Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Chapter 2

Outline of Topics The Corporate Social Responsibility Concept Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Outline of Topics 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 The Corporate Social Responsibility Concept Historical Perspective on CSR Corporate Social Responsibility The Four-Part Definition of CSR Arguments Against and For Corporate Social Responsibility Arguments Against CSR Arguments for CSR Corporate Social Responsiveness Ackerman and Bauer’s Action-Orients View Sethi’s Three-Stage Schema Frederick’s CSR1 and CSR2 Epstein’s Process View Other Views Measurable Dimensions of Responsiveness Corporate Social Performance Carroll’s Corporate Social Performance Model Usefulness of the Model to Academics and Managers Wartick and Cochran’s Extensions Wood’s Reformulated Model Nonacademic Research on Corporate Social Performance Social Performance and Financial Performance Socially Conscious or Ethical Investing Summary

What are Business’s Responsibilities? Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance What are Business’s Responsibilities? Business allegations… Little concern for the consumer Cares nothing about social problems Has no concept of acceptable ethical behavior Indifferent to the problems of minorities and the environment What responsibility does business have to society?

Corporate Social Responsibility (CSR) Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Corporate Social Responsibility (CSR) Corporate Social Responsibility CSR is a key concept Seriously considering the impact of a company’s actions on society.

Corporate Citizenship Concepts Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Corporate Citizenship Concepts Corporate Social… Responsibility Performance Responsiveness Emphasizes… Obligation, accountability outcomes, results action, activity

Historical Perspective on CSR Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Historical Perspective on CSR Economic Model Legal Model Social Model Responsible for meeting only economic obligations Responsible for meeting only economic and legal obligations Responsibility goes beyond economic and legal

Modification of the Economic Model Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Modification of the Economic Model Philanthropy Community obligations Paternalism Motivation: Keep government at arm’s length

Acceptance and Broadening of Meaning Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Acceptance and Broadening of Meaning From the 1950’s to the present, the concept of CSR has gained considerable acceptance and 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

Carroll’s Four-Part Definition of CSR Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Carroll’s 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.

Carroll’s Four-Part Definition of CSR Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Carroll’s Four-Part Definition 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.

Legal Responsibilities Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Legal Responsibilities Why laws are not sufficient: Law cannot address all the topics or issues that business may face Law often lags behind more recent concepts of what is considered appropriate behavior Laws are made by lawmakers and may reflect the personal interests/motivation of legislators rather than appropriate ethical justifications

Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance The Pyramid of CSR Philanthropic Responsibilities Give back to society. 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.

+ Total Corporate CSR = The CSR Equation Economic Responsibilities Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance The CSR Equation Economic Responsibilities Legal Responsibilities Ethical Responsibilities Philanthropic Responsibilities + = Total Corporate CSR

Arguments For CSR Enlightened self-interest Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Arguments For CSR Enlightened self-interest Wards off future government intervention Proactive better than reactive The public supports CSR

Arguments Against CSR These arguments do not hold favor any longer Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Arguments Against CSR Restricts the classic economic goal of profit maximization Business is not equipped to handle social activities Limits the ability to compete in a global marketplace Dilutes the primary purpose of business These arguments do not hold favor any longer

Corporate Responsibility in the 21st Century Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Corporate Responsibility in the 21st Century Millenium Poll on CSR (1999). Conclusion is that society expects businesses to: Demonstrate a commitment to society’s values and contribute to society’s social, environmental, and economic goals through action. Insulate society from the negative impacts of company operations and its products and services. Share benefits of company activities with key stakeholders as well as with shareholders. Demonstrate that the company can make more money by doing the right thing.

Corporate Social Responsiveness Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Corporate Social Responsiveness Responsibility Implies more of a state or condition of having assumed an obligation Responsiveness Connotes a dynamic, action-oriented condition

Corporate Social Performance Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Corporate Social Performance Areas of Performance

Corporate Social Performance: What Gets Measured Gets Managed Measuring and reporting key to communicating with stakeholders Measurement (goals and measures) Reporting: Global Reporting Initiative (GRI) Example: Intel

Corporate Citizenship Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Corporate Citizenship Corporate Citizenship… Embraces all the facets of corporate social responsibility, responsiveness, and performance. Widely accepted concept

Benefits of Corporate Citizenship Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Benefits of Corporate Citizenship Improved employee relations Improved customer relationships Improved business performance Enhanced marketing

Stages of Corporate Citizenship Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Stages of Corporate Citizenship

Business’s Interest in Corporate Citizenship Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Business’s Interest in Corporate Citizenship Business Recognition Fortune's ranking of “Most Admired” and “Least Admired” corporations Conference Board’s Ron Brown Award for Corporate Leadership Corporate Responsibility Officer Magazine Awards

Social and Financial Performance Relationship Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance 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

“Multiple Bottom Line” Perspective Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance “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

“Triple Bottom Line” Perspective Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance “Triple Bottom Line” Perspective Key Spheres of Sustainability Economic (easy to measure) Environmental (harder to measure) Social (hardest to measure)

Socially Responsible or Ethical Investing A technique used to screen firms for socially-responsible investment purposes Chapter 2 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Socially Responsible or Ethical Investing Social Screening Shareholder resolutions force companies to take action Example: CERES Shareholder Advocacy Investments made in a community with the purpose of enhancing its social/environmental condition Community Investing