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Corporate Social Responsiblity, Ethics and Change
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A look at CSR, shareholder and stakeholder concept of CSR. Key issues to consider. Social and Environmental Audits.
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Corporate Social ResponsibilityDefinition:
Willingness to accept responsibility for its actions + impact on stakeholders.
Considering interests of all groups in society before making a decision.
Previously main objective make highest possible reward for owners – shareholder concept.
Recently – pressure from other stakeholders = managers must consider their views – stakeholder concept.
Issues to Consider:
Extent of CSR:
Impact on local community.
Vary country to country.
Treatment of employees.
Wealthier countries – expect more from firms who they
Considering where their supplies come believe can afford to take these broader issues into
from. consideration.
Impact on environment. Even within these countries extent will vary from firm +
issue.
Shareholder Concept vs. Stakeholder Concept:
Larger, high profile plc’s – more expectation.
Stakeholder Concept: Satisfy the needs
of all groups + individuals.
Shareholder Concept: Managers solely responsible to owners. If a decision does not increase profit –
do not implement it at all.
Stakeholder Concept Shareholder Concept
If successful – higher LT profits. Avoids conflict objectives – all interests considered.
Improve public mage – favourable coverage. Improves ST profitability – funds not used for
community projects.
Competitive advantage esp. markets with little Avoids risk that most threatening group to
differentiation. management is likely to have its views considered
first.
Increase employee motivation.
Conflict:
Decision – keep plant open protect en environment – not commercially viable.
Reducing production – reduce emissions = loss of sales.
Not to trade in a country with poor HR record – lose sales.
CSR may reduce profits via higher costs + reduced revenue.
Meeting the Needs:
ST – probably not.
o Attempts to please customers – less reward to owners.
o More training for existing workers – take money from new jobs.
o Decision not to expand for environmental reasons.
LT – possibly.
o Stakeholder concept – co-operation between parties will ultimately benefit.
o Firm will be more competitive + successful.
o Higher wages – increased motivation, higher productivity, greater profits + dividends.
Traditional view stakeholder issues = zero-sum game (one group can only be made better off by
making another worse off).
Replaced with modern view = win-win game (co-operation make everyone better off).
Firms need to take into account – needs of stakeholders; some will interpret their CSR more broadly.
One of degree i.e. how far does a firm go rather than whether it accepts/does not accept.
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