Corporate Social Responsibility

Objectives:
1. Define Corporate Social Responsibility (CSR)
It is also referred as corporate citizenship or corporate conscience
Corporate citizenship is implying that the organization is a responsible citizen in
meeting all its obligations
Corporate conscience is implying that the organization is run with an awareness of its
obligations to society
Thus, Corporate Social Responsibilityis the actions of an organization that are
targeted toward the achievement of a social benefit over and above maximizing for its
shareholders and meeting all its legal obligations
It assumes that the corporation is operating in a competitive environment and
that the managers of the corporations are committed to an aggressive growth
strategy while complying with all of its obligations.
2. Distinguish between the instrumental and social contract approaches to corporate
management
Instrumental Approach is the perspective that the only obligation of a corporation is
to maximize profits for its shareholders in the provision of goods and services that
meet the needs of its customers; Management without conscience.
Miton Friedman argues that it would be unethical for a corporation to do
anything other than deliver the profits for which its investors have entrusted
the corporation
Friedman view of the corporate world supports the rights of individuals to
make money with their investments provided that it is done honestly and it
recognizes the clear legality of the employment contract
Social Contract Approach is the perspective that a corporation has an obligation to
society over and above the expectation of its shareholders; Management by inclusion.
It argues that since the corporation depends on society for its existence and
continued growth, there is an obligation for the corporation to meet demands
of a targeted group of customers
Henry Ford II said that the actions of a corporation impact their customers,
their employees, their suppliers and the community in which they produce and
deliver their goods and services

3. Summarize the five driving forces behind CSR

Transparency:
We live in an information-driven economy where business practices have
become increasingly transparent.
Information like this easy, fast, and free is making it far more practical for
individuals to make split second decisions based on social and environmental
criteria.
Knowledge:
The transition to an information-based economy also means that the
consumers and investors have more information at their disposal than at any
time in history.
The internet enhanced the public's access to information, including
information about social issues and the social & environmental performance
of companies.
Sustainability:
The earths natural systems are in serious and accelerating decline.
Sustainability and responsibility in our systems of production and
consumption is highly encouraged by making purchase decisions based on
social and environmental criteria.

As technology improves, costs for renewable energy and "green" technology

will fall, becoming more attractive to buyers from a cost-benefit perspective.
Globalization:
It represents a new stage of capitalist development, this time without public
institutions to protect society by balancing private corporate interests against
broader public interest.
Globalization has also forced domestic companies to compete like never
before, often with foreign firms that have different core competencies,
resources, and strengths.
Individuals and groups inside and outside of these companies are recognizing
this opportunity and are pressuring firms to carry out this bidding in order to
apply their social values overseas.
The Failure of the Public Sector:
Citizens arguably expect less of government than they used to, having
confidence in the public sector as the best or most appropriate venue for
addressing a growing list of social problems.
Individual citizens or well-organized advocacy groups are turning their
attention to companies, who have the potential to solve many social and

environmental problems directly, without the lag and bureaucracy of

government.
4. Distinguish between the three types of CSR
Ethical CSR
Organizations pursue a clearly defined sense of social conscience in managing
their financial responsibilities to shareholders, their legal responsibilities to
their local community and society as a whole and their ethical responsibility
to do the right thing for all their stakeholders.
This is founded on the belief that the relationship between companies and
their consumers did not have to be an adversarial one and that corporations
should honor social contract with the communities in which they operate and
the citizens they serve.
Altruistic CSR
Organizations take a philanthropic approach by underwriting specific
initiatives to give back to the companys local community or to designated
national or international programs.
This giving back is done with funds that rightly belong to shareholders.

Giving back is at the discretion of the corporation, which places the individua l
shareholders in the awkward position of unwittingly supporting caused they
would not support on their own.
Strategic CSR
Philanthropic activities are targeted toward programs that will generate the
most positive publicity or goodwill for the organization.
Companies can claim to be doing the right thing and on the assumption that
good publicity brings more sales, they also can meet their fiduciary
obligations to their shareholders.
5. Understand the key component of a successful CSR initiative
If an organization commits to CSR initiatives then they must be real commitments
rather than short term experiments.
Customers will not settle for second rate services or product just because there is a
charitable cause involved. Therefore, the companies product and service must meet
and ideally exceed the expectations of their target market, and if they continue to do
CSR for the long term and assuming they have a reasonably competent management
team, the needs of their stakeholders should be well taken care of.