Chap 4-SV

Chapter 4
Corporate
Social
Responsibility
© 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be
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in whole or part.
Learning Outcomes
• Describe and explain corporate social
responsibility (CSR)
• Distinguish between instrumental and social
contract approaches to CSR
• Explain the business argument for “doing well
by doing good”
© 2018 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may
not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
4-2
Learning Outcomes (continued)
• Summarize the five driving forces behind CSR
• Explain the triple bottom-line approach to
corporate performance measurement
• Discuss the relative merits of carbon-offset
credits
4-3
Corporate Social Responsibility
(CSR)
• Actions of an organization targeted toward the
achievement of a social benefit over and above
maximizing profits for its shareholders and
meeting all its legal obligations
• Also known as corporate citizenship and
corporate conscience
4-4
(CSR)
• Operate in a competitive environment
• Committed to aggressive growth strategy
• Must comply with all federal, state, and local

legal obligations
4-5
(CSR)
• All federal, state, and local legal obligations:
- Payment of all taxes
- Payment of all employer contribution
- Compliance with all legal industry standards in
operating a safe working environment
- Delivering safe products
4-6
What is it about?
https://www.youtube.com/watch?
v=nTOHKcggvsE&t=192s
4-7
Corporate management
CSR- Strategic plan
 Management without conscience

o Instrumental approach
o Social contract approach
 Management by inclusion
4-8
Instrumental approach
• Milton Friedman- Nobel prize-winning
economist
• Perspective that the only obligation of a
corporation is to maximize profits for its
shareholders in providing goods and services
that meet the needs of its customers
• Be earned without deception or fraud
4-9
• Support the rights of individuals to make money
with their investments
• Recognize the clear legality of employment
contract- expected to make as much profit as
possible to make our investment in a company
a success
• Still have some form of conscience
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Problem
=> Focus on the internal world of corporation itself
=> No external consequences to the actions of
corporation and its managers
4-11
Social contract approach
• The perspective that the corporation has an

obligation to society over and above the
expectations of its shareholders
4-12
• Originally, economic focus- continued economic
growth would bring an equal advancement in
quality of life
• The modern one- the corporation has an

obligation to meet the demand of that society
rather than just the demands of the targeted
group of customers
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• Corporations should be recognized as social
institutions and economic enterprises
• Long-term perspectives rather than just the

delivery of quarterly earnings numbers
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Management by Inclusion
• Impacts of corporations’ actions on???
• Customers
• Employee
• Suppliers
• Communities
=> Positively or negatively?
=> Winners or losers?
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Management by Inclusion
• Going beyond generating profit attracts a lot of
attention
• “ I like to think of CSR as doing well by doing
good. Doing what’s in the best long-term
interest of the customer is ultimately doing
what’s the best for the company. Doing good
for customer is just good business”
4-16
4-17
Doing well by doing good
Making charitable donations
Underwriting projects in their local communities
Sponsoring local events
Engaging in productive conversations with special

interest groups about earth-friendly packaging
materials
=> PUBLIC RELATIONS EXERCISES???

4-18
The Driving Forces behind CSR
Transparency Knowledge Sustainability
Failure of the
Globalization
public sector
4-19
Transparency No longer sweep things under the rug
4-20
 Consumers and investors have

Knowledge
more information at their disposal
 Consumers might choose a brand
based on repective environmental
records or involvement in
sweatshop practices overseas
4-21
 Cross sustainable yield thresholds

Sustainability of many natural systems
(water…)
 Corporations are under pressure
form diverse stakeholder
constituencies to demonstrate that
business plans and strategies are
environmentally sound
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 Improve the worst excesses of

Globalization
market capitalism
 Protect society by balancing

private interests against broader
public interests
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 Governed by dysfunctional
Failure of the
public sector regimes from the unfortunate and
disorganized to the brutal and
corrupt
4-24
CSR Risks
• Corporations experimenting with CSR initiatives
run the risk of creating adverse results
• Employees feel that they are working for an
insincere organization
• Public sees little more than a token action
concerned with publicity rather than community
• Organization does not perceive much benefit
from CSR and sees no need to develop the
concept
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Triple Bottom Line
• Adaptation of annual reports to reflect a triple
bottom-line approach is a testament of how
seriously companies are taking CSR
• They provide social and environmental updates
alongside their primary bottom-line financial
performance
=> easy to make public commitment to CSR but
actually delivering on that commitment to the
satisfaction of your customers can be hard
4-26
Types of CSR
• Ethical CSR
• Altruistic CSR
• Strategic CSR
4-27
Types of CSR
Ethical CSR
• The purest and most legitimate type
• The organizations pursue a clearly defined
sense of social conscience in managing:
 Their financial responsibilities to their
shareholders
 Their legal responsibilities to local community
and society
 Their ethical responsibilities to do the right
thing for all their stakeholders
4-28
Types of CSR
Altruistic CSR
A philanthropic approach to CSR in which
organizations underwrite specific initiatives to give
back to the company’s local community or to the
designated national or international programs
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Types of CSR
Altruistic CSR
Shell Oil Corp. responded to the devastation of the
tsunami disaster in Asia in December 2004 with
donations of fuel for rescue transportation and
water tanks for relief aid, in addition to financial
commitments of several million dollars for disaster
relief. Shell employees matched many of the
company’s donations.
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Types of CSR
Strategic CSR
• Philanthropic approach to CSR in which
organizations target programs that will generate
the most positive publicity or goodwill for the
organization but that run the greatest risk of
being perceived as self-serving behavior on the
part of the organization.
4-31
Carbon Footprint
• Total carbon dioxide emissions on an annual
basis
• Kyoto Protocol requires developed nations to
reduce their greenhouse gas emissions by
funding projects in developing countries in
return for carbon credits
• Purchasing credits from carbon-positive projects
can result in operations being made carbon
neutral
4-32

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Chapter 4

• Committed to aggressive growth strategy

• Must comply with all federal, state, and local

 Management without conscience

• The perspective that the corporation has an

• The modern one- the corporation has an

• Long-term perspectives rather than just the

Underwriting projects in their local communities

Sponsoring local events

Engaging in productive conversations with special

=> PUBLIC RELATIONS EXERCISES???

Transparency Knowledge Sustainability

Transparency No longer sweep things under the rug

 Consumers and investors have

 Cross sustainable yield thresholds

 Improve the worst excesses of

 Protect society by balancing

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