Chapter 2

Corporate
Citizenship: Social
Responsibility,
Responsiveness,
and Performance

1
 Learning Outcomes (1 of 2)
1. Explain how corporate social responsibility (CSR)
evolved and encompasses economic, legal, ethical, and
philanthropic components.
2. Provide business examples of CSR and corporate
citizenship.
3. Differentiate between corporate citizenship, social
responsibility, responsiveness, and performance, and
sustainability.
4. Elaborate on the concept of corporate social
performance (CSP).

© 2015 South-Western, a part of Cengage Learning 2

 Learning Outcomes (2 of 2)
5. Explain how corporate citizenship develops in stages in
companies.
6. Describe the triple bottom line and its relevance to
sustainability.
7. Describe the socially responsible investing movement’s
characteristics.

© 2015 South-Western, a part of Cengage Learning 3

 Chapter Outline

• The Corporate Social Responsibility (CSR) as a Concept

• Traditional Arguments Against and For CSR
• Corporate Social Responsiveness
• Corporate Social Performance
• Corporate Citizenship
• Social Performance and Financial Performance Relationship
• Sustainability – Profits, People, Planet
• Socially Responsible, Sustainable, Ethical Investing
• Summary

© 2015 South-Western, a part of Cengage Learning 4

 Allegations Against Business -
Business -
• Has little concern for the consumer
• Cares nothing about the deteriorating
social order
• Has no concept of ethical behavior
• Is indifferent to the problems of
minorities and the environment
• These claims have generated an
unprecedented number of pleas for
companies to be more socially
responsible.
© 2015 South-Western, a part of Cengage Learning 5
Corporate Social Responsibility
As a Concept
Early Definitions -
•CSR means seriously considering the impact
of a company’s actions on society.
•CSR requires the individual to consider his
or her acts in terms of a whole social system,
and holds him or her responsible for the
effects of his or her acts anywhere in that
system.
•These definitions provide useful insights
into the concept of Corporate Social
Responsibility.
© 2015 South-Western, a part of Cengage Learning 6
Historical Perspective on CSR
Economic Model

Legal Model

Social Model

Stakeholder Model

© 2015 South-Western, a part of Cengage Learning 7

 Evolving Meanings of CSR
• CSR:
• …is seriously considering the impact of
the company’s actions on society.
• … is the obligation of decision makers to
take actions that protect and improve the
welfare of society as a whole, along with
their own interests.
• …supposes that the corporation has
economic and legal obligations as well as
responsibilities to society that extend
beyond these obligations.
© 2015 South-Western, a part of Cengage Learning 8
 A Four-Part Definition of CSR
While each definition is valuable, we will
focus on the types of social responsibilities
business has. Corporate social responsibility
encompasses the:
Economic
Legal
Ethical, and
Discretionary
expectations that society has of organizations
at a given point in time.
© 2015 South-Western, a part of Cengage Learning 9
 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

Ethical Expected Do what is right, fair, and just

Desired/
Philanthropic Be a good corporate citizen
Expected

Chapter 2-
10
The Pyramid of CSR

Philanthropic Responsibilities
Be a good corporate citizen.

Ethical Responsibilities
Be ethical.

Legal Responsibilities
Obey the law.

Economic Responsibilities
Be profitable.

© 2015 South-Western, a part of Cengage Learning 11

 The CSR Equation

Economic Responsibilities
= Total
+
Legal Responsibilities Corporate
+ CSR
Ethical Responsibilities
+
Philanthropic Responsibilities

A stakeholder perspective focuses on the CSR

pyramid as a unified whole.

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© 2015 South-Western, a part of Cengage Learning
 Top 20 Activities or Characteristics of
Socially Responsible Companies
• Makes products that are safe.
• Does not pollute air or water.
• Obeys the law in all aspects of
business.
• Promotes honest or ethical employee
behavior.
• Commits to safe workplace ethics.
• Does not use misleading or deceptive
advertising.
• Upholds stated policy banning
discrimination.
• Utilizes “environmentally friendly”
packaging.
• Protects employees against sexual
harassment.
• Recycles within company.
• Shows no past record of questionable
activity.
© 2015 South-Western, a part of Cengage Learning
• Responds quickly to customer
problems.
• Maintains waste reduction program.
• Provides or pays portion of medical
costs.
• Promotes energy conservation
program.
• Helps displaced workers with
placement.
• Gives money toward charitable or
educational causes.
• Utilizes only biodegradable or
recyclable materials.
• Employs friendly or courteous or
responsive personnel
• Tries continually to improve quality.
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 Arguments Against CSR -
• Classical Economics: The classical economic
view is that business’ only goal is the
maximize profits for owners.
• Business Not Equipped: Business is not
equipped to handle social activities.
• Dilutes Business Purpose: It dilutes the
primary purpose of business.
• Too Much Power Already: Businesses have
too much power already .
• Global Competitiveness: It limits the ability
to compete in a global marketplace.
© 2015 South-Western, a part of Cengage Learning 14
 Arguments For CSR -
• Enlightened self-interest: Businesses must
take actions to ensure long-term viability.
• Warding off government Intervention:
This is one of the most practical reasons.
• Resources Available: Business has the
resources and expertise. Let it try.
• Proaction is better than Reaction.
Proaction is also less costly.
• Public supports: the public strongly
supports CSR.
© 2015 South-Western, a part of Cengage Learning 15
Business Responses to calls for CSR Make
the Business Case for CSR

Defensive approach

Cost-benefit approach

Strategic approach

Innovation and learning approach

© 2015 South-Western, a part of Cengage Learning 16

 The Business Case for CSR
6 Reasons for Embracing CSR 4. Attract, retain, and maintain a
1.Innovation happy workforce and be an
2.Cost savings Employer of Choice.
3.Brand differentiation 5. Save money on energy and
operating costs and manage risk.
4.Long-term thinking
5.Customer engagement 6. Differentiate itself from
competitors
6.Employee engagement
7. Improve its business reputation
and standing
Business Benefits of CSR
8. Provide access to investment and
1.Win new business
funding opportunities
2.Increase customer retention
9. Generate positive publicity and
3.Develop and enhance relationships media opportunities due to media
with customers, suppliers, and
interest in ethical business
networks.
activities.
© 2015 South-Western, a part of Cengage Learning 17
Corporate Social Responsiveness
Corporate Social Responsiveness -
•An action-oriented variant of CSR.
Responsibility -
•Implies a state or condition of having
assumed an obligation.
Responsiveness -
•Connotes a dynamic, action-oriented
condition.

© 2015 South-Western, a part of Cengage Learning 18

Corporate Social Responsiveness
Other Views -
•Sethi’s Three-Stage Schema
• Social obligation, social responsibility, and
social responsiveness; anticipatory,
preventive
•Frederick’s CSR1, CSR2, and CSR3
• CSR1 is accountability-focused.
• CSR2 is responsibility-focused.
• CSR3 refers to corporate social rectitude.
•Epstein’s Process View
• Emphasizes the process of social
responsiveness.
© 2015 South-Western, a part of Cengage Learning 19
Corporate Social Performance:
Carroll’s Model

© 2015 South-Western, a part of Cengage Learning 20

 Corporate Social Performance:
Wartick & Cochran’s Model Extensions

© 2015 South-Western, a part of Cengage Learning 21

 Corporate Citizenship (1 of 2)
Corporate citizenship -
•Embraces all the facets of corporate
social responsibility, responsiveness,
and performance even sustainability.
•Corporate citizenship is not a new concept,
but one whose time has come.
•Multinational enterprises are citizens of the
world.
•Corporate Citizenship serves a variety of
stakeholders.

© 2015 South-Western, a part of Cengage Learning 22

 Corporate Citizenship (2 of 2)
Broad View
•A reflection of shared moral and ethical principles.
•A vehicle for integrating individuals into the communities
in which they work.
•A form of enlightened self-interest that balances
stakeholders’ claims and enhances a company’s long-term
value.
Narrow View
•Corporate community relations
•Intentional interaction with nonprofit organizations,
citizen groups and other stakeholders at the
community level.
© 2015 South-Western, a part of Cengage Learning 23
 Drivers of Corporate Citizenship
“What drives companies to embrace corporate citizenship?”
Internal motivators include:
• Traditions and values
• Reputation and image
• Business strategy
• Recruiting or retaining employees
External pressures include:
• Customers and consumers
• Expectations in the community
• Laws and political pressures
© 2015 South-Western, a part of
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Cengage Learning
Benefits of Corporate Citizenship-

Benefits to the business:

•Improved employee relations (improves
recruitment, retention, morale, loyalty, etc.)
•Improved customer relationships (increases
customer loyalty; a tiebreaker)
•Improved business performance (positively
impacts bottom-line returns, increases
competitive advantage)
•Enhanced marketing efforts ( helps create a
positive company image)
© 2015 South-Western, a part of Cengage Learning 25
Stages of Corporate Citizenship

© 2015 South-Western, a part of Cengage Learning 26

Development Challenges That Trigger
Movement of Corporate Citizenship

© 2015 South-Western, a part of Cengage Learning 27

Global Corporate Citizenship -
• …and Global CSR are topics in which there has
been an explosion of interest.
• Multinational enterprises are expected to:
• be good corporate citizens in the countries in
which they do business.
• tailor their initiatives to conform to the cultural
environment.
• International academics and business people
around the world are now researching and
advocating CSR and corporate citizenship
concepts.
• Convergence in global CSR approaches will
continue as the world economic stage becomes
the common environment within which businesses
function.
© 2015 South-Western, a part of Cengage Learning 28
Corporate Citizenship Awards
by Business Press

• Fortune's ranking of “Most Admired” and

“Least Admired” corporations
• Conference Board’s Ron Brown Award
for Corporate Leadership
• CRO Magazine Awards
• Chamber of Commerce of the U.S.
Corporate Citizenship Awards

© 2015 South-Western, a part of Cengage Learning 29

 The Relationship Between
Social and Financial Performance
Perspective 1: Socially Responsible firms are more financially profitable.

Good Corporate
Good Corporate Good Corporate
Financial
Social Performance Reputation
Performance

Perspective 2: A firm’s financial performance drives its social performance.

Good Corporate
Good Corporate Good Corporate
Financial
Social Performance Reputation
Performance

Perspective 3: There is an interactive Relationship Among CSP, CFP, and CR.

Good Corporate
Good Corporate Good Corporate
Financial
Social Performance Reputation
Performance

© 2015 South-Western, a part of Cengage Learning 30

 One Bottom Line, or Many?
• The stakeholder-bottom line perspective -
• Impacts or benefits of social
performance cannot be fully measured or
appreciated by considering only the
impact on the firm’s bottom line.
• CSP cannot be fully comprehended
unless it includes impacts and measures
on consumers. employees, the
community and other stakeholder
groups.

© 2015 South-Western, a part of Cengage Learning 31

A Multiple Bottom Line Perspective
Owner Stakeholders’
“Bottom Line”
Consumer Stakeholders’
“Bottom Line”
Corporate Employee Stakeholders’
Social “Bottom Line”
Performance
Community Stakeholders’
“Bottom Line”
Other Stakeholders’
“Bottom Line”

© 2015 South-Western, a part of Cengage Learning 32

The Triple Bottom Line Perspective

Business Must Attend to Three Key

Spheres of Sustainability –
•Economic
•Social
•Environmental
The goal is corporate sustainability.

© 2015 South-Western, a part of Cengage Learning 33

Socially Responsible, Sustainable,
Ethical Investing
Socially Responsible Investing -
•Emerged in the 1970s
•Over $3.74 trillion in socially
responsible investments in the U.S.
Social Screening -
•A technique used to screen firms for
socially-responsible investment
purposes.
© 2015 South-Western, a part of Cengage Learning 34
 Reasons for the Upsurge in
Socially Responsible Investing
• Total dollars invested in SRI has grown
exponentially over past twenty years.
• Council on Economic Priorities suggests 3
reasons:
1. More reliable research on CSP
2. Investment firms using social criteria have
solid track record
3. The socially conscious 1960s generation is
making investment decisions

© 2015 South-Western, a part of Cengage Learning 35

 Key Terms
• Business for Social • legal responsibilities
Responsibility • mainstream adopters
• community obligations • paternalism
• corporate citizenship • philanthropic
• corporate social responsibilities
performance • philanthropy
• corporate social • pyramid of CSR
• social entrepreneurship
responsibility • social intrapreneurship
• corporate social • socially responsible,
responsiveness sustainable or ethical
• corporate sustainability investing
• stages of corporate
• economic responsibilities citizenship
• ethical responsibilities • sustainability
• global corporate • sustainable development
• triple Bottom Line
citizenship
© 2015 South-Western, a part of Cengage Learning 36