978-1259535437 Chapter 4 Part 2

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Chapter 04 – Corporate Social Responsibility

4-14

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

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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

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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?

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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

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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

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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

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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

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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

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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?

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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?

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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