© 2005 by Nelson, a division of Thomson Canada Limited. 1 Corporate Citizenship: Social Responsibility, Responsiveness, and Performance Search the Web One of the leading organizations promoting corporate responsibility is Business for Social Responsibility :

© 2005 by Nelson, a division of Thomson Canada Limited. 2 Chapter Two Objectives Explain corporate social responsibility (CSR) Provide business examples of CSR Differentiate social responsibility and responsiveness Explain corporate social performance (CSP) Relate social performance to financial performance Describe the socially conscious investing movement

© 2005 by Nelson, a division of Thomson Canada Limited. 3 The CSR Concept Arguments For and Against Corporate Social Responsibility Corporate Social Responsiveness Corporate Social Performance (CSP) Nonacademic Research on CSP Social Performance and Financial Performance Socially Conscious or Ethical Investing Summary Chapter Two Outline

© 2005 by Nelson, a division of Thomson Canada Limited. 4 Introduction to Chapter Two Search the Web One of the leading corporations promoting corporate responsibility is Proctor and Gamble: nship_main.jhtml nship_main.jhtml This chapter’s focus is on corporate social demands, and responsibilities outside of making a profit and asks: Does business have a social responsibility? What is the extent and type of their responsibility?

© 2005 by Nelson, a division of Thomson Canada Limited. 5 Corporate Social Responsibility Definitions of CSR To understand the impact of a company’s actions on society Demands that management be responsible for their acts and consider these actions as part of the social system

© 2005 by Nelson, a division of Thomson Canada Limited. 6 Corporate Social Responsibility Corporate Citizenship Concepts Corporate social responsibility – emphasizes obligation and accountability Corporate social responsiveness – emphasizes action and responsibility Corporate social performance – emphasizes outcomes and results

© 2005 by Nelson, a division of Thomson Canada Limited. 7 Corporate Social Responsibility Business Criticism / Social Response Cycle Factors in the Societal Environment Criticism of Business Increased concern for Social Environment A Changing Social Contract Corporate Social Responsibility Social Responsiveness/Performance, Corporate Citizenship A More Satisfied Society Fewer Factors Leading to Business Criticism Increased Expectations Leading to More Criticism

© 2005 by Nelson, a division of Thomson Canada Limited. 8 Corporate Social Responsibility (CSR) Historical Perspective Economic model – the marketplace protected societal interest Legal model – laws protected societal interests

© 2005 by Nelson, a division of Thomson Canada Limited. 9 Corporate Social Responsibility (CSR) Historical Perspective Modified the economic model –Philanthropy –Community obligations –Paternalism Search the Web Milton Hershey was a leading example of an individual who employed philanthropy, community obligation and paternalism To learn more about Milton Hershey and the company, school and town he built, log on to:

© 2005 by Nelson, a division of Thomson Canada Limited. 10 Corporate Social Responsibility Historical Perspective The motivation was to keep government at arm’s length Search the Web Businesses are interested in CSR and one leading business organization that companies can join is Business for Social Responsibility. To learn more about BSR, visit their web site at::

© 2005 by Nelson, a division of Thomson Canada Limited. 11 Corporate Social Responsibility Historical Perspective From the 1950s to the present, the concept of CSR has gained considerable acceptance and additional components

© 2005 by Nelson, a division of Thomson Canada Limited. 12 Corporate Social Responsibility Evolving Viewpoints CSR considers the impact of the company’s actions on society (Bauer) CSR requires decision makers to take action to protect and improve the welfare of society as well as their own interests (Davis and Blomstrom)

© 2005 by Nelson, a division of Thomson Canada Limited. 13 Corporate Social Responsibility Evolving Viewpoints CSR mandates that the corporation has not only economic and legal obligations, but also social responsibilities (McGuire)

© 2005 by Nelson, a division of Thomson Canada Limited. 14 Corporate Social Responsibility Evolving Viewpoints CSR relates primarily to achieving outcomes from organizational decisions, which have beneficial rather than adverse effects upon corporate stakeholders. The normative correctness of the products of corporate action have been the main focus of CSR (Epstein)

© 2005 by Nelson, a division of Thomson Canada Limited. 15 Corporate Social Responsibility Carroll’s Four Part Definition CSR encompasses the economic, legal, ethical, and discretionary (philanthropic) expectations that society has of organizations at a given point in time

Corporate Social Responsibility (CSR) CARROLL’S FOUR PART DEFINITION Understanding the Four Components ResponsibilitySocietal Expectation Examples EconomicRequiredMaximize sales, minimize costs, increase profits LegalRequiredObey laws and regulations. EthicalExpectedDo what is right, fair and just. Discretionary (Philanthropic) Desired/ Expected Be a good corporate citizen. Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved

© 2005 by Nelson, a division of Thomson Canada Limited. 17 Pyramid of CSR Philanthropic Responsibilities Philanthropic Responsibilities Be a good corporate citizen. Ethical Responsibilities Ethical Responsibilities Be ethical. Legal Responsibilities Legal Responsibilities Obey the law. Economic Responsibilities Economic Responsibilities Be profitable.

© 2005 by Nelson, a division of Thomson Canada Limited. 18 Corporate Social Responsibility CSR in Equation Form Is the Sum of: Economic Responsibilities ( Make a profit ) +Legal Responsibilities ( Obey the law ) +Ethical Responsibilities ( Be ethical ) +Philanthropic Responsibilities ( Good corporate citizen )

© 2005 by Nelson, a division of Thomson Canada Limited. 19 Corporate Social Responsibility Stakeholder View Stakeholder Group Addressed and Affected CSR Component OwnersCon- sumers EmployeesCommunityOthers Economic14235 Legal32145 Ethical41235 Philanthropic34215

© 2005 by Nelson, a division of Thomson Canada Limited. 20 Corporate Social Responsibility Arguments Against Restricts the market goal of profit maximization Business is not equipped to handle social activities Limits the ability to compete in a global marketplace Dilutes the primary aim of business

© 2005 by Nelson, a division of Thomson Canada Limited. 21 Corporate Social Responsibility Arguments For Addresses social issues caused by business Protects business self-interest Limits future government intervention Addresses issues by using business resources and expertise Addresses issues by being proactive

© 2005 by Nelson, a division of Thomson Canada Limited. 22 Corporate Social Responsibility: Business Responsibilities in the 21 st Century Demonstrates a commitment to society’s values through involvement. Insulates society from the negative impacts of company operations. Share benefits with key stakeholders and shareholders. Demonstrates more profits by doing the right thing.

© 2005 by Nelson, a division of Thomson Canada Limited. 23 Corporate Social Responsiveness Evolving Viewpoints Ackerman and Bauer’s action view Sethi’s three stage schema Frederick’s CSR 1, CSR 2, and CSR 3 Epstein’s process view

© 2005 by Nelson, a division of Thomson Canada Limited. 24 Corporate Social Performance Extensions and Reformulations Wartick and Cochran’s extensions Wood’s reformulations Swanson’s Reorientation

© 2005 by Nelson, a division of Thomson Canada Limited. 25 Corporate Social Performance Nonacademic Research Fortune's most and least admired corporations Council on Corporate Conscience Awards Business Ethics Magazine Awards Walker’s Research on the impact of social responsibility

© 2005 by Nelson, a division of Thomson Canada Limited. 26 Corporate Citizenship Corporate citizenship embraces all the facets of corporate social responsibility, responsiveness, and performance

© 2005 by Nelson, a division of Thomson Canada Limited. 27 Social—and Financial— Performance Good Corporate Social Performance Perspective 1: CSP Drives the Relationship Good Corporate Financial Performance Good Corporate Reputation Good Corporate Financial Performance Perspective 2: CFP Drives the Relationship Good Corporate Social Performance Good Corporate Reputation Good Corporate Social Performance Perspective 3: Interactive Relationship Among CSP, CFP, and CR Good Corporate Financial Performance Good Corporate Reputation

© 2005 by Nelson, a division of Thomson Canada Limited. 28 Socially Conscious or Ethical Investing? Social screening is a technique used to screen firms for investment purposes

© 2005 by Nelson, a division of Thomson Canada Limited. 29 Selected Key Terms Business for Social Responsibility Community obligations Corporate Citizenship Corporate social responsibility and responsiveness Corporate social performance Economic, legal, ethical, and discretionary responsibilities Paternalism Philanthropy The CSR Pyramid Socially conscious investing