Grade 12

Activity Sheets
Quarter 4 Week 4
Name:
Grade/Section:
Date: _______________ Total Score:
Corporate Social Responsibility Models
Learning Competency:
Describe the different models and frameworks of social responsibility.
(ABM_ESR12-IVi-I-3.4) (Quarter 4 Week 4)

Content/Concept:

CSR Models
1. Ackerman Model (1976) - Even before the concept of modeling CSR
initiatives according to priorities or liabilities or even responsibilities came
into the picture. Ackerman proposed his model that was laid down in three
phases: The first phase was about the top managers recognizing a
social problem, the second phase was an intensive study of the
problem and finding out solutions by hiring experts and the last phase was
implementation of the proposed solutions. It is obvious that this model,
rather a plan, merely provides strategies to deal with problems having social
implications. Other parameters and constraints of CSR activities did not
come under the purview of this model.

The model has emphasized on the internal policy goals & their relation to
the CSR.

Four Stages involved in CSR by Ackerman:

a. Managers of the company get to know the most common social

problem & then express a willingness to take a particular project which
will solve some social problems.
b. Intensive study of the problem by hiring experts & getting their
suggestions to make it operational.
c. Managers take up the project actively & work hard.
d. Evaluating of the project by addressing the issues.

Figure 1. The Degree of Social Responsibility

2. Friedman Model (1962-1973) - Milton
Friedman argued vehemently against
spending shareholder's money for anything
that does not directly contribute
to increasing shareholder wealth. He took
the Kantian view that directors must look
after the interests of shareholders, which
seek wealth maximization. As
socially responsible activities, in the
opinion of Friedman, reduce wealth,
companies should not engage in any
charitable activities. Another
principle expressed by Milton Friedman is the
need to stay within the rules of the game,
explicitly avoiding deception and fraud. This principle is further clarified
when he writes:
Figure 2. Milton Friedman
“A corporate executive … has direct
responsibility to conduct business in accordance with[shareholder] desires …
[i.e.] to make as much money as possible while conforming to their basic
rules of the society, both those embodied in law and those embodied in
ethical custom.”
This quotation implies that Friedman does not proclaim that directors can act
in any way to maximize profit as they have to abide by the law and follow
ethical custom. He, however, excludes explicitly charitable activities as they
do not directly contribute to profit. A good corporation in Milton Friedman's
view is not one that undertakes activities only because they are ethically
sound, but because they are economically viable. One of Friedman's main
arguments for excluding Corporate Social Responsibility from business stems
from his views on the ethical spending:
• Your money on yourself—spent wisely;
• Your money on others—spend wisely but challenging;
• People's money on yourself—little incentive to economize;
• People's money on other people— the role of government and
Corporate Social Responsibility programs.

3. Carroll Model (1991) - Carroll's CSR Pyramid is a simple framework that

helps argue how and why organizations should meet their social
responsibilities.
The key features of Carroll's CSR Pyramid are that:
• CSR is built on the foundation of profit – profit must come first
• Then comes the need for a business to ensure it complies with all laws
& regulations
• Before a business considers its philanthropic options, it also needs to
meet its ethical duties
 Figure 3. The Carroll Model

Economic responsibilities
As a fundamental condition or requirement of existence, businesses have an
economic responsibility to the society that permitted them to be created and
sustained. At first, it may seem unusual to think about an economic expectation as
a social responsibility, but this is what it is because society expects, indeed
requires, business organizations to be able to sustain themselves and the only way
this is possible is by being profitable and able to incentivize owners or shareholders
to invest and have enough resources to continue in operation.

Virtually all economic systems of the world recognize the vital importance to
the societies of businesses making profits. While thinking about its’ economic
responsibilities, businesses employ many business concepts that are directed
towards financial effectiveness – attention to revenues, cost-effectiveness,
investments, marketing, strategies, operations, and a host of professional concepts
focused on augmenting the long-term financial success of the organization.

Legal responsibilities
Society has not only sanctioned businesses as economic entities, but it has also
established the minimal ground rules under which businesses are expected to
operate and function. Businesses are expected and required to comply with these
laws and regulations as a condition of operating. It is not an accident that
compliance officers now occupy an important and high level position in company
organization charts. While meeting these legal responsibilities, important
expectations of business include their:

• Performing in a manner consistent with expectations of government and law.

• Complying with various federal, state, and local regulations.
• Conducting themselves as law-abiding corporate citizens.
• Fulfilling all their legal obligations to societal stakeholders.
• Providing goods and services that at least meet minimal legal requirements.

Ethical responsibilities
The normative expectations of most societies hold that laws are essential but not
sufficient. In addition to what is required by laws and regulations, society expects
businesses to operate and conduct their affairs in an ethical fashion. Legal
expectations certainly are based on ethical premises. But, ethical expectations
carry these further. In essence, then, both contain a strong ethical dimension or
character and the difference hinges upon the mandate society has given business
through legal codification. While meeting these ethical responsibilities, important
expectations of business include their:

• Performing in a manner consistent with expectations of societal mores and

ethical norms.
 • Recognizing and respecting new or evolving ethical/moral norms adopted by
society.
• Preventing ethical norms from being compromised in order to achieve
business goals.
• Being good corporate citizens by doing what is expected morally or ethically
• Recognizing that business integrity and ethical behavior go beyond mere
compliance with laws and regulations (Carroll 1991).

Philanthropic responsibilities
Corporate philanthropy includes all forms of business giving. Corporate
philanthropy embraces business’s voluntary or discretionary activities.
Philanthropy or business giving may not be a responsibility in a literal sense, but it
is normally expected by businesses today and is a part of the everyday
expectations of the public. Having said that, some businesses do give partially out
of an ethical motivation. That is, they want to do what is right for society. The public
does have a sense that businesses will “give back,” and this constitutes the
“expectation” aspect of the responsibility.

In summary, the four part CSR definition forms a conceptual framework that
includes the economic, legal, ethical, and philanthropic or discretionary
expectations that society places on businesses at a given point in time. And, in
terms of understanding each type of responsibility, it could be said that the
economic responsibility is “required” of business by society; the legal responsibility
also is “required” of business by society; the ethical responsibility is “expected” of
business by society; and the philanthropic responsibility is “expected/desired” of
business by society (Carroll 1979, 1991). Also, as time passes what exactly each of
these four categories means may change or evolve as well.

4. Environmental Integrity and Community Health Model - Redman’s

model called “Environmental integrity and community health model” is very
famous amount US corporations. It focuses more on environmental integrity
and human health. Whereas Ackerman Model 1967, focuses more on internal
policy goals and their relation to these responsibilities. The highlights of this
model are:
• Corporate contribution towards environmental integrity & human health,
there will be greater expansion opportunities.
• Healthy people can work more & earn more.
• CSR is beneficial for the corporate sector.
• CSR in a particular form is welcome.

5. Corporate Citizenship Model - Companies go through different stages

during the process of developing corporate citizenship. Companies rise to the
higher stages of corporate citizenship based on their capacity and credibility
when supporting community activities, a strong understanding of community
needs, and their dedication to incorporate citizenship within the culture and
structure of their company.

The Development of Corporate Citizenship

The five stages of corporate citizenship are defined as:

• Elementary
• Engaged
• Innovative
 • Integrated
• Transforming

In the elementary stage, a company’s citizenship activities are basic and

undefined because there are scant corporate awareness and little to no senior
management involvement. Small businesses, in particular, tend to linger in this
stage. They are able to comply with the standard health, safety, and environmental
laws, but they do not have the time nor the resources to fully develop greater
community involvement.

In the engagement stage, companies will often develop policies that promote
the involvement of employees and managers in activities that exceed rudimentary
compliance to basic laws. Citizenship policies become more comprehensive in the
innovative stage, with increased meetings and consultations with shareholders and
through participation in forums and other outlets that promote innovative corporate
citizenship policies.

In the integrated stage, citizenship activities are formalized and blend in

fluidly with the company’s regular operations. Performance in community activities
is monitored, and these activities are driven into the lines of business. Once
companies reach the transforming stage, they understand that corporate citizenship
plays a strategic part in fueling sales growth and expansion to new markets.
Economic and social involvement is a regular part of a company’s daily operations
in this stage.

Figure 4. The five stages of Corporate Citizenship

6. Stockholders and Stakeholders Model

Shareholder Theory - The shareholder theory was originally proposed by
Milton Friedman and it states that the sole responsibility of business is to increase
profits. It is based on the premise that management is hired as the agent of the
shareholders to run the company for their benefit, and therefore they are legally
and morally obligated to serve their interests. The only qualification on the rule to
make as much money as possible is “conformity to the basic rules of the society,
both those embodied in law and those embodied in ethical custom.”

The shareholder theory is now seen as the historic way of doing business with
companies realizing that there are disadvantages to concentrating solely on the
interests of shareholders. A focus on short term strategy and greater risk taking are
just two of the inherent dangers involved.
 Stakeholder Theory - Stakeholder theory, on the other hand, states that a
company owes a responsibility to a wider group of stakeholders, other than just
shareholders. A stakeholder is defined as any person/group which can affect/be
affected by the actions of a business. It includes employees, customers, suppliers,
creditors and even the wider community and competitors.

Edward Freeman, the original proposer of the stakeholder theory, recognized it

as an important element of Corporate Social Responsibility (CSR), a concept which
recognizes the responsibilities of corporations in the world today, whether they be
economic, legal, ethical, or even philanthropic. Nowadays, some of the world’s
largest corporations claim to have CSR at the center of their corporate strategy.
Whilst there are many genuine cases of companies with a “conscience”, many
others exploit CSR as a good means of PR to improve their image and reputation
but ultimately fail to put their words into action.

Figure 5. The Stockholders vs. Stakeholders Model

Assessment:
At this point of the module, a case study will be presented and you will need
to answer the question how are the different CSR Models affects the Company
presented in the long-run of their business. The scoring rubric on the next page will
be used in assessing your outputs.

What you need:

• Clean sheet of paper

• Pen/Pencil

What you have to do:

Read and analyze the Case Study presented on this part and answer it concisely
and explain your answers with good reasoning.

Case Study: Kingfisher is Europe's largest home improvement retailer, with

1,300 stores and 9,000 employees in 16 countries. Its operating companies include
BCC (The Netherlands), Promarkt (Germany), Vanden Borre (Belgium), Darty
(France), Comet (UK), B&Q (UK), Koçtas (Turkey) and Réno-Dépôt (Canada).

In 2001 the group achieved a turnover of £12.1 billion ($17.5 billion) and a
pre-tax profit of £606 million ($878 million).
 At the end of 2001, Kingfisher unveiled a group-wide initiative to monitor,
improve and report on corporate social responsibility issues at the level of individual
companies.

The group has identified six ways in which it believes CSR can help its
business:

• Being ready for the future: identifying and managing issues which
have the potential to affect the bottom line, either positively or
negatively;
• Respect for people: making Kingfisher companies attractive places to
work, and thereby retaining skilled staff;
• Stores that communities welcome: maximizing customer loyalty and
improving morale among the workforce;
• Product innovation: identifying 'green' products that consumers will
want to buy;
• Saving costs: recognizing that many CSR initiatives are largely good
housekeeping, such as reducing waste and retaining staff more
effectively;
• Brand: using innovation and excellence within individual operating
companies to enhance the reputation of the group as a whole.

Kingfisher has devised a 'ladder' model to simplify the assessment of CSR

within operating companies. The ladder has four rungs. The bottom rung is
'Managing the risk', and the next rung up is 'Managing the issues', followed by
'Creating an opportunity' and finally 'Leadership' at the top. Company managers will
have to decide where their businesses currently stand on each of 12 separate
'ladders', each representing a key issue such as waste, climate change or
community relations (see below). They are also asked to identify where they would
like eventually to be on the ladder, and to propose a realistic timescale.

These action plans are due for completion by the end of April 2002, and a
group-wide CSR report will be published in the spring of 2003.

The CSR initiative will be co-ordinated by a nine-person 'social responsibility

committee', which now includes include six members of the main board of directors
as well as Kingfisher's head of social responsibility, Dr Alan Knight. A' social
responsibility team', working closely with the committee, will provide coaching and
advice to managers within individual operating companies, and will also be
responsible for reporting progress both internally and to the outside world.

One of the challenges for Kingfisher is to develop a strategy that is flexible

enough to accommodate the differences between individual businesses yet strong
enough to reflect a common vision.

Kingfisher's definition of social responsibility entails 'making sure that in

helping our customers improve their quality of life we do not destroy someone
else's'. It adds: 'That might mean improving the working conditions in the factories
that make the products we sell, using renewable energy sources, or making sure
our equal opportunities policies are robust.'

Group chief executive Sir Geoff Mulcahy says several of Kingfisher's

subsidiaries have been active in CSR for some years already, particularly in terms of
environmental stewardship. 'We believe it is now time to co-ordinate these activities
more rigorously, at group level.'

Questions:
 1. What do you suggest of the Kingfisher’s way to develop on how to handle
their people using the Stakeholders and Shareholders Models?
2. Identify three key problems of Kingfisher that can affect their reputation and
performance in the future and make a suggestion on how to prevent or
eliminate those problems for their future.
3. Using the Environmental Integrity and Community Health Model, what is the
connection of Climate Change to the changes on the appliances used on
households?

Rubrics in grading the Case Study Analysis:

Skill Description Needs Meets Exceeds Comments
Area Improvement(3p Expectatio Expectatio /
t n n s (5pts) Score
s) s (4 pts) (15/15)
Ethical Students 1. Includes facts 1. Excludes 1. No ethical
Awarene identify up to that are ethically for the most irrelevance
ss five ethically irrelevant or only part
relevant facts marginally ethically
The ability that together relevant. irrelevant
to provide a facts
uncover comprehensiv
the 2. Leaves out facts 2. Includes 2. Includes
e summary of that are ethically most of the all the
ethical
issues the ethical relevant. ethically ethically
that are issues raised relevant relevant
embedde in the case facts facts
d 3. Ethically 3. List 3. List is
in Relevant fact list presented is carefully
complex, needs refining relatively refined
concrete (unclear, refined
situations unorganized)

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