Corporate Social Responsibility

Corporate Social Responsibility (CSR)

The managerial obligation to take action that

protects & improves both the welfare of society as a

whole & the interests of the organization
The key questions for corporations
include:
•Does business have a social responsibility?
•If so, what is the extent and type of the
responsibility?
 Evolution of social responsibility of
business
 Phase 1- profit maximizing management

 Entrepreneurs produce what people want only when they can earn a profit by
doing so

 Phase II- trusteeship management

 Managers were expected not only to maximize profits, but also to serve as
trustees of stakeholders

 Phase III- quality of life management

 what is good for society is good for our company

 recognizes government as a partner in a joint effort to solve society’s problems
 Advantages of CSR

Improved financial performance

Enhanced brand image & reputation

Increased sales & customer loyalty

Increased ability to attract & retain employees

Reduced regulatory oversight

Innovation & learning

 Social responsiveness

Degree to which an organisation

meets its social responsibilites
 What should be measured when measuring
social responsiveness?

Financial contributions to charitable

projects
Fund raising for a social cause
Volunteerism: involvement of employees in
civic activities
Recycling to conserve the environment
 What should be measured when measuring
social responsiveness?

Valuing diversity

Direct corporate investments to provide facilities

for a locality/ community

Quality of worklife

Providing quality & safe products to customers

Pollution control measures

Models of Corporate Social Responsibility (CSR)

Carroll’s Model
A firm has four categories of obligations of corporate
performance:
 Economic
 Legal
 Ethical
 Discretionary
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
Pyramid of CSR

Philanthropic Responsibilities
Be a good corporate citizen.

Ethical Responsibilities
Be ethical.

Legal Responsibilities
Obey the law.

Economic Responsibilities
Be profitable.
Models of Corporate Social Responsibility (CSR)

Halal’s Return On Resources Model Of

Corporate Performance
A firm can only attempt to unite the diverse interests

of various social groups for form a workable coalition.

Beyond a certain level of economic activity. The

social issues at stake can become conflicting

Models of Corporate Social Responsibility (CSR)

Ackerman’s Model
 3 phases in the development of social responsiveness of a firm
 Phase 1:
 top management recognises the existence of a social problem that need
company’s attention
 Acknowledges the company's policy by making an oral or written
statement
 Phase 2:
 Appointment of staff specialists/ external consultants to study the
problem & find solutions
 Phase 3:
 implementation of social responsibility programs
Models of Corporate Social Responsibility (CSR)

Keith Davis’ Model

 Describe why & how business should adhere to CSR
 Proposition I:
 social responsibility arises from social power.
 Proposition II:
 business shall operate as a two way open system with open receipt of
inputs from society & open disclosure of its operations to the public.
 Proposition III:
 The social costs & benefits of an activity, product/ service shall be
thoroughly calculated & considered in deciding whether to proceed with
it.
Models of Corporate Social Responsibility (CSR)

Keith Davis’ Model

Proposition IV:
 The social costs related to each activity shall be passed on to the
customer
Proposition V:
 business institutions, as citizens, have the responsibility to become
involved in certain social problems that are outside their normal area of
operations.
 Arguments favoring CSR

Business survives using resources of the society

Integral part of social systems, hence has to care for

the needs of the society

Business is resourceful

Social involvement would foster a harmonious &

healthy relationship between the society & business to

the mutual benefit of both
 Arguments favoring CSR- cont…

Social responsibilities like recycling the waste may

have favorable financial effects

Discourage government regulation & intervention

Create a better public image

 Arguments against CSR

Business should confine to its own business

Can adversely affect the economic health of a business

Can affect competitiveness if it causes an increase in

the price of the product

Can lead to an increase in the dominance of business

over the society

Responsibilities Of Business To
Different Sections Of The
Society
 Responsibility to shareholders

To safeguard the capital of the shareholders

To provide a reasonable dividend

By:
Strengthening & consolidating its position thru’

innovation & growth

 Responsibility to employees

The payment of fair wages

The provision of the best possible working conditions

The establishment of fair work standards & norms

Provision of labor welfare facilities to the extent

possible & desirable

Arrangements for proper training & education of the

workers
 Responsibility to employees- cont…

Reasonable chances & proper system for

accomplishment & promotion.

Proper recognition, appreciation & encouragement of

special skill & capabilities of the workers

The installation of an efficient grievance handling system

Opportunity to participate in managerial decision to the

extent possible
 Responsibility to consumers

 To improve the efficiency of the functioning of the business so as to

 Increase productivity & reduce prices
 Improve quality
 Smoothen the distribution system to make goods easily available.

 To do research & development, to improve quality & introduce better &

new products
 To take appropriate steps to remove the imperfections in the

distribution system, including black marketing or profiteering by

middle men or anti social elements
 To supply goods at reasonable prices
 Responsibility to consumers- cont…

 To provide the required after sales service.

 To ensure that the product supplied has no adverse effect on the consumer

 To provide sufficient information about the products, including their

adverse effects, risks, & care to be taken while using the products
 To avoid misleading the customers by improper advertisements or

otherwise
 To provide an opportunity for being heard & to redress genuine grievances

 To understand customer needs & to take necessary measures to satisfy these

needs.
 Responsibility to the community

Taking appropriate steps to prevent environmental

pollution & to preserve the ecological balance

Rehabilitating the population displaced by the

operation of the business, if any

Assisting the overall development of the locality

Taking steps to conserve the scarce resources &

developing alternatives , wherever possible

 Responsibility to the community- cont…

Improving the efficiency of the business operation

Contributing to R&D

Development of backward areas

Promotion of small scale industries

Making possible contribution to furthering social causes

like the promotion of education & population control

Contributing to the national effort to build up a better

society.
 Responsibility to the dealers

Fairness & truthness of all the activities including

pricing, licensing to sell & rights to sell.

Ensure business activities are free from litigation

Develop long term stability in dealer relationship

Ensure that there is equity in relationship with all

dealers.
 Responsibility to the government

To behave like a law abiding citizen

To pay its dues & taxes to the state fully & honestly

Impartiality towards political affairs, i.e., to abstain

from direct political involvement, & not to support

political parties
To follow honest trade practices & avoid activities

leading to restraint of trade

 Responsibility to the government- cont…

Not to corrupt public servants for selfish ends

To sell commodities & services without adulteration

Use scarce national resources properly

Environmental protection & reduce pollution

Respect to the community & citizens of the country

Contribute to social development.

 Corporate Citizenship

Corporate citizenship embraces all the facets of

corporate social responsibility, responsiveness and
performance