Corporate Social

Responsibility
 Do mangers have responsibility to their stockholders?

 Certainly, for the owners of the business have invested

their capital in the firm.

 Do managers also have a responsibility a social

responsibility, to the people who live where the firm
operate?
 Since community development often is closely related to
productivity, being socially supportive of the local
community seems to make good economic sense.
Corporate Social Responsibility (CSR)

 CSR means that a corporation should be held

accountable for any of its actions that affect people, their
communities, and their environment. It implies that harm
to people and society should be acknowledged and
corrected if at all possible.
 It may require a company to forgo some profits if its
social impact seriously hurt some of its stakeholder or if
its funds can be used to have a positive social impact.
 Business has many responsibilities: Economical, legal
and social.
Social Responsibility & Corporate Power

 The social responsibilities of business grow directly out

of two features of the modern corporation:
 The essential function it performs for a variety of
stakeholders .
 The immense influence it has on the lives of
stakeholders.
 The Corporate form of business is capable of
performing a great amount of good for society, such as
encouraging economic growth, expanding international
trade, and creating new technology.
 Business has become, in the last half century, the most
powerful institution on the planet. The dominant
institution in any society needs to take responsibility for
the whole society.
 The Iron law of responsibility say that in the long run,
those who do not use power in ways that society
considers responsible will tend to lost it.
 Charity Principle Stewardship Principle

Definition Business should give Business, acting as a public trustee,

voluntary aid to society’s should consider the interest of all who
needy person and groups are affected by business decision and
policies

Type of Corporate philanthropy Acknowledging business and social

activity Voluntary actions to interdependence
promote the social good Balancing the interest and needs of
many diverse groups in the society

Examples Corporate philanthropy Enlightened self interest

foundations Meeting legal requirements
Private initiatives to solve 
Stakeholder approach to corporate
social problems strategic planning
Social partnerships with
needy groups
How Corporate Social Responsibility Began

 The ideal of corporate social responsibility appeared

around the start of 20th century.
 Corporations at that time came under attack for being
too big, too powerful.
 Faced with this kind of social protest, a few farsighted
business executives advised corporations to use their
power and influence voluntarily for broad social purposes
rather than for profits alone.
 These business leaders believed that business had a
responsibility to society that went beyond or worked in
parallel with their efforts to make profits.
Charity Principle
 The idea that the wealthier member of society should be
charitable toward those less fortunate, is a very ancient
notion.

 Business leaders established pension plans, employee

stock ownership and life insurance programs,
unemployment funds, limitations on working hours, and
higher wages.

 They built houses, churches, schools and libraries,

provided medical and legal services, and gave to charity.
Stewardship Principle
 Stewardship Principle believe they have an obligation to see that
everyone particularly those in need or at risk – benefits from their
firms actions.

 Because they exercise this kind of crucial influence, they incur a

responsibility to use those resources in way that are good not just
for the stockholders alone but for society generally.

 In this way, they have become stewards, or trustee, for society. As

such, they are expected to act with a special degree of social
responsibility in making business decisions.
 Arguments for Corporate Arguments Against
Social Responsibility Corporate Social
Responsibility
Balances Corporate power Lower economic efficiency
with responsibility. and profit.
Discourages government Imposes unequal costs
regulation. among competitors.
Promote long-term profits for Imposes hidden costs
business. passed on to stakeholders.
Improves business value Require social skills
and reputation. business may lack.
Corrects social problems Places responsibility on
caused by business. business rather that
individuals.
Balancing Economic, Legal, and Social
Responsibilities
 Economic and Social Responsibilities

 Legal Requirement versus C.S.R.

 Stockholder Interests Versus Other Stakeholder interests

 Regulation tend to add economic costs and restrict flexibility in
decision making.
 Reputation refers to desirable or undesirable qualities associated
with an organization or its actors that may influence the
organization.
 Loyal consumers and helps to attract & retain better employee to
spur productivity and enhance profitability. It is reasonable to
imagine that employee who have the most to offer may be attracted
to work for a firm that contributes to the social good of the
community.
 Consumers generally like the idea of doing business with a good
company, one that is concerned for its consumer’s health, safety,
and well-being.
 Many people believe business has a responsibility to compensate society
for the harm it has sometimes caused.
 When a business pollutes the environment, the cleanup is the responsibility
of that firm.
 If a consumers are injured due to a product defect, the manufacturer is
responsible.
 Business does not voluntarily recognize its responsibility, the courts will
often step in to represent society and its interests.
 If a firm decides to keep an unproductive factory open because it wants to
avoid the negative social effect that a plant closing would have on the local
community and its workers, its overall financial performance may suffer.
 Stockholders may receive a lower return on their investment, making it more
difficult for the firm to acquire additional capital for future growth.
 Business managers and economists argue that the business of business is
business.
 Thereby depriving society of higher levels of economic production needed to
maintain everyone’s standard of living.
 Social responsibility is that it imposes unfair costs on more responsible
companies.
 A manufacturer wishes to be more socially responsible and decides to
install more safety equipment than the law requires to protect its employees.
 Firm penalizes itself and even runs the risks of going out of business,
especially in a highly competitive market.
 More costly pollution control standards, or stricter job safety rules, or more
stringent premarket testing of consumer drugs than other nations, it imposes
higher costs on business.
 Cost disadvantages means that competition cannot be equal.
 Foreign competitors who are the least socially responsible will actually be
rewarded because they will be able to capture a bigger share of the market.
 Many social proposals undertaken by business do not pay their own way in
an economic sense; therefore, someone must pay for them. Ultimately,
society pays all costs.
 Company chooses to install expensive pollution abatement equipment, the
air may be clearer, but ultimately someone will have to pay.
 Stockholders may receive lower dividends, employees may be paid less, or
consumers may be charged higher prices.
 By driving up business costs, these regulations often increases prices and
lower productivity, in addition to making the nation’s tax bill higher.
 Business people are not trained primarily to solve social problems.
 Business people in charge of solving social problems may lead to
unnecessarily expensive and poorly conceived approaches.
 Business analysts might be tempted to believe that methods that succeed in
normal business operations will also be applicable to complex social issues.
 Business people do not have the expertise or the popular required to
address what are essentially issued of public policy.
 Corporate responsibility is misguided, according to some critics, only
individual persons can be responsible for their actions.
 An entire company cannot be held liable for its actions, only those
individuals who are involved in promoting or carrying our a policy.
 Individual business can be responsible for their actions.
 An entire company cannot be held liable for its action, only those individuals
who are involved in promoting or carrying our a policy.
 Individuals business managers want to contribute their own personal money
to a social cause, let them do so; but it is wrong for them to contribute their
company’s fund in the name of corporate social responsibility.