CSR

CORPORATE SOCIAL
RESPONSIBILITY
 CORPORATE SOCIAL
RESPONSIBILITY
• Understand Corporate Social Responsibility
• Discuss the importance of CSR
• Distinguish the different perspectives of CSR
• Understand the Phases of CSR
• Know the roles of the Leaders of the organization
• Understand Good Governance
 CONCEPT OF CORPORATE SOCIAL
RESPONSIBILITY
• Is a moral obligation of each and every individual, institution,
business and organization since they all compose the society.
• The actions of an organization that are targeted toward
achieving a social benefit over and above maximizing profits
for its shareholders and meeting all its legal obligations.
 DEFINITIONS OF CORPORATE SOCIAL
RESPONSIBILITY ACCORDING TO:
The obligation of decision makers to take actions which protect
and improve the welfare of the society as a whole along with
their own interests.
Davis and Blomstrom

The response of the corporation to issues beyond its narrow

economic, technical, and legal requirements.
Professor Keith Davis
 DEFINITIONS OF CORPORATE SOCIAL
RESPONSIBILITY ACCORDING TO:
Corporate social responsibility means seriously considering the impact of
the company’s actions on society.
Bauer
The idea of social responsibility supposes that the corporation has not
only economic and legal obligations, but also certain responsibilities to
society which extend beyond these obligations.
McGuire
 DEFINITIONS OF CORPORATE SOCIAL
RESPONSIBILITY ACCORDING TO:
The first responsibility to society is to operate at profit... Business is
the wealth-creating organ of society
Peter Drucker
“It takes 20 years to build a reputation, but only 5 minutes to destroy
it.”
Warren Buffet
Great businessman and philanthropist
 THREE ETHICAL TYPES OF CSR
• Altruistic CSR
 Takes a philanthropic approach by underwriting specific initiatives to
give back to the company’s local community or designated national or
international programs.
Example:
• In 1980, Richard Branson’s Virgin Group launched Mates Condoms in
response to growing concern over the spread of HIV/AIDS.
• Shell Oil Corporation responded to the devastation of the tsunami
disaster in Asia in December 2004 with donation of fuel for
transportation rescue and tank water for relief aid, in addition to
financial commitment.
 THREE ETHICAL TYPES OF CSR
• Strategic CSR
 runs the greatest risk of being perceived as self-serving behavior on the
part of the organization.
Philanthropic activities are targeted toward programs that will generate
the most positive publicity or goodwill for the organization.
Example: Ford spent millions on an ad campaign to raise awareness of the
need for booster seats for children over 40 pounds under and under 4’9”
and gave away almost a million seats as part of the campaign.
 THREE ETHICAL TYPES OF CSR
• Ethical CSR
 represents the purest or most legitimate type of CSR in which
organizations pursue a clearly defined sense of social conscience in
managing their financial responsibilities to shareholder, their local
community and society as a whole, and their ethical responsibilities to “
do the right thing” for all their stakeholders
 CORPORATE SOCIAL
RESPONSIBILITY

Corporate Citizenship

CSR

Corporate Conscience
 CONCEPT OF CORPORATE
• Corporate Citizenship SOCIAL RESPONSIBILITY
-An alternative term for corporate social responsibility, implying that the
organization is a responsible citizen in meeting all its obligations.
• Corporate Conscience
-An alternative term for corporate social responsibility, implying that the
organization is run with an awareness of its obligations to society.
Instrumental Approach- The perspective that the only obligations of a
corporation is to maximize profits for its shareholders in providing
goods and services that meet the needs of its customers.
 MANAGEMENT WITHOUT
CONSCIENCE
• In the corporate world, individuals have the right to make money with
their investment (provided it is done honestly) and it recognizes the clear
legality of the employment contract.
• This position does not prevent the organization from demonstrating of
social conscience- donating to local charities- but it restricts such
charitable acts to the discretion of the owner, rather than recognizing any
formal obligation on the part of the corporation.
 MANAGEMENT WITHOUT
CONSCIENCE
• This very simplistic model focuses on the internal world of the
corporation itself and assumes that there are no external consequences to
the actions of the corporation and its managers.
• Once they acknowledge that there is a world outside that is impacted by
the actions of the corporation, social contract approach can be
considered to corporate management.
 MANAGEMENT WITHOUT
CONSCIENCE
• Social Contract Approach- the perspective that corporation has an
obligation to society over and above the expectations of its shareholder.

• The modern social contract approach argues that since the corporation
depends on society for its existence and continued growth, there is an
obligation for the corporation to meet the demands of the society rather
than just the demands of a targeted group of customers.
 MANAGEMENT BY INCLUSION
• Corporations do not operate in an isolated environment. Their actions
impact their customers, their employees, their suppliers, and the
communities in which they produce and deliver their goods and services
.
• Depending on the actions taken by the corporation, some of these groups
will be positively impacted and others will be negatively impacted.
 MANAGEMENT BY INCLUSION
Example: If a corporation is operating unprofitably in a very competitive
market, it is unlikely that it could raise prices to increase profits. Therefore
the logical choice would be to lower cost - lay off employees.
While those laid off employees are obviously the hardest hit, The
communities where the reside have now lost the spending power of those
employees.
MANAGEMENT WITHOUT MANAGEMENT BY
CONSCIENCE INCLUSION
• Actions have impact on
• Focus on the internal world consumers, employees and
of the corporation other members of stakeholders.
• Some can be positively
• No external consequence affected, some can be
negatively affected

Social contract approach – perspective that a

corporation has an obligation to society over and
above the expectations of its shareholders
 CSR FROM A HISTORICAL
PERSPECTIVE
1. Ancient And Medieval Period
During ancient times, people believe that businessmen and wealthy
people should do business to the community as part of public or social
service.
To make money or to lend money is an activity greatly despised
Greeks and Romans treated businessmen next to slaves.
 CSR FROM A HISTORICAL
PERSPECTIVE
1. Ancient and Medieval Period
The Catholic Church does not trust the business system and deemed
profit-motive as anti-Christian believing that the merchant never or
seldom pleases God
St. Thomas Aquinas-justified that business could exist as long as it was
used for the good of the community
Compensatory Justice
maintains that prices and wages should be fair
 CSR FROM A HISTORICAL
PERSPECTIVE
2. Period of Mercantilism
-European governments actively participated in business activities and
established monopolies.
-Colonization of more territories became rampant as these territories were
used as source of raw materials and cheap if not free labor.
-Millions of Africans were sent to work as slaves in the North, South, and
Central America.
 CSR FROM A HISTORICAL
PERSPECTIVE
2. Period of Mercantilism
Protestant values encouraged thrift, industry, and materialism making
Protestant countries more progressive than Catholic countries
The Harmony of Interest Theory of England states that “business should
act in accordance with the national interest because the state supported
it”.
Special privileges were granted to businessmen for performing
outstanding public service in the conduct of their business.
 CSR FROM A HISTORICAL
PERSPECTIVE
3. The Industrial Revolution
Along with industrial improvements was the change in the
businessman’s attitude and values towards business.
Businessmen regarded wealth as a symbol of moral excellence
Absolute free enterprise became an argument, rejecting the concept of
social responsibility and promoting the individualist philosophy that
the government must not interfere with the activities of the business.
 CSR FROM A HISTORICAL
PERSPECTIVE
3. The Industrial Revolution
Workers including children and the aged were exploited and forced to
work leaving only six hours in a day rest and sleep but wages given to
the workers were extremely low.
Capitalists abused unrestrained business activities by cheating and
selling their poor quality products at a very high price.
Emergence of big corporations also happened during this time that they
created their own government and used their wealth to bribe and cheat so
that they would remain untouched by the law.
 CSR FROM A HISTORICAL
PERSPECTIVE
4. After the Period of Depression(1930s-present)
Government, especially in progressive countries protected
the welfare of the public against the abuses of businesses.
Businesses viewed social responsibility as an adherence to
rules and regulations and compliance with the
administrative and legal standards.
 CSR FROM A HISTORICAL
PERSPECTIVE
4. After the Period of Depression(1930s-present)
Ethics in business and social responsibility are now given
serious attention by more and more companies as they
realized that their success lies in earning the confidence and
respect of the society.
Corporate social responsibility became part of their
corporate structures and processes.
 PERSPECTIVES OR VIEWS ON CSR
Classical Managerial Public View Christian View
View View
1. Maximization of 1. Not emphasizing of 1. Needs and 1. Excess wealth should
profit. profit maximization interests of the be given to the less
and interest of whole society. fortunate.
2. Satisfy stockholders.
stockholders for 2. Establishes 2. Returning a fair
their 2. Balancing the harmony with portion of profits to
investments. interest of both business the society in the form
employees, operations and of social services.
3. In line with customers, public interest.
Friedman’s suppliers, and the
point of view. local plant
community
 ARGUMENTS IN SUPPORT OF CSR
1. Long-run self-interest
•Business enterprises will benefit from their own investment by
using their resources in reducing social problems.
2. Business resources
•Enterprises could use their huge resources in the improvement
of societal and environmental conditions.
 ARGUMENTS IN SUPPORT OF CSR
3. Viability of businesses
•Revoking of business if it fails to meet social expectations.
4. Good public image
•Participation with charitable, civic and socio-economic projects
enhances reputation.
5. Profits from social problems
•Business can turn problems into profits through creativity (e.g.
recycling)
 ARGUMENTS AGAINST CSR

1. Profit maximization
• concern on profit, not on society.
2. Lack of social skills
• businessmen lack skills in solving social problems.
 ARGUMENTS AGAINST CSR
3. Lack of social accountability
•social needs and problems should not be passed on to
businessmen. It is for the government to solve.

4. Higher product cost

•the participation of business to social activities only add cost
for the company. In order to recover from such losses,
businessmen increases the cost of their products.
 SOCIAL RESPONSIBILITY
Consumers TOWARDS CONSUMERS
- the most important stakeholder of the business

Consumer rights
Right to safety
Right to be informed
Right to choose
Right to be heard
EVOLUTION/PHASES OF CSR
 EVOLUTION/PHASES OF CSR
1. Defensive CSR
 corporate sustainability and responsibility
practices were only undertaken only if it can
protect shareholder value.

2. Charitable CSR
 supporting various social and environmental
causes through “Foundations”.
 PHASES OF CSR
3. Promotional CSR
 corporate sustainability and responsibility seen as
public relations opportunity

4. Strategic CSR
 CSR activities being in line with the company’s
core business (vision, mission, objectives, nature)

5. Transformative CSR
 innovating business models, revolutionising
processes, products and services
 DRIVING FORCES BEHIND CSR
1. TRANSPARENCY
- Producing truthful reports and status of companies
2. KNOWLEDGE
- right information to customers
- great for consumers and investors
- consumers will be able to access these companies’ files and when
purchasing between products that are similar in nature
- will be able to choose the one that has the best CSR
3. SUSTAINABILITY
- best to be environmentally friendly and preserving it for the good of
our future
 DRIVING FORCES BEHIND CSR
4. GLOBALIZATION
- cooperations of people, companies and governments of different nations to
come together and create a plan for our future so we will be able to sustain life
here on our planet for as long as possible.

5. FAILURE OF PUBLIC SECTOR

- lost faith and expecting less from the government because of its failure
- businesses and corporations are expected to take action for their own social
actions and do what is right for the people
 DIMENSIONS OF CSR
1. Value Creation

2. Good Governance

3. Societal Contribution

4. Environmental Integrity
 CORPORATE GOVERNANCE

 is the process by which organizations and corporations are controlled

and directed.
 involves balancing the interests of the stakeholders
 identifies the distribution of responsibilities amongst the participants in
the corporation
 it also provides framework for attaining a company’s objective.
 4 PILLARS OF CORPORATE
GOVERNANCE

1. Accountability

2. Fairness

3. Transparency

4. Independence
 BENEFITS OF CORPORATE GOVERNANCE

• Role clarity for the owners and management team

- CG Framework helps identify the roles of shareholders and the
management.

• Purposeful strategic direction

- CG relies on definitive strategic direction. This helps identify the
most beneficial opportunities in order to allocate resources to is.
 BENEFITS OF CORPORATE GOVERNANCE

• Retention of staff
- a clear definite vision communicated to employees becomes a
motivation.

• Improved relationships with financial institutions

- transparency and honesty from corporations can result to confidence
from financial institutions.
 BENEFITS OF CORPORATE GOVERNANCE

• Improvement in profitability
- CG often leads to improved reporting of performance. A
good and accurate report helps create a good decision for the
corporation.
 WHAT DOES CORPORATE
GOVERNANCE LOOK LIKE
Board of Directors
A group of individuals hired to oversee governance of an organization.
 Elected by vote of the shareholders at annual general meeting, the true
power of the board can vary form institution from a powerful unit that
closely monitors the management of the organization, to a body that
merely rubber-stamps the decisions of the chief executive officer and
executive team.
 WHAT DOES CORPORATE
GOVERNANCE LOOK LIKE
Audit Committee
 An operating committee staffed by members of the board of directors
plus independent or outside directors.
The committee is responsible for monitoring the financial policies and
procedures of the organization – specifically the accounting policies and
internal controls, and the hiring of external auditors.
 WHAT DOES CORPORATE
GOVERNANCE LOOK LIKE
Compensation Committee
 An operating committee staffed by members of the board of director
plus independent or outside directors.
The committee is responsible for setting the compensation for the CEO,
and other senior executives. Typically, this compensation will consist of
a base salary, performance bonus, stock options, and other perks.
 GOVERNANCE OF MODERN CORPORATION
Owners
Public shareholders, institutional
investors, Other Corporation

Corporate
Compensation
Audit committee Board of Directors governance
Committee
committee

CEO, CFO, COO

Managers and Creditors Financial

employees institutions

Stakeholders
Customers, vendor partner, state and local entities,
community partners