Corporate Social

Responsibility &
Corporate Governance
Topic: Corporate Social Responsibility (CSR)

LECTURE 3
 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 organizations?
• Scrutinise the social contract between business and society
(and role of CG and CSR in this session

Enterprise and its Business Environment © Goodfellow

Publishers 2016
 Introduction
The focus in this lecture is on corporate social responsibility,
which involves responsibilities outside of making a profit and the
key questions for corporations include:
• Does business have a social responsibility?
• If so, what is the extent and type of the responsibility?
 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…

Enterprise and its Business Environment © Goodfellow

Publishers 2016
 Corporate Social Responsibility (CSR)
Enterprise and its Business Environment

Preliminary Definitions of CSR

• The impact of a company’s actions on society
• Requires a manager to consider his/her acts in terms of a
whole social system, and holds him/her responsible for the
effects of his/her acts anywhere in that system
 CSR Defined
World Business Council for Sustainable Development :

“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”.

Enterprise and its Business Environment © Goodfellow

Publishers 2016
 CSR Defined
“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)

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

discretionary business practices and contributions of corporate
resources”
(Kotler & Lee)
 Corporate Social Responsibility (CSR)
Enterprise and its Business Environment
Corporate Citizenship Concepts
• Corporate social responsibility – emphasizes
obligation and accountability to society
• Corporate social responsiveness – emphasizes action,
activity
• Corporate social performance – emphasizes
outcomes, results
 Corporate Social Responsibility (CSR)
Evolving Viewpoints
• CSR considers the impact of the company’s actions on society (Bauer)
• CSR requires decision makers to take actions that protect and improve
the welfare of society as a whole along with their own interests
(Davis and Blomstrom)
• CSR mandates that the corporation has not only economic and legal
obligations, but also certain responsibilities to society that extend
beyond these obligations (McGuire)
 Corporate Social Responsibility (CSR)
Evolving Viewpoints
• CSR relates primarily to achieving outcomes from organizational
decisions concerning specific issues or problems, which by some
normative standard have beneficial rather than adverse effects upon
pertinent corporate stakeholders.
• The normative correctness of the products of corporate action have
been the main focus of CSR
(Epstein)
 Corporate Social Responsibility (CSR)
Carroll’s Four Part Definition
CSR encompasses
1. the economic,
2. legal,
3. ethical and
4. discretionary (philanthropic) expectations
that society has of organizations at a given point in time
 Corporate Social Responsibility (CSR)
Carroll’s Four Part Definition
Understanding the Four Components

Responsibility Societal Examples

Expectation
Economic Required Be profitable. Maximize sales, minimize
costs, etc.
Legal Required Obey laws and regulations.
Ethical Expected Do what is right, fair and just.
Discretionary Desired/ Be a good corporate citizen.
(Philanthropic) Expected
 Corporate Governance
• An essential aspect of ensuring confidence in democratic
market economies (Organization for Economic Co-operation &
Development-OECD)
• Managing the relationship between management, board
members, shareholders and other stakeholders
(OECD)
• Central to attracting and maintaining investment.

Enterprise and its Business Environment ©

Goodfellow Publishers 2016
 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).

Enterprise and its Business Environment © Goodfellow
Publishers 2016
Corporate Social Responsibility Pyramid
 Corporate Social Responsibility Pyramid
This pyramid is important because it triangulates three major
trends:
1)Economic Globalization,
2) Expanding CSR expectations, and
3) The call for improved business ethics.
This CSR pyramid advises organizations to:
1.Make a profit consistent with expectations for international
business
2.Obey the law of the host countries as well as international law
3.Be ethical in its practices, taking host-country and global
standards into consideration
4.Be a good corporate citizen, especially as defined by the host
 Corporate Social Responsibility (CSR)

CSR in Equation Form Is the Sum of:

Economic Responsibilities (Make a profit)
Legal Responsibilities (Obey the law)
Ethical Responsibilities (Be ethical)
Philanthropic Responsibilities (Good corporate citizen)
 Group Assignment # 2
Corporate Social Responsibility (CSR)
Arguments Against
• Increase
Restricts business
the free market
power goal of profit maximization
• Limits theisability
Business to compete
not equipped in a global
to handle socialmarketplace
activities
• Dilutes the primary aim of business
 Group Assignment # 2
Corporate Social Responsibility (CSR)
Arguments For
• Addresses social issues business• Limits
causedfuture
and allows business
to be part of the solution government
• Protects business self-interest intervention
• Addresses issues by
using business resources
and expertise
• Addresses issues by
being proactive
Corporate Social Performance
 Corporate Social Performance
Nonacademic Research
• Fortune's ranking of most and least admired corporations
• Council on Economic Priorities Corporate Conscience Awards
• Business Ethics Magazine Awards
• Walker Information’s Research on the impact of social
responsibility
 Corporate Citizenship
Corporate citizenship embraces all the facets of
corporate social responsibility, responsiveness and
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
Reputation
Performance Performance

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

Good Corporate
Good Corporate Good Corporate
Financial
Social Performance Reputation
Performance
 Selected Key Terms
• Economic,
Business forlegal,
Social
ethical
Responsibility
and discretionary responsibilities
• Philanthropy
Community obligations
• Corporate
Pyramid ofCitizenship
CSR
• Socially
Corporate social responsibility
conscious investing Corporate social
responsiveness
• Corporate social performance