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CHAPTER 3
THE CORPORATION’S SOCIAL
RESPONSIBILITIES
INTRODUCTION
The idea that businesses bear broad responsibilities to society as they pursue economic
goals is an age-old belief. Both market and nonmarket stakeholders expect businesses to
act responsibly, and many companies have responded by making social goals a part of
their overall business operations and adopting the goal of being a good corporate citizen.
Businesses embracing these responsibilities often build positive relationships with
stakeholders, discover business opportunities in serving society, and transform a concern
for financial performance into a vision of integrated financial and social and
environmental performance. Establishing effective structures and processes to meet a
company’s social and corporate citizenship responsibilities, assessing the results of these
efforts, and reporting on the firm’s performance to the public are important challenges
facing today’s managers.
PREVIEW CASES
Starbucks Helps Coffee Farmers
Reckitt Benckiser (RB) Partners with Save the Children
Are the efforts described above examples of corporate social responsibility, how
businesses merge their social goals with solid economic objectives, or are these
inappropriate uses of corporate assets—finances, personnel, and product? If these are
examples of good business practice, how far should an organization go to help those in
society in need of their support? How much is too much?
CHAPTER OUTLINE
I. CORPORATE POWER AND RESPONSIBILITY
Teaching Tip: Socially Responsible Companies
The preview cases should provide students will ample opportunities to
debate the questions raised above – social responsibility or
inappropriate use of company assets – and how far “should” a company
go? Student may want to locate examples of social responsibility from
their local communities or off the Internet.
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II. CORPORATE SOCIAL RESPONSIBILITY AND CITIZENSHIP
A. The Origins of Corporate Social Responsibility
III. BALANCING SOCIAL, ECONOMIC, AND LEGAL RESPONSIBILITIES
IV. THE CORPORATE SOCIAL RESPONSIBILITY DEBATE
A. Arguments For Corporate Social Responsibility
Balances corporate power with responsibility
Discourages government regulation
Promotes long-term profits for business
Improves stakeholder relationships
Teaching Tip: Iron Law of Responsibility
Students could look through local or national business periodicals or
the Internet for examples of businesses who have abused their power
and encountered the wrath of social interest groups or the government.
Teaching Tip: Corporate Social Responsibility and Citizenship
The CEO at UBS sees it “as a duty to understand the scope and scale of
societal challenges.” Do other executives share this vision or are they
opposed to this view?
Besides the examples included in the text book, students could explore
differences in corporate citizenship, possibly from around the world,
based on their own experiences, observations, or from information
acquired by surfing the Internet.
Teaching Tip: The CSR Debate
Students could be divided into teams and assigned one side of the CSR
debate or each pro and con issue in the debate for in-class
presentations. Students could support their debate position by
acquiring quotes from local executives via interviews or from corporate
documents, such as annual reports or press releases. Figure 3.3 The
Pros and Cons of Corporate Social Responsibility might help students
form the debate.
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Enhances business reputation
B. Arguments Against Corporate Social Responsibility
Lowers economic efficiency and profits
Imposes unequal costs among competitors
Imposes hidden costs passed on to stakeholders
Requires skills business may lack
Places responsibility on business rather than individuals
V. MANAGEMENT SYSTEMS FOR CORPORATE SOCIAL
RESPONSIBILITY AND CITIZENSHIP
Teaching Tip: Introducing the B Corporation
Exhibit 3.A – The B Corporation – is intended to be somewhat
controversial given the newness of this phenomenon and the few
organizations that have received this certification. It is an effort to
provide some sort of license or objective seal of approval on firm’s
seeking to be socially responsible. Is this a good development? Do
firms really care about being known as a socially responsible firm?
Students may want to explore which other firms, besides those
mentioned in the chapter, have been awarded this designation.
There are numerous videos available online focusing on and describing
the actions of B Corporations – just search for “B Corporations videos”
and many can be found on YouTube.
Also, see www.bcorporation.net for more information about these
organizations and the certification procedures.
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VI. STAGES OF CORPORATE CITIZENSHIP
A. Elementary Stage
B. Engaged Stage
C. Innovative Stage
Teaching Tip: The Gap’s Corporate Citizenship Manager
Bobbi Silten is introduced in this chapter as The Gap’s corporate
citizenship manager. Student could “adopt” a firm and investigate if
the firm has a corporate citizenship officer and, if so, what is the
person’s job title, responsibilities, who do they report to, etc.? Which
stakeholders are addressed by the firm’s corporate citizenship officer?
If students are assigned into groups, they might identify firms within an
industry and compare which firms better address their corporate
citizenship responsibilities or publicize their corporate citizenship
practices.
Teaching Tip: Corporate Social Responsibility and Citizenship
Professional Associations
Groups of students could be assigned each of the associations listed in
Exhibit 3.C and compare how each association serves the interests of
its members differently. Are there regional differences around the
world when it comes to the practice of corporate social responsibility
and citizenship?
Teaching Tip: Corporate and Individual Philanthropy
The Boston College Center’s stage model, Figure 3.5, provides an
array of possible assignments for students to explore firm’s corporate
citizenship activities. It might be interesting for students to identify
firms operating at different stages of corporate citizenship. Are there
firms within an industry that are at different stages? Or, students might
explore corporate citizenship practices by a single firm over time to see
if the firm has progressed from one stage of corporate citizenship to
another. Another interesting question for exploration is whether firms
change in their stage of corporate citizenship after experiencing a
corporate crisis, embarrassment in the press, or change in senior
leadership at the firm.
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E. Transforming Stage
VII. ASSESSING AND REPORTING SOCIAL PERFORMANCE
A. Social Audit Standards
B. The Global Reporting Initiative – GRI
C. Social Reporting
GETTING STARTED
KEY LEARNING OBJECTIVES
LO 3-1: Understanding the role of big business and the responsible use of corporate
power in a democratic society.
enhance society when exercising their power.
Teaching Tip: Corporate Social Audits
Locate, using the Internet, examples of firms that conduct social audits.
Assess their audit evaluations. Do they consider the “right elements”
of corporate citizenship? Are their conclusions and commitment for
future actions likely to promote the social and economic objectives
espoused by the firm? Are they pursuing an effective corporate
citizenship strategy?
Teaching Tip: Global Reporting Initiatives
Students may also want to explore the Global Reporting Initiatives at
www.globalreporting.org. What services or new opportunities does the
GRI provide to firms?
Teaching Tip: Social Reporting
Social reports are easily available in most global corporation’s
websites. Students could compare and contrast reports, determine the
level of transparency found in the reports, and identify which firms
have integrated reports.
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LO 3-2: Knowing when the idea of social responsibility originated and investigating
how a company’s purpose or mission can integrate social objectives with
economic and legal objectives.
LO 3-3: Examining the key arguments for and against corporate social
responsibility.
Corporate social responsibility is a debatable notion. Some argue that its benefits
maximize stockholders’ return alone.
LO 3-4: Defining global corporate citizenship and recognizing the rapidly evolving
management practices to support global citizenship.
Global corporate citizenship refers to putting a commitment to serving various
firm.
LO 3-5: Distinguishing among the sequential stages of global corporate citizenship.
LO 3-6: Understanding how businesses assess and report their social performance.
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KEY TERMS
B Corporation
corporate citizenship
INTERNET RESOURCES
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DISCUSSION CASE
CORPORATE SOCIAL RESPONSIBILITY AT GRAVITY
PAYMENTS
Discussion Questions
1. Is Price demonstrating elements of corporate social responsibility by his actions
in this case, or not?
And so on.
2. What principles of corporate citizenship (using Exhibit 3.A) are evident in this
case?
Teaching Tip: Gravity Payments
There is an excellent video about this case from the New York Times:
http://www.nytimes.com/video/business/100000003628438/new-
minimum-wage-70000-a-year.html
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3. What arguments for and against corporate social responsibility (referring to
Figure 3.3) are relevant to this case?
One could claim that all of the arguments found in Figure 3.3 are relevant to this
Price seems to be embracing the notion that a firm’s leader must “balance corporate
“improve stakeholder (employee) relations” and likely will “enhance his business’s
reputation.”
4. Is Price acting like an executive of a firm that could be certified as a B
corporation?
employees, a single stakeholder. Moreover, he is not attempting “to solve social and
environmental problems.”
– the firm’s profitability.
But, in general, Price’s actions are narrower in scope than what typically would be
5. What stage of global corporate citizenship (using Figure 3.5) is Gravity
Payments operating at, and why do you think so?
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Content at the Transformation Stage. He has set a high standard, challenging other
business owners to pay employees wages that will allow them to emerge from the
match his employees’ new annual salary.
dramatic announcement and change in the employees’ wage structure.
employees’ wages. His efforts may not rise to the level of the Transformation Stage
(“defining”).
organizational” element to his actions.
Finally, it seems clear that there is full disclosure of Price’s actions, thus the
Transparency dimensions appears to be at the Transformation Stage.
The application of the Stages of Global Corporate Citizenship model to this