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Chapter 04 - Corporate Social Responsibility
4-14
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Students’ responses may vary. Some of them may say that Coca-Cola needs to address the
human rights violations and reporting the progress of their business practices to the
Frontline Focus
“A Stocking Error—Claire Makes a Decision” Questions
1. Did Claire do the right thing here?
Claire made a good decision in this situation. Mistakes happen; therefore, customers and
2. Do you think the customers will be convinced? Why or why not?
3. What do you think Mr. Jones’s reaction will be?
Student answers will vary. Mr. Jones should like the low-cost of the communications in the
Key Terms
Altruistic CSR: Philanthropic approach to CSR in which organizations underwrite specific
initiatives to give back to the company’s local community or to designated national or
international programs.
Corporate Social Responsibility (CSR): The actions of an organization that are targeted toward
achieving 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.
Ethical CSR: Purest or most legitimate type of CSR in which organizations pursue a clearly
Chapter 04 - Corporate Social Responsibility
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defined sense of social conscience in managing their financial responsibilities to shareholders,
their legal responsibilities to their local community and society as a whole, and their ethical
responsibilities to do the right thing for all their stakeholders.
Instrumental Approach: The 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.
Social Contract Approach: The perspective that a corporation has an obligation to society over
and above the expectations of its shareholders.
Strategic CSR: Philanthropic approach to CSR in which organizations target programs that will
generate the most positive publicity or goodwill for the organization but which runs the greatest
risk of being perceived as self-serving behavior on the part of the organization.
Review Questions
NOTE: Some questions allow for a number of different answers. Below are some suggestions.
1. Would organizations really be paying attention to CSR if customers and federal and state
agencies weren’t forcing them to? Why or why not?
Students’ responses may vary. It is hopeful that organizations would adhere to corporate
social responsibility and provide the good service and products that consumers deserve.
2. Would the CSR policies of an organization influence your decision to use their products or
services? Why or why not?
Students’ responses may vary. Many people are aware of and respond to an organization’s
Chapter 04 - Corporate Social Responsibility
4-16
3. Which is more ethical: altruistic CSR or strategic CSR? Provide examples to explain your
answer.
Students’ responses may vary. Students should recall that altruistic CSR takes a
philanthropic approach and centers itself in the charitable giving of a corporation. The
4. How would you measure your carbon footprint?
At www.carbonfootprint.com/calculator.aspx, students could calculate the carbon dioxide
5. If a carbon-offset project is already profitable, is it ethical to provide credits over and above
those profits? Why or why not?
Students’ responses may vary. Individuals can purchase credits to offset the emissions to
render themselves “carbon neutral.” Consider the use of the credits over and above profits.
The Kyoto Protocol is an agreement between 160 countries that became effective in 2005
6. Consider the company you currently work for (or one you have worked for in the past).
What initiatives could they start to be more socially responsible? How would you propose
such changes?
Chapter 04 - Corporate Social Responsibility
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Students would need to look at the current initiatives of the company and find opportunities
Review Exercises
1. The PGEP/Payatas project is being promoted as a win-win project for all parties involved. Is
that an accurate assessment? Why or why not?
Students’ responses may vary. Quezon City is doing what it can to enhance the lives of
individuals and groups in the community. When Pangea Green Energy Philippines, Inc.
2. The Payatas project is estimated to generate 100,000 carbon credits per year. At an average
market value of U.S. $30 per credit (prices vary according to the source of the credit), PGEP
will receive an estimated U.S. $3 million from the project. On those terms, is the U.S.
$300,000 donation to the Payatas community a fair one?
3. How could Quezon City officials ensure that there is a more equitable distribution of
wealth?
Internet Exercises
1. Review the CSR policies of a Fortune 100 company of your choice. Would you classify its
Chapter 04 - Corporate Social Responsibility
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policies as ethical, altruistic, strategic, or a combination of all three? Provide examples to
support your answer.
Students’ responses will vary. The students should review the CSR policies of a Fortune 100
2. Review the annual report of a Fortune 100 company of your choice. What evidence can you
find of triple bottom-line reporting in the report? Provide examples to support your answer.
Students’ responses will vary. The students should review the annual report of a Fortune 100
Team Exercises
1. Instrumental or social contract?
Divide into two teams. One team must prepare a presentation advocating for the
instrumental approach model of corporate management. The other team must prepare a
presentation arguing for the social contract model of corporate management.
The instrumental approach is the 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
2. Ethical, altruistic, or strategic?
Divide into three groups. Each group must select one of the following types of CSR: ethical
CSR, altruistic CSR, or strategic CSR. Prepare a presentation arguing for the respective
Chapter 04 - Corporate Social Responsibility
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merits of each approach and offer examples of initiatives that your company could engage in
to adopt this strategy.
Ethical CSR represents the purest or most legitimate type of CSR in which organizations
pursue a clearly defined sense of social conscience in managing their financial
represents a violation of shareholder rights if they are not given the opportunity to vote on
the initiatives launched in the name of corporate social responsibility. The relative
3. Closing down a factory.
Divide into two groups and prepare arguments for and against the following behavior:
Your company is managing to maintain a good profit margin on the computer parts you
manufacture in a very tough economy. Recently, an opportunity has come along to move
your production capacity overseas. The move will reduce manufacturing costs
significantly as a result of tax incentives and lower labor costs, resulting in an
anticipated 15 percent increase in profits for the company. However, the costs associated
with shutting down your U.S.-based operations would mean that you wouldn’t see those
increased profits for a minimum of three years. Your U.S. factory is the largest employer
in the surrounding town, and shutting it down will result in the loss of over 800 jobs. The
loss of those jobs is expected to devastate the economy of the local community.
Students’ responses may vary. The benefits for moving the production capacity overseas
Chapter 04 - Corporate Social Responsibility
4-20
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
computer parts to consumers. On the other hand, there are numerous arguments for keeping
the production capacity in the United States:
• First, the firm is already maintaining a good profit margin in a tough economy.
• Second, if the production capacity were to be moved, the community in which the
4. A limited campaign.
Divide into two groups and prepare arguments for and against the following behavior:
You work in the marketing department of a large dairy products company. The company
has launched a “revolutionary” yogurt product with ingredients that promote healthy
digestion. As a promotion to launch the new product, the company is offering to donate
10 cents to the American Heart Association (AHA) for every foil top from the yogurt pots
that is returned to the manufacturer. To support this campaign, the company has invested
millions of dollars in a broad “media spend” on television, radio, web, and print outlets,
as well as the product packaging itself. In very small print on the packaging and
advertising is a clarification sentence that specifies that the maximum donation for the
campaign will be $10,000. Your marketing analyst colleagues have forecast that first-
year sales of this new product will reach 10 million units, with an anticipated
participation of 2 million units in the pot-top return campaign (a potential donation of
$200,000 without the $10,000 limit). Focus groups that were tested about the new
product indicated clearly that participants in the pot-top return campaign attach positive
feelings about their purchase to the added bonus of the donation to the AHA.
Students’ responses will vary. Arguments for the pot-top return promotion include that the
or maximum of $10,000 provides an outlet for the firm to potentially donate less to the AHA
while still gaining positive publicity. Arguments against this campaign includes the ethical
Chapter 04 - Corporate Social Responsibility
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Thinking Critically
4.1 – Sustainable Capitalism
1. Why is “people, planet, profits” a more media-friendly message than a triple bottom-line
approach to CSR?
testament to how seriously companies are now taking CSR, many have adapted their annual
reports to reflect a triple bottom-line approach, for which they provide social and
2. On what grounds could the CSR initiatives of a corporation be dismissed as “window-
dressing”?
Students’ responses may vary. Some corporations provide glossy annual reports and
more conscious capitalism than the pursuit of profit at any cost. However, this project based
approach, it is argued, facilitates the development of “window-dressing” strategies where the
3. What is meant by the term sustainable capitalism?
4. Based on the information in this case and a review of GenerationIM’s manifesto document,
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is there any correlation of its proposal to the commonly accepted tenets of CSR?
profits for its shareholders and meeting all its legal obligations. This definition assumes that
the corporation is operating in a competitive environment and that the managers of the
corporation are committed to an aggressive growth strategy while complying with all
The proposals made in the GenerationIM’s manifesto documents are somewhat similar to
• Integrated reporting of environmental, social, and governance (ESG) performance
alongside mandated financial returns
5. What challenges do you foresee in the broader acceptance of sustainable capitalism around
the world?
Students’ responses may vary. Critics of sustainable capitalism argue that its action items
represent nothing more than an attempt to burden an efficient capitalist model with political
6. How would you go about introducing sustainable capitalism in your company?
Students’ responses may vary. In order to introduce sustainable capitalism in a company the
Chapter 04 - Corporate Social Responsibility
4-23
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
• Align compensation structures with long-term sustainable performance
• Encourage long-term investing with loyalty-driven securities
4.2 – Corporate Social Irresponsibility
1. Why would companies choose to inflate the image of their corporate citizenship?
Students’ responses may vary. Companies are inflating the image of their corporate
2. Is it ethical to direct company donations to “nonprofit groups closely aligned with the
interests of the corporation’s employees, communities, and business objectives”? Why or
why not?
Students’ responses may vary. Company donations to nonprofit groups closely aligned with
3. Is it ethical to direct company donations to support “pet projects of senior managers or board
members”? Why or why not?
4. Why would budgeting a fixed percentage of pretax profits for corporate philanthropy be
seen as a more convincing commitment to CSR than just funding a variety of projects?
5. The authors of this article claim that “an effectively managed contribution program can
deliver strong returns to a corporation.” What might those returns be?
Chapter 04 - Corporate Social Responsibility
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Students’ responses may vary. An effectively managed contribution program can deliver
6. Does the fact that Target and General Mills donate five times more than the minimum 1
percent make them five times more socially responsible? Why or why not?
Students’ responses may vary. Some of them may say that the fact that Target and General
business.
4.3 – Monsanto’s Mystery Wheat
1. Did Monsanto violate any ethical standards in developing genetically modified wheat and
planning to sell it as a companion product to Roundup?
Students’ responses may vary. The lack of communication about the development of
2. What should it have done differently?
Students’ responses may vary. Monsanto could have anticipated the negative market
3. Was it ethical for Monsanto to settle the litigation with no admission of responsibility or
commitment to change any internal practices? Why or why not?
Chapter 04 - Corporate Social Responsibility
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establishes a precedent that can prove to be very expensive for the company in any
4. Did Japan make the right decision when it banned all imports of U.S. soft wheat?
5. Food scientists argue that Mother nature has been genetically modifying plant species for
thousands of years, and that technology now gives them the opportunity to do the same for
the welfare of a global population. Explain the ethical position of this argument.
6. Anti-GMO protesters warn of the creation of “frankenfoods” that have the potential to harm
our bodies in ways that we do not yet understand. Explain the ethical position of this
argument.
Students’ responses may vary. Universal ethics argues that there are certain and universal
