Prof Scofied
Malotaibi
class_5_-_csr__stakeholders.pptWhat is the role of the corporation?
What is the company’s purpose?
Why?
Core Purpose Is Reason for Being
Hewlitt-Packard: To make technical contributions for the advancement and welfare of humanity.
Mary Kay Cosmetics: To give unlimited opportunity to women.
Wal-Mart: To give ordinary folk the chance to buy the same things as rich people.
Walt Disney: To make people happy.
(Collins & Porras, HBR, 1996, p.69)
At each end of the spectrum
Corporations should only have one purpose - to make the most profit for their shareholders - and pursuit of that goal will be best for society in the long run.
Corporations should have more than one purpose. They also owe something to their workers and communities they work in.
What Is Company’s Purpose?
1) Profit maximization, maximizing shareholder value
2) Earning a satisfactory return on capital employed - using resources as efficiently as possible in supplying goods and services to customers and to compensate equitably those who supply the resources.
What Is Company’s Purpose?
3) To promote the common good of the community (Aristotelian idea that social institutions exist to fill society’s needs).
4) The primary objective is the integration of human well-being within the context of the well-being of the natural world (Rev. Thomas Berry, Dream of the Earth).
Harris Poll – >2000 respondents
- 95% of respondents agreed with the following claim: “U.S. corporations should have more than one purpose. They also owe something to their workers and the communities in which they operate, and they should sometimes sacrifice some profit for the sake of making things better for their workers and communities.”
Business Week September 11, 2000.
Stakeholder Framework
As a Model for Ethical Decision Making
Introduction to
Stakeholder Concept
- Freeman (1984) defined stakeholders as groups or individuals who can significantly affect or be affected by an organization’s activities
Moral vs Instrumental View
- Moral view - stakeholders have intrinsic value and managers have a moral duty to be responsible to a variety of stakeholders (CSR)
- Instrumental view - stakeholders are those groups or individuals that are in a mutually dependent relationship with the firm; managers focus on prioritizing (based on power)
Why Focus on Stakeholder Mgmt?
- Improved predictability of change
- Innovation
- Fewer damaging moves (strikes, boycotts, bad press)
- Fewer obstacles during strategy implementation
- right thing to do (Harrison & St. John, 1996)
Traditional Stakeholders
- Shareholders
- Lenders
- Regulators
- Policymakers
Emerging Stakeholders
- Customers/consumers
- Associations/coalitions
- Community/environmental groups
- Institutes/universities
Surrogate Stakeholders for
- Future generations
- World population
- Environment
Challenges
- Corporate Social Responsibility (CSR) debate
- Problems with multiple stakeholder approaches (definitions, complexity)
- Ethical responsibility to a broad set of constituencies
Does corporate law inhibit CSR?
Does a corporation have a moral personality or a moral conscience?
If the legal goal or purpose of a corporation is to maximize the profit for its shareholders, then anything a company can do to “externalize costs”, i.e. push its financial burdens onto some external entity, instead of itself, will translate into increased profit for its shareholders, but unfortunately, at the expense of the external party, be it the community, the employees or the environment (Hinkley).
An Analysis of the Problem:
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Does Corporate Law Inhibit CSR?
- Corporate Charter (Board of directors and Board duties)
- Failing duty to shareholders/owners leaves those who govern open to being sued
- Protection of ‘privatization of gain’ and ‘externalization of costs’
- But is it corporate law or Bay St./Wall St. culture that inhibits CSR?
Does a Corporation
Have a Conscience?
You never expect justice from a company, do you? They neither have a soul to lose nor a body to kick.
Sydney Smith, 1771-1845, English writer, clergyman
- Corporations Do Not
Have a Conscience
- amoral, impersonal, institution
- committed only to shareholders
- maximizing profit is primary goal
- liability and blame not attributable to institution
- based on utilitarianism
- “invisible hand” (state responsible for making rules)
Robert Monks
Michael Moore
2) Corporations Have a Conscience
- Corporation is a moral agent, morally responsible to society (The Soul of Business)
- Internal decision structure is ‘individual collective’
- Corporations held morally accountable like persons
Sir Mark Moody-Stewart
Complementary Disciplines?
Well-Being
Human Development
Responsibilities
Ideals, Justice
Rights and Wrongs
Benefits and Harms
Communities
Reciprocity
Transparency
Universality
Wealth Creation
Efficient Resource Use
Revenues
Profits
Assets and Liabilities
Gains and Losses
Cash Flow, Markets
NPV, ROI, ROA
ROE, EVA
Ethics
Economics
Adam Smith & CSR
- "No society can surely be flourishing and happy of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who food, clothe, and lodge the whole body of the people should have such a share of their own labour as to be themselves tolerably well fed, clothed, and lodged" (Smith, Wealth of Nations, p.181).
Adam Smith & CSR
- "Generosity, humanity, kindness, compassion, mutual friendship and esteem, all the social and benevolent affections, when expressed in the countenance or behavior, even towards those who are not peculiarly connected with ourselves, please the indifferent spectator upon almost every occasion" (Smith, MS, 52).
The Domain
of CSR
fairness? honesty? privacy?
human rights? public relations? confidentiality?
philanthropy? corporate citizenship?
workplace safety?
sustainable development? business ethics?
transparent reporting? stakeholder impact?
community expectations? responsible products and services?
employee volunteerism? diversity? rules?
business and society?
profitability? Discrimination?
harassment? helping meet people’s needs
Wood’s 3 Principles of CSR
- Business & Society are Interwoven
- Legitimacy – Society grants power to business in general
- Public Responsibility – Businesses are responsible for outcomes related to their operation
- Managerial Discretion – Managers are moral actors with the business obliged to act in such a way to achieve responsible outcomes
Basis for CSR
- Corporate Citizenship
- Sense of responsibility and connection to community (solely for public good)
- Social Contract
- Business reaps benefits of society – they owe something
- Enlightened Self Interest
- Leads to competitive advantage and differentiation
What are the arguments for and against CSR?
Strategic Arguments for CSR –
Enlightened Self-interest
- Improved risk management
- Improved organizational functioning
- Improved market attractiveness
- Improved relations with public
- Improved efficiency of natural resources
- Corporate self-regulation
Ethical/moral
Arguments for CSR
- Injurious impacts of business
- A better way
- Noblesse oblige
Arguments Against CSR
- Creates a competitive disadvantage
- Gets in way of primary goal to maximize shareholder returns
- Gives more power to business to influence society (legitimacy)
- Lack of technical incompetence of managers in dealing with social issues
- Invisible hand
economic
responsibility
ethical responsibility
legal responsibility
Carroll’s Pyramid of CSR
Chart1
| Category 1 | Category 1 | Category 1 | Category 1 |
Sheet1
| Economic | Legal | Ethical | Philanthropic | |
| Category 1 | 4 | 4 | 4 | 4 |
| Category 2 | 2.5 | 4.4 | 2 | |
| Category 3 | 3.5 | 1.8 | 3 | |
| Category 4 | 4.5 | 2.8 | 5 | |
| To resize chart data range, drag lower right corner of range. |
Quote of the Day
Once upon a time…the Elder said to the businessperson: “As the fish perishes on dry land, so you perish when you get tangled in the world. The fish must return to the water and you must return to the Spirit.”
The businessman was aghast. “Are you saying that I must give up my business and go into a monastery?”
And the elder said, “Definitely not. I am telling you to hold on to your business and go into your heart.”
Monastic Tale told by Joan Chittister
