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2 -Literature Review

2 -Literature Review

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Published by: bhagaban_fm8098 on Mar 11, 2011
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02/05/2013

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CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
This chapter presents theoretical framework in relation to corporate socialresponsibility and financial performance. It further describes the relationship betweencorporate social responsibility and financial performance, prior empirical researcheson corporate social responsibility and financial performance as well as the Sri Lankancontext in relation to corporate social responsibility. This chapter helps to get a clear understanding of the theoretical background lies behind the research topic.
2.2 Corporate Social Responsibility
Corporate social responsibility is not as simple as it sounds. The world businesscouncil for sustainable development in its publication (2001) “making good businesssense” by Lord Hlme and Richerd Wattes used the following definition, “CSR is thecontinuing commitment by business to behave ethically and contribute to economicdevelopment while improving the quality of life of the workforce and their families aswell as of the local community and society at large”. The same report gave someevidence of different perceptions of what this should mean from a number of societiesacross the world.There is no universally accepted definition for CSR. Selected definitions by CSR organizations and actors include, "CSR is about how companies manage the businessprocesses to produce an overall positive impact on society”, Mallen Baker (2007)."CSR is a company’s commitment to operating in an economically, sociallyand environmentally sustainable manner whilst balancing the interests of diversestakeholders", CSR Asia (2007).
 
"Corporate social responsibility is the commitment of businesses to contribute tosustainable economic development by working with employees, their families, thelocal community and society at large to improve their lives in ways that are good for business and for development," International Finance Corporation (2008). “Thecorporate social responsibility is a concept whereby companies integrate social andenvironmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis," The European Commission (2001).Definitions vary from being defined as “CSR is about capacity building for sustainable livelihoods. It respects cultural differences and funds the businessopportunities in building the skills of employees, the community and the government”from Ghana, through to “CSR is about business giving back to society” from thePhilippines.In the United States, CSR has been defined traditionally much more in terms of aphilanthropic model. Companies make profits unhindered except by fulfilling their duty to pay taxes. Then they donate a certain share of the profits to charitable causes.It is seen as tainting the act for the company to receive any benefit from the giving.The European model is much more focussed on operating the core business in asocially responsible way, complimented by investment in communities for solidbusiness case reasons.Therefore, corporate social responsibility (CSR) is a concept which encouragesorganizations to consider the interests of society by taking responsibility for theimpact of the organization's activities on customers, employees, shareholders,communities and the environment in all aspects of its operations. This obligation isseen to extend beyond the statutory obligation to comply with legislation and seesorganizations voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large.8
 
2.3 Evolution of Social Responsibility
In the United States, the idea of corporate social responsibility appeared in the earlypart of the twentieth century, amid growing concerns about large corporations andtheir power. The ideas of charity and stewardship helped to shape the early thinkingabout CSR in the United States. Some of the wealthier business leaders became greatphilanthropists who gave much of their wealth to educational and charitableinstitutions and developed paternalistic programs to support the recreational andhealth needs of their employees. These business leaders believed that business had aresponsibility to society that went beyond or worked in parallel with their efforts tomake profits.The term CSR itself came in to common use in the early 1970s although it wasseldom abbreviated. The term stakeholder, meaning those impacted by anorganization's activities, was used to describe corporate owners beyond shareholdersfrom around 1989. As a result of the early ideas about business’s expanded role insociety, two broad principles emerged.They are charity principle and stewardship principle. These principles have shapedbusiness thinking about social responsibility during the twentieth century. They arethe historical foundation stones for the modern idea of corporate social responsibility.
2.3.1 The charity principle
The idea that the wealthier members of society should be charitable towards those lessfortunate is a very ancient notion. Royalty through the age have been expected toprovide for the poor. The same is true of those with vast holding of property, from thefeudal times to present time. When wealthy business leaders endowed public libraries,supported settlement houses for poor, gave money to educational institutions, andcontributed fund to many other community organizations, they were continuing thislong tradition of being “my brother’s keeper”.9

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