Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Chapter 9
Handmaid of Ethics:
Corporate Social Responsibility
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Perspectives of Corporate Social Responsibility
There are three perspectives that prompt corporate
social responsibility. These are:
•Business perspective
•Eco-social perspective
•Rights-based perspective
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Why Social Responsibility of Business?
• Accountability to Society
In a democratic society any kind of enterprise exists for
the sake of society.
• Corporations’ Debt to Society
A corporation has to behave as a good citizen. The
corporation has to donate generously towards causes of
public welfare and must get itself directly involved in
social welfare programmes.
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Definitions of CSR
It is a set of obligations to pursue those policies, to make
those decisions, or to follow those lines of action which are
desirable in terms of the objectives and values of our
society.
It is the overall relationship of the corporate with all of its
stakeholders.
Elements of social responsibility include investment in
community outreach, employee relations, creation and
maintenance of employment, environmental stewardship
and financial performance.
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Definitions of CSR (Contd.)
The classical economic model: Adam Smith believed that
public interest was served best by individuals pursuing their
own self-interests.
The socio-economic model: Business is seen as one
subsystem among many in a highly interdependent society.
•It recognizes that companies have stakeholders other than
their stockholders.
•Business has an obligation to respond to the needs of all
stakeholders while pursuing its profit.
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Today’s Corporate Social Responsibility
The corporate social responsibility of an organization today,
is a set of obligations with which it has to protect, enhance,
and otherwise work to the betterment of the society in
which it functions.
The concept of corporate social performance includes a
business organization’s
• configuration of principles of social responsibility
• process of social responsiveness, and
• policies, programmes, and observable outcomes as they
relate to the firm’s societal relationships.
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Implementation of CSR
The systematic implementation of CSR means:
● The adoption of strong organizational values and norms
depicting behaviours that are appropriate towards a
variety of stakeholders.
● The continuous generation of intelligence about
stakeholder issues, along with positive responses to these
issues.
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Theoretical Justification
for CSR
Trusteeship Model adopts a realistic and descriptive
perspective in viewing the current governing situation of a
publicly held corporation, drawing from the continental
European conception of the corporation as a social
institution with a corporate personality.
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Theoretical Justification
for CSR (Contd.)
Social entity theory: The social entity conception of the
corporation regards the company not as a private
association united by individual property rights, but as a
public association constituted through political and legal
processes and as a social entity for pursuing collective goals
with public objectives.
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Theoretical Justification
for CSR (Contd.)
The Pluralistic Model: This model supports the idea of
multiple interests of stakeholders, rather than shareholder
interest alone. It argues that the corporation should serve
and accommodate wider stakeholder interests in order to
make the corporation more efficient and more legitimate.
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
What are Corporations Expected to Do?
Corporations need to erase the perception of the public
that they accumulate wealth for their own cause;
They should participate in social welfare projects, which
will improve their image in public esteem;
They also have to make quality products and stick to
delivery schedules while importing and exporting goods;
and
They should create employment opportunities for the
disadvantaged.
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Models for Implementation of CSR
Four Models of CSR
Model Emphasis Proponent
Ethical Voluntary commitment by companies to Mahatma Gandhi
public welfare
Statist State ownership and legal requirements Jawaharlal Nehru
determine corporate responsibilities
Liberal Corporate responsibilities limited to Milton Friedman
private owners (shareholders)
Stakeholder Companies respond to the needs of R. Edward Freeman
stakeholders – customers, creditors,
employees, communities, etc.
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Advantages of Corporate Social Responsibility
There are several advantages to corporations when they
exhibit a sense of CSR and implement it, such as:
1.Improved financial performance
2.Enhanced brand image and reputation
3.Increased sales and customer loyalty
4.Increased ability to attract and retain employees
5.Reduced regulatory oversight
6.Innovation and learning
7.Risk management
8.Easier access to capital
9.Reduced operating costs
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Scope of Corporate Social Responsibility
Three levels of social responsibility can be identified
(evolution of areas of social responsibility)
1.Market forces
2.Mandated actions
3.Voluntary actions
Business Ethics and Corporate Governance, 2e A. C. Fernando
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Understanding Social Responsibility of
Business
1) Protecting and promoting stakeholders’ interests
a) to consumers and community
b) social responsibilities of business towards employees
c) to owners and inter-business establishments
2) Promotion of common welfare programmes
3) Philanthropy
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Understanding Social Responsibility of
Business (Contd.)
4) Good corporate governance
5) Render social service
6) Abiding by rules and regulations
7) Creation of wealth
8) Ensure ecological balance
Business Ethics and Corporate Governance, 2e A. C. Fernando
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Understanding Social Responsibility of
Business (Contd.)
9) Focus on the human element
10) Improve productivity
11) Sponsor social and charitable causes
12) Supplement state efforts
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Steps to Corporate Social Responsibility
The International Chamber of Commerce recommends the
following nine steps to attain Corporate Social Responsibility:
1. Confirm CEO/Board commitment to prioritize
responsible business conduct
2. State company purpose and agree on company
values
3. Identify key stakeholders
4. Define business principles and policies
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Steps to Corporate Social Responsibility
(Contd.)
5. Establish implementation procedures and management
systems
6. Benchmark against selected external codes and
standards
7. Set up internal monitoring
8. Use language that everyone can understand
9. Set pragmatic and realistic objectives.
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
External Standards on CSR
• The Caux Round Table (CRT)
• Organization for Economic Cooperation and Development
(OECD)
• United Nations Global Compact
• Asian-Pacific Economic Cooperation (APEC) Business Code
of Conduct
• The Global Reporting Initiative (GRI)
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
External Standards on CSR
• AA1000 Accountability
• Social Accountability 8000
• Principles for Global Corporate Responsibility
• The Global Sullivan Principles
• The Keidanren Charter for Good Corporate Behaviour
Business Ethics and Corporate Governance, 2e A. C. Fernando
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India on the Ethical/CSR Matrix
Indian corporations consider business ethics, compliance
with regulatory requirements and consistency in value
delivery as the three most important factors that impact
their social reputation.
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
India on the Ethical/CSR Matrix (Contd.)
Wider adoption of CSR in Indian companies will be enabled by:
• Provision of tax, duties and custom benefits.
• Inclusion of CSR performance of promoters as a parameter
in according fast track clearance to projects.
• Decreased government interventions.
• Depreciation benefits where asset investments are made.
• Development guidelines on estimation of socio-economic
impacts.
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Ethics and Social Responsibility of Business
• Business ethics in India today
• Why so much corruption?
• The license raj
• Black money
Business Ethics and Corporate Governance, 2e A. C. Fernando
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.
Future of Indian CSR
There is a clear need for
• Transition from the present compliance centric approach
to the new paradigm
• Creation of an enabling environment and an array of
support measures.
• Business schools teaching CSR to facilitate this process
• Industry associations to share experiences and reward
best practice
• Need to incorporate public policies into the Indian CSR.
• International agencies to share cross-country experience.
Business Ethics and Corporate Governance, 2e A. C. Fernando
