Corporate Social Responsibility

Presentation
by
Anita Chouhan
Executive Trustee
Corporate Social Responsibility
Lecture 6 & 7: Drivers. Theories.
Models
CSR- Key Drivers
Investor pressure/FDI
Litigation/risk management
NGO pressure/activism
NGO media partnership , a power to reckon with.
Mandatory increased disclosure
Increased supply chain responsibility
Codes & Standards
Changing expectations of society
Theoretical Underpinnings
Stockholder Theory of Milton Friedman (1983)
Social Contract Theory: Keith Davis (1960), Donaldson
(1982), Iron law of responsibility & Enlightened self
interest.
Deontological Theory: Social Justice Theory , Rights
Theory
Gandhijis Trusteeship Theory
Stakeholder Theory- Ed Freeman(1984)
Joint Stock Company - Tom Cannon

Stockholder Theory Milton Friedman

The only social responsibility of business to use its resources
and engage in activities designed to increase its profits for it
stockholders
Assumptions:
The Underlying Ethical principle: Manager has Fiduciary
Responsibility to Owners
Purpose of business is not to provide employment, avoid
pollution, help community etc
Business is not charity. Socialism v/s free society
Businesses cannot have responsibility , only people can .
Executive has obligation to stockholders - their agent
Manager does not have social ill solving expertise
PR not charity









Stockholder Theory Milton Friedman.
Do YOU agree with Milton Friedman ??
Ethical Caveat:
while conforming to the basic rules of the society,
both those embodied in law and those embodied in
ethical custom.
Manager has obligation to the
Law
Ethical Custom

Problems with Friedmans Theory
It assumes that forces of competition are sufficiently vigorous
but they arent to take care of dishonest /bad business
Government regulations are essential to force companies to act
in an ethical manner. Such regulations direct the market
towards ethical behavior.
Distribution of income that results from unrestrained profit
maximization is very unequal.
Maximizing profits is socially inefficient when costs are not paid
eg pollution, traffic congestion ,no taxes, poorly educated
workforce
Maximizing profits is socially inefficient when seller has great
knowledge advantage over buyer
Social Contract Theory: Keith Davis (1960),
Donaldson (1982)
Rooted in a broader political theory :Responsibilities and rights
of individuals grounded in a hypothetical contract between
members of society Social Contract
The iron law of responsibility refers to the negative
consequences of the absence of use of power.
Whoever does not use his social power responsibly will lose it.
In the long run those who do not use power in a manner which
society considers responsible will tend to lose it because other
groups eventually will step in to assume those responsibilities
Enlightened Self interest : It is in organisations interest to act in
ways that society considers responsible.


Justifications of Social Contract Theory
The benefits of business (especially corporations)
to society are well recognized.
Accumulation of capital; distribution of risk; jobs.
The potential costs are also obvious.
Resource depletion; political corruption; concentration
of wealth; threats to democracy.
A contract is the best way to understand the
tradeoffs between these benefits and risks
Takes the form of specific principles which guide
behavior of all parties to the contract.
Deontological Theory
Deals with the belief that everyone, including corporate managers,
has a moral duty to treat everyone else with respect, including
listening and considering their needs.
Deontology is the branch of moral philosophy that concentrates on
duties or moral obligationsit puts the responsibility in
corporate social responsibility.
If an action does (does not) fulfill one's duties, then the action is (is
not) an ethical one.
The two major deontological frameworks are:
1. The theory of rights, concerned with individuals moral rights and
the duties/responsibilities of moral agents to respect and protect
those rights, and
2. The theory of justice, dealing with fairness and
equity in decision making.
Rights Theory
Rights theory, is concerned with the meaning of
rights, including basic human rights and property
rights.
One argument in rights theory is that property rights
should not override human rights. This means that
while shareholders of a corporation have certain
property rights, this does not give them license to
override the basic human rights of employees, local
community members, and other stakeholders
Groups:
civil, political rights
economic, social, cultural rights
group rights

Features:
inherence in human beings
universal
inalienable
Human Rights Law
Social Justice Theory
Social justice theory, focuses on fairness and distributive justice
how, and according to what principles, societys goods (here
meaning wealth, power, and other intangibles) are distributed
amongst the members of society.
Justice:
Consists in giving each person his or her due, treating equals
equally and unequals unequally
Distributive
Procedural
Compensatory
Retributive
Andrew Carnegies Theory
Legendary steel tycoon
- Advocates benevolent, paternalistic leadership
Enunciated
Charity principle & Stewardship principle-the
business of benevolence"
He believed in the "Gospel of Wealth," which meant
that wealthy people were morally obligated to give
their money back to others in society.

Gandhijis Trusteeship Theory( 1939)
Wanted capitalists to act as trustees (not owners) of their property
and conduct themselves in a socially responsible way.
Theory is based on two basic premises:
1. The rich cannot accumulate wealth without the cooperation of the
poor.
2. Western socialism and communism are not the last words on the
question of mass poverty.
serves as an alternative to capitalism and scientific socialism. He
was opposed to the western capitalism, which necessarily leads to
oppression, exploitation, concentration of wealth and inequality.
At the same time, he was against an increase in the power of the
state which, in his opinion, is essentially based on violence.
Gandhiji, wanted to provide the institution of trusteeship as a
compromise between private enterprise and state controlled
enterprise.
Stakeholder Theory: Ed Freeman (1984)
Managing for stakeholders is about creating as much
value as possible for stakeholders, without resorting to
tradeoffs.
The basic idea is that businesses, and the executives who
manage them, actually do and should create value for
customers, suppliers, employees, communities, and financiers
(or shareholders). And, that we need to pay careful attention to
how these relationships are managed and how value gets
created for these stakeholders.
To create value for stakeholders, executives must understand
that business is fully situated in the realm of humanity.
Businesses are human institutions populated by real live
complex human beings.

Tom Cannons views
With the advent of the Joint Stock Company, society or state
provides to business, two special rights
Potential immortality
Limited Liability
Business does have social responsibility to fulfill in return for
these privileges.
Models of CSR: Carroll's Pyramid of
Responsibilities of Business
PARADIGM SHIFT IN CSR UPTAKE
GLOBAL TRENDS
1. Terminology
Patterns of CSR in Europe, Us, Asia.
2. CSR & Management Concept
Peter Drucker -1945
Howard Bowen -1953
Dirk Matten, Jeremy Moon -2008
3. Social imperatives & Social consequences
of business success

CURRENT SCENARIO
Niche Boardroom Investors
Integrated with business strategy
Global frameworks
(OECD, UNGC, IIRC, UNSDG, UNGPBHR.)
Aligning with national frameworks
(NVG, BRR, BOVESPA, SoE, SASAC, SASB, StockEx)
(180 forms of regulation related to 3p)
India SD Policy ; EU SD Strategy
Evolving Definition (Matten & Moon)
Models of CSR: India
Philanthropic Model
Statist Model ( State Intervention)
Liberal Model ( Friedman Model)
Stakeholder Model ( Freeman Model)

Approaches to CSR
Philanthropy Individual & business charity
Community Wellbeing industrial/labor welfare
Foundations - specially dedicated charities of
businesses
Corporate Non financial Resource Sharing
Public Private partnerships
Strategic CSR competitive advantage
Sustainable Development - adoption of global
standards of ESG.
Generations of CSR Simon Zadek
1
st
Generation: Companies contributing out of their
own free will towards charity or corporate
philanthropy to address social, economic & other
issues
2
nd
Generation: Companies, and industries see CSR as
an integral part of business strategy
3
rd
Generation: Companies make significant
contribution to addressing poverty, exclusion and
environmental degradation through trade. Believes in
both corporate as well as societal sustainability.

How Does CSR benefit Business
Reputation
Loyal
Employees
&
Customer
s
Less Law
Suits
Less Media
Harassment
Access to
Capital
Improves
Improves
Productivity
Community
Goodwill
Better
Environment

Thank you
anita.chouhan@gmail.com