Lecture 5-Theories and Models of CSR

Dr. M.K.Satish
Models of CSR

Philanthropic Model/
Altruistic

Statist Model ( State

Intervention)

Liberal Model ( Friedman Model)

Stakeholder Model ( Freeman Model)

Origins of CSR: Theoretical
Perspectives
 CSR: Theories
Set of Theory Approaches
INSTRUMENTAL Focusing on achieving • Maximization of share
economic objectives holders value
through social activities • Strategies for competitive
advantages
• Cause related marketing
POLITICAL Focusing on a responsible • Corporate citizenship
use of business power in • Social contract theory
a political arena
ETHICAL Focusing on right thing to • Stakeholder normative
achieve a good society theory- moral theory
• Universal rights
• Sustainable development
• The common good
INTEGRATIVE Focusing on the • Issues management
integration of social • Public responsibility
demands • Stakeholder management
• Corporate social
performance
Theory
Milton Friedman
The Social contract, Social justice
theory, Andrew Carnegie’s Theory
and Enlightened Self Interest
Theory
Rights theory, Consequential
theory (JS Mill); Deontological (
moral) theories ( Immanuel Kant)
and the Gandhian Trusteeship
model is a based on ethical
theories
Stakeholder Management
(R.Edward Freeman), Tom Cannon
INSTRUMENTAL
 Stockholder Theory
Milton Friedman : The Purpose of Business is to make money for the
owner or stockholders.
Business v/s social responsibilities

“The Social Responsibility

of Business is to increase
its profits”
The Underlying Ethical principle:
Manager has Fiduciary Responsibility to
Owners
social responsibilities of the
executive:
• Family, conscience, feelings of charity,
church, clubs, city, country

Fiduciary responsibility: To
The Purpose of Business in not to: ----provide
employment, eliminate discrimination, avoid
make money for stockholders
pollution help the community, make life better
for workers
POLITICAL
 Integrative Social Contract Theory : Donaldson
Societal Expectations of Business: Micro & Macro Social Contract
License to
Operate
The iron law of responsibility refers to
the negative consequences of the
absence of use of power.
‘Whoever does not use his social
power responsibly will lose it. In the
long run those who do not use power
in a manner which society considers
responsible will tend to lose it because
other groups eventually will step in to
assume those responsibilities’’
If business do not meet the
challenge of social responsibility,
then government reform
legislation will force it to meet its
obligations.
Social Justice Theory

Social justice theory, focuses on fairness and

distributive justice—
Corporations have to be just distributing
wealth, power, and other intangibles among the
members of society
 Social Justice Theory

Social injustice incorporates social issues that involve the individual, the family, the community,
the wider society, and even the international community

It refers to unfair treatment or inequities that have resulted from racism, sexism,
socioeconomics, sexual orientation, religion and so on which affect quality of life

Social justice constitutes the right to fairness and equity

Forms of social injustice may manifest more covertly, such as institutional unwritten policies
that prevent people of colour and/or women from advancing to senior positions, or
discrimination that results in lower pay raises for people who are gay or lesbian or are
physically challenged
Andrew Carnegie’s Theory
 Legendary steel tycoon
 Advocates benevolent, paternalistic leadership
 Enunciated
 Charity principle & Stewardship principle-the business of benevolence"
 He believed in the "Gospel of Wealth," which meant that wealthy people
were morally obligated to give their money back to others in society.
Keith Davis- Enlightened Self Interest

Enlightened self interest

It is in organization's interest to act in
ways that society considers responsible

Iron law of responsibility

Those who do not exercise power
responsibly will tend to loose it
ETHICAL
 Immanuel Kant: Philosopher: 18th Century-
Deontological (moral) theory

Describe and explains our

morality

Feelings: Child abuse; slavery;

unjust practices, exploitation

Concept of Good Will (

Motives) : Acting from Duty:
Acting from reason…. And that
our reason from action could
apply to every one

The term deontology comes from the Greek word deon, meaning duty. The theory of
deontology states we are morally obligated to act in accordance with a certain set of
principles and rules
Immanuel Kant
 Every one has right But How?
To experience happiness Moral Acts are
governed by
Duty
Act from Duty is important
Categorical Imperative
JS Mill: Utilitaranisim
 Value
Theory of Right Action
Theory

Only thing that is valuable Maximizes

is happiness in the absence Expected Value
of suffering
Money: Happiness
Doctors: Distribution of Drugs

Universally shared Ethical Dilemmas: Should

value we violate rights of others if
Egalitarnism it is going to maximize
Intitutive value?
 Trusteeship Theory

 Gandhi's theory of trusteeship is based on two basic

premises—

 A) The rich cannot accumulate wealth without the

cooperation of the poor.

 B) Western socialism and communism are not the last

words on the question of mass poverty.
Trusteeship
 The theory of trusteeship as an alternative to capitalism and
scientific socialism. He was opposed to the western capitalism,
which necessarily leads to oppression, exploitation,
concentration of wealth and inequality.

 At the same time, he was against an increase in the power of

the state which, in his opinion, is essentially based on violence.

 Gandhi, wanted to provide the institution of trusteeship as a

compromise between private enterprise and state controlled
enterprise.
 Rights Theory

Property rights of corporations

should not override human
rights. This means that while
shareholders of a corporation
Human beings have : Economic, have certain property rights, this
Civil, Political, Social and Cultural does not give them license to
Rights override the basic human rights
of employees, local community
Recognition of the inherent members, and other stakeholders
dignity and equal and inalienable
rights of all members of the
human family is the foundation of
freedom, justice and peace in the
world
INTEGRATIVE
 Tom Cannon

Business provides : Society provides:

Means of exchange
Products & services
Trained manpower
Direct & indirect employment Legal & banking system

Income generation Social & physical infra-structure

Stakeholder’s Theory

To create value for key

Businesses are human
stakeholders, executives
institutions populated
must understand that
by real live complex
business is fully situated
human beings
in the realm of humanity

Understand stakeholder
expectations and engage
them
Stages in Evolution of CSR
 Stages in Evolution of CSR

The only social responsibility of businesses is to make money for

owners and stockholders and obey the law.

Businesses must also be “ethical” in the ways they make money

and not engage in bribery, fraud or corruption.

Businesses must also protect the environment and biodiversity.

Businesses must also protect and promote human rights, labour

rights, and sustainable development. (“triple bottom line”)

Businesses must adhere to a global standard for CSR enforced by

law.
 CSR: Generations

The first generation of

CSR showed companies
out of their own free will
contributed towards
charity or corporate The Second The Third Generation
philanthropy to address a Generation of CSR is of CSR makes significant
variety of social, where companies, and contribution to
economic and other entire industries, see CSR addressing poverty,
issues. In recent years, as an integral part of exclusion and
adoption of a strategic long-term business environmental
approach to philanthropy, strategy. degradation.
in which companies align
charitable giving with the
company’s core business
interests is seen.
CSR Drivers
Present Drivers for CSR

Risk
Corporate
Stakeholder Consumer Management Business Attracting Global
Environment
management Pressure & Ethics Employees Values
Management
Sustainability
Thank You