Introduction to

Corporate Social Responsibility

Module Eight | Lesson One

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 Lesson One | Introduction

CSR is both critical and controversial

 It is critical because the for-profit sector is
the largest and most innovative part of any
free society’s economy.

 It is controversial because some see CSR as

a distraction from the economic purpose
of a business.

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 Lesson One | Introduction

Business & Society

People create organizations to leverage their
collective resources in pursuit of common
goals.

As organizations pursue these goals, they

interact with others inside a larger context
called society.
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 Lesson One | Introduction

CSR is controversial
 Do companies have obligations beyond
the benefits their economic success
already provides?

 Two opposing views

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The Business View

 Milton Friedman
 “the only social responsibility of business
is to increase its profits”
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Social responsibility: A corporate

responsibility?
 Friedman:
 “Profit, as a result of the actions of the firm, is
an end in itself.”
 “A firm does not need to have any additional
justification for existing.”
 “Social value is maximized when a firm focuses
on pursuing its self-interest in attempting to
maximize profits.”
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 Friedman:“Few trends could so thoroughly

undermine the very foundations of our
free society as the acceptance by
corporate officials of a social responsibility
other than to make as much money for
their stockholders as possible.”
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Friedman’s arguments
 CSR is against capitalism: a “fundamentally
subversive doctrine in a free society”
 CSR is a waste of the firm’s resources, which
legally belong to the firm’s owners, its
shareholders, and the executives.
 Social matters are not the concerns of business
people and that problems should be resolved by
the other social actors.
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The Societal View

 No one group of stakeholder has a priority over
other groups, and that corporations must balance
the interests of all stakeholders.

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Stakeholders defined

 As Freeman defined them, a firm’s

stakeholders include those who affect or
are affected by the firm’s goals

 Simply put, they include those groups that

have a stake in the firm’s operations

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“CSR includes all stakeholder and constituent

groups that maintain an ongoing interest in
the organization’s operations.”

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CSR = A company's relationships

with its stakeholders
 The success of a firm is directly related to its
ability to incorporate stakeholder/constitute
concerns into its business model.

 Conflicting/competing stakeholder interests

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Underlying Arguments for CSR

 Moral
 Ethical
 Rational
 Economic

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A Moral Argument for CSR

 CSR = the relationship/interdependence

between a company & the wider society
within which it operates.

 ‘for profit’ entities do not exist in a vacuum:

they need to be congruent with societal
values
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A Rational Argument for CSR

Businesses seek to maximize their performance
by minimizing restrictions on operations.
In today’s globalizing and wired world, CSR is a
means of anticipating and reflecting societal
concerns to minimize operational and financial
limitations on business
 “The Iron Low of Social Responsibility”
– If you abuse your power, you will face societal sanctions—such as laws,
fines, prohibitions, boycotts, or social activism—impact the firm’s
strategic goals.
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An Economic Argument for CSR

 Economic self-interest for business
 CSR provides
– a point of differentiation
– competitive market advantage and avoid moral, legal and other
sanctions
– a reflection of the needs and concerns of their various stakeholder
groups
 By doing so, a company is more likely to
retain its societal legitimacy, and maximize its
financial viability, over the long term.
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Case Study: An Ethical Perspective to

Competing Stakeholder Interests
The Case: Howard Schultz Responds to Anti-Gay-
Marriage Starbucks Shareholder

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“If you feel, respectfully, that

you can get a higher return
than the 38 percent you got
last year, it’s a free country.
You can sell your shares of
Starbucks and buy shares in
another company. Thank you
very much.”

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What is CSR?
“A responsibility among firms to pursue goals
in addition to profit maximization and a
responsibility among a firm’s stakeholders
to hold the firm accountable for its actions.”

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Archie B. Carroll, 1979

“The social responsibility of business

encompasses the economic, legal, ethical, and
discretionary expectations that society has of
organizations at a given point in time.”

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The Pyramid of CSR

to benefit the firm & society

more proactive & strategic Discretionary

Responsibilities

to do no harm
Ethical to its
Responsibilities stakeholders/
environment

Legal to act within legal

Responsibilities framework

Economic to produce acceptable

Responsibilities returns on investments

Source: Archie B. Carroll, (1991) The Pyramid of Corporate Social Responsibility

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Relationships & Responsibilities

Relationships affect future success of the
business:
Good leadership
Developing key relationships
Pro-active engagement in emerging
issues
The establishment of understanding
and trust
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In Summary: CSR is. . .

 A dynamic, fluid concept

 An integral element of ethics
 Both a means and an end
– How a firm operates to gain societal legitimacy
– How well a firm has been able to navigate stakeholder
concerns while implementing its business model

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