Instructor Manual
Chapter 10: Socially Responsible Business
(Prepared by Klaus E. Meyer, March 2019)
Introduction to the Topic
Learning Objectives
1. Articulate a stakeholder view of the firm
2. Articulate CSR challenges faced by firms operating in the global economy
3. Explain how institutions influence firms’ corporate social responsibility activities
4. Participate in three leading debates concerning corporate social responsibility
5. Draw implications for action
General Teaching Suggestions
Globalization, among other consequences, makes ethical issues faced by managers more
complex. We have therefore chosen to integrate CSR right at the centre at book, within Part
III of globalization (rather than as an add-on last chapter as in some other textbooks). Raising
students’ awareness for the complexity of ethical issues and providing conceptual framework
to structure CSR discussion should be a central element within an IB class.
The approach we have taken here is to start out by introducing the stakeholder perspective of
firms and outline two challenges specific to the global economy: varying standards for labour
and the environment across countries (A third issue, corruption, is discussed in Chapter 3).
Then we elaborate on the institutional differences between Europe and the US that explain
some features why the CSR debates tend to run along quite different lines based on Matten
and Moon’s work.
Opening Case Discussion Guide
The opening case ‘Starbucks’ outlines some of the challenges faced by firms that publicly
commit to high standards of CSR. In particular, by taking high profile initiatives, companies
also become vulnerable to attack by interest groups pushing their specific views on aspects of
CSR. The conflict features Starbucks and Global Exchange, an organization lobbying for ‘fair
trade’. To initiate a discussion, you as instructor may ask, “how do you suggest Starbucks
should handle demonstrations from Global Exchange?”
Chapter Outline, Section by Section
Section 1: Stakeholders of the Firm
Key Ideas
The section introduces key concepts in the CSR debate, including primary and secondary
stakeholders, and normative v instrumental vies of CSR. These concepts are essential to
structure CSR-related discussions and to identify why different people come to different
conclusions on basis CSR issues.
In Focus 10.1 illustrates the complexity of stakeholder net, and I have used it often to initiate
the topic in class. For this purpose, you can find pictures of IKEA’s catalogue in Saudi
Arabia and Sweden on the internet. (Here http://www.dn.se/ekonomi/inga-kvinnor-i-saudisk-
ikeakatalog/ and http://www.bbc.co.uk/news/world-europe-19786862)
Key Concepts
corporate social responsibility (CSR)
The consideration of, and response to, issues beyond the narrow economic, technical, and legal
requirements of the firm to accomplish social benefits along with the traditional economic gains which
the firm seeks.
sustainability
The ability to meet the needs of the present without compromising the ability of future generations to
meet their needs around the world.
human rights
The rights that one has simple because one is a human being
triple bottom line
The economic, social, and environmental performance that simultaneously satisfies the demands of all
stakeholder groups.
stakeholder
Any group or individual who can affect or is affected by the achievement of the organization’s
objectives.
primary stakeholder groups
The constituents on which the firm relies for its continuous survival and prosperity.
secondary stakeholder groups
Those who influence or affect, or are influenced or affected by, the corporation, but they are not
engaged in transactions with the corporation and are not essential for its survival.
non-governmental organisations (NGOs)
Organisations, such as environmentalists, human rights activists and consumer groups that are not
affiliated with governments.
instrumental view
A view that treating stakeholders well may indirectly help financial performance
normative view
A view that firms ought to be self-motivated to ‘do it right’ because they have societal obligations
shared value creation
An approach to CSR that focuses on activities that are good for both the firm and its stakeholders.
child labour
Working persons under the age of 16
Section 2: CSR in the Global Economy
Key Ideas
The CSR challenges faced by companies operating across borders are considerably more
complex than those of firms operating in a single national context. This is because the ethical
standards and legal requirements likely vary, and thus companies have to make decisions on
which standards apply to them. We introduce two discussions that companies are exposed to:
environmental standards and labour standards. A critical issue here is the ‘race to the bottom’,
and the implementation of ‘standards of engagement’ that a firm may impose on its suppliers.
Key Concepts
pollution haven
Countries with lower environmental standards
race to the bottom
Countries competing for foreign direct investment by lowering environmental standards
labour standards
Rules for the employment of labourers including working hours, minimum pay, union representation
and child labour.
footloose plant
Plants that can easily be relocated
code of conduct (standards of engagement, code of ethics)
Written policies and standards for corporate conduct and ethics.
health safely and environment (HSE)
A common term to cover the areas for which companies have mandatory standards
compliance
Procedures to monitor and enforce standards for employees and suppliers.
compliance training
Mandatory training and tests designed to ensure that every employee knows the relevant codes of
conduct.
Section 3: Institutions, Stakeholders and CSR
Key Ideas
CSR debates vary considerably between countries because the legal foundation of what
companies do or do not have to do vary, as do the views the norms and values supporting
ethics. This often leads to major misunderstandings, and views that ‘our’ standards are better.
Matten and Moon’s distinction of explicit and implicit CSR provides a framework to better
understand these different perspectives (the concepts liberal market economy and coordinated
market economy have been introduced in Chapter 2). On this basis, we explore why firms in
different institutional contexts use different strategies to handle pressures to engage in CSR.
Key Concepts
explicit CSR
Voluntarily assuming responsibilities of societal concerns
philanthropy
Donations for purposes that benefit the wider society
implicit CSR
Participating in the wider formal and informal institutions for the society’s interests and concerns
Section 4: Debates and Extensions
Key Ideas
The first debate concerns the impact of CSR on firms’ financial performance, a topic on
which empirical evidence remains (almost) inconclusive.
The second debate raises the issue that some CSR initiative may not in fact generate positive
effects for society, which may be a bigger surprise.
The third debate introduces Donaldson and Dunfee’s concept of hyper norms that would be
considered valid around the world, and thus stand above local norms.
Key Concepts
hypernorms
Norms considered valid anywhere in the world
Section 5: Implications for Practice
Key Ideas
The final section emphasizes the need for managers to engage with CSR debates and to make
sure that their actions match their pronouncements.
Key Concepts
defensive strategy
A strategy that focuses on regulatory compliance with little top management commitment to CSR
causes.
accommodative strategy
A strategy that is characterized by some support from top managers, who may increasingly view CSR
as a worthwhile endeavour.
proactive strategy
A strategy that endeavours to do more than is required in CSR.
Review Questions
Review questions are provided to students on the website accompanying the book. They
directly ask to summarize the material provided in the text. Instructors may also use the
questions to structure their lectures or review sessions.
Review Questions
(as provided to students on the website)
Material in the Book
1. What is corporate social responsibility?
Page 276
Table 10.1
2. What are some of the recommendations on how
MNEs ought to behave as responsible citizens of
the world?
3. Name the most important groups of stakeholders of a
firm!
4. Why are stakeholders of concern to firms?
5. Why do demands for ‘socially responsible
behaviour’ often appear to contradict each other?
6. What are the pressures that may or may not induce
MNEs to locate more polluting activities in less
developed countries?
7. What are the pressures that may or may not induce
MNEs to employ lower labour standards in
countries outside their home base?
8. What is the purpose of the ‘standards of
engagement’ created by many MNEs?
9. How can MNEs establish and implement
‘standards of engagement’ across their firm and
their supply chain?
CSR often focusing on quite different issues?
11. Why do firms’ standards of engagement vary
across the world?
12. What are the levels of strategic responses that MNE
may adopt in response to pressures for CSR?
13. Are ‘social responsibility’ and ‘shareholder value’
conflicting objectives?
14. What is needed to ensure that CSR practices actually
create benefits for the designated beneficiaries?
15. Should companies engage in political disputes in
the countries in which they operate?
Figure 10.1
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Critical Discussion Questions
At the end the chapter, we provide discussion questions that aim to stimulate students
thinking beyond memorizing the material learned in the chapter. They are designed to be
used at a basis for in-class discussions, group work, or individual assignments. Below,
provide some indicative answers of issues that may be raised in response to these questions.
Discussion Questions
(as provided in the book)
Indicative Responses
1. In your opinion, how should MNEs act
when legal requirements on labour or
environmental issues vary between the
different countries in which they operate?
Should they remain politically neutral and
adopt practices and laws of the host
country, or should they stick to the rules
that would apply to the same operation
back home?
2. Some argue that investing in emerging
economies greatly increases the economic
development and standard of living of the
Others contend that moving jobs to low-
cost countries not only abandons CSR for
domestic employees and communities in
developed economies but also exploits the
the home country of the MNE that is
losing lots of jobs, or (3) the leader of an
environmental NGO in the low-cost
of age. How do you react?
4. You are the PR officer of a major MNE in
These questions concern ethical issues where
students are, based on varying values, likely to
come to different conclusions. Critical is,
however, that they develop their arguments
rigorously with correct usage of concepts, and
identify conflicts of value from conflicts of self-
interests.
1. MNEs have to engage with different
stakeholders locally and in their markets
(customers), neither of which they can afford
to offend.
2. It should be clear that a lot of the labour
the West (trade unionists, students, and
activists) are not shared by local people in
developing countries – they often see them as
a non-tariff trade barrier (Chapter 5), and
them. At the same time, you have to retain
your own credibility but enforcing the SoE,
which would require discontinuing sourcing
else they will keep digging (but if you give
false information you are even more
vulnerable). If you find out it is true, you
in your home country alleges that your
company is covering up an environmental
disaster caused by your subsidiary in India,
in which several people died. How do you
react?
against those guilty of misconduct, and find
ways to assure the public on both countries
that it will ‘never ever’ happen again.
Closing Case
The closing case provides further opportunities to apply ideas and concepts learned in this
chapter in a real-world setting. The Closing Case for this Chapter is “Marks and Spencer” and
focuses on their initiatives to develop high level of social and environmental practices
throughout their organization and their supply chain. Below are some indicative responses to
the case discussion questions.
Case Discussion Questions
(as provided in the book)
Indicative Responses
1. Why is the Plan A agenda important to M&S?
2. What are the disadvantages and risks of
giving ‘how we do business’ such as central
role in a firm’s identity?
3. What could they do even better?
1. Students should clear the significance of
CSR. Social and environmental concerns
become important to consumers once their
first need was met, such as food and ware. As
a premium brand, many of M&S’s customers
care about CSR issues. As we mentioned in
case “Plan A was backed by a strong business
case that recognised the potential for business
growth if supported by responsible business
practices.”
2. For question 2 and 3, it is critical that
with correct usage of the concepts, and
identify potential benefits and conflicts.
Further Learning Activities
to use any of the following activities to further engage students with the material.
1. The Integrative Case ‘German Chamber of Commerce Develops Social Responsibility in
China’ has been designed as a real-world scenario in which the Chamber as representation of
German business is trying to encourage and coordinate CSR initiatives. It is based on an
initiative that I myself have been involved in. Designing potential social engagement
initiatives will not only enhance students understanding of CSR (Chapter 10 and its
embeddedness in informal institutions of a society (Chapter 3), but also of headquarter and
subsidiary relationships (Chapter 14) because the actors in the case are mostly representing
Shanghai-based subsidiaries of firms headquartered in Germany.
2. The Integrative Case “Tackling Corrupt Practices: GSK in China” brings together
the themes of corruption (Chapter 3), social responsibility in foreign countries
(Chapter 10) and headquarter-subsidiary relationships (Chapter 14). GSK has globally
announced high standards of social responsibility but appears to have failed to
implement these policies in China. This resulted in one of the largest scandals
involving a foreign MNE in China in recent years. The case details the complex
demands on the pharmaceutical sector in China that create strong incentives to be
inventive in ‘cutting corners’.
3. Microfinance is an emerging area of individualized financial investment in developing
countries that is based on social responsibility principles. However, since it involves the
investment of resources with the expectation that a profit will be made, microfinance investors
tend to search for regions and portfolios that have the highest profitability. Analyze information in
a global data set to determine which areas of the world seem to have the most profitable
microfinance activities. What conclusions can you draw from this information?
Mix website, click on the Publications link at the top. Then, choose a report entitled
“Microfinance at a Glance”. Then, the Profitability portion of the data should provide the
insight needed. If ROA is the measure of profitability, the top 3 regions are: Eastern Europe
and Central Asia, East Asia and Pacific, and Middle East and North Africa. However, if ROE
Further Readings
At the end the chapter, suggested further readings are provided. The primary aim is to
provide students a starting point for further work, for example when preparing a class
assignment or dissertation. These references also are recommended for instructors not
familiar with the topic and wishing to ‘get ahead of the students’ before lecturing on a topic.
J.H. Dunning, ed., 2004, Making Globalization Good: The Moral Challenges of Global Capitalism, Oxford:
Oxford University Press – a collection of essays by scholars as well as political and religious leaders about
the moral challenges of global capitalism.
L.A. Hartman, D.G. Arnold & R.E. Wokutch, 2003, Rising above Sweatshops: Innovative Approaches to
Global Labor Challenges, Westport, CT: Praeger – A study that investigated several initiatives by firms
and industry organization to raise labour standards in firms supplying Western MNEs.
A. Kolk, 2016, The social responsibility of international business, JWB, 51: 23–34 – A review of
the literature on CSR themes in international business research.
D. Matten & J. Moon, 2009, ‘Implicit’ and ‘Explicit’ CSR: A conceptual framework for a
comparative understanding of corporate social responsibility, AMR, 33, 404-424 – a
theoretical articles that explains why the driving forces of CSR differ between Europe and North
America.
M. Porter & M. Kramer, 2011, Creating shared value, HBR, 89(1–2): 62–77 – the most influential
recent article shaping the thinking of boardrooms on social responsibility.
A.G. Scherer & G. Palazzo, eds., 2008, Handbook on Research on Global Corporate Citizenship,
Cheltenham: Elgar – a collection of essays outlining and reflecting over the state of the art in
research on CSR in a global context.
R. Van Tulder & A. van der Zwart, 2006, International Business-Society Management,
Abington: Routledge – a textbook that explores the role of companies’ CSR practices within the
conflicting pressures of markets, state and civil society.
M. Yaziyi & J. Doh, 2009, NGOs and Corporations: Conflicts and Collaboration, Cambridge:
Cambridge University Press – analyzes the relations between firms and NGOs from both sides,
exploring the potential (and limits) for mutually beneficial interaction.