Lecture Business and society: Stakeholders, ethics, public policy (14/e): Chapter 3 - Anne Lawrence, James Weber

Chapter 3 - Corporate social responsibility. Learning objectives of this chapter: Understanding the role of big business and its responsible use of corporate power in a democratic society, knowing when the idea of social responsibility originated and the phases through which it has developed, investigating how a company’s purpose or mission can integrate social objectives with economic objectives,...

Chapter 3

Corporate Social

Responsibility

Ch 3: Key Learning Objectives

use of corporate power in a democratic society

and the phases through which it has developed

integrate social objectives with economic objectives

social responsibility

solving social problems

poorest members

Corporate Power and Responsibility

 Corporate power refers to the capability of corporations

to influence government, the economy, and society,

based on their organizational resources

 The tremendous power of the world's leading

corporations has both positive and negative effects

 Positives include commanding more resources, producing at

lower costs, planning further into the future, and bring new

products, technologies, and economic opportunities to

developing societies

 Negatives include disproportionate influence on politics, shape

tastes, dominate public discourse, divide markets, and squash

competition

Corporate Power and Responsibility

 Iron law of responsibility says that in the long run,

those who do not use power in ways that society

considers responsible will tend to lose it

 Given the virtually immeasurable power in the hands of

the leaders of large, global corporations, stakeholders

throughout the social system expect business to take

great care in wielding its power responsibly for the

betterment of society

The Meaning of

Corporate Social Responsibility

 A corporation should act in a way that enhances society

and its inhabitants and be held accountable for any of

its actions that affect people, their communities, and

their environment

 It implies that harm to people and society should be

acknowledged and corrected if at all possible

 It may require a company to forge some profits if its

social impacts seriously hurt some of its stakeholders or

if its funds can be used to have a positive social impact

The Origins of

Corporate Social Responsibility

 In the United States, the idea of corporate social

responsibility appeared around the start of the 20th

century

 Faced with social protest, a few farsighted business

executives advised corporations to use their power and

influence voluntarily for broad social purposes rather

than for profits alone

Phases of Corporate Social

Responsibility

 Frederick provides expanded framework for

understanding the evolution of CSR concept

 Divided into 4 phases:

 Corporate social stewardship, 1950s – 1960s

 Corporate social responsiveness, 1960s – 1970s

 Corporate/business ethics, 1980s – 1990s

 Corporate/global citizenship, 1990s – 2000s

Balancing Multiple Responsibilities

 Multiple responsibilities of business include

 Economic responsibilities

 Social responsibilities

 Legal responsibilities

 Challenge is to balance all three

 Successful firm is one which finds ways to meet each of

its critical responsibilities and develops strategies to

enable the obligations to help each other

Enlightened Self-Interest

 Economic and social goals come together in

companies that practice enlightened self-interest

 Means firm leadership can see it is in the company’s

self-interest in the long term to provide true value to its customers, to help its employees grow and behave responsibility

 Scholars have debated the related question: Do

socially responsible companies sacrifice profits by

promoting the social good?

 Studies comparing CSR with firm performance shows there

is a moderately positive association between the two factors

 Corporate social and environmental responsibility is likely to

pay off

The Corporate Social Responsibility Debate

Figure 3.3

The Social Enterprise

 A business that adopts social benefits as its core

mission

 An organization that uses business strategies for the

purpose of improving human and environmental

well-being

 Its primary purpose is not to maximize returns to

shareholders

 It can be large and established or small and new

Social Entrepreneurship

 Individuals who—like traditional entrepreneurs—act

boldly to pursue opportunities, attract support, and

build new organizations to create and sustain social

rather than economic value

 When a person or group of people identify a social

need and use their entrepreneurial skills to address

this need, this process is called social

entrepreneurship

The B Corporation

 Also called a “benefit corporation” - a new type of

corporation that seeks to blend its social objectives

with financial goals

 A B Corporation must prove its socially responsible

by meeting the B Lab standards

 B Lab is a non-profit organization that assesses a

corporation’s social and environmental performance standards

Serving the Bottom of the Pyramid

 The term bottom of the pyramid refers to the poorest

people in the world—nearly 4 billion who earn less

than $2.50 per day

 Business can carry out its responsibility to society by

bringing products and services to these underserved

people

 Example: Grameen Bank uses microfinance to

serve the bottom of the pyramid

 microfinance occurs when financial organizations provide

loans to low-income clients or solidarity lending groups who traditionally lack access to banking or related services