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Corporate Social Responsibility and Stakeholders effect
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Corporate Social Responsibility and Stakeholders effect

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  • 1.  Describe role of stakeholders in socialresponsibility.By: Muhammad Hanif KhanCorporate Social ResponsibilityHanifka9@gmail.com
  • 2. corporate social responsibilityDefinition: A company‟s sense ofresponsibility towards the community andenvironment (both ecological and social)in which it operates. Companies expressthis citizenship (1) through their waste andpollution reduction processes, (2) bycontributing educational and socialprograms, and (3) by earning adequatereturns on the employed resources.2
  • 3. ExampleWateen offers summer internship programmes as part of its corporate citizenship.Students intern at Wateen to enrich their curriculum learning with corporate exposure andexperience.We have partnered with The Universal Service Fund, established by the Government ofPakistan, to develop the telecommunications infrastructure and establish high speedinternet providers and promote computer literacy with a special focus on underservedareas by offering subsidized Internet and Telephony services. Our collaboration andsubsidized services are provided in Faisalabad Telecom Region, Hazara Telecom Region,Gujranwala Telecom Region and Central Telecom Region. Support and value addition isalso provided with planned Education and Community Broadband Centers. Wateen mobileunits and vans operate in these areas to educate and increase Internet and computerliteracy. In recent months Pakistan was hit with one of the worst natural disasters to date.In this crisis, Wateen‟s employees donated their salary (on personal discretion rangingfrom 1 day salary and going up to 7 days) and carried out an aggressive drive to collectrelief goods and personal donations. Some were directly affected by the floods and Wateenresponded with priority attention to the respective employees. Even through itscommunication, Wateen reflected its obligations as a responsible corporate entity andinitiated a „Go Green with Wateen‟ campaign aimed at helping people to adopt „greener‟lifestyles.3
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  • 7. Social Responsibility ofStakeholdersCompany stakeholders are not merelyinvestors in a company -- stakeholderstypically have voting power that caninfluence the social and financial impact of acompany. With this voting power comes asocial responsibility to the employees andcustomers. Stakeholders must consider morethan just the companys bottom line whenusing their influence to shape companygoals.7
  • 8. 1. Company InterestsCompany stakeholders have a social responsibility to act forthe good of the entire company, not just their own self-interests. The policies for which stakeholders push must notbe based purely on financial gain. For example, stakeholdersmay have the opportunity to increase their own wealth ifthey push to merge the companys subsidiaries into theparent company. This merger, however, could limit thecompanys ability to serve multiple markets, hinder itsproduct diversification or create other problems.Stakeholders must push for a strategy that focuses on long-term gain and growth for their company.8
  • 9. 2. Market InterestsStakeholders must consider the interests of their market whenimplementing company policy or new business strategies. The needs anddesires of stakeholders may not align with those of the consumers forwhich the company produces products. For example, a company thatproduces high-optioned vehicles for low prices might be able to squeezemore profit out of customers by charging for the options, but it wouldalienate its customers. Stakeholders must consider the social impact oftheir segmentation, targeting and positioning (STP) in the marketplace.The companys STP is the type of customer to which it sells products(segment), the advertising method it uses to reach that customer(targeting) and the current marketing advantage it has amongcompetitors in the industry (positioning).9
  • 10. 3. Company MonitoringMonitoring and auditing is critical to ensure that a companyis socially responsible. Stakeholders must push for tightregulations and ethical practices within the company toavoid financial and legal problems. For instance, a companycan significantly limit its tax burden by storing profits in off-shore bank accounts. However, this practice might put thecompany in a legal gray area that could shake the confidenceof potential investors. Stakeholders have to insist oncompany transparency and adherence to industry norms toavoid breaking their "social contract" to consumers.10
  • 11. 4. Employee RelationsThe fate of employee pay, safety, health quality andjob security might sometimes rest in the hands ofstakeholders. It is the social responsibility of thestakeholder to ensure that the employees of thecompany work under the best possible conditions.A company could potentially increase its profits byworking employees harder for less pay, but theeffects on the employees would be negative.Stakeholders must push for profits and employeesatisfaction, simultaneously.11
  • 12. Stakeholders and CorporateSocial Responsibility• Let‟s begin this topic with quotation of Robert W. Lane, theChairman and CEO of Deere & Company, “If you don‟t havehonesty and integrity, you won‟t be able to develop effectiverelationships with any of your stakeholders.”• These stakeholder groups form the basis of success and failure of thebusiness. Stakeholders are individuals or groups that have interests,rights, or ownership in an organization and its activities. Customers,suppliers, employees, and shareholders are example of primarystakeholder groups. Each has interest in how an organizationperforms or interacts with them. These stakeholder groups canbenefit from a company‟s success and can be harmed by its mistakes.12
  • 13. Cont.• Secondary stakeholders are also important because theycan take action that can damage or assist the organization.Secondary stakeholders include governments (especiallythrough regulatory agencies), unions, nongovernmentalorganizations (NGOs), activities, political action groups,and the media.• In orders to serve their stakeholders in an ethical andsocial manner, more and more organizations are adaptingthe model of corporate social responsibility. The termCorporate Social Responsibility goes by many otherterms such as corporate citizenship, responsible businessor simply corporate responsibility. 13
  • 14. Cont.Stakeholders of Organization14
  • 15. Cont.When an organization builds ethical and socialelements in its operating philosophy andintegrate them in its business model, it is said tohave possessed a self-regulating mechanism thatguides, monitor and ensure its adherence to law,ethics, and norms in carrying out business activitiesthat ensures the serving the interest of all externaland internal stakeholders. In other words, theobjective of being socially responsible business isachieved when its activities meet or exceed theexpectations of all its stakeholders. 15
  • 16. Cont.• Here is a model for evaluating anorganization‟s social performance. Themodel indicates that total corporate socialresponsibility can be subdivided into fourcriteria-economic, legal, ethical anddiscretionary responsibilities.• These responsibilities are ordered frombottom to top in the following illustration.Let‟s discuss each one them briefly 16
  • 17. Cont.Total Corporate Social Responsibility17
  • 18. 1. Economic responsibilities• The first criterion of social responsibility is economic responsibility.The business institution is, above all, the basic economic unit ofsociety. Its responsibility is to produce goods and services that asociety wants and to maximize profit for its owners and shareholders.Economic responsibilities, carried to the extreme, is called profit-maximizing view; it was advocated by Nobel economist MiltonFriedman. This view argued that a company should be operated on aprofit-oriented basis, with its sole mission to increase its profits solong as is stays within the rule of the game.• The purely profit-maximizing view is no longer considered anadequate criterion of performance in the world in general. Treatingeconomic gain in the social as the only social responsibility can leadcompanies into trouble.18
  • 19. 2. Legal responsibilitiesAll modern societies lay down ground rules, laws andregulations that businesses are expected to follow. Legalresponsibility defines what society deems as important withrespect to appropriate corporate behavior. Businesses areexpected to fulfill their economic goals within the legalframework. Legal requirements are imposed by localcouncils, state and federal governments and their regulatingagencies. Organizations that knowingly break the law arepoor performers in this category. Intentionallymanufacturing defective goods or billing a client for worknot done is illegal. Legal sanctions may includeembarrassing public apologies or corporate „confessions‟.19
  • 20. 3. Ethical responsibilitiesEthical responsibility include behavior that is notnecessarily codified into law and may not serve theorganization‟s direct economic interests. To beethical, organization‟s decision makers should actwith equity, fairness and impartiality, respect therights of individuals, and provide differenttreatments of individual only when differencesbetween them are relevant to the organization‟sgoals and tasks. Unethical behavior occurs whendecisions enable an individual or organization togain expense of society. 20
  • 21. Discretionary responsibilitiesDiscretionary responsibility is purely voluntaryand guided by an organization‟s desire to makesocial contributions not mandated by economics,laws or ethics. Discretionary activities includegenerous philanthropic contributions that offer nopayback to the organization and are not expected.Discretionary responsibility is the highest criterionof social responsibility, because it goes beyondsocietal expectations to contribute to thecommunity‟s welfare.21