Archie B. Carroll Ann K. Buchholtz Business & Society Ethics, Sustainability, and Stakeholder Management Eighth Edition Archie B. Carroll Ann K. Buchholtz © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Learning Outcomes Explain how corporate social responsibility (CSR) evolved and now encompasses economic, legal, ethical, and philanthropic components. Provide business examples of CSR and corporate citizenship. Differentiate between corporate citizenship, social responsibility, responsiveness, and performance. Elaborate on the concept of corporate social performance (CSP). Explain how corporate citizenship develops in stages in companies. Describe the socially responsible investing movement. © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Chapter Outline The Corporate Social Responsibility Concept Arguments Against and For Corporate Social Responsibility Corporate Social Responsiveness Corporate Social Performance Corporate Citizenship Business’s Interest in Corporate Citizenship Social Performance and Financial Performance Relationship Socially Responsible or Ethical Investing Summary © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Business Allegations Little concern for the consumer Cares nothing about the deteriorating social order Has no concept of ethical behavior Indifferent to the problems of minorities and the environment What responsibility does business have to society? Business for Social Responsibility (BSR) is a consulting firm and global business network helping organizations to develop sustainable business strategies and solutions. © 2012 South-Western, a part of Cengage Learning

Corporate Social Responsibility Seriously considering the impact of a company’s actions on society. Requires the individual to consider his or her acts in terms of a whole social system, and holds him or her responsible for the effects of his or her acts anywhere in that system. © 2012 South-Western, a part of Cengage Learning

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 © 2012 South-Western, a part of Cengage Learning

Corporate Citizenship Concepts Corporate Social… Responsibility Performance Responsiveness Emphasizes… obligation, accountability outcomes, results action, activity © 2012 South-Western, a part of Cengage Learning

Historical Perspective on CSR Economic Model Legal Model Social Model Stakeholder Model © 2012 South-Western, a part of Cengage Learning

Modification of the Economic Model Philanthropy Community obligations Paternalism Motivation: Keep government at arm’s length © 2012 South-Western, a part of Cengage Learning

CSR’s Acceptance and Broadening of Meaning From the 1950s to the present, the concept of CSR has gained acceptance. 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 © 2012 South-Western, a part of Cengage Learning

Evolving Meanings of CSR Corporate social responsibility is seriously considering the impact of the company’s actions on society. The obligation of decision makers to take actions that protect and improve the welfare of society as a whole, along with their own interests. Supposes that the corporation has economic and legal obligations as well as responsibilities to society that extend beyond these obligations. © 2012 South-Western, a part of Cengage Learning

A Four-Part Definition of CSR The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time. © 2012 South-Western, a part of Cengage Learning

The Four Components of CSR Responsibility Societal Expectation Examples Economic Required Be profitable. Maximize sales, minimize costs. Legal 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. © 2012 South-Western, a part of Cengage Learning

The Pyramid of CSR Philanthropic Responsibilities Be a good corporate citizen. Ethical Responsibilities Be ethical. Legal Responsibilities Obey the law. Economic Responsibilities Be profitable. © 2012 South-Western, a part of Cengage Learning

The CSR Equation = + + + Total Corporate CSR Economic Responsibilities Legal Responsibilities Ethical Responsibilities Philanthropic Responsibilities = Total Corporate CSR + + + A stakeholder perspective focuses on the CSR pyramid as a unified whole. © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Arguments Against CSR The classical economic view that business’ only goal is the maximize profits for owners. Business is not equipped to handle social activities. It dilutes the primary purpose of business. Businesses have too much power already . It limits the ability to compete in a global marketplace. © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Arguments For CSR It addresses social issues brought on by business, and allows business to be part of the solution. Enlightened self-interest: businesses must take actions to ensure long-term viability. Wards off future government intervention. It addresses issues by using business resources and expertise. It addresses issues by being proactive. The public supports CSR. © 2012 South-Western, a part of Cengage Learning

Ways Firms Respond to CSR Pressure Cost-benefit approach Strategic approach Innovation and learning approach Defensive approach © 2012 South-Western, a part of Cengage Learning

Corporate Social Responsiveness An action-oriented variant of CSR. Responsibility Implies a state or condition of having assumed an obligation. Responsiveness Connotes a dynamic, action-oriented condition. © 2012 South-Western, a part of Cengage Learning

Corporate Social Responsiveness Alternative Views Sethi’s Three-Stage Schema Social obligation, social responsibility, and social responsiveness. Frederick’s CSR1, CSR2, and CSR3 CSR1 is accountability-focused. CSR2 is responsibility-focused. CSR3 refers to corporate social rectitude. Epstein’s Process View Emphasizes the process of social responsiveness. © 2012 South-Western, a part of Cengage Learning

Carroll’s Corporate Social Performance Model © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Corporate Social Performance: Extensions, Reformulations, Reorientations Wartick and Cochran’s CSP Extensions Wood’s Reformulated CSP Model Swanson’s Reorientation of CSP © 2012 South-Western, a part of Cengage Learning

Wartick and Cochran’s Corporate Social Performance Model Extensions © 2012 South-Western, a part of Cengage Learning

Corporate Citizenship Embraces all the facets of corporate social responsibility, responsiveness, and performance. Serves a variety of stakeholders. Companies have certain responsibilities that they must fulfill in order to be perceived as good corporate citizens. © 2012 South-Western, a part of Cengage Learning

Corporate Citizenship (continued) Broad View 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. Narrow View Corporate community relations © 2012 South-Western, a part of Cengage Learning

The Drivers of Corporate Citizenship Internal Motivators External Pressures Traditions and values Customers and consumers Reputation and image Expectations in the communities Business strategy Laws and political pressures Recruiting and retaining employees © 2012 South-Western, a part of Cengage Learning

Benefits of Corporate Citizenship Improved employee relations Improved customer relationships Improved business performance Enhanced marketing efforts © 2012 South-Western, a part of Cengage Learning

Stages of Corporate Citizenship © 2012 South-Western, a part of Cengage Learning

Development Challenges That Trigger Movement of Corporate Citizenship © 2012 South-Western, a part of Cengage Learning

Global Corporate Citizenship Multinational enterprises are expected to be good corporate citizens in the countries in which they do business. Are expected to tailor their initiatives to conform to the cultural environment. International academics and business people do research on and advocate CSR and corporate citizenship concepts. Convergence in global CSR approaches will continue as the world economic stage becomes the common environment within which businesses function. © 2012 South-Western, a part of Cengage Learning

Business’ Interest in Corporate Citizenship Non-academic research Fortune's ranking of “Most Admired” and “Least Admired” corporations Conference Board’s Ron Brown Award for Corporate Leadership CRO Magazine Awards Chamber of Commerce of the U.S. Corporate Citizenship Awards © 2012 South-Western, a part of Cengage Learning

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 © 2012 South-Western, a part of Cengage Learning

Stakeholder Bottom-Line Perspective The view that a firm has multiple bottom lines that benefit for corporate social performance. The impacts of benefits of social performance cannot be fully measured or appreciated by considering only the impact on the financial bottom line. © 2012 South-Western, a part of Cengage Learning

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 © 2012 South-Western, a part of Cengage Learning

“Triple Bottom Line” Perspective Key Spheres of Sustainability Economic Social Environmental Corporate sustainability is the goal. © 2012 South-Western, a part of Cengage Learning

Socially Responsible or Ethical Investing Emerged in the 1970s Over $2.7 trillion in socially responsible investments in the U.S. Social Screening A technique used to screen firms for socially-responsible investment purposes. © 2012 South-Western, a part of Cengage Learning

Reasons for the Upsurge in Socially Responsible Investing More reliable research on CSP Investment firms using social criteria have solid track record The socially conscious 1960s generation is making investment decisions © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Key Terms Business for Social Responsibility Corporate citizenship Corporate social performance Corporate social responsibility Corporate social responsiveness Corporate sustainability Economic responsibilities Ethical responsibilities Global corporate citizenship Paternalism Performance Philanthropic responsibilities Philanthropy Pyramid of CSR Socially responsible or ethical investing Stages of corporate citizenship Sustainability Triple Bottom Line © 2012 South-Western, a part of Cengage Learning