MS-208

CORPORATE SOCIAL RESPONSIBILITY, HUMAN VALUES AND ETHICS

UNIT 1

Historical Perspective & Theories

of CSR
SOURCE: The PowerPoint presentation has been prepared from the following books:

1) Lawerence & Weber, Business and Society.

2) Blowfield & Murray, Corporate Responsibility.
 LEARNING OUTCOMES

S. No Learning Outcome PO Level Knowledge Level

1. Understanding Values and Ethics as Corporate Social PO1, PO2, PO3 K1, K2, K3
Responsibility drivers.

2. Able to understand the historical perspectives of Corporate PO1, PO2, PO3 K1, K2, K3
Social Responsibility.

3. Understanding and applying the theories of CSR and the related PO1, PO2, PO3 K1, K2, K3
regulatory issues.
 CSR: Introduction
• Corporate Social Responsibility (CSR) means that a corporation should
act in a way that enhances society and its inhabitants and be held
accountable for any of its actions that affect people, their
communities, and their environment.

• The concept is based in the root of the term responsibility, meaning

“to pledge back”, creating a commitment to give back to society and
the organization’s stakeholders.
EVOLUTION OF CSR
 Phases of CSR CSR Drivers CSR Policy Instruments

CSR1 Corporate Social Stewardship Executive conscience Philanthropic funding

Early in the 20th Corporate Philanthropy-acts of charity Company image/reputation Public Relations
Century but Managers as public Trustee-stewards
formally in the Balancing social pressures
1950s-1960s

CSR2 Corporate Social Responsiveness Social Unrest/protest Stakeholder strategy

1960s-1970s Social Impact Analysis Repeated corporate misbehaviour Regulatory compliance
Strategic priority for social response Public Policy/government regulation Social audits
Organizational redesign and training for Stakeholder pressures Think tank policy Public affairs function
responsiveness papers Governance reform
Stakeholder mapping and implementation Political lobbying

CSR3 Corporate/Business Ethics Religious/ethnic beliefs Mission/Vision/Values

1980s-1990s Foster an ethical organizational climate Technology-driven value changes Statements
Recognize common ethical principles Human committee/officer/audits CEO leadership ethics
Ethics training
Stakeholder negotiations

CSR4 Corporate/Global Citizenship Global economic trade/investment Intergovernmental compacts

1990s-present Stakeholder partnerships integrate financial, High-tech communication networks Global audits standards
social, and environmental performance Geopolitical shifts/competition NGO dialogue
Identify globalization impacts sustainability Ecological awareness/concern Sustainability audits/reports
of company and environment NGO pressures
Values & Ethics: CSR Drivers
• Ethics and values provide the code of conduct that governs the
behaviour of humans, and managers in case of business
organizations.

• Business ethics are said to be the application of ethics in different

business areas like marketing, finance, HR, technical, etc.

• Nowadays business ethics determine the fundamental purpose of

existence of a company in many organizations.
Caroll’s Social Responsibility Pyramid
 Components of CSR

• Economic Responsibilities

• Legal Responsibilities

• Ethical Responsibilities

• Philanthropic Responsibilities
Theories of CSR
1. Shareholder Value Theory (SVT)

• Classical approach to business.

• Corporate expenditure on social causes represents a violation of management

responsibility to shareholders to the extent that the expenditure does not lead to
higher shareholder wealth (Ruf et al., 1998).

• This theory is precise, makes sense in a mechanistic way and provides clear
guidelines for managerial behavior (Mudrack, 2007).

Source: Mohammed, S. (2020). Components, theories and the business case for corporate social
responsibility. International Journal of Business and Management Review, 8(2), 37-65.
2. Corporate Social Performance (CSP)

• Corporate Social Performance is understood as “the configuration in the

business organization of principles of social responsibility, processes of
response to social requirements, and policies, programs and tangible results
that reflect a company’s relations with society” (Wood, 1991b, p. 693).

• This theory maintains that business, apart from wealth creation, also has
responsibilities for social problems created by business, or by other causes,
beyond its economic and legal responsibilities. This includes ethical
requirements and discretionary or philanthropic actions carried out by
business in favor of society.

Source: Mohammed, S. (2020). Components, theories and the business case for corporate social
responsibility. International Journal of Business and Management Review, 8(2), 37-65.
3. The stakeholder theory of CSR

• Given by R. Edward Freeman in the year 1984.

• Stakeholder Theory is a view of capitalism that stresses the

interconnected relationships between a business and its customers,
suppliers, employees, investors, communities and others who have a
stake in the organization.

• The theory argues that a firm should create value for all stakeholders,
not just shareholders.

Source: http://stakeholdertheory.org/about/
4. Corporate Citizenship

• Given by Crane, et al. in the year 2008.

• A good corporate citizen actively promotes human welfare or goodwill.

• Global corporate citizen relates to philanthropic responsibilities; not mandated by

law.

Source: Mohammed, S. (2020). Components, theories and the business case for corporate social
responsibility. International Journal of Business and Management Review, 8(2), 37-65.
 Regulatory Issues
• There are two essential grounds for linking corporate social
responsibility to accountability, through: functional roles and impacts
of businesses.

• The first is “Business relations” and second is “impact relations”.

• Business relations relates to the dependency of business on social

resources like employees, customers, suppliers, etc. which are all part
of social environment.

• These are the first set of moral obligations that are associated with
the primary functions of business.
Source: Tamvada, M. Corporate social responsibility and accountability: a new theoretical foundation for regulating
CSR. Int J Corporate Soc Responsibility 5, 2 (2020). https://doi.org/10.1186/s40991-019-0045-8
• Impact relations relates to the potential impacts of the business
operations on society.

• The impact relation, as part of the firm’s moral responsibility,

necessitates their responsibility to refrain from causing such impacts
and unduly benefit.

• These impact related obligations are a second set of moral obligations

that are associated with the primary functions of business.

Source: Tamvada, M. Corporate social responsibility and accountability: a new theoretical foundation for regulating
CSR. Int J Corporate Soc Responsibility 5, 2 (2020). https://doi.org/10.1186/s40991-019-0045-8
 Conclusion
• Corporate social responsibility is a form of international private business self-
regulation which aims to contribute to societal goals of a philanthropic,
activist, or charitable nature by engaging in or supporting volunteering or
ethically-oriented practices.

• Four components of CSR are: economic; ethical; philanthropy; legal.

• There are four theories of Corporate Social Responsibility.

• There are two essential grounds for linking corporate social responsibility to
accountability, through: functional roles and impacts of businesses.
 Questions
• What do you understand by corporate social responsibility? What is the
need for corporates to be socially responsible?

• Explain the evolution of corporate social responsibility as a global concept.

• Enumerate the stakeholders of a business firm along with the responsibility

of the business towards them.

• Differentiate between shareholders theory and stakeholders theory of CSR.

• Why CSR needs to be regulated?