Business paper

Corporate Power and Responsibility BUS 166, Week 4 Matthew Maguire [email protected] San José State University

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1. Corporate power

2. Corporate social responsibility

3. Discussion case: Gravity Payments

4. Corporate social reporting

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Corporate power

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Learning objectives

In Week 2 we focused on: (1) identifying a firm’s relevant stakeholders and (2) understanding the nature of their interests, power, and alliances with one another.

In Week 3 we focused on: (1) building relationships across organizational boundaries, (2) learning from stakeholders, and (3) altering practices in response.

In Week 4 we examine the debate surrounding corporate social responsibility.

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Corporate power

Corporate power = “the capability of corporations to influence government, the economy, and society, based on their organizational resources” (p. 49)

The tremendous power of the world’s leading corporations has both positive and negative effects.

• Positive — more resources; lower cost of production; new products; new technologies.

• Negative — disproportionate political influence; dominate public discourse; squash competition.

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Corporate power Discussion question: With great power comes great responsibility?

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Corporate power and responsibility

The iron law of responsibility = “in the long run those who do not use power in ways that society considers responsible will tend to lose it” (p. 50)

Discussion question: What is expected of companies by society? How have these expectations changed over time?

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Corporate social responsibility

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The meaning of corporate social responsibility (CSR)

• Act in a way that enhances society and be held accountable.

• Acknowledge any harm to people and society and correct it if possible.

• May forgo some profits if its social impacts hurt its stakeholders or if its funds is usable for a positive social impact.

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Corporate citizenship

Corporate citizenship = “the actions they take to put their commitments to corporate social responsibility into practice” (p. 51)

Companies demonstrate their commitment to CSR by:

• proactively building stakeholder partnerships

• discovering business opportunities in serving society

• transforming a concern for financial performance into a vision of integrated financial and social performance

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The origins of CSR

In the United States, the idea of corporate social responsibility appeared around the start of the 20th century.

Corporations under attack for being too big, too powerful, and guilty of antisocial and anticompetitive practices.

To use their power and influence voluntarily for broad social purposes rather than for profits alone (e.g., steelmaker Andrew Carnegie, automaker Henry Ford).

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Four phases of CSR

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Balancing multiple responsibilities The challenge is to balance all three:

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The CSR debate

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Business reputation

Many businesses view CSR as a way to protect and/or enhance their reputation.

Reputation = “to desirable or undesirable qualities associated with an organization or its actors that may influence the organization’s relationships with its stakeholders” (p. 56)

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Social entrepreneurs

Social entrepreneurs are driven by a core mission to create and sustain social rather than economic value (p. 59).

Social entrepreneurship is the process of identifying a social need and using their entrepreneurial skills to address this need.

Social ventures are the organizations founded by social entrepreneurs.

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Stages of corporate citizenship

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The B Corporation

Must meet rigorous, independent social and environmental performance standards.

Focus on social responsibility and citizenship by blending their social objectives with financial goals.

B Corporation must prove its socially responsible by meeting the B Lab standards.

• B Lab is a non-profit organization that assesses a corporation’s social and environmental performance standards. https://bcorporation.net

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Discussion case: Gravity Payments

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Discussion case: Corporate Social Responsibility at Gravity Payments

“Do higher wages help raise revenue?” https://www.youtube.com/watch?v=XiE4WnlqzX4

Discussion questions:

• Is Price demonstrating elements of corporate social responsibility by his actions in this case, or not?

• What arguments for and against corporate social responsibility are relevant in this case?

• Should more companies be following in the footsteps of Gravity Payments?

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Discussion case: Corporate Social Responsibility at Gravity Payments

“Three years ago, this boss set a $70,000 minimum wage for his employees, and the move is still paying off” https://hbx.hbs.edu/blog/post/three-years-a go-this-boss-set-a-usd70-000-minimum-wag e-for-his-employees-and-the-move-is-still -paying-off

• Revenue continues to grow at Gravity Payments, and the number of employees has climbed by 40 percent since 2015.

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Corporate social reporting

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Assessing and reporting social performance

Social audit = “a systematic evaluation of an organization’s social, ethical, and environmental performance” (p. 64)

Benefits:

• Help businesses know what is happening within their firm

• Understand what stakeholders think about and want from the business

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Assessing and reporting social performance

Benefits (continued):

• Tell stakeholders what the business has achieved

• Strengthen the loyalty and commitment of stakeholders

• Enhance the organization’s decision making

• Improve the business’s overall performance

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Social audit standards

Three kinds:

• Designed by individual companies (e.g., Apple’s supplier code of conduct).

• Designed by multiple companies within the same industry (e.g., Electronics Industry Citizenship Coalition).

• Designed by nongovernmental organizations or standard-setting organizations, usually working with multiple stakeholders (e.g., Global Reporting Initiative).

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Social reporting

Corporate social reporting = “when a company decides to publicize information collected in a social audit” (p. 65)

When companies clearly and openly report their performance—financial, social, and environmental—to their various stakeholders, they are acting with transparency.

An emerging trend in corporate reporting is the integration of legally required financial information with social and environmental information into a single integrated report.

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Social reporting

Look at the following resources to find social reports from individual companies:

• Global Reporting Initiative: http://database.globalreporting.org

• United Nations Global Compact: https://www.unglobalcompact.org/what-i s-gc/participants

• Corporate Register: http://www.corporateregister.com

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