Managing Corporate Social Responsibility Globally 15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

LEARNING OUTCOMES 2 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1Articulate a stakeholder view of the firm 2Apply the institution-based and resource- based views to analyze corporate social responsibility 3Identify three ways you can manage corporate social responsibility

3 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Corporate Social Responsibility (CSR) Consideration of, and response to, issues beyond the economic, technical, and legal requirements of the firm to gain social and traditional economic benefits Stakeholder: Any group or individual who can affect or is affected by a firm’s actions

4 Exhibit GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Stakeholder View of the Firm

5 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Global Sustainability Ability to meet the needs of the present without compromising the ability of future generations to meet their needs Known as sustainable social and natural environment and sustainable capitalism Driven by: The need for solutions to population explosion, poverty, and environmental damage The influence of NGOs and civil society stakeholders

6 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Stakeholder Groups Primary stakeholder groups: Constituent on which a firm relies for its continuous survival and prosperity Shareholders, managers, employees, suppliers, customers Secondary stakeholder groups: Group or individual who can indirectly affect or are indirectly affected by a firm’s actions Environmental groups and labor practice groups

7 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Triple Bottom Line Economic, social, and environmental performances that simultaneously satisfy the demands of all stakeholder groups

8 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Why do Firms Exist? Free market movement Social responsibility of business is to increase profits Attempts to attain social goals will reduce focus on profit maximization Firms may become socialist organizations

9 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Why do Firms Exist? (continued) CSR movement In practice, firms and managers might choose self-interest over public interest All stakeholders have equal right to a fair deal

10 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The CSR Debate CSR school of thought has become popular Two driving forces Despite increase in free markets worldwide, differences between haves and have-nots has widened Scandals and disasters drive CSR movement

11 Exhibit GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Institutions, Resources, and Corporate Social Responsibility

12 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Institutions and Corporate Social Responsibility Institution-based view Focuses on CSR movement and strategic responses of firms Strategic response framework Reactive strategy: Only responds to CSR causes when required by disasters and outcries Defensive strategy: Focuses on regulatory compliance but with little actual commitment to CSR by top management

13 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Institutions and Corporate Social Responsibility (continued 1) Accommodative strategy: Some support from top managers, who may increasingly view CSR as a worthwhile endeavor Code of conduct Set of written policies and standards stating proper practices for a firm to follow Negative view - Superficial interest in CSR Instrumental view - CSR activities are profitable

14 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Institutions and Corporate Social Responsibility (continued 2) Positive view - Some firms are self-motivated to take on CSR activities Proactive strategy: Anticipates CSR and endeavors to do more than required According to CSR, best firms follow this strategy

15 Exhibit GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part The US Chemical Industry Responds to Environmental Pressures

16 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Resources and Corporate Social Responsibility Value Social issue participation: Firms’ participation in social causes not directly related to the management of primary stakeholders Research shows that these activities can reduce shareholder value

17 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Resources and Corporate Social Responsibility (continued 1) Rarity CSR-related resources are not always rare Valuable resources are not advantageous if competitors have them too Imitability Valuable and rare resources which are difficult to imitate give the firm competitive advantage In some firms, CSR activities have idiosyncratic skills, attitudes, and interpretations

18 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Resources and Corporate Social Responsibility (continued 2) Organization Complementary assets like formal management control systems and informal relationships between managers and employees help a firm utilize its CSR potential

19 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. CSR-Economic Performance Puzzle No conclusive evidence on a direct and positive link between CSR and economic performance Resource-based view Differences in various firms show that not every firm’s economic performance will benefit from CSR

20 Exhibit GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15.4Implications for Action

21 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Debate: Race to the Bottom Versus Race to the Top Race to the Bottom Shift pollution- intensive production from developed to developing countries Race to the Top MNEs follow higher environmental standards in developing countries

KEY TERMS 22 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Triple bottom line Reactive strategy Defensive strategy Accommodative strategy Proactive strategy Social issue participation Corporate social responsibility (CSR) Stakeholder Global sustainability Primary stakeholder group Secondary stakeholder group

SUMMARY 23 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Stakeholders are groups or individuals who can affect or are affected by a firm’s actions Institutions that govern CSR Formal institutions in home/host countries Informal norms, value, and cultures CSR-related resources can include: Tangible technologies and processes Intangible skills and attitudes

SUMMARY 24 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. To successfully manage CSR, managers should: Understand the rules and prepare for potential changes Pick CSR battles carefully Include CSR as part of the core activities and processes of the firm

25 GLOBAL3 | CH15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.