling moral claims may be valid even when not universalizable Inclusion of the private sphere as territory for morality Common focus on public life overlooks the private domains of family and friendship, where women are often economically dependent and subject to a highly inequitable division of labour. People are relational and interdependent People start out as morally and epistemologically relational and interdependent. This contrasts to traditional conceptualizations of fully autonomous and rational individual agents. Source: Derived from Held (2006:10-13)

10 Masculinist Interpretation of SHT Feminist
1) Corporations as autonomous entities are bounded off from their external environment SMEs as webs of relations among stakeholders 2) Corporations control their external environment SMEs should thrive on chaos and embrace environmental change 3) The language of competition and conflict best describes the character of managing a firm Communication and collective action should describe the character of managing an SME 4) Objective thinking is needed to generate strategy Strategy as solidarity with decisions based on responsibilities and relationships 5) Corporations structure power and authority within strict hierarchies (Derived from Wicks, Gilbert and Freeman ,1994) Structure power and authority through decentralization and empowerment.

11 Policy implications Cost rather than profit
Personal rather than compliance-based responsibility Supply Chain Responsibility rather than customer pressure and codes Acknowledge care as part of business practice Importance of mentors, family, peers, networks and social capital Sector approaches Role for Regulation? Focus on profit and the ‘business case’ to motivate social responsibility is misguided – but cost focus will attract some attention Responsibility is keenly felt by SME owner-managers, but because of personal relationships not government intervention Supply chain pressures should not assume the simple transfer of codes/standards from large customers to small suppliers is unproblematic. Whole supply chain approach needed. Role for Regulation? Levels the playing field

12 Entreprenurs vs owner-manager
Family firms Sectors Virtual firms Partnerships Venture capital owned Entrepreneurial type Transition economies Ecopreneurs Franchises Informal economy Social enterprises Sole traders/no employees

13 Remember, SMEs are: different in nature, not just size from large firms often unfamiliar with corporate jargon often led by people who do not want someone else telling them what to do characterised by multi-tasking and fire-fighting deserve our respect should not be underestimated & can teach a lot to large firms 13

14 Professor Laura J. Spence
Royal Holloway, University of London, UK

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