CSR Lecture 12/07/2011

Arguments for and against CSR 1. FOR CSR Failure in performing their social responsibility role is viewed as failure to perform in financial matters by certain investors. Business must realize that social problems can become opportunities, or can even lead to profits. Eg. Adoption of methods to recycle waste can lead to profits in the future. Example ITC Business must be concerned with the public image and the goodwill generated by responsible social actions. 2. AGAINST CSR The primary purpose of business is profit maximization and to have any other purpose is not socially responsible. Business corporations are responsible to shareholders and have no authority to operate in the social area. Social policy is the jurisdiction of government, not business. Business lacks the training and skills in cleaning the social issues. Social responsibility is viewed by some as another excuse to let big businesses to increase their power.

To whom are businesses responsible? -environment -general public -economically backward -socially deprived -----All these and more together are known as Stakeholders What is a stake? interest, right(legal and moral), Definition of stakeholder Individual who possesses a stake. Group or individual who benefit from or harmed by, and whose rights are violated or respected by, corporate action They can be seen as being either external to the organization, or internal. But some may be both!

Business firm (managers) Insurance Agents Distribute products Employees sell labour Stockholders Invest Capital Creditors Lend money Suppliers sell raw materials

But... Some groups can be both internal and external stakeholders Such as staff or shareholders who are also local residents Secondary stakeholders (indicative, not exhaustive): THE GENERAL PUBLIC positive/negative opinions LOCAL COMMUNITIES jobs, environment GOVERNMENTS (CENTRAL/STATE AND LOCAL) regulations/taxes SOCIAL ACTIVIST GROUPS social demands BUSINESS SUPPORT GROUPS MEDIA image/reputation

Attributes of a stakeholder: Legitimacy : refers to the perceived validity of the stakeholders claim to stake Power: refers to the ability or the capacity of a stakeholder to produce an effect. Urgency: refers to the degree to which the stakeholders claim demands immediate attention. Types of stakeholders (bracket items are the attributes possessed by the stakeholder) Latent stakeholder: 1. Dormant stakeholder (power) 2. Discretionary stakeholder (legitimacy) 3. Demanding stakeholder (urgency) Expectant Stakeholder: 1. Dominant stakeholder (power and legitimacy) 2. Dangerous stakeholder (power and urgency) 3. Dependent stakeholders (legitimacy and urgency)

Definitive stakeholders (all three attributes) Mapping stakeholders for sustainability (power/dynamism dependent)

B - Unpredictable but manageable dont know their reaction, but as and when it comes up (keep them informed) C - Powerful but predictable shareholders eg how many times the dividends are paid etc (dynamism is low, just need to keep them satisfied) D greatest danger/opportunity (high dynamism => most management attention, key players, need to keep them happy)

Principles of stakeholder management: the Clarkson Principle Key Questions in stakeholder management Stakeholder/Responsibility Matrix Stakeholders Owners Customers Employees Community Public at large Social Activists Other Economic Legal Ethical Philanthropic