This document discusses concepts of corporate social responsibility and corporate citizenship. It addresses key debates around whether corporations have social responsibilities beyond profit generation for shareholders. It outlines Milton Friedman's argument that corporations only have economic responsibilities and discusses counterarguments that corporations can be morally responsible. The document also discusses stakeholder theory and how corporations affect and are affected by a wide range of stakeholders, not just shareholders. It examines different models of corporate social responsibility and citizenship, from limited views focused on philanthropy to extended views incorporating political and social dimensions.

1. Corporate Responsibility, Stakeholders &
Corporate Citizenship

2. Key features of a corporation
• A corporation is essentially defined in terms
of legal status and the ownership of assets
• Corporations are typically regarded as
‘artificial persons’ in the eyes of the law
• Corporations are notionally ‘owned’ by
shareholders, but exist independently of them
• Managers and directors have a ‘fiduciary’
responsibility to protect the investment of
shareholders

3. Can a corporation have social
responsibilities?
• Milton Friedman’s classic article is “The social
responsibility of business is to increase its
profits” (1970)
• Friedman vigorously argued against the
notion of social responsibilities for
corporations based on three main arguments:
– Only human beings have a moral responsibility for
their actions
– It is managers’ responsibility to act solely in the
interests of shareholders
– Social issues and problems are the proper
province of the state rather than corporate
managers

4. Can a corporation be morally
responsible for its actions?
• Evidence to suggest that legal designation of a
corporation makes it unable to be anything but
self-interested (Bakan 2004)
• Long, complex debate but generally support from
literature for some degree of responsibility
accredited to corporations. Argument based on:
– Every organisation has a corporate internal decision
structure which directs decisions in line with
predetermined goals (French 1979)
– All organisations manifest a set of beliefs and values
that lay out what is generally regarded as right or
wrong in the corporation – organizational culture
(Moore 1999)

5. Why do corporations have social
responsibilities?
• Business reasons (‘enlightened self-interest’)
– Extra and/or more satisfied customers
– Employees may be more attracted/committed
– Forestall legislation
– Long-term investment which benefits corporation
• Moral reasons:
– Corporations cause social problems
– Corporations should use their power responsibly
– All corporate activities have some social impacts
– Corporations rely on the contribution of a wide set of
stakeholders in society, not just shareholders

6. What is the nature of corporate social
responsibilities?
Corporate social responsibility includes the
economic, legal, ethical, and philanthropic
expectations placed on organizations by
society at a given point in time
(Carroll and Buchholtz 2009:44)

7. Carroll’s four-part model of corporate
social responsibility
Philanthropic
Responsibilities
Ethical
Responsibilities
Legal
Responsibilities
Economic
Responsibilities
Desired by society
Expected by society
Required by society
Required by society
Source: Carroll (1991)

8. CSR in an international context
• CSR strong in US. Influence elsewhere is more recent.
This is partly explained by explicit vs. implicit CSR
• Regional differences exist with respect to all CSR levels:
– Economic responsibility
• Focus in USA on shareholders; France has extensive responsibility for
employees; India has tradition of investment in the local community
– Legal responsibility
• State seen in Europe as key enforcer of rules; elsewhere government seen
with more scepticism (e.g. corrupt, interfering with liberty)
– Ethical responsibility
• Wide range of local ethical values & preferences: expectations vary
– Philanthropic responsibility
• Europe tends to compel giving via legal framework; elsewhere (e.g., USA,
India, China), companies are expected to share their wealth.

9. CSR and strategy: corporate social
responsiveness
• Corporate social responsiveness refers to
the capacity of a corporation to respond to
social pressures (Frederick 1994)
• 4 ‘philosophies’ or strategies of social
responsiveness (Carroll 1979)
– Reaction
– Defence
– Accommodation
– Proaction

10. Outcomes of CSR: corporate social
performance
• Outcomes delineated in three concrete areas:
– Social policies
– Social programmes
– Social impacts

11. Stakeholder theory of the firm
• Theory developed by Edward Freeman (1984)
• A stakeholder of an organization is:
– …any group or individual who can affect, or is affected
by, the achievement of the organization’s objectives
(Freeman 1984:46)
• More precise definition of ‘affects’ and ‘affected
by’ (Evan and Freeman 1993)
– Principle of corporate rights - the corporation has
the obligation not to violate the rights of others
– Principle of corporate effect – companies are
responsible for the effects of their actions on others

12. Stakeholder theory of the firm:
Traditional management model
Firm
Shareholders
Customers
Suppliers Employees

13. Stakeholder theory of the firm
Governmen Competitors
Firm
Shareholders
Customers
Suppliers Employees
Civil
society
t

14. Stakeholder theory of the firm:
A network model
Government Competitors
Firm
Shareholders
Suppliers
Supplier
stakeholder
1
Customers
Civil society
Employees
Civil society
stakeholder
2
Civil society
stakeholder
1
Employee
stakeholder
1
Employee
stakeholder
2
Customer
stakeholder
1
Customer
stakeholder
3

15. Why stakeholders matter
• Milton Friedman – businesses should only be
run in the interests of their owners
• Freeman - others have a legitimate claim on the
corporation
– Legal perspective
• ‘Stake’ in corporation already protected legally in some way
(e.g. legally binding contracts)
– Economic perspective
• Externalities – outside contractual relationships
• Agency problem – short term interests of ‘owners’ vs. long
term interests of managers, employees, customers etc.

16. A new role for management
• According to Freeman, this broader view of
responsibility towards multiple stakeholders
assigns a new role to management.
• Rather than simply being agents of
shareholders, management has to take into
account the rights and interests of all
legitimate stakeholders:
– SSttaakkeehhoollddeerr ddeemmooccrraaccyy
– CCoorrppoorraattee ggoovveerrnnaannccee

17. Different forms of stakeholder theory
• Donaldson & Preston (1995):
– Normative stakeholder theory: attempts to
provide a reason why corporations should take
into account stakeholder interests
– Descriptive stakeholder theory: attempts to
ascertain whether (and how) corporations actually
do take into account stakeholder interests
– Instrumental stakeholder theory: attempts to
answer the question of whether it is beneficial for
the corporation to take into account stakeholder
interests

18. Reasons for the political role of the firm
• Government failure
– Risk society thesis
• Rise of ‘subpolitics’
• ‘Organized irresponsibility’
• Corporate power on the rise
– Liberalization and deregulation results in more power
and choice for private actors
– Privatization of ‘public’ services
– Responsible for employment decisions
– Globalization
– Governments increasingly encourage self-regulation

19. The problem of democratic accountability
• Who controls corporations?
• To whom are corporations accountable?
• Key to corporate accountability is
transparency
• Transparency is the degree to which
corporate decisions, policies, activities and
impacts are acknowledged and made visible
to relevant stakeholders

20. Defining corporate citizenship: three
perspectives
• A limited view of CC
– this essentially equates CC with corporate
philanthropy
• An equivalent view of CC
– this essentially equates CC with CSR
• An extended view of CC
– this acknowledges the extended political role of
the corporation in society

21. Commitments to corporate
citizenship
Company Source
BHP
Mining,
Billiton
Australia
Banking &
financial
services, USA
Software, USA
Oil & gas,
France
Citibank
Microsoft
Toyota
CC statement Industry & (emphasis added)
origin
Sustainability
Report, 2008
… The Company’s community investment programs should create sustainable,
long-term value for our host communities and demonstrate the Company’s
citizenship. The critical question in regard to our success is whether we have
managed to leave a lasting positive legacy in the communities where we operate.
2007 Citizenship
Report
We define citizenship as the positive impact that Citi has on society and the
environment through its core business activities, philanthropy, diversity efforts,
volunteerism and public policy engagement, as well as the philanthropic initiatives
undertaken by the Citi Foundation.
CSR Report,
2007
Sustainability
Report, 2008
Microsoft’s endorsement of the UN Global Compact signifies that we are
committed to aligning our business operations and strategies with 10 established
principles […] Principles – which correspond with Microsoft’s global corporate
citizenship values – help guide our efforts to achieve greater accountability and
drive continuous improvement of our business practices.
Total is committed to contributing to the sustainable development of host
communities around the world. In addition to being a normal part of good
corporate citizenship, this policy fosters good relationships with neighbors and
greater acceptance of our operations.
Total
Automobiles,
Japan
Citizenship
Report 2009
The Corporate Citizenship Division was organized in January 2006 as a
specialized division to reinforce corporate social contribution activities and
integrate corporate social contribution functions that had been performed by
multiple divisions.

22. Three views of corporate citizenship
Philanthropy, focused on
projects, limited scope
Local communities,
employees
Primarily philanthropic;
also economic where
citizenship is ‘strategic’
Reciprocity, i.e. ‘putting
something back’
Extended view
Focus
Main
stakeholder
group
Motivation
Moral
grounding
Limited view Equivalent view
Citizenship: social, political and
civil rights
All areas of CSR
Broad range of citizens; society
in general
Broad range of stakeholders
Mixed – economic, legal, Political
ethical, philanthropic
Grounding is not moral, but
comes from changes in the
political arena
Duty to be responsible and
avoid harms to society

23. An extended view of CC
Corporate citizenship
Social role of the corporation in governing citizenship
Social rights corporation as provider/ignorer
Civil rights corporation as dis-/enabler
Political rights corporation as channel/blockage