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Corporate Responsibility A Summary
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This summary includes all lecture slides (1 - 11) with additional notes.
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Corporate Social Responsibility (Summary)Academic papers, Slides and notes.
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Lecture 1: The Tension Between Business and Society
Within society, Anti-Profit beliefs persist. Anti-Profit beliefs are the percepton that profttseeeing is necessarily in confict with
benefcial outcomes 뀂or consumers and society. This leads to the belie뀂 that badtpractces lead to higher profts o뀂 companies in
comparison to positie practces that are regarded as losstmaeing/less proftable. This noton howeier does not match with
reality as the 뀂ollowing studies will show.
Study 1:
Iniestng in a portolio with highly sustainable frms leads to higher profts in comparison to peers with low
sustainability
Study 2:
Positie correlaton is present between oierall corporate social responsibility and frm per뀂ormance (howeier,
뀂ocusing on eniironment per뀂ormance leads to a weaeer correlaton and i뀂 eniironmental per뀂ormance, a 뀂racton
o뀂 corporate social responsibility, is excluded the correlaton is stronger).
Study 3:
More than 50% o뀂 the studies that looeed into the relaton o뀂 between the two. Lead to positie fndings.
Firm were originally created to support actiites that were legally separated by the household. Howeier it is important to
understand that profts o뀂 frms are priiatied and losses are socialiied (at the expense o뀂 society) this is the priiilege o뀂
Limiited liabiliity. Society has granted this priiilege as a compromise that had to be
made. Society benefts 뀂rom frms (wore, tax paid), howeier a incentie should be
present to start a frm (minimaliie risettaeing)
This priiilege was also accepted because it stmulates risettaeing out o뀂 sel뀂tinterest to
generate innoiaton (which benefts society), this is not something that could be
entrusted to the goiernment. Ultmately Firm are created because it allows to
exploit sel뀂tinterested moties to generate wel뀂are to society. This idea also
contradicts anttproft belie뀂s.
Anttproft belie뀂s stll persist because o뀂 the 뀂ollowing reasons:
t ZeroiSum gain: point where two interests meet, we judge profts on maeing profts while the efect that these profts
haie to innoiate and increase wel뀂are is iniisible.
t Media coiers mainly the negatie external efects frms haie on society. Firms haie to maee a tradetof: i뀂 they are
not sustainable the are (ofen justly) critciied, but i뀂 they are sustainable they are ofen under high scrutny or
accused 뀂or Greenwa hing.
, Lecture 2: The Tension Between Business and Society
Preiiously, we haie discussed the phenomenon o뀂 antiprofit beliefs which is defned as “the perceptio that prifttseekiog is
oecessarily io ciofict ith beoefcial iutcimes fir ciosumers aod siciety” then we looeed into the empirics o뀂 diferent studies
and we haie looeed into the origins o뀂 the frm. We haie also confrmed that anttproft belie뀂s not only determine how we
ialue frms, but also how we ialue sustainabilitytrelated ideas.
Today we looe deeper into the origins o뀂 frms and economic theory. Originally frms were created as economic enttes to
exploiit ithe elfsiinitere ited motie ofs indiiidual in a way that generate societal ialue. Howeier, at some point in tme, the
proft motie trans뀂ormed into the noton ofs maximum profit which has been persistent eier since. Eier since, debaite
per i it about the role o뀂 companies in society and the tension between the two.
Militon Friedman (1962 – 1970)
Milton Friedman was a neoclassical economist associated with the Chicago school o뀂 economics. His school o뀂 neoclassical
thineing consists o뀂 the 뀂ollowing notons:
t Firms should maee as much money as possible while con뀂orming to the basic rules o뀂 society (there뀂ore maximiiaton
o뀂 proft is constraint by ethics and law).
t Companies should not be iniolied in adiancing societal ialue, because eiery $ that is used 뀂or societal goals reduces
the returns 뀂or iniestors since societal and economic progress are polar opposites.
t Free mareet will solie eierything, goiernments will not solie problems.
Friedman’s idea could be considered i뀂:
t Full in뀂ormaton is present about the impact o뀂 the frm’s actiity on society. Only frms that comply with basic rules o뀂
society, law, and ethical custom will suriiie.
t It fts the tme뀂rame o뀂 the 1960’s where there was endless economic growth and potentally negatie impact o뀂 frms
on society was either not measured or unenown
Naturally, within the tme뀂rame, the only way o뀂 contributng to society is to generate as much profts 뀂or shareholders as
possible.
(read slides 7 – 9)
Caroll (1979 – 1991)
Carroll deieloped the Corporaite Social Re pon ibiliity (CSR) pyramid. Which shows the phases o뀂 a frm.
1) Economic (be profitable): in order to ensure contnuaton
2) Legal (obey ithe law): which are codifed ethics which embody the basic notons
o뀂 뀂air operatons as en뀂orced by lawmaeers
3) Eithical(be eithical): adhere to the basic rules o뀂 society
i. Immoral: actons that are opposite o뀂 what is considered moral
ii. Amoral: not being sensitie that decisions and actons may haie negatie
consequences
iii. Moral: Con뀂orming to pro뀂essional conduct and exempli뀂ying on
leadership on it.
4) -Philanithropical (be a good citien): Encompasses all corporate actons in
response to the expectaton o뀂 society that business can be good corporate
citiens. This includes engaging in programs and acts that promote human wel뀂are or goodwill.
The pyramid shows the leiels on which the frm can operate and the responsibilites it may haie. The 뀂ocus should be on the
entrety o뀂 the pyramid and not only the economic responsibility.
In conclusion, the 뀂ollowing issues haie been addressed:
t Both Milton and Carrol confrm that CSR is ofen a 뀂ricton between corporate and societal goals.
t In additon, being a good citien ofen leads to a restricton on proft generaton and there뀂ore is considered to not
haie an integral part in strategy.
(View slides 19 – 20)
Sitakeholder managemenit:
Staeeholder management ofen is the frst step to an integrated CSR strategy, to ensure that the strategy is tailored to the
diferent types o뀂 staeeholders o뀂 the frm. The main challenge here is to decide which staeeholders haie the merit and should
be taeen into consideraton when implementng a strategy.
Sitakeholder managemenit: a process by which managers reconcile their own objecties with the claims and expectatons being
made on them by iarious staeeholder groups.
In order to determine the importance o뀂 staeeholders, the 뀂ollowing criteria must be met:
t Legitmacy: the extent to which a group has justfable right to be maeing a claim
t -Power: the extent to which staeeholders can exercise power oier the frm (based on access to resources)
t Urgency: how 뀂ast and strongly needs a claim by the staeeholder atenton.
Staeeholder management is made 뀂easible through a Sitakeholder Maitrix (SLIDE 25)
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