Corporate Social Responsibility

TOPIC CONTENT
W H AT E N TA I L S C S R
T H E C O R P O R AT E R E S P O N S I B I L I T I E S
CSR VIEWS
MODES OF ETHICS MANAGEMENT
ARGUMENTS FOR AND AGAINST CSR
CASE STUDIES

Muchenje B. UZ
 Corporate Social Responsibility
2

This focuses on what an organization does that

affects the society in which it exists.
It is all about how the organization’s decisions
affect other people.
Corporations are not independent entities
responsible only to stakeholders.
But they also have responsibility to the larger
society that creates and sustains them.
Ethics and social responsibility are concepts that
are fundamentally about the quality of
relationships over time.

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 How do Organizations fit into Society?
3
The fitness is felt from the following:
 The nature of business itself whether it fits the socio-
cultural and legal values of the society.
 Company policies that may be friendly and or
unfriendly to both internal and external the communities
in terms of employment conditions, relationships and
treatment of employees, pricing strategies ,etc.
 Company’s compliance with regulatory requirements.
 Company’s sensitivity and responsiveness to social
needs i.e. are they cooperative or not.
Give practical situations for the above.
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 Ethics and Corporate Reputation
4

The image of an organization over time as seen

through its stakeholders’ eyes is its reputation.
It is the collective opinion of stakeholders towards an
organization based on past record(Nokra, 2005).
Reputation develops as history of interactions between
an organization and its stakeholders.
Kuper (2006) believes that reputation provides one
with information about how an organization is likely to
act and react.
It affords the stakeholders the predictability of what to
expect and mitigates risks as well as reducing the cost
of acquiring trust-related information.
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 The Dimensions of Corporate Responsibility
5

 Economic – responsibility to earn profit for owners

(financial sustainability) that contribute to societal well-
being and create value for a wide range of
stakeholders .
 Legal – responsibility to comply with the law.
 Ethical – not acting just for profit but doing what is
right, just and fair to gain legitimacy and enhance
strategic interests and to honor ethical duties to
society.
 Voluntary and philanthropic – promoting human
welfare and goodwill.
 Being a good corporate citizen, contributing to the
community and the quality of life with stakeholders.
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 Views about CSR
6

 This notion of corporate social responsibility became

a smoke screen for the personal values of a few
powerful individuals since the 1970s. Milton
Friedman, the economist, is one of them.
 His view is known as the Free Market View/
Classical View of CSR
 Socio-economic View/CSR view of Andrew
Carnegie (1835-1919).
 Stakeholder Theory- ‘what you do as a manager in
terms of pursuing social goals depends on the
persons to whom you believe you are responsible.
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 Friedman’s Classical View of CSR
7

 The business of business is business.

 If business are to survive, they must be relieved of
inappropriate social responsibilities and allowed to get
back to basics, i.e. getting money thus the business’
primary responsibility is to maximize profits.
 “ There is one and only social responsibility of
business, i.e. to use its resources and energy in
activities designed to increase its profits so long as it
stays within the rules of the game and engages in open
and free competition , without deception and fraud”.
 There is nothing like a social action but companies who
practice it are using it as a “good marketing hook”.
 NB. The beliefs are that, ‘All that matters is the bottom
line’. ‘Nice guys/girls come second’.
Muchenje B. UZ
 Thought Questions
8

1. To what extent is the Classical View true?

2. Can a business survive independent of the
society?
3. Is profit making the only obligation of a
business?
4. Justify the ethicality of the Economic View.
NB. Find more arguments that support this
Classical View.

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 Andrew Carnegie (1835-1919)’s Socio-Economic/
CSR View
9

 Carnegie applies the Charity Principle to his view

where he requires the more fortunate members of
society to assist its less fortunate members directly
or indirectly.
 He also has the Stewardship Principle that he
derived from the Bible.
 With this he requires businesses to view
themselves as stewards or caretakers of their
property.

Muchenje B. UZ
 Continued
10

 Carnegie’s idea is that the rich hold their

money “in trust” for the rest of the society and
can use it for any purpose that society deems
legitimate.
 CSR represents “the integrity with which a
company governs itself, fulfills its mission, lives
by its values, engages with stakeholders,
measures its impact and reports on its
activities”.

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 Socio-economic View Arguments
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 CRS is an obligation beyond that required by the

law and economics for a firm to pursue long term
goals that are good fro society.
 It is about how a company manages its business
process to produce an overall positive impact on
society.
 Focusing on what an organization does that
affects the society in which it exists.

Muchenje B. UZ
 Thought Questions
12

1. What are other arguments for the Socio-

Economic View?
2. How can do organizations balance their
interests and those of their stakeholders?
3. How much power does the society have over
the businesses?
4. What kind of relationship must exist between
organizations/ corporates and their societies?

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 The Stakeholder Theory
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 This says, ‘what you do as a manager in terms of

pursuing social goals depends on the persons to
whom you believe you are responsible.
 With this theory social responsibility develops as
a continuum that has four stages:

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 Stage 1
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 Managers will promote the shareholders’

interests by seeking to minimize costs and
maximize profits. (Friedman's Classical View)

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 Stage 2
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 Managers will accept responsibility to their

employees by improving working conditions,
expanding employee rights, improving employee
benefits, increasing job security, etc. (who is
benefiting who?)

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 Stage 3
16

 Managers will expand their goals to include fair

prices, high quality products and services, safe
products, good supplier relations and other
similar practices.
 The perception is that managers can meet their
responsibilities to shareholders only indirectly by
meeting the needs of their constituents. (good
marketing hook).

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 Stage 4
17

 Managers see their business as a public property

and are responsible for advancing the public
good, justice and preserved environment and
support social and cultural activities even if such
actions negatively affect their profits, (Socio-
economic view).

Muchenje B. UZ
 Thought Questions
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1. To what extent does the continuum fulfil the

stakeholders’ interests and expectations?
2. What other arguments are there for the
Stakeholder Theory?

Muchenje B. UZ
 Modes of Ethics Management
19
Rossouw and Vuuren (2003) believe that there are six modes of ethics
management.
A mode is the manner in which an organization manages its ethics in an given
situation.
These are:
1. Amoral mode-The amoral management approach is neither immoral nor
moral but, rather, ignores or is oblivious to ethical considerations.
There are two types of amoral management:
 Intentional: A moral managers do not include ethical concerns in their decision
-making, or behaviour, because they basically think that general ethical
standards are more appropriate to other areas of life than to business.
 Unintentional: Amoral managers also do not think about ethical issues in their
business dealings, but the reason is different. These managers are basically
inattentive or incentive to the moral implications of their decision-making,
actions, and behaviour.
 Overall amoral managers pursue profitability as a goal and may be generally
well meaning, but intentionally or unintentionally they pay little attention to the
impacts of their behaviours on others.

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 Characteristics of Managerial Ethics

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 Reactive mode
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The company responds to social issues only after it has challenged

company goals.
 The reactive mode is prompted by awareness that something needs to
be done in order to avoid the risk and consequences of unethical
conduct.
 PURPOSE: Organisations fear rejection from their stakeholders
therefore they protect themselves against the consequences of
unethical behaviour.
 MANAGEMENT STRATEGY: Some organisations may use strategic
planning sessions resulting in the generation of a number of corporate
ethical values. Although these values signal a commitment to integrity,
respect and organisational ethics, they may not have the force to create
an ethical context in which employees can operate.
 CHALLENGES: There may be a gap between ‘talking and walking'
ethics; this leads to serious credibility problems with stakeholders. In the
absence of the security and predictability that an ethical context can
provide for employees, the organisational morale may be fragile.

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 THE COMPLIANCE MODE
22
This represents a substantial move away from the
reactive mode. Organisations commit themselves
to monitoring and managing their ethics
performance and ensuring that all members of the
organisation abide by the ethical standards of the
organisation.
When deviation from the code of ethics occurs, the
company takes corrective action by disciplining or
penalizing the transgressors.
PURPOSE: The managerial purpose of the
compliance mode is to prevent unethical behaviour
by the business.

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 Totally Aligned/Accommodative Mode
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Companies that take an accommodating approach

abide by legal requirements and are ethical at the
same time. This means they are open to sharing facts
and they don't try to hide things from the public.
The company brings itself into line with government
requirements and public opinion by being progressive.
Organization wishing to integrate ethics seamlessly
into the purpose, mission and goals of the organization
Reinforce ethics as part of the company's culture and
purpose.
A TAO strategy is about congruence between the
purpose, vision and ethical values of the organization.

Muchenje B. UZ
 Continued:
24

Defensive mode- This is whereby the company

acts to ward off a challenge i.e. the company does
only what is required and nothing more.
Proactive mode-This is whereby a company
anticipates demands that have not yet been made
i.e. leading the industry.

Muchenje B. UZ
 Thought Questions
25

1. In which circumstances can each mode apply?

2. Which companies are popular for a particular
mode of ethics management in Zimbabwe?
3. What are your comments on the ethics
management modes that can be adopted by
organizations?

Muchenje B. UZ
 Is CSR the same as Business Ethics?
26

 There is clearly an overlap between the two.

 Both concepts concern values, objectives and
decisions based on something than the pursuit of
profits.
 Socially responsible firms must act ethically.
 Ethics concern individual actions which can be
assessed as right or wrong by reference to moral
principles.
 It is the ethical values and standards(good) that
guide the business(self) in its interaction with
stakeholders(others).
 CSR is about the organization’s obligations to all
stakeholders and not just shareholders.
Muchenje B. UZ
 Thought Questions
27

1. Is CSR an obligation for organizations?

2. What are the merits and demerits of practising
CSR?

Muchenje B. UZ