Corporate Social Responsibility A corporation should be held accountable for any of its actions that affect people, their communities, and their environment. Requires companies to balance the benefits to be gained against the costs of achieving those benefits. Iron Law of Responsibility: In the long run, those who do not use power in ways society considers responsible will lose it.

Foundation principles of corporate social responsibility Figure 3.1 Foundation principles of corporate social responsibility Charity Principle Stewardship Principle Definition Business should give voluntary aid to society’s needy persons and groups Business, acting as a public trustee, should consider the interests of all who are affected by business decisions and policies Type of Activity --Corporate philanthropy --Voluntary actions to promote the social good --Acknowledging business and society interdependence --Balancing the interests and needs of many diverse groups in society Examples --Corporate philanthropic foundations --Private initiatives to solve social problems --Social partnerships with needy groups --Enlightened self-interest --Meeting legal requirements --Stakeholder approach to corporate strategic planning

Arguments for Corporate Social Arguments against Corporate Social Figure 3.3 The pros and cons of corporate social responsibility Arguments for Corporate Social Responsibility Balances corporate power with responsibility. Discourages government regulation. Promotes long-term profits for business. Improves business value and reputation. Corrects social problems caused by business. Arguments against Corporate Social Responsibility Lowers economic efficiency and profit. Imposes unequal costs among competitors. Imposes hidden costs passed on to stakeholders. Requires social skills business may lack. Places responsibility on business rather than individuals. .

“Should Companies Care?” Colvin asserts companies today are doing more of what corporate-citizenship activists want than they have ever done before, because they’re listening to markets Product-market decisions by consumers Labor-market decisions by employees Q: To what extent do consumers or employees make decisions based on corporate social responsibility? Source: Fortune, 6/11/01

Two views of corporate social responsibility The shareholder view The only social responsibility of business is to create shareholder wealth legally and with integrity. Corporate management cannot decide what is in the social interest. The costs of social responsibility which do not increase the value of stock, will be passed on to consumers by way of higher prices, or to employees as lower wages, or to shareholders as lower returns. The multiple stakeholders view All customers and employees are treated with dignity. Investor trust must be honored. Relationships with suppliers must be based on mutual respect. Belief in fair economic competition. Business can contribute to social reform and honor human rights.

Evolving Phases of Corporate Social Responsibility Figure 3.5