What is the role of Business in Society

Allegations About Business …

 Little concern for the consumer

 Cares nothing about the deteriorating social order
 Has no concept of acceptable ethical behavior
 Indifferent to the problems of minorities and the
environment

What responsibility does business have to society?

 Does the firm have a social responsibility?

NO!!!

Nobel Laureate Economist Milton Friedman argues

corporations’ only social responsibility is to make money.
Some of his key arguments are:
 Social issues are in the realm of public policy i.e.
government action.
 Managers have no constituency to whom they are
responsible
 Managers are not trained to make public policy decisions.
 More Arguments Against CSR

 Restricts the free  Increase business

market goal of profit power
maximization
 Limits the firm’s ability
 Dilutes the primary aim to compete in a global
of business
marketplace
 Does the firm have a social responsibility?

YES!!

The social Contract (Rousseau etc.) suggests

that corporations as citizens society have a
responsibility to give back to that society in
fair measure to what they receive from that
society.
 More Arguments For CSR

 Addresses social  Limits future

issues business may government intervention
have caused and allows
business to be part of
 Addresses issues by
using business
the solution
resources and expertise
 Protects business
 Addresses issues by
self-interest
being proactive
 Corporate Social Responsibility (CSR)

Requires the individual to consider

his/her acts in terms of a whole
social system, and holds him/her
Corporate responsible for the effects of acts
Social anywhere in that system. The impact
Responsibility? of a company’s actions on society
is the focus.
 Business Criticism/
Business Response Cycle
Factors
Factors in
in the
the Societal
Societal Environment
Environment

Criticism
Criticism of
of Business
Business

Increased
Increased Concern
Concern AA Changed
Changed
for
for the
the Social
Social Context
Context Social
Social Contract
Contract
Business
BusinessAssumption
Assumptionofof
Corporate
CorporateSocial
SocialResponsibility
Responsibility
Social
SocialResponsiveness,
Responsiveness,leads
leadsto
toSocial
Social
Performance,
Performance,and
andCorporate
CorporateCitizenship
Citizenship

AAMore
MoreSatisfied
SatisfiedSociety
Society

Fewer
Fewer Factors
Factors Leading
Leading to
to Increased
Increased Expectations
Expectations
Business
Business Criticism
Criticism Leading
Leading to
to More
More Criticism
Criticism
 Ethical and Moral Relativism

Responsibility according to whom????

 Evolution of Concepts

Corporate Social… Emphasizes…

Responsibility obligation, accountability

Responsiveness action, activity

Performance outcomes, results

 Corporate Social Performance

“CSP is the firm's configuration of principles of

social responsibility processes of social
responsiveness and policies, programs and
observable outcomes as they relate to the firm's
societal relationships" ( Wood's 1991:691)
 Acceptance and Broadening of Meaning

 From the 1950’s to the present, the concept of

CSP has gained considerable acceptance and
the meaning has been broadened to include
specific issues, such as:
 product safety
 honesty in advertising
 employee rights
 affirmative action
 environmental sustainability
 ethical behavior
 global CSP
 Carroll’s Four-Part Definition of CSR(P)

 The social responsibility (performance) of

business encompasses the economic, legal,
ethical and discretionary (philanthropic)
expectations that society has of organizations at
a given point in time.
 Carroll’s Four-Part Definition of CSR

Understanding the Four Components

Societal
Responsibility Examples
Expectation
Be profitable. Maximize sales,
Economic Required
minimize costs
Legal Required Obey laws and regulations

Expected/
Ethical Do what is right, fair, and just
Required
Desired/
Philanthropic Be a good corporate citizen
Expected
 The Pyramid of CSR(P)

Philanthropic Performance
Philanthropic Performance
Be a good corporate citizen.
Be a good corporate citizen.
Ethical Performance
Ethical Performance
Be ethical.
Be ethical.
Legal Performance
Legal Performance
Obey the law.
Obey the law.
Economic Performance
Economic Performance
Be profitable.
Be profitable.
Ways Firms Respond to CSR(P) Pressure

Defensive
Defensive approach
approach

Cost-benefit
Cost-benefit approach
approach

Strategic
Strategic approach
approach

Innovation
Innovation and
and learning
learning approach
approach

The Civil Corporation, Simon Zadek

Corporate Social Performance
 Social and Financial Performance
Perspective 1: CSP Drives the Relationship
Good Corporate
Good Corporate Good Corporate
Financial
Social Performance Reputation
Performance

Perspective 2: CFP Drives the Relationship

Good Corporate
Good Corporate Good Corporate
Financial
Social Performance Reputation
Performance

Perspective 3: Interactive Relationship Among CSP, CFP, and CR

Good Corporate
Good Corporate Good Corporate
Financial
Social Performance Reputation
Performance
 A Multiple Bottom-Line Perspective
Owner
Owner Stakeholders’
Stakeholders’
“Bottom
“Bottom Line”
Line” (Profit
(Profit and
and WACC)
WACC)
Consumer
Consumer Stakeholders’
Stakeholders’
“Bottom
“Bottom Line”
Line”
Corporate
Corporate Employee
Employee Stakeholders’
Stakeholders’
Social
Social “Bottom
“Bottom Line”
Line”
Performance
Performance
Community
Community Stakeholders’
Stakeholders’
“Bottom
“Bottom Line”
Line”
Other
Other Stakeholders’
Stakeholders’
“Bottom
“Bottom Line”
Line”