Corporate social responsibility lecture notes


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Corporate social responsibility lecture notes

  1. 1. CORPORATE SOCIAL RESPONSIBILITY Introduction The debate about corporate social responsibility (CSR) began in the early 20th century, as concerns about large corporations and their power came to the fore. Two broad principles—charity and stewardship—have help to shape thinking about CSR. The arguments for CSR tend to focus on the relationship between power and responsibility, the need for good stakeholder relations, and business’ desire to forestall government regulation. (The notion of “enlightened self-interest” also fits in here.) The arguments against CSR tend to focus on the economic function of business (to make products, not to solve social problems that are the responsibility of individuals, society, and the government), the imposition of unequal costs on some companies and stakeholders, and lower economic efficiency. Businesses need to balance economic, legal, and social responsibilities in order to achieve long-run success. More generally, there is often a relationship between good social and good financial performance. Further, firms that are seen as acting illegitimately are likely to face difficult relations with employees, governments, communities, and consumers— which all have direct impacts on the top and bottom lines. One defense of the shareholder view of CSR is that shareholders take on a unique set of risks, but other stakeholders are protected by contractual relations with organizations. But Enron1 and other companies illustrate that most stakeholders take on risk—sometimes without knowing it. One result of increasing globalization is that there are many different voices around the world with differing views on corporate social responsibility. What is seen as “ethical” in one country may not be in another (like Genetically Modified Foods). Definition of CSR There are number of ways to define Corporate Social Responsibility. It is the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life. It can also be defined as a concept that relates to organizations taking on their social and environmental responsibilities and includes factors such as provisions for employees, participation in local community, green working practices, ethical trading and good corporate governance. On the other hand,Corporate Social Responsibility (CSR) is a concept that organizations, especially (but not only) corporations, have an obligation to consider the interests of customers, employees, shareholders, communities, and ecological considerations in all aspects of their operations. It characterizes the need for organisations to consider the good of the wider communities, local and global, within which they exist in terms of the economic, legal, ethical and philanthropic impact of their way of conducting business and the activities they undertake. 1 See a case study 2 on the creative accounting lecture notes
  2. 2. Generally it is is the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life CSR for an organization means achieving long term growth and profitability while reducing their environmental footprint and meeting the needs of employees and the communities in which the organization operate. This can be depicted in a diagram below The Triple Bottom Line Economic Prosperity Opportunity?? Environmental An Integrated, Balanced Strategic Economic Approach Social Social Environmental Responsibility Stewardship It can be clearly be summarized by a triangular relationship below: Ethical Responsibilities Social Responsibilities Legal Responsibilities Economic Responsibilities
  3. 3. Need for CSR There are number of arguments on the reasons for CSR whereas there are state laws and regulations guiding business practices. On the other hand to counter the argument the law is very slow to much with high pace of innovation impacting upon the business today. Furthermore the law is slow and reactive rather than being proactive. CSR models There are various models to describe the CSR complexity. These can be divided in accordance to time as follows • Premodern o Minimalist o Self Interested • Modern o The social contract • Postmodern o Stakeholder (management and stewardship) The dual responsibility and goal for each of the model position are shown hereunder; Position Responsible to Therefore… Minimalist Stockholders/ Maximizing profit owners Self interested Stockholders/ owners/ cost Do good when furthers quest for “controllers” growth and profit Social contract Those with social and legal Goes beyond law to spirit of contract commitment Stakeholder Those who influence direction Develop responsive strategies Management and fortunes Stakeholder Society as whole / future Solutions for social problems stewardship Minimalist Model The major participants in this model are investors/stockholders and owners/managers. Their focus for change issues is hyper-competition and globalization. Their level of trust grows when performance meet expectation and there is distrust when fails to meet expectation Self Interest Model Participants are