Lecture 2

Corporate Citizenship: Social

Responsibility, Responsiveness,
and Performance
BUS320
Oscar Imaz

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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
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 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.

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 Early Definitions -
• CSR means seriously
considering the impact of a
company’s actions on
society.

• CSR requires the individual

Corporate to consider his or her acts in
Social terms of a whole social
Responsibility system, and holds him or her
As a Concept 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.

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Business Criticism-
Social Responsibility Cycle
Factors in the Societal Environment

Criticism of Business

Increased Concern A Changed

for the Social Environment Social Contract
Business Assumption of
Corporate Social Responsibility
Social Responsiveness, Social
Performance, and Corporate Citizenship

A More Satisfied Society

Fewer Factors Leading to Increased Expectations

Business Criticism Leading to More Criticism
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 Corporate Citizenship Concepts
Traditional CSR Patterns
Newer Terms with Similar Meanings
Emphasize:
Corporate Social Responsibility
Corporate Citizenship (CC) - Views
Emphasizes Obligation,
companies as citizens and all this implies
Accountability
Corporate Responsibility (CR) – Broadly
Corporate Social Responsiveness
Focuses on all categories of corporate
Emphasizes Action, Activity
Responsibility
Corporate Social Performance Sustainability (SUS) –
(CSP) Emphasizes Outcomes, Emphasizes longer-term concern for people,
Results planet and profits

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Historical Perspective on CSR

Economic Model

Legal Model

Social Model

Stakeholder Model

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Modifications of the Economic
Model

Philanthropy

Community obligations Paternalism

Motivation:
Keep government at arm’s length

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 • CSR:
Evolving • …is seriously considering
the impact of the company’s
Meanings of CSR 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.

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A Four-Part
Definition of
CSR
While each definition is valuable, we will focus on the
types of social responsibilities business have.
Corporate social responsibility encompasses the:
Economic
Legal
Ethical, and
Discretionary
expectations that society has of organizations at a
given point in time . 10
 The Four Components of CSR
Societal
Responsibility Examples
Expectation

Be profitable. Maximize sales,

Economic Required
minimize costs.

Obey laws, adhere to

Legal Required
regulations

Avoid questionable practices.

Ethical Expected
Do what is right, fair, and just

Desired/ Be a good corporate citizen.

Philanthropic
Expected Give back.

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12
Philanthropic Responsibilities
Be a good corporate citizen.
Ethical Responsibilities
Be ethical.
Legal Responsibilities
Obey the law.
Economic Responsibilities
Be profitable.
The Pyramid of CSR
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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 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.

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• Shows no past record of questionable activity.
• 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 to 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.
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 Arguments For CSR -
• Enlightened self-interest: Businesses must take
actions to ensure long-term viability.
• Warding off government regulations. This is one of
the most practical reasons.
• Resources Available: Business has the resources
and expertise. Let it try.
• Pro-action is better than Reaction . Pro-action is
also less costly.
• Public supports: the public strongly supports CSR.

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Business Responses to calls for CSR Make the
Business Case for CSR (Zadeck’s The civil
corporation)

Defensive approach

Cost-benefit approach

Strategic approach

Innovation and learning approach

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The Business Case for CSR
•6 Reasons for Embracing CSR
• Innovation
• Cost savings
• Brand differentiation
• Long-term thinking
• Customer engagement
• Employee engagement

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Business Benefits of CSR

1. Win new business

2. Increase customer retention

3. Develop and enhance relationships with customers, suppliers,

and networks.

4. Attract, retain, and maintain a happy workforce and be an

Employer of Choice.

5. Save money on energy and operating costs and manage risk.

6. Differentiate itself from competitors

7. Improve its business reputation and standing

8. Provide access to investment and funding opportunities

9. Generate positive publicity and media opportunities due to

media interest in ethical business activities.

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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.

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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.

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Corporate Social
Performance:
(Carroll’s Model)

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Corporate Social Performance:
Wartick & Cochran’s Model Extensions

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Corporate citizenship -
• Embraces all the facets of corporate
social responsibility, responsiveness,
and performance.
• Corporate citizenship is not a new
concept, but one whose time has Corporate
come. Citizenship
• Corporate Citizenship serves a
variety of stakeholders.

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 Broad View
Embracing all that is implied in the
concepts of social responsibility,
responsiveness and performance
Fombrun proposition:
• A reflection of shared moral and ethical
Corporate principles.

Citizenship • 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
(Altman)

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Drivers of Corporate Citizenship

Internal Motivators External Pressures

Traditions and values Customers and
consumers
Reputation and image Expectations in the
communities
Business strategy Laws and political
pressures
Recruiting and
retaining employees

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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)

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Stages of Corporate Citizenship
Deliver on core values by: minimising harm and maximising benefits
accountable to stakeholders and supports strong financial results.

(Source: Mirvis and Googins 2006)

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Development Challenges That Trigger
Movement of Corporate Citizenship

(Source: Mirvis and Googins 2006)

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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.

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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

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 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

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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.

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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”

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The Triple Bottom Line Perspective

Business Must Attend to Three Key

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

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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.

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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

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