BUS 100 - Chapter 3

A well known quotation that assumes a responsible role for business in society

"Business has become... the most powerful institution on the planet. The dominant institution in any society needs to take responsibility for the whole... Every decision that is made, every action that is taken, must be viewed in light of that kind of responsibility"

Origins of Corporate Social Responsibility

-In 20th century, corporations became under attack for being too big and powerful -business executives advised corporations to use their power and influence voluntarily for broad social purposes -some wealthy business leaders became great philanthropists and gave wealth to educational and charitable institutions -laws were passed that required protection of the natural environment, safer products, promotion of equity and supporting workplace diversity (in 50's and 60's)

Negative effects of social responsibility

-a company can risk lowering its efficiency or even going out of business -commitments to employees can become too costly -certain social activities lower business's efficiency -puts greater costs on more responsible companies (puts them at a competitive disadvantage)

What do company sponsored social programs do?

-aided companies in recruiting employees -employees became more engaged in their work they were involved in social-oriented projects

How do visionary CEO's see citizenship?

-as an opportunity to create value for their organization, gains a competitive advantage, and help address some of the world's biggest challenges -as businesses have become more committed to citizenship, specialized consultancies and professional associations for managers have emerged

What do business executives believe that companies should do?

-balance their responsibility to their investors with their responsibilities of other business stakeholders -demonstrate a mission that balances profit and purpose to grow and be successful

Globalization of markets

-brings new products, technologies, and economic opportunities to developing societies, and help those in need

How do companies demonstrate their corporate citizenship?

-building stakeholder partnerships -discovering business opportunities in serving society -transforming a concern for financial performance into a vision of integrated financial and social performance

Positive effects of the tremendous power of the world's leading corporations

-command more resources -produce at a lower cost -plan further into the future -weather business fluctuations somewhat better

Which companies are recognized as "survivors"?

-companies with the ability to recognize profound social changes and anticipate how they will affect operations -they get along better with government regulators, are more open to the needs of the company's stakeholders, and often cooperate with legislators as new laws are developed -those who concentrate on producing goods and services and selling them at the lowest competitive price

Negative effects of the tremendous power of the world's leading corporations

-disproportionately influence politics -shape tastes -dominate public discourse -move production from one site to another (weakening unions and communities) -use economic influence to collude fix prices, divide markets, and quash competition

What are a business's responsibilities and what's the challenge they have to face?

-economic responsibilities, social responsibilities, and legal obligations -the challenge is to integrate them all into a coherent and comprehensive mission -another challenge is to meet their multiple economic and social responsibilities simultaneously

Five stage model of global corporate citizenship (individual companies can be at more than one stage at once)

-elementary stage (citizenship is undeveloped, managers are uninterested and uninvolved in social issues, companies tend to be defensive and react only when threatened, communication is only from company to the stakeholder) -engaged stage (companies become aware of changing public expectations, companies adopt formal policies, they interact and listen to stakeholders, top managers become involved, step up philanthropic giving) -innovative stage (become aware that they lack the capacity to carry out new commitments, departments being to coordinate, new programs are launched, companies begin reporting their efforts to stakeholders, external groups become more influential, companies begin to understand business reasons for engaging in citizenship) -integrated stage (companies see the need to build initiatives that are more coherent, companies may adopt sustainability/triple bottom line measures, enter into ongoing partnerships with stakeholders) -transforming stage (companies have visionary leaders, they partner extensively with other organizations and individuals to address broad social problems)

What do we count on corporations for?

-job creation -much of our community well-being -the standard of living we enjoy -the tax base for essential municipal, state and national services -our needs for banking and financial services, insurance, transportation, communication, utilities, entertainment, and health care

Benefits of corporate social responsibility action

-preserves the environment -protects consumers -safeguards the safety and health of employees -prevents job discrimination

The Debate

-the business of business is business ("there is one and only social responsibility of business- to use its resources and engage in activities designed to increase its profits so congas it stays within the rules of the game") -social responsibility ("each four stakeholders is essential. we commit to deliver value to all of them, for the future success of our companies, our communities and our country")

Why do businesses act in socially responsible ways?

-to benefit its stakeholders and fend off additional burdensome government regulations -when firms practice socially responsible activities, the firm's financial performance is enhanced

What's the goal of a global citizenship management system?

-to integrate corporate responsibility and citizenship concerns into a company's values, culture, operations, and business decisions at all levels of the organization

What do stakeholders expect of businesses?

-to take great care in wielding its power responsibly for the betterment of society -social responsibility has become a WORLDWIDE EXPECTATION

What are the 3 different ways that audit standards can be created?

1) companies can develop standards designed to set expectations of performance for themselves or their suppliers or partners 2) companies within an industry can agree on a common industrywide standard 3) can be developed by global nongovernmental organizations or standard-setting organizations

What are the six benefits social audits?

1) they help businesses know what is happening within their firm 2) understand what stakeholders think about and want from the business 3) tell stakeholders what he business has achieved 4) strengthen the loyalty and commitment of stakeholders 5) enhance the organization's decision making 6) improve the business's overall performance

Integrated report

An emerging trend in corporate reporting is the integration of legally required financial information with social and environmental information into a single -a majority of the largest companies included information of corporate responsibility in their annual financial reports

Who has the greatest influence over the company's CSR agenda?

CEO's

CSR vs Corporate Activism

CSR: a corporation's initiative to assess and take responsibility for their efforts on environmental and social well-being Corporate Activism: the ability to act as a voice calling for larger societal change, even if it is not accompanied by direct business action

Reputation

The desirable or undesirable qualities associated with an organization or its actors that may influence the organization's relationships with its stakeholders -social reputation of a firm is viewed as an important element in establishing trust between the firm and its stakeholders -It prompts repeat purchases by loyal consumers and helps to attract and retain better employees to spur productivity and enhance profitability -a firm's reputation increases its attractiveness to employees

Why do companies publish social responsibility reports?

They are motivated by ethical concerns

Corporate Social Responsibility

a corporation should act in a way that enhances society and its inhabitants and be held accountable for any of its actions that affect people, their communities, and their environment -responsibility means "to pledge back" -harm to people and society to be acknowledged and fixed -company may have to forgo some profits if its social impact seriously hurt some of its stakeholders -"learning to live with, and respect, others" -ensures corporate compliance with laws and regulations that protect the general public from abusive business practices -may head off increased government regulation (regulation adds economic costs and restricts flexibility)

Social audit

a systematic evaluation of an organization's social, ethical, and environmental performance -In a social audit, a company's performance is evaluated relative to a set of externally imposed standards -the results are used to improve the firm's performance and to communicate with stakeholders and the public -many businesses use social audits to measure the societal impact of their actions -social audit results are used to minimize risks or capitalize on opportunities -looks at what an organization does and the results of these actions

Social Entrepreneur

are like traditional entrepreneurs who act boldly to pursue opportunities, attract support, and build new organizations

B Corporation

business that focus on social responsibility and corporate citizenship by blending their social and environmental objectives with financial goals to use the power of business to solve social and sustainability challenges -to qualify for B Corporation status, an organization must meet rigorous, independent social and environmental performance standards, assessed by the nonprofit organization -certified b corporations are more likely to receive various government recognitions, ability to qualify for a LEED certification for their buildings, be certified as engaging in fair trade

How to improve the firm's stakeholder relationships?

by developing a strong social agenda and series of social programs

How to get a sense of the economic power of the world's largest companies?

compare them with nations (Walmart has the same GDP as Belgium)

Businesses people ____ have the expertise or the popular support required to address what are essentially issues or public policy

don't

What is the focused power found in the modern business corporations?

ever action it takes can affect the quality of human life

Iron Law of Responsibility

in the long run, those who do not use power in ways that society considers responsible will tend to lose it

Who are the only entities that can be responsible for their actions?

individual people

Businesses, especially large corporations...

play a major role in all that occurs in society

Enlighted self-interest

providing value to stakeholders is in a business's long run self-interest

Global Corporate Citizenship

putting these commitments into practice worldwide

Transparency

refers to a quality of complete clarity -companies are acting with transparency when they clearly and openly report their performance -financial, social, and environmental to their various stakeholders

Who pays all costs?

society

What do multiple stakeholders demand?

that businesses adopt measurable standards for corporate responsibility and citizenship, audit their organizations according to these standards, and report the results to the public

Corporate Citizenship

the actions they take to put their commitments to corporate social responsibility into practice

Corporate power

the capability of corporations to influence government, the economy, and society, based on their organizational resources

Social Ventures

the organizations found through identifying a social need and using their entrepreneurial skills to address this need

Social Entrepreneurship

the process of a person or group of people identifying a social need and using their entrepreneurial skills to address this need

The greater the social equity documented...

the stronger the argument a business can make that it is meeting its social obligations

Corporate social reporting

when a company decides to publicize information collected in a social audit