Corporate Social Responbility

& Corporate Governance

Enterprise and its Business Environment

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Lecture Overview
 To develop and understanding of both corporate
governance and CSR:
- what are they?
- why are they important?
- how are they implemented?
- what do they offer to business organisations?
 Scrutinise the social contract between business and
society (and role of CG and CSR in this

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Trust in business
 Often consumers buy products without
worrying about the impact of that product’s
manufacturing upon societies and the
environment because they trust businesses
to do this for them.
 Business organisations do (or should do) this
through activities such as corporate
governance and CSR.
 When this fails trust can be damaged…
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CSR & Corporate
Governance

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Early examples/foundations

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Business and society
 Businesses are part of societies (locally,
nationally, globally) therefore have a duty to
act within their expectations and norms.
 By doing so they are able to operate
successfully without harming the societies,
communities and environments in which they
operate (Sethi, 2003).

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Corporate governance
 An essential aspect of ensuring confidence in
democratic market economies (OECD, 2004).
 Managing the relationship between
management, board members, shareholders
and other stakeholders (OECD, 2004).
 Central to attracting and maintaining
investment.

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Corporate governance
defined?
Corporate governance is the system by which companies are
directed and controlled. Boards of directors are responsible for the
governance of their companies. The shareholders’ role in
governance is to appoint the directors and the auditors and to satisfy
themselves that an appropriate governance structure is in place. The
responsibilities of the board include setting the company’s strategic
aims, providing the leadership to put them into effect, supervising the
management of the business and reporting to shareholders on their
stewardship. The board’s actions are subject to laws, regulations
and the shareholders in general meeting.

The Cadbury Report (1992, paragraph 2.5).

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Corporate governance
1. Leadership
2. Effectiveness/capability
3. Accountability/transparency
4. Relations with shareholders
5. Sustainability
…but this is an evolving concept and
organisations must react to this.
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CSR
 Difficult to define:
- Because it is an evolving concept;
- Because there is disagreement amongst
businesses, governments, NGOs.
 Variety of models, measures and frameworks

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CSR’s evolution
 Early definitions (1950s-1970s): broad and
heavily rooted in the ‘social’ element
 ‘Conceptualisations’ and models (1970s-
1980s): efforts to produce a model of CSR
and its institutional role
 Business case grows (1980s-): research
turned towards analysing the financial impacts
and competitive advantages offered.
(See Carroll, 1999)
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CSR Defined (1)
World Business Council for Sustainable
Development (1999):

“The continuing commitment by business to

behave ethically and contribute to economic
development while improving the quality of life
of the workforce and their families as well as of
the local community and society at large”.

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CSR Defined (2)
“CSR is the commitment of business to contribute to sustainable
economic development-working with employees, their families, the
local community and society at large to improve the quality of life in
ways that are both good for business and good for development”
(World Bank, 2008).

“CSR is a commitment to improve community well-being through

discretionary business practices and contributions of corporate
resources”(Kotler & Lee, 2005).

“Social responsibility of business is to encompass the economic, legal,

ethical and discretionary expectations that society has of organizations
at a given point in time” (Carroll, 1979).

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CSR Defined (3)
“Corporate social responsibility is essentially a concept whereby
companies decide voluntarily to contribute to a better society and a
cleaner environment. At a time when the European Union
endeavours to identify its common values by adopting a Charter of
Fundamental Rights, an increasing number of European
companies recognise their social responsibility more and more
clearly and consider it as part of their identity. This responsibility is
expressed towards employees and more generally towards all the
stakeholders affected by business and which in turn can influence
its success.”

The Commission of the European Communities (2001, p.4)

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CSR Defined (3)

Primum Non Nocere

-First, do no harm.

Hippocrates (460-370 BC)

Drucker (2007)

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Models of CSR
 There are many!
 Carroll (1979): pyramid of corporate social
performance one of the most cited models
 Dahlsrud (2008): five dimensions of CSR

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Carroll’s pyramid
Julie’s model?

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Carroll’s pyramid

 Four areas:
- Economic
- Legal
- Ethical
- Philanthropic

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Dahlsrud’s dimensions
Dahlsrud (2008) reviewed
several definitions of CSR in
order to identify the areas in
which CSR reached, finding
five dimensions:
- Environmental
- Social
- Economic
- Stakeholder
- Voluntariness
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Business case
 Zadek (2004): shift from looking at CSR as managing
risk to its role in creating value
 Davis (1960) highlighted that short-term costs may
lead to long-term gains.
 How?
 Reducing emissions – efficient (cheaper) supply chains
 Employee retention – reduced recruitment and training costs
 Customer loyalty as result of CSR

…but once CSR becomes a profit gaining activity does it

cease to become CSR?
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Large corporations – small
business
 CSR causes implementation issues because
one size does not fit all.
 Large corporations: standardisation and
formulation
 Smaller business: organic structure, looser
and informal.
…this leads to significant differences in CSR
approach

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Large corporations – small
business
 Large corporations often have a CSR policy
which is developed at board level and
implemented from the top down.
 CSR in smaller businesses often seen as an
additional activity (Jenkins, 2004; Schaper &
Savery, 2004).
 Academic research is dominated by analysis
of CSR in larger organisations

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A social contract?
 Foundations of CSR and corporate governance as
old as the history of business (Bolton, Kim &
O’Gorman, 2011).
 CSR and corporate governance central to managing
the contemporary relationship between business and
society
 CSR and corporate governance mutually beneficial
and can add value to companies whilst maintaining a
good relationship with society (Harjoto & Jo, 2011; Jo
& Harjoto, 2011)

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References
 Bolton, S.C., Kim, R.C., & O’Gorman, K.D. (2011) Corporate social responsibility as a dynamic internal organizational process: A case
study, Journal of Business Ethics 101:1, pp.61-74
 Cadbury Report (1992), Report of the Committee on the Financial Aspects of Corporate Governance, London: Burgess Science Press.
 Carroll, A. (1979), ‘A three dimensional conceptual model of corporate performance’, Academy of Management Review, 4:4, pp. 497-
505.
 Carroll, A. B. (1999). Corporate Social Responsibility: Evolution of a Definitional Construct. Business & Society, 38:3, pp.268-295.
 Commission of the European Communities (2001) ‘Promoting a European framework for Corporate Social Responsibility’, EU
Commission Green Paper COM(2001) 366.
 Dahlsrud, A. (2008), How corporate social responsibility is defined: an analysis of 37 definitions. Corporate Social Responsibility and
Environmental Management, 15:1, pp.1–13.
 Davis, K. (1960). Can business afford to ignore social responsibilities? California Management Review, 2(3), pp.497-505.
 Drucker, P. F. (2007). People and Performance: The Best of Peter Drucker on Management. Boston, MA: Harvard Business School
Press.
 Jenkins, H. (2004). A critique of conventional CSR theory: An SME perspective. Journal of General Management, 29, pp.37-57.
 Kotler, P. and Lee, N. (2005) Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause, New Jersey:
John Wiley and Sons, Inc.
 OECD (2004), OECD Principles of Corporate Governance, Paris: OECD.
 Schaper, M. T., & Savery, L. K. (2004). Entrepreneurship and philanthropy: the case of small Australian firms. Journal of Developmental
Entrepreneurship, 9:3, pp.239-250.
 Sethi, S.P. (2003) Setting global standards: guidelines for creating codes of conduct in multinational corporations, Wiley, Hoboken (New
Jersey)
 World Business Council for Sustainable Development (1999) Corporate Social Responsibility: Meeting Changing Expectations,
Geneva: World Business Council for Sustainable Development.
 Zadek, S. (2004) The path to corporate social responsibility, Harvard Business Review, 82:12, pp.125-132

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