business ethics
VincentL
CSRandStakeholderTheory.pptStakeholder Theory
and
Corporate Social Responsibility
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Allegations Against Business –
Driving Force Behind CSR
[Started out as an anti-business agenda in 1960’ and 1970’s]
Business -
- Has little concern for the consumer
- Cares nothing about the deteriorating social order (rich v. poor, those who have participate v. those who cannot)
- Has no concept of ethical behavior
- Is indifferent to the problems of minorities and the environment
- These claims have generated an unprecedented number of pleas for companies to be more socially responsible.
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Society’s Expectations Versus Business’ Actual Social Performance
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Society’s
Expectations
of Business
Performance
Social Performance: Expected and Actual
1960s 2010s
Time
Social Problem
Business’s Actual Social Performance
Social Problem
Social Environment, Business Criticism and Corporate Response
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Factors in the Social Environment
Affluence
Education
Awareness
Rising Expectations
Rights Movement
Entitlement
Mentality
Victimization
Philosophy
Increased Concern for the
Societal Environment
A Changed Social Contract
Business Criticism
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WHAT DO YOU THINK IS MEANT BY A CHANGED SOCIAL CONTRACT HERE?
Modifications of the
Shareholder Maximization Model
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Community obligations
Paternalism
Philanthropy
Motivation:
Keep government at arm’s length
The evolution to CSR
(learnings from economists – away from the market approach)
Stakeholder Model –
Integrated Model
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A Four-Part Definition of CSR
CSR encompasses the:
Economic – to make a profit [Required]
Legal – follows the law (not the letter but the spirit) [Required]
Ethical – considers social norms, standards and values [Expected]
Discretionary / Philanthropic – [Desired]
- Chick-fil-A: college scholarships,
- Aflac: cancer funding,
- General Mills: education funding,
- Timberland: skill training for women in China)
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Relationship Between Social and Financial Performance
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Good Corporate
Reputation
Good Corporate
Social Performance
Good Corporate
Financial
Performance
Good Corporate
Reputation
Good Corporate
Financial
Performance
Good Corporate
Social Performance
Good Corporate
Reputation
Good Corporate
Social Performance
Good Corporate
Financial
Performance
Perspective 1: Socially Responsible firms are more financially profitable.
Perspective 2: A firm’s financial performance drives its social performance.
Perspective 3: There is an interactive Relationship Among CSP, CFP, and CR.
Corporate Citizenship (1 of 2)
Corporate citizenship -
- Embraces all the facets of corporate
social responsibility, responsiveness,
and performance. - Corporate Citizenship serves a variety of stakeholders.
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A Multiple Bottom Line Perspective
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Consumer Stakeholders’
“Bottom Line”
Employee Stakeholders’
“Bottom Line”
Community Stakeholders’
“Bottom Line”
Owner Stakeholders’
“Bottom Line”
Other Stakeholders’
“Bottom Line”
Corporate
Social
Performance
The Triple Bottom Line Perspective
Business Must Attend to Three Key Spheres of Sustainability –
- Economic, Financial (how much profit?)
- Social (added value to society)
- Environmental (added to or did not take as much from the environment)
The goal is corporate sustainability.
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Socially Responsible, Sustainable, Ethical Investing
Socially Responsible Investing -
- Emerged in the 1970s
- Over $7 trillion in socially responsible investments in the U.S.
[The Forum for Sustainable and Responsible Investment]
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Stakeholder Theory
Origins of the Stakeholder Concept
Stake -
- An interest or a share in an undertaking.
Can be categorized as:
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An Interest
A Right
Ownership
Legal Right
Moral Right
Stakeholders
Stakeholder -
- Any individual or group who can affect or is affected by the actions, decisions, policies, practices, or goals of the organization.
- Stakeholder is a variant of the concept of stockholder– an investor/owner of businesses.
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Production and Managerial Views
of the Firm
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Stakeholder View of the Firm
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Secondary
Primary
Addressing Stakeholder Needs - IMPORTANT
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What is the strongest argument for and the strongest argument against CSR?
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Arguments Against CSR -
- Classical Economics: The classical economic view is that business’ only goal is the maximize profits for owners.
- Business Not Equipped: Business is not equipped to handle social activities.
- Dilutes Business Purpose: It dilutes the primary purpose of business.
- Too Much Power Already: Businesses have too much power already .
- Global Competitiveness: It limits the ability to compete in a global marketplace.
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Arguments For CSR -
- Enlightened self-interest: Businesses must take actions to ensure long-term viability.
- Warding off government regulations. This is one of the most practical reasons.
- Resources Available: Business has the resources and expertise. Let it try.
- Proaction is better than Reaction. Proaction is also less costly.
- Public supports: the public strongly supports CSR.
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