Post on 06-Jan-2018
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CBEB3101 Business Ethics Lecture 4
Semester 1, 2011/2012Prepared by Zulkufly Ramly
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Topic 3Corporate Social
Responsibility
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Contents of Topic 3
• Definition of stakeholders
• Stakeholders groups• Ownership theory
versus stakeholder theory
• Definition of CSR• Arguments for and
against CSR• CSR Analysis • Corporate social
responsiveness3
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Topic 3 Learning Outcomes5.Contrast the ownership
theory with stakeholder theory
6.Explain the arguments for and against CSR
7.Assess a firm’s CSR using the four-part definition
8.Explain the concept of corporate social responsiveness
1. Define stakeholders
2. Identify and explain a firm’s primary and secondary stakeholders
3. Explain the importance of identifying stakeholder groups
4. Apply the typology of stakeholder attributes in classifying stakeholders
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StakeholderAny group that has a claim or interest in the operations
of a company that can affect or be affected by the policies or activities of the company
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Primary stakeholdersHave a direct stake in the company and its
success
Seconday stakeholdersHave a public or special interest stake in the
company 6
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A Typology of Stakeholder Attributes
The perceived validity or appropriateness of the
claim
The ability of a stakeholder to produce an effect
The degree to which the claim demands immediate
atttention
Legitimacy
Urgency
• Company is property of its owners
• Objective: To maximize returns to shareholders
• Shareholders’ interests are supreme and take priority
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Ownership theory
• Company serves a broader objective
• Must make profit for owners to survive, however, creates other kinds of value too
• Companies have multiple obligations
• All “stakeholder” groups must be considered
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Stakeholder theory
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• To understand potential sources of risk, disruption and tension to its business activities or projects – can assess them
• To evaluate source of influence over objectives and results for business– can identify stakeholders with most power and interest
• Morally right for firms to find out how a company’s decisions affect people
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Importance of Knowing
Stakeholders
• Obligations to maximise the company’s positive impact on stakeholders and to minimise its negative impact
• Company should be held accountable for any of its actions that its stakeholders
• Requires companies to balance the benefits to be
gained against the costs of achieving those benefits
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Corporate Social Responsibility
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Addresses social issues brought on
by business
The public supports CSR
Addresses issues by using business resources and
expertise
Discourages future government intervention
Protects business reputation
CSR is good because …
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Restricts the classic economic goal of profit maximization
Creates powerful business
Limits the ability to compete in global
marketplace
Dilutes the primary purpose of business
Business is not equipped to
handle social activities
CSR is bad because …
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Economic Be profitable and think long term survival
Legal
Philanthropic
Ethical
“giving back’ to society
Avoid questionable practices
Obey laws and government regulations
CSR Analysis
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• REQUIRED of business by society
• Society sanctions the beneficial existence and operations of businesses
• In return the society requires firms be financially effective
• Dramatically impact shareholders and employees – return, jobs, goods and services
Economic Responsibilities
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• REQUIRED of business by society
• Law is society’s codification of right and wrong
• Law prescribes ground rules for conducting businesses – ensure fair practices
• Businesses expected to honour all contractual obligations
Legal Responsibilities
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• EXPECTED of business by society
• Obligation to do what is right, fair and avoid harms
• Be mindful of activities and practices that are expected or prohibited by the society – althought not covered by law
Ethical Responsibilities
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• DESIRED/EXPECTED of business by society
• Reflect current expectations of business by the public
• Guided by business’s desire to engage in social activities – but not mandated
• If companies do not wish to participate then it is not considered unethical
• Society expected businesses to ‘give back’
Philanthropic Responsibilities
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• If philanthropic activities are actually voluntary why include in the corporate social responsibility?
• Philanthropy is a responsibility because it is expected of business by society
• However, it is not required, as are the economic and legal responsibilities
• Can forego philanthropic activities without suffering sanctions from society
• Has discretion in what causes it supports and how it contributes to those causes
• Discretionary - managers are given freedom and flexibility to make proper judgment on the need to fulfill this part of CSR
Voluntary but responsible?
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Characteristics of Socially Responsible Firms
• Makes product that are safe• Does not pollute air or water• Promotes honest/ethical
employee behavior• Does not use
misleading/deceptive advertising
• Protects employees against sexual harassment
• Recycles within company
Responds quickly to customer problems
Maintains waste-reduction programme
Helps displaced workers with placement
Gives money to charitable/educational causes
Tries to continually improve quality
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• A more proactive and action oriented concept
• Firms anticipate social expectations
• Meet them before they are imposed as a new responsibility
• E.g. child care benefits to its working parents
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Corporate Social Responsiveness
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Is corporate social responsiveness an improvement of CSR?
Obligations and accountability
implied that business should do only the
minimum that would satisfy the duties imposed on it by
society
Focus of CSR
Using this approach both encourages social performance by business and allows it more
freedom in what actions it will take
Focus of corporate social
responsiveness• A proactive, dynamic and action orientation
• Actively seek to meet social needs before they become a duty imposed by society
YES!
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