Chapter 6

Implementing Social ResponsibilityThis chapter:

Discusses the key elements of managing for social responsibility, including leadership, review, strategy, reporting, and verification.

Discusses corporate and strategic philanthropy.

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The Bill & Melinda Gates Foundation Opening Case

Bill Gates was a slender, intense boy with a messy room and a dazzling mind who often challenged his teachers in class.

He attended Harvard University, but left to pursue his fascination with computers.

At age 19, Gates founded Microsoft Corporation and twelve years later he was a billionaire.

He was energetic, independent, and confrontational and developed the reputation of a fanatical competitor willing to appropriate any technology and crush market rivals.

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The Bill & Melinda Gates Foundation Opening Case

(continued) Gates established the Bill & Melinda Gates

Foundation, which has an endowment of $33 billion.

The foundation’s work is based on a two values: All lives—no matter where they are being led—have

equal value; To whom much is given, much is expected.

The foundation has given out more than $13.4 billion.

Gates follows a long tradition of wealthy entrepreneurs who have made fortunes, sometimes by compromising ethics, then later in life used their wealth for works of extraordinary benevolence..

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Sources of Pressure for Social Responsibility

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Leadership and Business Models

Top management sets the tone for a company’s social response.

A traditional business model is one in which the central strategy is based on meeting market demands.

A progressive business model is one is which the central strategy is to meet market needs by mitigating social problems.

Although based on traditional business models, some companies have cultures emphasizing voluntary social responsibility in one or more dimensions because of the influence of founders.

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A Spectrum of Responses to Social Demands

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CSR Implementation: CSR Review

CSR implementation includes an assessment of the firm’s current situation and activities, discovery of the firm’s core values ,and engagement of stakeholders.

A key source of values is the mission statement, a brief statement of the basic purpose of an organization.

Engagement has advantages: Mapping helps identify sphere of influence. Dialogue can review gaps between company

performance and stakeholder expectations, provide important information, build trust, and lead to cooperative efforts.

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Insert Figure 6.4 here (Basic Stakeholder Map)

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CSR Implementation: CSR Strategy

A company defining its CSR strategy must first find an objective, or a vision of what it will achieve, then create a method for reaching it.

For large firms the task of setting priorities is complex because multiple, sometimes conflicting, stakeholder demands exist.

Border and Kramer suggests an “essential test” for the worthiness of any additional social initiative is to determine whether it produces a meaningful benefit for society that is also vital to the business.

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CSR Implementation

Steps for CSR implementation: Create a CSR decision-making structure within

the overall organization Develop an action plan that sets forth a

multitude of tasks that will bring the strategy to fruition

Establish performance targets and timelines for their accomplishment

Setup incentives to encourage achievement of goals and targets

Align corporate culture with strategic intent

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CSR Implementation: Reporting and Verification

Assessment and reporting create transparency and allows managers to evaluate corporate social performance and measure overall progress toward strategic goals.

In the last decade a new wave of social reporting has risen.

The leading effort to create a new reporting format is the Global Reporting Initiative (GRI)

GRI guidelines show performance on a triple bottom line of economic, social, and environmental results.

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Corporate Philanthropy

Large philanthropic contributions by American companies are a relatively recent phenomenon. Until about 50 years ago courts held that

corporate funds belonged to shareholders; therefore, managers had no right to give away money, even for noble motives.

The first major break from narrow legal restrictions on corporate giving was the Revenue Act of 1935, which allowed charitable contributions to be deducted from taxable earnings up to 5 percent of net profits before taxes (raised to 10 percent in 1981.)

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Patterns and Magnitudes of Corporate Giving

Charitable giving is now a traditional dimension of corporate social responsibility.

Corporate philanthropy is only a small part of overall private philanthropy in the U.S.

The basic motives for corporate giving are: Response to pressure Belief that it will bring monetary profit Desire for reputational gain Altruism

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Strategic Philanthropy

As corporations gained experience with philanthropy, many concluded that the traditional approach of diffuse giving to myriad worthy causes was noble but flawed.

Many firms decided to change their philosophy of giving from one of pure generosity to one that aligned charity with commercial objectives.

Strategic philanthropy is a form of corporate and three in which charitable activities reinforce strategic business goals

Not everyone approves of strategic philanthropy.

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Cause-Related Marketing

Cause-related marketing is a marketing method linking a corporation or brand to a social cause so that both benefit.

Corporations realize that if their brand is connected to a social cause or charity, this appeals to the conscience of a consumer.

Cause-related marketing raises big sums of money for worthy causes but its mixture of altruism and self-interest attracts criticism.

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New Forms of Philanthropy

Philanthropy can be inefficient compared with market-driven business activity.

An emerging approach seeks to increase productivity from charitable giving by bringing businesslike methods to the task.

These new approaches to philanthropy seek to solve global problems by correcting market failures and applying the tools of capitalism.

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Concluding Observations

If a corporation announces aspirations to be socially responsible, it must follow up with the hard work of building those aspirations into its operations.

Corporate philanthropy, while not a management method, is a long-standing way of implementing social responsibility.

Recently, corporations have shifted from a tradition of altruistic giving to a new style of philanthropy that aligns with business strategy. Some critics attack this approach as too self-interested. Strategic philanthropy may be a promising development

because it injects thinking about corporate social responsibility into the strategic mainstream.

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