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CORPORATE SOCIAL RESPONSIBILITY
CSRa) EMPHASIS ON FAIRNESS b) HISTORICAL OVERVIEW
c) POLITICAL CONTINUUM: stakeholder---------------------------------------------minimalist
[left] [right]
ISN’T THIS WHAT WE HAVE LAWS FOR?THE LAW IS NECESSARY BUT
INSUFFICIENT a) THE LAW IS REACTIVE
b) THE LAW IS SLOW
c) BUSINESS IS CHANGE-
ORIENTED &FASTER
Economic Responsibilities
Legal Responsibilities
Social Responsibilities
Ethical Responsibilities
CORPORATE SOCIAL
RESPONSIBILITY IN CONTEXT
•Community in a pre-modern, modern and postmodern world
•Why we expect more from business and how “the game is played”
PRE-MODERN TRADITIONAL ENTREPENEURIAL Power goes to those who succeed in
“the jungle” Authority resides in those with
legitimacy– size; wealth; longevity confers authority
Ethics based on individual responsibility and programs minimized
MODERN COMMUNITY OF RATIONAL RULESi) BUREAUCRATICii) SCIENTIFIC MANAGEMENTiii) RELIANCE ON "EXPERTS"iv) COMPREHENSIVE RULESPower goes to those who make the rules.
Relies on expertiseAuthority goes to those who can enforce their
rules Reach for the topEthics are based on “fairness’ and programs
based on rules
POSTMODERN COMMUNITY OF FLEETING EXCHANGES i) NEED TO INTERPRETii) NEED TO BUILD CONSENSUSiii) LOOSE CONNECTIONSiv) SUSPICION OF AUTHORITYPower goes to those who can “make the
deal” through networking and can handle uncertainty
Authority goes to those who see and can sell coalitions and deals regardless of other levels of authority
Ethics are situational; programs emerge to be responsive
CSR MODELS
Position Responsible to therefore…
Minimalist Stockholders/owners
Maximizing profit
Self interested Stockholders/ owners/ cost “controllers”
Do good when furthers quest for growth and profit
Social contract Those with social and legal contract
Goes beyond law to spirit of commitment
StakeholderManagement
Those who influence direction and fortunes
Develop responsive strategies
Stakeholderstewardship
Society as whole / future
Solutions for social problems
THE CASE FOR THE MINIMALIST
MINIMALIST CSR Traditional stockholders model,
fundamentalism, Libertarian Friedman
PREMISES-Shareholders are the st priority -Obey the laws-Private vs. Public [MINIMAL STATE]
MINIMALIST CRITIQUES OF OTHER MODELS
THEY DISTRACT FROM PROFIT MOTIVE THEY ARE SOCIALISTIC "PUBLIC GOOD" IS SUSPECT
SELF-INTERESTDefining “Me”
SELF-INTERESTED CSR
PREMISES
GOOD MOTIVES NOT ENOUGH PROFITS & COMMUNITY CULTIVATING PHILANTHROPY REPUTATION
CRITIQUES OF OTHER PERSPECTIVES
MINIMALIST IS TOO RIGID ALL OTHERS IGNORE PROFIT
FORD:“we endeavor to become a leading contributor to a
more sustainable world”…”The Ford Motor Company Fund supports many local and national programs to affect change, provide for those in need, and improve quality of life.”
“Are consumers, especially in North America, truly interested in and willing to pay for new technology?”
http://www.ford.com/en/ourCompany/corporateCitizenship/ourLearningJourney/strategicIssuesUpdate/climateChange.htm
SOCIAL CONTRACT
SOCIAL CONTRACT CSRPREMISES CORPORATION AS "MORALPERSON" IMPLICIT & EXPLICIT CONTRACT WITH
SOCIETY WITH POWER COMES RESPONSIBILITY
CRITIQUE OF ALTERNATE 1ST 2 MODELS FOCUS TOO MUCH ON
PROFIT
EXAMPLE LEAKY" CONDO PLAYERS LACKED A
SENSE OF "IMPLICIT" CONTRACT WITH SOCIETY
… developers “put a lot of money into marble countertops and fancy kitchens because that’s what sells the product. And consequently they don’t spend a lot of time thinking about how it looks [and functions] from the outside. It’s designing inside out.”
http://www.myleakycondo.com/com020601.htm
STAKEHOLDER MANAGEMENT
3 STAKEHOLDER GROUPS:
*PRIMARY [ECONOMIC]
*SECONDARY [SOCIO POLITICAL]
* TERTIARY [POWERLESS]
CRITIQUES OF ALTERNATIVES 1ST 2 MODELS TOO PROFIT-FOCUSED -S-C MODEL IS TOO VAGUE
EXAMPLES CITIZENSBANK SHELL
STAKEHOLDER STEWARDSHIP
STAKEHOLDER STEWARDSHIPPREMISES -CARING FOR TERTIARY -HELP NON-BENEFICIAL PARTIES -HOLD IN TRUST -ASPIRE TO HIGH IDEALS
*ALL OF THIS PRESUPPOSES TIME & MONEY
CRITIQUES OF ALTERNATE -1ST 2 MODELS TOO PROFIT-FOCUSED -S-C MODEL TOO VAGUE STAKEHOLDER MODEL NOT AMBITIOUS
ENOUGH
EXAMPLE
Ben and Jerrys “Ben & Jerry’s Head of Social Mission
has returned from a two-week mission in Cote d’Ivoire and Mali on the subject of alleged child trafficking in West Africa”
http://www.benjerry.com
ISSUES OF TRUST AND CHANGE: MINIMALIST
Participants Investors/
stockholders Owners /
managers
Change Issues Hyper
competition globalization
Trust
Trust grows when performance meets expectation;
Distrust if fails to meet expectation
ISSUES OF TRUST AND CHANGE: SELF INTERESTED MODEL
Participants Program
advocates Owners /
managers
Change Issues Competition Reputation
enhancement
Trust
Trust grows when program advocates deliver enhanced corporate reputation;
Distrust if do not
ISSUES OF TRUST AND CHANGE: SOCIAL CONTRACT
Participants Those with
contracts with firm
Owners / managers
Change Issues Need for
flexibility internationaliz
ation
Trust
Trust grows when keeps legal and social contracts over time;
Distrust if do willing to violate them
ISSUES OF TRUST AND CHANGE: STAKEHOLDER MANAGEMENT
Participants Primary and
secondary Owners /
managers
Change Issues Information
access to firm increases
Systems open to scrutiny
Trust
Trust grows when stakeholders feel included in decision making
Distrust if feel excluded
ISSUES OF TRUST AND CHANGE: STAKEHOLDER STEWARDSHIP
ParticipantsSpokesperson
s for tertiaryOwners /
managers
Change Issues Pressure to
include tertiary
Worry about environment
Trust
Trust grows when firm willing to negotiate with spokespersons for tertiary
Distrust if feel excluded
MODELING THE CONTEXT Pre modern
MinimalistSelf Interested
ModernThe social contract
PostmodernStakeholder (management and
stewardship)
Economic Responsibilities
Legal Responsibilities
Social Responsibilities
Ethical Responsibilities
CORPORATE SOCIAL RESPONSIBILITY (CSR)
AND ETHICS
DEFINITIONS AND RELATIONSHIPS
Corporate social responsibility (CSR) is the process by which businesses negotiate their role in society
In the business world, ethics is the study of morally appropriate behaviors and decisions, examining what "should be done”
Although the two are linked in most firms, CSR activities are no guarantee of ethical behavior
Companies can engage in CSR activities even while they are acting in unethical ways. For example, Enron was a champion of community involvement, but used off-balance-sheet partnerships to bilk investors and eventually ruin the company.
Companies can say one thing and do another.
REASONS FOR CSR ACTIVITIES
CSR activities are important to and even expected by the publicAnd they are easily monitored worldwide
CSR activities help organizations hire and retain the people they want
CSR activities contribute to business performance
Maximize firm’s profits to the exclusion of all else
Balance profits and social objectives
Do what it takes to make a profit; skirt the law; fly below social radar
Fight social responsibility initiatives
Comply; do what is legally required
Integrate social objectives and business goals
Lead the industry and other businesses with best practices
Do more than required; e.g. engage in philanthropic giving
Articulate social value objectives
Corporate Social Responsibility Continuum
CSR ARE GROUNDED BY OPPOSING OBJECTIVES (MAXIMIZE PROFITS TO BALANCE PROFITS WITH SOCIAL RESPONSIBILITY) AND SO ACTIVITIES RANGE WIDELY
Do what it takes to make a profit; skirt the law; fly below social radar
Fight CSR initiatives Comply with legal requirements Do more than legally required, e.g.,
philanthropy Articulate social (CSR) objectives Integrate social objectives and business goals Lead the industry on social objectives
BUSINESSES CSR ACTIVITIES
Philanthropy give money or time or in kind to charity Integrative philanthropy—select beneficiaries aligned with company
interests Philanthropy will not enhance corporate reputation if a company
fails to live up to its philanthropic image or if consumers perceive philanthropy to be manipulative
These may be activities you’ll see in your firms.
Integrative philanthropy—Avon Products Inc. “The company for women" donates funds to breast cancer research.
In Seattle, FareStart partners with Consolidated Restaurants; Pharma companies align with Operation Smile, AIDs donations.
INTEGRATE CSR GLOBALLY Incorporate values to make it part of an
articulated belief system Act worldwide on those values
Cause-related marketingCause-based cross sector partnerships
Engage with stakeholdersPrimary stakeholdersSecondary stakeholders
Incorporate values in belief statements: McDonald's: “We believe that being a good corporate citizen means treating people with fairness and integrity, sharing our success with the communities in which we do business, and being a leader on issues that affect customers” (McDonald's Corporation, 1992).
Act on values: Starbucks put resources into integrating values. Primary stakeholders are internal to the company such as owners,
employees, labor unions, customers and suppliers (Clarkson, 1995). Secondary stakeholders operate external to the firm; they could be nongovernmental organizations, social activists, community groups, and governmental organizations.
REI definition of social responsibility: “Achieving commercial success in ways that honor ethical values and respect people, communities, and the natural environment” includes ethics, community investments, corporate governance, environmental health and safety practices, sustainability, sourcing practices. Matt Hyde, Sr VP of Merchandizing and Logistics at REI said the only way we can be CSR is if we pursue commercial success—it’s a given that you have to make money (November 1, 2004).
BUSINESS ETHICS DEVELOPMENT
The cultural context influences organizational ethics
Top managers also influence ethics The combined influence of culture and top
management influence organizational ethics and ethical behaviors
If national practice is bribery, then most companies in that nation will use bribery.
If a top manager is unethical, then he/she sets a lead that others follow.
When managers behave unethically, employees can be demoralized, lose faith in the organization, and even leave their jobs. Others might follow-the-leader themselves and engage in unethical behaviors.
High demands for performance and profitability led Enron employees first to cut ethical corners and finally to break laws as well. According to one Enron controller, the logic was as follows: "If your boss was [fudging] and you have never worked anywhere else, you just assume that everybody fudges earnings. Once you get there and you realized how it was, do you stand up and lose your job? It was scary. It was easy to get into 'Well, everybody else is doing it, so maybe it isn't so bad.'"
THE EVOLVING CONTEXT FOR ETHICS
From domestic where ethics are shared To international where ethics are not
shared when companies:Make assumptions that ethics are the sameEthical absolutism—they adapt to us Ethical relativism—we adapt to them
To global which requires an integrative approach to ethics
Most firms are developed within a nation, borrowing their ethical practices from them.
When they go international, they face new ethical challenges.
NIKE Inc. was "founded on a handshake" with implicit belief that "business with all of our partners [would be] based on trust, teamwork, honesty and mutual respect. We expect all of our business partners to operate on the same principles."
Nike discovered that their overseas subcontractors were not treating workers with respect, and this suggests that Nike's view of these principles and what they meant did not result in desired subcontractor behavior.
EMERGENCE OF A GLOBAL BUSINESS ETHIC
Growing sense that responsibility for righting social wrongs belongs to all organizations
Growing business need for integrative mechanisms such as ethics Ethics reduce operating uncertainties Voluntary guidelines avoid government impositions
Ethical conduct is needed in an increasingly interdependent world—everyone in the same game
Companies wish to avoid problems and/or be good public citizens
Create a cohesive ethical program that meets multiple and sometimes conflicting demands.
WAYS COMPANIES INTEGRATE ETHICS
Top management commitment in word and deed
Company codes of ethics Supply chain codes Develop, monitor, enforce ethical behavior Seek external assistance
Fundamental honesty and adherence to the law. Product safety and quality, workplace health and
safety precautions Conflicts of interest Employment practices Fair practices in selling and marketing products or
services Financial reporting Supplier relationships Pricing, billing, and contracting Trading in securities and/or use of insider
information Payments to obtain business Acquiring and using information about others Security and political activities Environmental protection Intellectual property or use of proprietary
information (Business Roundtable, 1988).
EXTERNAL ASSISTANCE WITH ETHICS
Industry or professional codes Certification programs, e.g., ISO 9000 Adopt/follow global codes
Caux Round Table Principles
Accountants have a professional code of ethics that companies rely on.
REASONS FOR BUSINESSES TO ENGAGE IN DEVELOPMENT OF A
GLOBAL CODE OF BUSINESS ETHICS
Create the same opportunity for all businesses if there are common rules
Level the playing field They are needed in an interconnected
world They reduce operating uncertainties If businesses don’t collaborate, they may
not like what others develop
A. Maintaining or creating the opportunity for business activities.
b. All firms should be operating according to the same principles; this produces the "level playing field" upon which many organizational leaders prefer to play.
c. Ethical codes are needed and are possible in a world that is interdependent on many other dimensions of business activities.
d. They reduce operating uncertainties and, e. Growing public interest in a global code of ethics
suggests that if businesses don't develop such codes, they will be developed by other bodies that may be unfavorable to business interests.
FOUR CHALLENGES TO A GLOBAL ETHIC
Global rules emerge from negotiations and will reflect values of the strong
Global rules may be viewed as an end rather than a beginning Rules can depress innovation and creativity Rules are static but globalization is dynamic
Global rules are likely to emerge from a negotiation process; they are unlikely to reflect values and habits consistent for all cultures. To the extent that these rules are developed by firms from the Westernized countries, they may not incorporate concerns for much of the world. Second, global ethics may be viewed as an end point rather than a beginning point for developing global ethics. Organizations may hide behind global codes, claiming that the absence of rules means that all behaviors are acceptable as conditions change. Organizations may/will find loopholes then use the rules in defense.
A global code of ethics also may serve to depress innovation, since some will hesitate to act in the absence of clear guidelines. However, a static set of guidelines is unlikely to keep pace with globalization.
INDIVIDUAL ETHICS IN ORGANIZATIONS Ethics
An individual’s personal beliefs regarding what is right or wrong or good or bad.
Ethical Behavior Behavior that is acceptable in the eye of
the beholder. However, it also refers to behavior that conforms to generally accepted social norms.
Examples of Unethical Behavior “Borrowing” office supplies for personal
use. “Surfing the Net” on company time.
DETERMINANTS OF INDIVIDUAL ETHICS
Family Influences
Family Influences
SituationalFactors
SituationalFactors
Values andMorals
Values andMorals
Experiences
Experiences
PeerInfluences
PeerInfluences
Individual EthicsIndividual Ethics
ORGANIZATIONAL ETHICS Organizational Ethics
moral values, beliefs, and rules that establish the appropriate way for an organization and its members to deal with each other and people outside the organization
MANAGING ETHICS IN ORGANIZATIONS
Managing Ethical Behavior Begins with top management which
establishes the organization’s culture and defines what will and will not be acceptable behavior.
Includes training on how to handle different ethical dilemmas.
Developing a code of ethics. A written statement of
the values and ethical standards that guide the firm’s actions.
SOCIAL RESPONSIBILITY AND ORGANIZATIONS Social Responsibility
The set of obligations (to behave responsibly) that an organization has to protect and enhance the social context in which it functions.
Areas of Social Responsibility Stakeholders: customers, employees, and
investors. The natural environment: environmentally
sensitive products, recycling, and public safety. The general social welfare: charitable
contributions, and support for social issues such as child labor and human rights.
ARGUMENTS FOR AND AGAINSTSOCIAL RESPONSIBILITY
APPROACHES TO SOCIAL RESPONSIBILITY
Source: Barney, Jay B. and Ricky W. Griffin, The Management of Organizations. Copyright © 1992 by Houghton Mifflin Company. Used with permission.
Obstructionist Stance
Accommodative Stance
Defensive Stance
Proactive Stance
Highest Degree of Social
Responsibility
Lowest Degree of Social
Responsibility
MANAGING SOCIAL RESPONSIBILITY:FORMAL ORGANIZATIONAL DIMENSIONS Legal Compliance
Extent to which the organization conforms to local, state, federal, and international laws.
Ethical Compliance Extent to which members of the organization
follow basic ethical/legal standards of behavior. Philanthropic Giving
Awarding of funds or gifts to charities or other social programs.
MANAGING SOCIAL RESPONSIBILITY:INFORMAL ORGANIZATIONAL DIMENSIONS Organizational Leadership and Culture
Leadership practices and the culture of the organization can help define the social responsibility stance an organization and its members will adopt.
Whistle Blowing The organizational response to the disclosure by an
employee of illegal or unethical conduct on the part of others within the organization is indicative of the organization’s stance on social responsibility.