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Corporate Social

Responsibility

Do mangers have responsibility to their stakeholders?

Do managers also have a responsibility a social


responsibility, to the people who live where the firm
operate?

Since community development often is closely related to


productivity, being socially supportive of the local
community seems to make good economic sense.

Corporate Social Responsibility (CSR)

CSR means that a corporation should be held


accountable for any of its actions that affect people, their
communities, and their environment. It implies that harm
to people and society should be acknowledged and
corrected if at all possible.
It may require a company to forgo some profits if its
social impact seriously hurt some of its stakeholder or if
its funds can be used to have a positive social impact.
Business has many responsibilities: Economical, legal
and social.

Social Responsibility & Corporate Power

The social responsibilities of business grow directly out


of two features of the modern corporation:
The essential function it performs for a variety of
stakeholders .
The immense influence it has on the lives of
stakeholders.
The Corporate form of business is capable of
performing a great amount of good for society, such as
encouraging economic growth, expanding international
trade, and creating new technology.

Business has become, in the last half century, the most


powerful institution on the planet. The dominant
institution in any society needs to take responsibility for
the whole society.
The Iron law of responsibility say that in the long run,
those who do not use power in ways that society
considers responsible will tend to lost it.

Charity Principle

Stewardship Principle

Definition

Business

should give
voluntary aid to societys
needy person and groups

Business,

Type of
activity

Corporate

philanthropy
Voluntary actions to
promote the social good

Acknowledging

Examples

Corporate

Enlightened

philanthropy

acting as a public trustee,


should consider the interest of all who
are affected by business decision and
policies
business and social

interdependence
Balancing the interest and needs of
many diverse groups in the society

self interest
foundations
Meeting legal requirements
Private initiatives to solve Stakeholder approach to corporate
social problems
strategic planning
Social partnerships with
needy groups

How Corporate Social Responsibility Began

The ideal of corporate social responsibility appeared


around the start of 20th century.
Corporations at that time came under attack for being
too big, too powerful.
Faced with this kind of social protest, a few farsighted
business executives advised corporations to use their
power and influence voluntarily for broad social purposes
rather than for profits alone.
These business leaders believed that business had a
responsibility to society that went beyond or worked in
parallel with their efforts to make profits.

Charity Principle

The idea that the wealthier member of society should be


charitable toward those less fortunate, is a very ancient
notion.

Business leaders established pension plans, employee


stock ownership and life insurance programs,
unemployment funds, limitations on working hours, and
higher wages.

They built houses, churches, schools and libraries,


provided medical and legal services, and gave to charity.

Stewardship Principle

Stewardship Principle believe they have an obligation to see that


everyone particularly those in need or at risk benefits from their
firms actions.

Because they exercise this kind of crucial influence, they incur a


responsibility to use those resources in way that are good not just
for the stockholders alone but for society generally.

In this way, they have become stewards, or trustee, for society. As


such, they are expected to act with a special degree of social
responsibility in making business decisions.

Ethics and Social Responsibility

The ethical behavior of business and the


broader social responsibilities of corporations
have become major issues in the United
States and all countries around the world.
Unbiased ethical decision-making processes
are imperative to modern international
business practices. It is difficult to determine a
universal ethical standard when the views
and norms in one country can vary
substantially from others.

In Rome, do as the Romans


Cultural relativism suggests that businesses
and the managers should behave in
accordance with the ethical standards of the
country they are active in, regardless of MNC
headquarter location.
Halal Food Certification became mandatory
for American Food Brands, operating in
Islamic Countries.

CSR v/s Ethics

The newer area of corporate social responsibility


(CSR) is closely related to ethics.
Ethics is the study of or the learning process
involved in understanding morality, while CSR
involves taking action.
Furthermore, the area of ethics has a lawful
component and implies right and wrong in a legal
sense, while CSR is based more on voluntary
actions.

Engro Foods Olpers CSR

CSR by P&G Pakistan

Environmental Protection

Conservation of natural resources is another area of ethics


and social responsibility in which countries around the world
differ widely in their values and approach.
Many poor, developing countries are more concerned with
improving the basic quality of life for their citizens than
worrying about endangered species or the quality of air or
water.
There are several hypotheses regarding the relationship
between economic development, as measured by per capita
income, and the quality of the natural environment.

The
Environmental
Kuznets
Curve

At relatively low
levels of income the
use of natural
resources and/or the
emission of wastes
increase with
income. Beyond
some turning point,
the use of the
natural resources
and/or the emission
of wastes decline
with income.

Globalization and Ethical


Obligations of MNCs

How much responsibility do MNCs have in


changing these practices?

Should they adopt the regulations in the


country of origin or yield to those in the
country of operation?

Arguments for Corporate


Social Responsibility
Balances Corporate power
with responsibility.
Discourages government
regulation.
Promote long-term profits for
business.
Improves business value
and reputation.
Corrects social problems
caused by business.

Arguments Against
Corporate Social
Responsibility
Lower economic efficiency
and profit.
Imposes unequal costs
among competitors.
Imposes hidden costs
passed on to stakeholders.
Require social skills
business may lack.
Places responsibility on
business rather that
individuals.

Balancing Economic, Legal, and Social


Responsibilities

Economic and Social Responsibilities

Legal Requirement versus C.S.R.

Stockholder Interests Versus Other Stakeholder interests

Regulation tend to add economic costs and restrict flexibility in


decision making.
Reputation refers to desirable or undesirable qualities associated
with an organization or its actors that may influence the
organization.
Loyal consumers and helps to attract & retain better employee to
spur productivity and enhance profitability. It is reasonable to
imagine that employee who have the most to offer may be attracted
to work for a firm that contributes to the social good of the
community.
Consumers generally like the idea of doing business with a good
company, one that is concerned for its consumers health, safety,
and well-being.

Many people believe business has a responsibility to compensate society


for the harm it has sometimes caused.
When a business pollutes the environment, the cleanup is the responsibility
of that firm.
If a consumers are injured due to a product defect, the manufacturer is
responsible.
Business does not voluntarily recognize its responsibility, the courts will
often step in to represent society and its interests.
If a firm decides to keep an unproductive factory open because it wants to
avoid the negative social effect that a plant closing would have on the local
community and its workers, its overall financial performance may suffer.
Stockholders may receive a lower return on their investment, making it more
difficult for the firm to acquire additional capital for future growth.

Business managers and economists argue that the business of business is


business.
Thereby depriving society of higher levels of economic production needed to
maintain everyones standard of living.
Social responsibility is that it imposes unfair costs on more responsible
companies.
A manufacturer wishes to be more socially responsible and decides to install
more safety equipment than the law requires to protect its employees.
Firm penalizes itself and even runs the risks of going out of business,
especially in a highly competitive market.
More costly pollution control standards, or stricter job safety rules, or more
stringent premarket testing of consumer drugs than other nations, it imposes
higher costs on business.
Cost disadvantages means that competition cannot be equal.

Foreign competitors who are the least socially responsible will actually be
rewarded because they will be able to capture a bigger share of the market.
Many social proposals undertaken by business do not pay their own way in
an economic sense; therefore, someone must pay for them. Ultimately,
society pays all costs.
Company chooses to install expensive pollution abatement equipment, the
air may be clearer, but ultimately someone will have to pay.
Stockholders may receive lower dividends, employees may be paid less, or
consumers may be charged higher prices.
By driving up business costs, these regulations often increases prices and
lower productivity, in addition to making the nations tax bill higher.
Business people are not trained primarily to solve social problems.
Business people in charge of solving social problems may lead to
unnecessarily expensive and poorly conceived approaches.

Business analysts might be tempted to believe that methods that succeed in


normal business operations will also be applicable to complex social issues.
Business people do not have the expertise or the popular required to
address what are essentially issued of public policy.
Corporate responsibility is misguided, according to some critics, only
individual persons can be responsible for their actions.
An entire company cannot be held liable for its actions, only those
individuals who are involved in promoting or carrying our a policy.
Individual business can be responsible for their actions.
An entire company cannot be held liable for its action, only those individuals
who are involved in promoting or carrying our a policy.
Individuals business managers want to contribute their own personal money
to a social cause, let them do so; but it is wrong for them to contribute their
companys fund in the name of corporate social responsibility.