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CHAPTER 14

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CHAPTER 14 LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1. Articulate a stakeholder view of the firm. 2. Apply the institution-based and resource-

based views to analyze corporate social responsibility.

3. Identify three ways you can manage corporate social responsibility.

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CORPORATE SOCIAL RESPONSIBILITY (CSR)

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.

At the heart of CSR is the stakeholder – any group or individual who can affect or is affected by the achievement of the organization’s objectives.

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LO1: STAKEHOLDER VIEW OF THE FIRM

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LO1: STAKEHOLDER VIEW OF THE FIRM

Key goal: global sustainability – meet the needs of the present without compromising the ability of future generations to meet their needs.

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LO1: STAKEHOLDER VIEW OF THE FIRM

Firms should pursue a triple bottom line: Economic Social Environmental

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LO2: INSTITUTIONS AND RESOURCES AND CORPORATE SOCIAL RESPONSIBILITY

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LO2: STRATEGIES FOR CSR

Reactive strategy: relatively little or no response to CSR

causes; denial usually first line of defense.

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LO2: STRATEGIES FOR CSR

Defensive strategy: focuses on regulatory compliance. Firms admit responsibility but fight it.

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LO2: STRATEGIES FOR CSR

Accommodative strategy:some support from top managers who may increasingly view CSR

as a worthwhile endeavor.

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LO2: STRATEGIES FOR CSR

Proactive strategy:being responsible and endeavoring

to do more than is required.

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LO2: STRATEGIES FOR CSR

Sources: Adapted from A. Hoffman, “Institutional evolution and change: Environmentalism and the US chemical industry,” Academy of Management Journal 42 (1999): 351–371 for the phases and statements.Hoffman’s last phase ended in 1993; its extension to the present was done by the present author.

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LO2: CODE OF CONDUCT

Set of written policies and standards outlining the proper practices for a firm.

Adopting one tangible indication of firm’s willingness to accept CSR.

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LO2: THREE VIEWS ON CSR

Negative view – interest in CSR may be only window dressing.

Instrumental view – CSR activities are instruments for making profit.

Positive view – some firms self-motivated to take on CSR activities.

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LO2: RESOURCES AND CORPORATE SOCIAL RESPONSIBILITY

Do CSR-related resources and capabilities add value?

Are CSR-related resources always rare?

Are CSR resources imitable?

Does the firm have organizational capabilities to do a good job on CSR?

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LO2: VALUE

A firm’s resources can be applied to CSR causes in what is known as social issue participation. Research suggests that these activities may reduce shareholder value.

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LO2: RARITY

Example: Home Depot and Lowe’s have similar NGOs concerning lumber sources.

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LO2: IMITABILITY

At some firms, CSR activities are embedded in idiosyncratic skills, attitudes, and interpretations.

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LO2: ORGANIZATION

Does the firm have organizational capabilities to do a good job on CSR? Is the firm organized to exploit the full potential of CSR?

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LO2: CSR ECONOMIC PERFORMANCE PUZZLE

The resource-based view helps solve the CSR-economic performance puzzle.

According to puzzle, there is no conclusive evidence for direct, positive link between

CSR and economic performance.

According to the resource-based view, since each firm is different, not

every firm’s economic performance is likely to benefit from CSR.

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LO3: THREE WAYS TO MANAGE CSR

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DEBATE: DOMESTIC vs. OVERSEAS SOCIAL RESPONSIBILITY

MNEs increase employment in host countries and help developing economies.

However, this expansion often comes at the cost of domestic employees and communities. MNE may shirk their CSR by increasing social burdens in their home countries.