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Chapte

r 6
Implementing Social
Responsibility
This chapter:
 Discusses key elements of managing for social
responsibility, including leadership; mission statements;
issues management; alignment of structure, culture, and
processes; and auditing and reporting.
 Discusses corporate philanthropy.

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The Chad-Cameroon Pipeline Project
Opening Case
 In 1974 an exploratory Exxon well hit oil in a remote
desert in Chad.
 In the mid-1990s Exxon formed a joint venture with
two other energy giants to build a 660-mile pipeline
across Chad, through Cameroon, and out to an
offshore tanker facility.
 Environmental and human rights groups attempted
to stop the pipeline.
 Groups pressured Exxon to submit its plans to the
World Bank to approve and oversee.

McGraw-Hill/Irwin 6-3 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
The Chad-Cameroon Pipeline Project
Opening Case (continued)
 Even with guidelines in place Chad’s President
bought weapons with the first profits and dealt
harshly with critics.
 Subsequent construction was marred by:
 Spread of HIV-AIDS along the pipeline route
 Rural migration to constructions areas and inflation
 Constant dust from unpaved roads around project sites

Few companies have guidelines like those used by the pipeline


consortium. However, many firms attempt to define a social
mission and then use a range of actions and management tools
to carry it out.
McGraw-Hill/Irwin 6-4 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Managing the Social Response –
Leadership
 Top management sets the tone for a company’s social
response.
 A few companies have been founded by progressive
visionaries who make social responsibility central to
their business model.
 Progressive business models are rare.
 Although based on traditional business models, some
companies have cultures emphasizing voluntary
social responsibility in one or more dimensions
because of the influence of founders.

McGraw-Hill/Irwin 6-5 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Sources of Pressure for
Social Responsibility

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A Spectrum of Responses to
Social Demands

McGraw-Hill/Irwin 6-7 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Mission Statements
 The best mission statements:
 Define the business
 Differentiate it from competitors
 Explain relationships with stakeholders
 Focus energy on critical activities and goals

McGraw-Hill/Irwin 6-8 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Mission Statements
(continued)
 Most corporate mission statements emphasize
product quality, markets served, and profitability.
 Companies often state additional purposes, for
instance, protecting the environment or improving
society.
 Ideally, mission statements should be based on an
effort to discover or shape core values that can then
be articulated in writing.

McGraw-Hill/Irwin 6-9 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Managing Social Issues
 A relevant social issue is a matter Issues management
of dispute arising from corporate The use of methods to
behavior and its impact on social detect, classify,
institutions or social problems. analyze, track and
prioritize social issues
 The earlier that such issues are in the corporate
detected, the easier it is to environment.
maneuver and adjust to them.

McGraw-Hill/Irwin 6-10 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
The Issue Life Cycle

McGraw-Hill/Irwin 6-11 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
The Life Cycle of Issues
 Methods to analyze issues:
 Intuitive search
 Scenarios
 The probability/impact matrix
 Stakeholder engagement

McGraw-Hill/Irwin 6-12 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Alignment of Structure, Culture, and
Processes
 If the organization structure, culture, and processes
of a company are misaligned with the social goals in
its mission statement, those goals will be slighted.
 Many companies create elements of formal structure
to provide leadership for social responsibility.
 Corporate culture must be aligned with formal
incentives.
 Strong efforts at coordination are needed in very
large corporations.

McGraw-Hill/Irwin 6-13 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Corporate Social Reporting
 Corporate social reporting is the Social audit
practice of assessing and An assessment of
publishing information about the social impacts
social performance. of a corporation on
society.
 A 1974 survey found that 76
percent of 284 large companies did
some form of social auditing.
 In the late 1990s voluntary social
reporting again emerged as a
useful tool for companies to
address stakeholders.
McGraw-Hill/Irwin 6-14 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Corporate Social Reporting
(continued)
 The leading effort to create a new auditing and
reporting format is the Global Reporting Initiative
(GRI).
 In the late 1990s, the GRI published guidelines for
reporting on the triple bottom line, a calculation of
corporate economic, environmental, and social
performance.
 The GRI standards are voluntary with a transcending
requirement for transparency.
 Two major concerns:
 Measuring social performance is difficult.
 Firms are reluctant to invite criticism.
McGraw-Hill/Irwin 6-15 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Corporate Philanthropy
 Large philanthropic contributions by American
companies are a relatively recent phenomenon.
 Until about 50 years ago courts held that corporate
funds belonged to shareholders; therefore, managers
had no right to give away money, even for noble
motives.
 The first major break from narrow legal restrictions
on corporate giving was the Revenue Act of 1935,
which allowed charitable contributions to be
deducted from taxable earnings up to 5 percent of net
profits before taxes (raised to 10 percent in 1981.)
McGraw-Hill/Irwin 6-16 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Patterns and Magnitudes of
Corporate Giving
 Charitable giving is now a standard dimension of
corporate social responsibility.
 The basic motives for corporate giving are:
 Response to pressure
 Belief that it will bring monetary profit
 Desire for reputational gain
 Altruism
 Corporate philanthropy is only a small part of overall
private philanthropy in the U.S. and only a tiny
portion of overall welfare spending.
McGraw-Hill/Irwin 6-17 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Fortunes in Action
 Historically, wealthy entrepreneurs contributed large
sums separately from their companies to traditional
educational, medical, and humanitarian causes.
 Notable givers:
 Stephen Girard
 John Jacob Astor
 John D. Rockefeller
 Andrew Carnegie
 Bill Gates
 Gordon Moore
 George Soros
McGraw-Hill/Irwin 6-18 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Strategic Philanthropy
 As corporations gained experience with
philanthropy, many concluded that the traditional
approach of diffuse giving to myriad worthy causes
was noble but flawed.
 Many firms decided to change their philosophy of
giving from one of pure generosity to one that
aligned charity with commercial objectives.
 Not everyone approves of strategic philanthropy.

McGraw-Hill/Irwin 6-19 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Cause-Related Marketing
 Cause-related marketing is a marketing method
linking a corporation or brand to a social cause so
that both benefit.
 Corporations realize that if their brand is connected
to a social cause or charity, this appeals to the
conscience of a consumer.
 Cause-related marketing raises big sums of money
for worthy causes but its mixture of altruism and self-
interest attracts criticism.

McGraw-Hill/Irwin 6-20 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Concluding Observations
 If a corporation announces aspirations to be socially
responsible, it must follow up with the hard work of building
those aspirations into its operations.
 Corporate philanthropy, while not a management method, is a
long-standing way of implementing social responsibility.
 Recently, corporations have shifted from a tradition of altruistic
giving to a new style of philanthropy that aligns with business
strategy.
 Some critics attack this approach as too self-interested.
 Strategic philanthropy may be a promising development
because it injects thinking about corporate social
responsibility into the strategic mainstream.

McGraw-Hill/Irwin 6-21 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

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