Chapter 2 and 3
1.Corporate Social Responsibility: What is corporate social responsibility (CSR)? Is CSR good business?
Social Investment: What is the field of social investing? What are social investment criteria?
Learning Objectives: understand CSR theory and debate, evaluate CSR criteria, formulate your own position on CSR.
The Central Focus of CSR Theory: What obligations does a firm have toward society?
CSR Definitions: “The idea of social responsibility supposes that the corporation has not only economic and legal obligations, but also certain responsibilities which extend beyond these obligations”
And “Social responsibility is the obligation of decision makers to take actions which protect and improve the welfare of society as a whole along with their own interests”
Related CSR Business Concepts: cause related marketing (percent of product price goes to charitable cause) corporate strategic philanthropy (sponsorship/voluntarism) cradle to cradle (design products to create new products) environmental footprint (human demand versus planet’s ability to regenerate) fair trade (provide sustainable livelihood to suppliers). fortune at the bottom of the pyramid (e.g., microfinance) social enterprise (business where profits used to further social aims) social entrepreneur (visionary leader of non-profit used to solve social issues) triple-bottom line (economic prosperity, environmental quality, social equity)
Milton Friedman (Maximize Profits) vs. The Body Shop (Beyond Profits)
Milton Friedman: A corporation’s only social responsibility is “to make as much money as possible while conforming to the basic rules of the society”: (i) obeying the law; (ii) conforming to “ethical custom” (i.e., business norms where you do business); and
(iii) acting “without deception or fraud”.
The Body Shop: Business should do more than make money, we believe that companies have additional ethical obligations (i.e., beyond Friedman’s criteria) and/or philanthropic obligations (e.g., helping to solve social problems).
Outline of the CSR Debate: Narrow Obligations:
company is a legal fiction
pursuit of profit maximizes social utility
‘Chainsaw’ Al Dunlap formerly of Sunbeam
company is a moral agent
upholding stakeholder obligations maximizes social utility
Anita Roddick of The Body Shop
Milton Friedman vs. The Body Shop:
managers are agents of shareholders
spending shareholders’ money, imposes taxes
companies pursuing profits leads to social utility maximization
policy decisions better left to government
shareholders or managers can still give charity
firms can engage in ‘socially responsible’ activity but only if it maximizes the bottom line
The Body Shop:
corporations are citizens of society, must consider all stakeholders
shareholders’ desires often go beyond the bottom line
shareholders have moral obligation towards society
managers often make decisions under uncertainty
corporations have power and ability to make a difference, government not always sufficient or willing
Conceptual Reasons for Broader CSR:
Stakeholder Theory: moral obligations to all stakeholders, not merely shareholders
Social Contract: corporation is a citizen of society (i.e., reciprocity)
Social Power: social responsibility arises from power held by corporation, able to do more good
Is Ethics and Broader CSR Really Good Business? Although not conclusive, the bulk of empirical and anecdotal evidence conducted to date suggests that acting in an ethical or socially responsible manner improves the bottom line, at least in the long-term.
CAUTIONARY NOTE! Even if good ethics is demonstrated to be good business, a strong argument is that this should not be the only or primary motivation for being