Changing paradigms of corporate social responsibility
Jayashree Sadri and Sorab Sadri 1CHANGING PARADIGMSOFCORPORATE SOCIAL RESPONSIBILITYProfessor Jayashree SadriandDr Sorab Sadri
Jayashree Sadri and Sorab Sadri 2BASIS This program is an extension of theargument in Sadri, Jayashree andAjgaonkar Geometry of HR (2002) andextended in Jayashree, Sadri and DastoorTheory and Practice of Managerial Ethics(2008). It has borrowed from sopme doctoral workconducted under the guidance of Dr Sadribetween 2004 and 2008
Jayashree Sadri and Sorab Sadri 3SOME BASICS Theory is an abstraction of reality thatseeks to explain reality. If a theory doesnot explain reality it is a quasi theory, ameta theory or not a theory at all. The distinction between theory andpractice thus disappears.
Jayashree Sadri and Sorab Sadri 4PARADIGM The noted philosopher Thomas Kuhn gavethis word its contemporary meaning whenhe adopted it to refer to the set ofpractices that define a scientific disciplineduring a particular period of time His work The Theory of ScientificRevolutions (1962) in truly path breaking.
Jayashree Sadri and Sorab Sadri 5SHIFTING POSITIONS Paradigm shift is the term first used byThomas Kuhn in his bookThe Structure of Scientific Revolutions todescribe a change in basic assumptionswithin the ruling theory of science. It is incontrast to his idea of normal science.
Jayashree Sadri and Sorab Sadri 6ELEMENTS OF A PARADIGMKuhn defines a scientific paradigm as: what is to be observed and scrutinized, kind of questions that are supposed to be asked andprobed for answers in relation to this subject, how these questions are to be structured, how the results of scientific investigations should beinterpreted
Jayashree Sadri and Sorab Sadri 7OUR INQUIRY Based on a detailed review of publishedliterature and some on going doctoralresearch, we examined the variouselements of the paradigm of CSR. This led us to conclude that there was avisible shift.
Jayashree Sadri and Sorab Sadri 8UNDERSTANDING C. S. R. Corporate Social Responsibility is not the latestbullet or business fad, it is not a philanthropicidea. It is an international imperative for bothbusiness and the countries we are operating in. Maureen C. Shaw, President & CEO (2005) IAPA (Industrial Accident PreventionAssociation)
Jayashree Sadri and Sorab Sadri 9Some Concepts in Business Society InterfaceCorporate Social Responsibility (Bowen, 1953)Corporate Social Performance (Carroll, 1979)Corporate Citizenship (Altman,1998)Corporate Social Responsiveness (Frederick, 1986)Triple Bottom Line & Sustainability (Elkington,1998)
Jayashree Sadri and Sorab Sadri 10Linkages in Corporate ManagementSource: CSR Quest
Jayashree Sadri and Sorab Sadri 11CONCEPT OF CSR The concept of CSR has its origins in the Book by HaroldBowen – Social Responsibilities of the Businessmanwhom Carroll (1999) takes to be the father of CSR CSR concept is primitive to all other concepts inbusiness society interface field (Carroll,1999).
Jayashree Sadri and Sorab Sadri 12VARIED PERCEPTIONS OF CSR CSR means something, but not always the samething to every body. To some it conveys the ideaof legal responsibility or liability ; to others itmeans socially responsible behavior in theethical sense ; to still others the meaningtransmitted is that of responsible for in a causalmode ; many simply equate it with charitablecontributions ;a few see it as a sort of fiduciaryduty imposing higher standards of behavior onbusinessman than on citizens at large (Votow,1972 )as quoted by Elisabet Garriga et al (2004)
Jayashree Sadri and Sorab Sadri 13VARIED PERCEPTIONS OF CSR An eclectic field with loose boundaries;broadly than focused, multidisciplinary;wide breadth; brings in wider range ofliterature ;and interdisciplinary (Carroll,1994) The very nature of CSR has led to aplethora of approaches and definitions ofthe concept.
Jayashree Sadri and Sorab Sadri 14SOME DEFINITIONS OF CSR "decisions and actions taken for reasons at least partiallybeyond the firms direct economic or technical interest."Davis (1960) "problems that arise when corporate enterprise casts itsshadow on the social scene, and the ethical principles thatought to govern the relationship between the corporationand society" Eells and Walton (1961) . "The basic idea of corporate social responsibility is thatbusiness and society are interwoven rather than distinctentities; therefore, society has certain expectations forappropriate business behavior and outcomes." Wood(1991)
Jayashree Sadri and Sorab Sadri 15SOME DEFINITIONS OF CSR Situations where the firm goes beyond complianceand engages in ‘actions that appear to further somesocial good, beyond the interests of the firm and thatwhich is required by law’ McWilliams and Siegel(2001) "The CSR firm should strive to make a profit, obeythe law, be ethical and be a good corporate citizen.”Carroll (1999).
Jayashree Sadri and Sorab Sadri 16IMPORTANT APPROACHES TO CSR ‘Government’s job is not business, and business’s job is notgovernment’ Theodore Levitt (1958). The neo-classical view of the firm that essentially states thatmaximizing shareholder value is pre-eminent and CSR is irrelevant.Milton Friedman (1962) The stakeholder view espoused by R Edward Freeman (1984) thatmanagers must satisfy a variety of constituents (e.g. workers,customers, suppliers, local community organizations) who caninfluence firm outcomes. Donaldson and Davis, (1991) proposed the stewardship theory basedon the idea that there is a moral imperative for managers to ‘do theright thing’, without regard to how such decisions affect firm financialperformance. Archie Carroll (1999) took a community service view of CSR Recent theories of CSR (Baron (2001), McWilliams and Siegel (2001),Bagnoli and Watts (2003) assert that firms engage in “profit-maximizing” CSR
Jayashree Sadri and Sorab Sadri 17IMPORTANT APPROACHES TO CSR Stakeholders outside the stockholder group areviewed as means to the ends of maximizingshareholder wealth (Kenneth Goodpaster, 1996). The idea is that while being socially responsibleoften entails short-run sacrifice and even pain, itusually ultimately results in long-long-gain.Expenditures on strategic CSR activities shouldproperly be viewed as investments in a “GoodwillBank” (Vaughn, 1999) which yields financialreturns (McWilliams and Siegel, 2001).
Jayashree Sadri and Sorab Sadri 18THE LOGIC Scholars have traditionally disassociatedethics from business (both philosophicallyand empirically) while stressing that thepractice of business ethics is amanagement option based on a givenvalue system of the corporate entity. We have questioned this position.
Jayashree Sadri and Sorab Sadri 19OUR DEFINITIONAL PREMISEWE HAVE SOUGHT TO DEFINE OURPOSITION BASED ON THREE PREMISES Approach : Shareholder Primacy Vs StakeholderManagement Nature: Voluntary / Obligatory / Mandatory Motive: Moral Duty (Altruistic) Vs Competitiveadvantage (Strategic)
Jayashree Sadri and Sorab Sadri 20TWO FUNDAMENTAL APPROACHES• CSR is defined as a voluntary verifiable continuingcommitment by business to contribute to development of thequality of life of the stakeholders and society at large. CSR elements Social Welfare Stakeholder management Voluntary Nature It is the moral duty of business regardless of the impact itwould have on the firm profitability (Normative Altruisticapproach) CSR helps corporations gain some competitive advantage andcan be strategically used to gain competitive advantage(Positive Strategic Approach)
Jayashree Sadri and Sorab Sadri 21ALTRUISTIC APPROACH Corporate constitutionalism focusing on a responsible use ofbusiness power. Social responsibilities of businesses arisefrom the amount of social power that they have Davis (1960,1967) Integrative Social Contract Theory Assumes that a socialcontract between business and society exists Donaldson andDunfee (1994, 1999) Corporate (or business) citizenship where a firm is understoodas being like a citizen with certain involvement in thecommunity Wood and Lodgson (2002), Matten and Crane(2005) CSP theories Search for social legitimacy and processes togive appropriate responses to social issues Carroll (1979),Wartick and Cochran (1985), Wood (1991) Stakeholder normative theory Considers fiduciary dutiestowards stakeholders of the firm. Its application requiresreference to some moral theory (Kantian, Utilitarianism,theories of justice, etc.) Freeman (1984, 1994), Evan andFreeman (1988), Donaldson and Preston (1995)
Jayashree Sadri and Sorab Sadri 22STRATEGIC APPROACH Maximization of shareholder value, Long-term valuemaximization Friedman (1970), Jensen (2000) Social investments in a competitive context Porter andKramer (2002) Strategies based on the natural resource view of the firmand the dynamic capabilities of the firm Hart (1995) Strategies for the bottom of the economic pyramid PrahaladPrahaladand Hammond (2002), Prahalad (2003)and Hammond (2002), Prahalad (2003) Cause-related marketing Altruistic activities, sociallyrecognized, used as an instrument of marketingVaradarajan and Menon (1988), Murray and Montanari (1986) Strategic CSR Baron (2001), McWilliams and Segel (2000)
Jayashree Sadri and Sorab Sadri 23DEFINING ALTRUISTIC CSR According to Lantos (2001) the term altruistic or humanitarianCSR suggest genuine optional caring, even at possiblepersonal or organizational sacrifice. Humanitarian CSR is Carroll’s “fourth face” of CSR—philanthropic responsibilities—to be a “good corporate citizen”by “giving back” to society, furthering some social good,regardless of whether the firm will financially reap what it hasspiritually sown. It demands that corporations help alleviate“public welfare deficiencies” (Brenkert, 1996) The most basic justification for Altruistic CSR is the socialcontract argument that “Business is a major social institutionthat should bear the same kinds of citizenship costs for societythat an individual citizen bears” (Davis, 1983) Unlike strategic CSR, where it is believed that the money putinto good works will yield a return on investment for thebusiness, with altruistic CSR this is not the motive (althoughthe firm could conceivably benefit as a byproduct).
Jayashree Sadri and Sorab Sadri 24DEFINING STRATEGIC CSR Strategic CSR or “strategic philanthropy” (Carroll, 2001) is done toaccomplish strategic business goals—good deeds are believed to begood for business as well as for society. With strategic CSR,corporations “give back” to their constituencies because they believeit to be in their best financial interests to do so. This is “philanthropyaligned with profit motives” (Quester and Thompson, 2001) socialgoals might be profitable in the long run since market forces providefinancial incentives for perceived socially responsible behavior.
Jayashree Sadri and Sorab Sadri 25STRATEGIC VS ALTRUISTIC CSR What distinguishes Strategic CSR and AltruisticCSR is the motive of the managers adoptingCSR. If the motive is gaining some kind ofadvantage for the company, it is strategic CSRand absence of any such motive would classifythe CSR programmes as altruistic CSR.
Jayashree Sadri and Sorab Sadri 26SHIFTING PARADIGMS:FROM ALTRUISTIC TOSTRATEGIC: Evidences in Literature Review of literature suggest globally there is astrong trend towards strategic CSR. Indian CSR has traditionally been altruistic in naturebut there are indications of a shift towards strategicintent. The Indian CSR approach has been shiftingfrom the purely normative philanthropic CSR tostakeholder engagement and strategic use of CSR(Chahoud et al ,2007) Boatright (2000) States that the wisdom of strategicCSR is seen in the fact that some of the mostsuccessful corporations are also among the mostsocially responsible.
Jayashree Sadri and Sorab Sadri 27SHIFTING PARADIGMS:FROM ALTRUISTICTO STRATEGIC: Further Evidences inLiterature Carroll (2001) argues that due to belt tighteningand increased pressure on accountability forexpenditures, the trend will likely be towardsfunding those good works expected to financiallybenefit the companies. Geoffrey P Lantos (2001) while making a case orstrategic CSR argues that in view of the risingpublic expectations for corporate good works,returns to strategic CSR should rise. He stronglyemphasized the need to identify criticalstakeholders and CSR practices which wouldfurther the strategic interests of the companies
Jayashree Sadri and Sorab Sadri 28CHANGING PERSPECTIVESON CSR Author Perspective Year 1953 Bowen Altruistic1970 Davis Altruistic1984 Freeman Altruistic1991 Wood Altruistic1995 Donaldson and Preston Strategic and Altruistic1995 Jones Strategic1995 Hart Strategic2001 Baron Strategic2001 McWilliams and Siegel Strategic2003 Bangoli and Watts Strategic
Jayashree Sadri and Sorab Sadri 29SHIFTING PARADIGMS:FROM ALTRUISTIC TO STRATEGIC(Evidences from Industry) CSR Survey 2002 India ITCs e-Chaupal initiative HLLs ( HUL) Packaging revolution Gramin Bank, Bangladesh
Jayashree Sadri and Sorab Sadri 30THE CONTINUUM OF CSR FROM ALTRUISTIC TO STRATEGIC Corporate Charity Corporate Philanthropy The Good Corporate Citizen CSR as a select strategy Strategic CSRCharity Strategic CSRCompany ($) Society Company ($) Society($)
Jayashree Sadri and Sorab Sadri 31REASONS FOR THE SHIFT Legitimacy Sustainability Efficiency and Effectiveness
Jayashree Sadri and Sorab Sadri 32Conclusions Given the changing form and content ofmarket competition, CSR is no longer amanagement option but a strategicimperative. Corporate strategists have realized this andare integrating CSR in their core businessstrategy. The distinction between ethics and businessdisappears with the advent of strategic CSR.
Jayashree Sadri and Sorab Sadri 33So What role do you like to you can play inpromoting CSR? What role do you feel you can play in promotingCSR? What occasions this gap? Thank You