Global Corporate Citizenship Chapter 4 Global Corporate Citizenship McGraw-Hill/Irwin Copyright © 2008 The McGraw-Hill Companies, All Rights Reserved.

Ch. 4: Key Learning Objectives Defining corporate citizenship and global corporate citizenship Contrasting the structures and processes businesses use to manage their social responsibilities Evaluating how the multiple dimensions of corporate citizenship progress through a series of stages Assessing how corporate citizenship differs among various countries and regions of the world Understanding how a business or social groups can audit corporate citizenship activities and report their findings to stakeholders Recognizing the leading-edge corporate citizenship companies and how they carry out their corporate citizenship mission 4 - 2

Introduction to Corporate Citizenship Refers to businesses putting corporate social responsibility into practice Involves Proactively building stakeholder partnerships Discovering business opportunities in serving society, and Transforming a concern for financial performance into a vision of integrated financial and social performance

Davenport Principles of Corporate Citizenship One researcher's answer to core elements of corporate citizenship Total of 20 Principles with 3 performance categories: ethical business behavior, stakeholder commitment, and environmental commitment For stakeholder commitment -- principles define overall standards and specific standards for 5 stakeholder groups Overarching 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

Davenport Principles of Corporate Citizenship Exhibit 4.Aa Ethical Business Behavior 1) 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 Commitment 4) 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.

Davenport Principles of Corporate Citizenship Exhibit 4.Ab Community 7. Fosters a reciprocal relationship between the corporation and community. 8. Invests in the communities in which corporation operates. Consumers 9. Respects the rights of consumers. 10. Offers quality products and services. 11. Provides information that is truthful and useful.

Davenport Principles of Corporate Citizenship Exhibit 4.Ac Employees 12. 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.

Davenport Principles of Corporate Citizenship Exhibit 4.Ad Investors 17. Strives for a competitive return on investment. Suppliers 18. Engages in fair trading practices with suppliers. Environmental Commitment 19. Demonstrates a commitment to the environment. 20. Demonstrates a commitment to sustainable development.

Citizenship Profile Research 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 advantage Particularly true of global firms where citizenship activities overcome nationalistic barriers and build local advantage Important for global firms to choose a Citizenship Profile which matches the local setting Public expectations vary on factors such as environmental risk, philanthropy and worker rights Companies that choose the right configuration of citizenship activities to match public expectations will reap strategic advantages

Business Commitment to Citizenship – Examples of Corporate Citizenship Statements Exhibit 4.Ba ExxonMobil – “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)

Business Commitment to Citizenship – Examples of Corporate Citizenship Statements Exhibit 4.Bb Nokia – “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)

Global Corporate Citizenship Public expectation that as companies expand internationally they will behave in ways that enhance benefits and minimize risks for all stakeholders Companies must have an acceptable level of corporate citizenship to earn and maintain a “license to operate” in the countries where do business Definition of Global Corporate Citizenship Process 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.

Global Corporate Citizenship Concept is consistent with themes throughout this text Managers and companies have responsibilities to all their stakeholders Corporate citizenship (CC) involves more than just meeting legal requirements CC requires that a company focus on, and respond to, stakeholder expectations and undertake those voluntary acts that are consistent with its values and business mission CC involves both what the corporation does and the processes and structures through which it engages stakeholders and makes decisions

Management Structures for Corporate Citizenship 2004 Business for Social Responsibility study found no single universally accepted design for CSR (corporate social responsibility) management systems Could be assigned to committee of the board, senior executive committee, or single executive/group of executives Other management structure research has found Some companies have broadened scope of Public Affairs Offices to include corporate citizenship (see Ch. 2) Emerging trend is separate department

Stages of Corporate Citizenship Is a developmental change process, involving new attitudes, routines, policies, programs and relationships Model (shown on next slide) by Mirvis and Googins shows sequence of 5 stages based on Citizenship content Strategic intent Leadership Structure Issues management Stakeholder relationships Transparency

Stages of Corporate Citizenship Figure 4.1

Transforming Stage of Corporate Citizenship Is highest stage, Stage 5 Qualities of companies at this stage Visionary leaders motivated by higher sense of corporate purpose Partner extensively across organizational, sector, and national borders to address social problems

Limits to Corporate Citizenship Despite growth in many companies and countries, are some critics of corporate citizenship activities An 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.

Corporate Citizenship in Comparative Perspective How businesses interpret and act on their citizenship varies across the glob Trends from current studies Companies 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 policies Comparative study across the Americas showed “huge gap” between U.S. and Canada and Latin America and Caribbean Governments in Europe play a much more important role in promoting CSR than in the U.S.

Corporate Social Performance Audit Is a systematic evaluation of an organization’s social, ethical, and environmental performance Demand for social auditing has grown in Europe and U.S. In some European countries is required by law Can take 2 forms Performance measured against a company’s own mission statement or policies Performance measured against a set of established standards Like the Davenport Principles presented earlier, or the global standards presented on the following slides

Global Social Audit Standards Figure 4.2

Trends in Corporate Social Reporting Figure 4.3

Additional Social Audit Approaches Balanced Scorecard Set of key financial and non-financial indicators Triple Bottom Line Financial, social and environmental results taken together as an integrated whole Transparency Growing demand by stakeholders for companies to report publicly the results of their financial, social and environmental performance audits

Corporate Citizenship Awards 100 Best Corporate Citizens annual ranking by Business Ethics Magazine Joint initiative with scholars and KLD Research and Analytics Companies that have consistently been on the list since its inception in 2000 shown on next slide

The Best Corporate Citizens for the Past 7 Years Exhibit 4.F These organizations have made Business Ethics’ 100 Best Corporate Citizens list since the list began in 2000: Brady Corporation Cisco Systems Cummins Engine Ecolab Graco Herman Miller Hewlett-Packard Intel Modine Manufacturing Pitney Bowes Procter & Gamble St. Paul Travelers Cos. Southwest Airlines Starbucks Timberland Whirlpool

Corporate Citizenship Awards Corporate reputation Joint initiative between Reputation Institute and Harris Interactive Johnson & Johnson top rated 7 years in a row Technology companies were rated top industry Fortune magazine annual “Most Admired” list Includes a peer rating of social responsibility Among companies recognized: UPS, Public Super Markets, Starbucks, and Herman Miller