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Advanced Readings in

Management
Muhammad Atiq (PhD)
Corporate Social Responsibility
(CSR)
The basic questions before
discussing CSR
What do we mean by business?

Do businesses have any social
responsibilities?

If yes, what are the social
responsibilities of businesses?
CSR: Evolution and Definition
In modern times, the seminal work of Howard
R. Bowen Social Responsibilities of the
Businessman (1953)
It refers to the obligations of businessmen to
pursue those policies, to make those decisions,
or to follow those lines of action which are
desirable in terms of the objectives and values
of our society (Bowen, 1953, p. 6)
Businessmen apply social responsibility when
they consider the needs and interest of others
who may be affected by business actions. In so
doing, they look beyond their firms narrow
economic and technical interests (Davis and
Blomstrom, 1966, p. 12)
CSR: Evolution and Definition
Friedman (1962, 1970) argued that business
has no social responsibility other than
generation of profits and obeying the law

The most widely adopted and debated
definition of CSR is given by Archie B. Carroll
who defines CSR as:
The social responsibility of business
encompasses the economic, legal, ethical, and
discretionary expectations that society has of
organizations at a given point in time (Carroll,
1979, p. 500)

CSR: Evolution and Definition
Economic: generating employment and profits
Legal: obeying the law (e.g. minimum wage)
Ethical: Doing what is fair, just and right (e.g.
respecting people, providing good quality
products etc.)
Discretionary: mainly philanthropic
contributions like building schools, cash
donations to hospitals etc.

Most controversial of all is discretionary
responsibility as its limits are vague


CSR: Evolution and Definition
In 1984, Freeman published his seminal work
Strategic Management: A Stakeholder
Approach
In 1990s, the publications on CSR increased
and it started gaining momentum
Primarily, stakeholder theory remained the
focus of CSR publications
The late 1990s saw a great shift in the policies
of corporate managers
The adoption of CSR started with a belief that
businesses were having a negative impact on
the natural environment
CSR: Evolution and Definition
In 2002, Michael Porter and Mark Kramer
introduced the notion of Strategic Philanthropy
In 2006, they introduced the concept of
Strategic CSR

Despite its significance, there is no single
commonly agreed upon definition of CSR
(Turker, 2009)

CSR clearly means different things to different
people in different countries (Frynas, 2009, p.
4)

CSR: Evolution and Definition
Dahlsrud (2008) analyzed 37 definitions of CSR
and concludes that CSR has five dimensions:
Environmental dimension, social dimension,
economic dimension, stakeholder dimension and
voluntariness dimension

In 2013, Atiq and Karatas-Ozkan introduced the
term SCSR in place of strategic CSR

SCSR entails linking opportunity-centred approach
to CSR in order to extract both corporate and
social value simultaneously

CSR: Evolution and Definition
Atiq (2014) defines CSR in the context of Pakistan
as:
Such corporate initiatives that educate stakeholders
on important aspects of personal and business well-
being, focus on the quality of product, provide relief
and assistance to employees in time of need and
contribute towards the development and uplift of
society in general, can be termed as CSR.
Critique of CSR
CSR critics claim that the corporate sector is
involved in green washing rather than CSR (Hess
and Warren, 2008)

Green washing: The practice of highlighting good
eco-friendly and social aspects of operations in
order to green wash significantly worse social and
non eco-friendly aspects of CSR

Rather than focusing on key societal issues,
corporations attempt to define CSR simply in
terms of philanthropic activities and voluntary
community involvement projects (Shamir, 2004;
2005)
Rationale for CSR

Businesses have to engage in CSR because
government, activists, and the media are closely
scrutinizing the social and environmental
consequences of business activities (Porter and
Kramer, 2006)

CSR produces reputational gains that ultimately
lead to the creation of competitive advantage
(Fombrun et al., 2000)

Reputational gain = the market value of the
company in excess of its liquidation value and
intellectual capital



Rationale for CSR
CSR acts as an opportunity platform as well as
helps tone down the risks faced by the corporation
(Fombrun et al., 2000)

CSR can be a vehicle for differentiation and thus
competitive advantage (Gelbmann, 2010)

Pivato et al. (2008) maintain that consumer trust,
improved reputation, increased customer
satisfaction, and clear differentiation from
competitors are the benefits of engaging in socially
responsible practices
Stakeholder Theory

Stakeholder theory is the most widely used theory
of explaining corporate responses to social
problems (Frynas, 2009; Atiq and Karatas-Ozkan,
2013)

Donaldson and Preston (1995, p. 67) define
stakeholders as persons or groups with legitimate
interests in procedural and/or substantive aspects
of corporate activity

Clarkson (1995) defines stakeholders as persons or
groups that have, or claim, ownership, rights, or
interests in a corporation and its activities, past,
present, or future (p. 106)


Stakeholder Theory
Clarkson (1995) classifies stakeholders as primary
and secondary stakeholders

Those stakeholders are primary stakeholders on
whom the corporation depends for its survival and
without whose support it cannot continue its
operations
Customers, employees, suppliers, shareholders,
the Government, and the community

Secondary stakeholders are those on whom the
corporation does not depend for its survival
Media and special interest groups
Stakeholder Theory
Freemans work is considered the most
influential work on stakeholder theory

Freeman (1984) contends that organizations
should operate by taking into account the
often conflicting needs and demands of
stakeholders and attempt to balance the
conflicting interests of stakeholders

Creation of value for stakeholders will lead to
the creation of value for shareholders



Stakeholder Saliency
Stakeholders possessing three attributes, namely
power, legitimacy and urgency are considered more
important by managers than other stakeholders
(Mitchell et al., 1997)

Power means the ability to bring about change that
one desires

Legitimacy refers to socially accepted and
expected structures or behaviours (ibid, p. 866)
Stakeholder Saliency
Urgency can be described as the degree to which
stakeholder claims call for immediate attention
(ibid, p. 867)

Power and legitimacy combine to create authority
and urgency brings dynamism to the stakeholder-
manager relationship

Government is the most salient stakeholder
followed by owners and customers out of 10
relevant environmental stakeholders in Spains
manufacturing sector(Gago and Antolin, 2004)
Balancing Stakeholder Interests
To examine and address the issue of distributing
corporate resources among the stakeholders
(Reynolds et al., 2006)

Resources are not easily divisible and managers
give relatively unequal importance to
stakeholders(Mitchell et al., 1997)

Corporations accord attention to only a few
stakeholders because of impractability of balancing
interests, corporate priorities, focus on short-term
objectives, limited resources and competitive
pressures (Jamali, 2008)
Critique of Stakeholder Theory
Balancing stakeholder interests is impractical
because the number of those who affect or are
affected by the corporation is infinite (Sternberg,
1997)

Sternberg (1997) contends that there might be
difference of opinion among the members of the
same stakeholder group as to what constitutes
benefit for them

Stakeholder theory violates the agency theory of
the firm by requiring that the assets of the firm be
used for the benefit of all stakeholders (ibid)
Critique of Stakeholder Theory
By gaining the confidence of stakeholders, managers
may indulge in pursuing items of self-interest, which
may go un-noticed (Cennamo et al., 2009)

Managers may over-invest in social initiatives, which
may lead to a deterioration in the competitive
positioning of the firm (ibid)

On these grounds, Cennamo et al. (2009) claim that
engaging in stakeholder management can have invisible
costs

Stakeholder theory focuses on stakeholder pressures
and prescribes a reactive behaviour for corporations
(Frynas, 2009)
Theory of Strategic CSR
(SCSR)
Corporations should take a pro-active stance to
the needs of society because of:
Increased Competition
Increased globalization enabled by rapid
changes in technology
Changing customer preferences

Corporations need to have an entrepreneurial focus
on their social responsibility initiatives

The goal of SCSR is to create shared value
SCSR
Strategic CSR approach originally developed by
Burke and Logsdon (1996)
Corporate social responsibility (policy, programme
or process) is strategic when it yields substantial
business-related benefits to the firm, in particular
by supporting core business activities and thus
contributing to the firms effectiveness in
accomplishing its mission (Burke and Logsdon,
1996, p. 496)

SCSR has five dimensions:
Central to the firms mission, specific to the firm,
makes the firm positively visible, is pro-active and
voluntary
SCSR
CSR initiatives should be aligned with the strategic
goals and resources of the corporation, in order to
achieve both corporate and social benefits
(McAlister and Ferrell, 2002)

Theory of SCSR further developed by Porter and
Kramer (2002; 2006; 2011)
Shared value is an outcome of engaging in SCSR
practices
Stakeholders cannot understand business
complexities, the trade-offs it has to make, the
competitive context and business capabilities
CSR initiatives should be highly relevant to the
operations and strategies of the corporation
SCSR
SCSR can have benefits for the corporation in terms
of good reputation, cost reduction, increased sales,
product differentiation and attracting highly
qualified employees (Husted and Salazar, 2006)

Jamali (2007) finds that two out of the eight
companies examined n Lebanon are engaged in
Strategic philanthropy only

She limits her conceptualization of SCSR to
strategic philanthropy only

SCSR
Atiq and Karatas-Ozkan (2013) link opportunity-
centred approach of entrepreneurship to CSR
SCSR comprises of not only strategic philanthropy
but also meeting the unmet needs of society in an
entrepreneurial manner

Bryons Thyrazol product, Nestles Nesvita, Nestle
Pure Life, PSOs fuel cards and green fuels (Atiq,
2014)
Moreover, Atiq (2014) reports education of
stakeholders, providing right quality of product and
concern for employees as SCSR initiatives