McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter Five Corporate Social Responsibility Part 2 The Nature and Management of Social Responsibility

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 5-2 Chapter 5 Learning Objectives CORPORATE SOCIAL RESPONSIBILITYDefine CORPORATE SOCIAL RESPONSIBILITY. Become familiar with the history of social responsibility from early times to the present. ULTRA VIRESUnderstand early court rulings on corporate philanthropy based on the ULTRA VIRES doctrine. Reflect on how the corporate social contract is different from nation to nation because of cultural, economic, governmental and other differences. Corporations and Codes. (more)

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 5-3 Chapter 5 Learning Objectives (continued) Appreciate how the Principle Elements of Social Responsibility have changed in comparative magnitudes over time. Understand, through the General Motors example, the comprehensive effects of large corporations on the stakeholders around them. Examine General Principles of Corporate Social Responsibility. Understand how a corporation’s social responsibilities are determined.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 5-4 Corporate Social Responsibility The duty of a corporation to create wealth by using means that protect, enhance or avoid harm to societal assets.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 5-5 Evolving Social Responsibility The classical view and the invisible hand Social responsibility in Colonial America Charity in the Nineteenth century Corporations and the doctrine of Ultra Vires Corporations in the early Twentieth century Corporations in the late Twentieth century: The Circles of Responsibilities

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 5-6 Business Roundtable Statement on Corporate Responsibility “Economic responsibility is by no means incompatible with other corporate responsibilities in society.... A corporation’s responsibilities include how the whole business is conducted every day. It must be a thoughtful institution which rises above the bottom line to consider the impact of its actions on all, from shareholders to the society at large. Its business activities must make social sense just as its social activities must make business sense.”

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 5-7 Historical Milestones in the Idea of Corporate Social Responsibility CORPORATE SOCIAL RESPONSIBILITY TRUSTEESHIP, BALANCE, SERVICE SOCIAL DARWINISM PHILANTHROPY CLASSICAL IDEOLOGY

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 5-8 The Social Contract of Business Across the World EUROPEAN NATIONS JAPAN LESS DEVELOPED COUNTRIES (LDCs) INDUSTRIALIZING NATIONS

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 5-9 Corporations and Codes The United Nations & the Global Compact Single Corporation Codes Industry Codes Codes Created by External Groups Guidelines for Multinational Enterprises

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Principal Elements of Social Responsibility and Their Evolving Magnitudes Figure 5.1 Voluntary % 0% Externally Mandated Market 2050

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Impact of GM’s Market Operations in 2000 Employed 386,000 people in 51 countries Made 8.5 million vehicles Franchised 14,000 dealers employing 500,000 Paid $2.4 billion in taxes worldwide Withheld $3.7 billion from U.S. employees for federal income and Social Security taxes Customers paid $6.6 billion in transaction taxes worldwide Retirees were paid 2.4 billion in benefits

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved General Principles of Social Responsibility Economic criteria are primary Obey the law Adverse social impacts must be corrected Responsibility varies by company Try to meet all legitimate stakeholder needs Corporate behavior must comply with norms in an underlying social contract

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved FINAL QUESTION: Are Corporate Social Responsibility and Corporate Profitability related? There have been 95 studies over the last 30 years. The results are not conclusive. Virtue has to be its own reward.