CHAPTER 4 - Corporate Social Responsibility: Lesson Overview

Instructor Supplement
Understanding Ethics – Ghillyer
CHAPTER 4 – Corporate Social Responsibility

LESSON OVERVIEW
The purpose of this lesson is to introduce the student to corporate social responsibility.
You will give students an understanding of corporate social responsibility and the triple bottom line.
CHAPTER OUTLINE
The textbook outlines the chapter with the following six headings. As an instructor, you can use the
headings to focus and direct your major lecture topics.
o Corporate Social Responsibility

o Management without Conscience
o Management by Inclusion
o The Driving Forces behind Corporate Social Responsibility
o The Triple Bottom Line
o Jumping on the CSR Bandwagon
CHAPTER OBJECTIVES
You will find notations throughout the support material indicating the appearance of the objectives. The
notations will appear, for example, as OBJ 4.1 for Chapter 4, objective 1.
Upon completion of this chapter, the students will be able to:

1. Define corporate social responsibility (CSR).
 Assessment Method –
 Progress check questions
 Assignments/activities
2. Distinguish between the instrumental and social contract approaches to corporate management.
 Progress check questions
3. Summarize the five driving forces behind CSR.
 Progress check quiz
4. Distinguish between the three types of CSR.
Assignments/activities
5. Understand the key components of a successful CSR initiative.
Assignments/activities
Chapter 4 – Page 1
ASSESSMENT TOOLS
This chapter supplement includes quizzes, homework assignments, a test bank, projects, and group
exercises.
KEY TERMS AND CONCEPTS

Key terms and concepts are posted in the student textbook margins. They are compiled here alphabetically
for your quick reference. You can use this table to check off terms as they are covered in class.
Write the terms you will be covering in your lesson on the board prior to class. Refer to the board during
the lecture time. Also do a quick review of the terms after the breaks by asking students to provide an
extemporaneous definition. It will help students refocus prior to resuming the lecture.
For online faculty, post “terms of the day” for students to review.
Include a definition quiz as part of your daily lesson. Select the key terms from the board, give the
definition, and have the students write the correct term.
Term Definition Page

Organizations take a philanthropic approach by underwriting specific
initiatives to "give back" to the company's local community or to designated
Altruistic CSR national or international programs. 68
An alternative team for corporate social responsibility, implying that the
Corporate Citizenship organization is a responsible "citizen" in meeting all its obligations. 59
An alternative team for corporate social responsibility, implying that the
Corporate Conscience organization is run with an awareness of its obligations to society. 59
The actions of an organization that are targeted toward the achievement of a
Corporate Social social benefit over and above maximizing profits for its shareholders and
Responsibility (CSR) meeting all its legal obligations. 60
Organizations pursue a clearly defined sense of social conscience in
managing their financial responsibilities to shareholders, their legal
responsibilities to their local community and society as a whole, and their
Ethical CSR ethical responsibilities to "do the right thing" for all their stakeholders. 67
The perspective that the only obligation of a corporation is to maximize
profits for its shareholders in the provision of goods and services that meet
Instrumental Approach the needs of its customers. 60
The perspective that a corporation has an obligation to society over and
Social Contract Approach above the expectations of its shareholders. 61
Philanthropic activities are targeted programs that will generate the most
Strategic CSR positive publicity or goodwill for the organization. 68
LESSON OUTLINE
Estimated Topic Description Asset
time
5 minutes Administrative  Take attendance. Roster
10 to 30 Chapter 4  Corporate Social Responsibility Textbook

minutes Introduction 1. Corporate social responsibility (CSR) also p. 58 – 61
OBJ 4.1 & 4.2 referred to as corporate citizenship or
corporate conscience—may be defined as the
actions of an organization that are targeted
toward the achievement of a social benefit PowerPoint
over and above maximizing profits for its slides 3 – 4
shareholders and meeting all its legal
obligations.
2. This definition assumes that the corporation is

operating in a competitive environment that
the managers of the corporation are
committed to an aggressive growth strategy
while complying with all federal, state, and
local legal obligations.
3. Many companies’s take an instrumental

approach to corporate management and argue
that the only obligation of a corporation is to
make profits for its shareholders in the
provision of goods and services that meet the
needs of its customers.
Teaching tip: Ask students if they agree with

this statement from Milton Friedman, “from
an ethical standpoint, it would be unethical for
a corporation to do anything other than deliver
the profits for which its investors have
entrusted it with their funds in the purchase of
shares in the corporation.” Answers will vary.
 Management without Conscience

1. The social contract approach to corporate
management is a perspective that a
corporation has an obligation to society over
and above the expectation of its shareholders.
2. The modern social contract approach argues

that since the corporation depends on society
for its existence and continued growth, there
is an obligation for the corporation to meet
demands of the society rather than just the
demands of a targeted group of customers.
Objectives
Discuss each of the objectives to be completed during
the lesson with the class.
Upon completion of this chapter, the student will be
able to:
1. Define corporate social responsibility (CSR).
2. Distinguish between the instrumental and

social contract approached to corporate
management.
3. Summarize the five driving forces behind

CSR.
4. Distinguish between the three types of CSR.
5. Understand the key components of a

successful CSR initiative.
LESSON OUTLINE
time
30 to 60 Chapter 4  Management by Inclusion Textbook
minutes Lecture 1 1. Corporations do not operate in an isolated p. 61 – 67
OBJ 4.3 environment. As far back as 1969, Henry Ford II
recognized that. PowerPoint
slides 5 – 7
2. Corporations’ actions impact their customers, their
employees, their suppliers, and the communities in
which they produce and deliver their goods and
services.
Teaching tip: Ask students if they believe a

corporation demonstrating a “conscience” is merely a
public relations exercise. Answers will vary.
 The Driving Forces Behind Corporate Social

Responsibility
1. Transparency: We live in an information-driven
economy where business practices have become
increasingly transparent.
2. Knowledge: The transition to an information-based

economy also means that consumers and investors
have more information at their disposal than at any
time in history.
3. Sustainability: The earth’s natural systems are in

serious and accelerating decline, while global
population is rising precipitously.
4. Globalization: It represents a new stage of capitalist

development, this time without … public institutions
[in place] to protect society by balancing private
corporate interests against broader public interests.
5. The failure of the public sector: Many if not most

developing countries are governed by dysfunctional
regimes ranging from the [unfortunate] and
disorganized to the brutal and corrupt.
Teaching tip: Ask students if CSR initiatives

generate immediate financial gains to the
organization. Many CSR initiatives do not generate
immediate financial gains for the organization.
 The Triple Bottom Line

1. Many corporations have now adopted their annual
reports to reflect a “triple bottom-line approach,”
where they provide social and environmental updates
alongside their primary bottom-line financial
performance.
2. While it may be easy to support the idea of
LESSON OUTLINE
time
organizations pursuing social and environmental goals
in addition to their financial goals, there has been no
real evidence of how you would measure such
achievements.
Teaching tip: Ask students if they agree with this old

management adage, “if you can’t measure it, you
can’t manage it.” Answers will vary.
FRONTLINE FOCUS:
‘A Stocking Error’
Claire is a management trainee at MegaDrug, a national retail pharmacy. She has only been there a month,
which the Store Manager, Mr. Jones, seems to think requires that she must still learn every task from the
ground up. So today, Claire is developing her management skills by re-stocking some shelves with a well-
known allergy medicine.
Claire doesn’t mind really. She knows that when she’s running her own store she’ll have to stock shelves
on some days, especially if someone calls in sick, so its good practice – plus, you get to help customers
who are looking for other items and they’re usually very grateful for your help.
As she’s stocking the shelves, Claire notices that the medicine is 4 days past its expiration date. She
immediately brings it to Mr. Jones’ attention, fully expecting him to tell her to put the expired medicines
back in the storeroom and to replace them with new ones.
However, Mr. Jones’ response catches Claire by surprise:
“Oh, I know. There was a stocking error in their storeroom – somebody didn’t rotate the last delivery and
these got pushed to the back,” said Mr. Jones. “The trouble is, we have an advertised one-day special on
these tomorrow, and if we don’t put these out, we’ll run out.”
“Not to worry,” he continued, “It’s a popular item and at the sale price they’ll be gone in a day or two.
Customers never check the dates and anyway, it’s only 4 days. I’d rather have one or two customers
complain about an expired date than twenty complaining because we’re out of stock on a sale item. Go
ahead and put them out”.
1. MegaDrug advertises that it is a Socially Responsible organization that puts its stakeholders first. Is
Mr. Jones being ethically responsible to his customers here? Read the definition of Ethical CSR on
page 67 for more details.
No. To deliberately sell items that are past their expiration date (even if it is only 4 days past a
recommended sell-by date) is unethical.
2. Mr. Jones would rather have one or two customers complain about an expired date than twenty
complaining about an out of stock sale item. Is selling expired medication a valid solution?
No. Mr. Jones should find an alternative solution to this problem.
3. What should Claire do now?
Answers will vary. Mr. Jones is expecting her to stock the shelves with this product, but she knows that
to do so would both put the company at risk for a lawsuit and alienate customers. She must find a
way to ensure that the expired product does not get put on the shelves.
LESSON OUTLINE
Time
60 to 75 Chapter 4  Jumping on the CSR Bandwagon Textbook
minutes Lecture 2 p. 67 – 69
OBJ 4.4 & 1. Ethical CSR represents the purest or most legitimate
4.5 type of SCR where organizations pursue a clearly PowerPoint
defined sense of social conscience in managing their slide 8
financial responsibilities to shareholders, their legal
responsibilities to their local community and society
as a whole, and their ethical responsibilities to “do the
right thing” for all of their stakeholders.
2. Altruistic CSR takes a philanthropic approach to

underwriting specific initiatives to “give back” to the
company’s local community or to designated national
or international programs.
3. Strategic CSR are philanthropic activities targeted

toward programs that will generate the most positive
publicity or goodwill for the organization.
Teaching tip: Ask students which CSR approach

runs the risk of being perceived as self-serving
behavior on the part of the organization. The
Strategic CSR approach can be perceived as self-
serving behavior on the part of the organization.
Progress Check Questions:
1. Define Corporate Social Responsibility.
The actions of an organization that are targeted towards the achievement of a social benefit over and
above maximizing profits for its shareholders and meeting all its legal obligations.
2. Name two other terms that may be used for ‘socially-aware’ corporate behavior.
Corporate Citizenship - implying that the organization is a responsible ‘citizen’ in meeting all its
obligations.
Corporate Conscience - implying that the organization is run with an awareness of its obligations to
society.
3. Give four examples of a Corporation’s Legal Obligations.
“These obligations would include the payment of all taxes related to the profitable operation of the
business; the payment of all employer contributions for their workforce; and compliance with all legal
industry standards in the operation of a safe working environment for their employees and the delivery
of safe products to their customers.”
4. Do you agree or disagree with Friedman’s argument? Explain why or why not.
Answers will vary. Some will agree with Friedman and argue that Social Welfare is the domain of
federal and state organizations. Others will argue that Corporations bear a responsibility to deal with
the consequences of their actions.
5. Do investors always invest money in companies to make a profit?
While most investors are seeking a return on their investment, some will invest in a company to
support the product and/or the work that the organization does. As long as they don’t lose money on
the investment, they may be willing to invest in a company because of its social or economic mission.
6. What is the instrumental model of Corporate Management?
The perspective that the only obligation of a corporation is to maximize profits for its shareholders in
the provision of goods and services that meet the needs of their customers.
7. What is the social contract model of Corporate Management?
The perspective that a corporation has an obligation to society over and above the expectation of its
shareholders.
8. Do you agree or disagree with the social contract model? Why?
Answers will vary. Some will agree with Friedman and argue that Social Welfare is the domain of
federal and state organizations. Others will argue that Corporations bear a responsibility to deal with
the consequences of their actions.
9. List the five major trends driving CSR.
 Transparency
 Knowledge
 Sustainability
 Globalization
 The failure of the Public Sector.
10. Which one do you think is the most important? Why?
Answers will vary. There is a valid argument for each to be considered the most important.
Globalization is certainly the most topical.
11. Explain why organizations are struggling to adopt CSR initiatives.
“Ironically, it’s not the ethical action itself that causes the problem; it’s how to promote those acts to
your stakeholders as proof of your new corporate conscience without appearing to be manipulative or
scheming to generate press coverage for policies that could easily be dismissed as ‘feel-good’
initiatives that are simply chasing customer favor.
In addition, many CSR initiatives do not generate immediate financial gains to the organization.
Cynical customers may decide to ‘wait and see’ if this is real or just a temporary project to win new
customers in a tough economic climate. This delayed response tests the commitment of those
organizations who are inclined to ‘cut and run’ on experimental initiatives when the going gets
tough.”
12. Why would customers be cynical of CSR initiatives?
“Many still see these initiatives as Public Relations exercises with no real evidence of dramatic
changes in the core operating philosophies of these companies.”
13. Explain the term ‘Triple Bottom-Line’.
Where organizations pursue policies and provide social and environmental updates alongside their
primary bottom line financial performance.
14. Explain the term ‘Ethical CSR’.
Organizations pursue a clearly defined sense of social conscience in managing their financial
responsibilities to shareholders, their legal responsibilities to their local community and society as a
whole, and their ethical responsibilities to ‘do the right thing’ for all their stakeholders.
15. Explain the term ‘Altruistic CSR’.
Organizations take a philanthropic approach by underwriting specific initiatives to “give back’ to the
company’s local community or to designated national or international programs.
16. Explain the term ‘Strategic CSR’.
Philanthropic activities are targeted towards programs that will generate the most positive publicity
or goodwill for the organization.
Case 4.1: Malden Mills4
1. How would you describe Feuerstein’s approach to helping his workers and the community when the
factory burned?
His approach was a classic example of CSR. As he is quoted in the case:

“I have a responsibility to the worker…I have an equal responsibility to the community. It would have
been unconscionable to put 3,000 people on the streets and deliver a deathblow to the cities of
Lawrence and Methuen.”
2. Do you think the employees should have been expected to deal with the consequences of the fire
without his help?
Answers will vary. Advocates of the instrumental approach will argue that the fire was an accident
and that the local state and federal agencies should step in to help the workers. Advocates of the social
contract approach will argue that Malden Mills had a responsibility to the community and that the
employees had a right to expect help based on that responsibility.
3. Could Feuerstein have done anything more for his workers?
Other than filing a patent for Polar Tec, which Feuerstein confessed to never having done, there is
nothing more that he could have done for his employees. He was cognizant of his responsibilities to
them and to the community in which they lived and did his best to meet those obligations.
4. What do you think most organizations would have done in this situation?
The fact that Feuerstein’s response drew such a large audience would suggest that most organizations
would not have followed his approach. Their commitment to ‘shareholder value’ would most probably
have led them to move their production facilities overseas, claiming that the rebuilding costs were
prohibitive and using the insurance payout (assuming they had insurance) to offer token severance
packages to the employees in the now-devastated local community.
Case 4.2: Banning The Real Thing7
1. Which ethical standards are being violated here?
Violations can be measure across the board here – from a CSR perspective, Coke appears to be
offending every element of the ‘triple bottom line’ – environmental, social, and (since they are losing
contracts) financial.
2. Is the University being unreasonable in the high standards demanded in their Vendor Code of
Conduct?
The University is setting high standards without any corresponding commitment to pay the higher
prices that would no doubt ensue if Coca-Cola followed all these directives. If Coke has indeed ‘cut
corners’ in all these areas, then the decisions were probably driven by cost.
3. Do you think the University would have developed the Vendor Code of Conduct without the
aggressive campaign put forward by SOLE?
Probably not. Without a vocal student group to draw attention to these issues, the University would
most likely have concerned itself with more internal issues such as enrollment numbers and the cost of
tuition.
4. How should Coca-Cola respond in order to keep the University of Michigan contracts?
Hopefully Coca-Cola will realize that the media attention on this can reach far wider than just the
local University of Michigan community. In that respect, they should make every effort to be seen as
committing to an open and responsive dialogue with the University on this issue. Realistically,
however, it is unlikely that a global corporation will commit to large-scale changes on the basis of one
vendor contract.
FRONTLINE FOCUS:
‘A Stocking Error’ – Claire makes a decision
Claire decides to follow Mr. Jones’ instructions and stock the shelves with the expired medicine. However,
she decides to put it at the back of the shelf behind the units with the ‘in-date’ expiration dates, on the
assumption that if they do have a run on this item as a result of the sale price, at least the new units will be
sold first.
On the day of the sale, the allergy medicine is their best selling item and by noon they are almost out of the
in-date items. Now Claire has a choice to make. Does she follow Mr. Jones’ instructions and hope that no
one notices the expired date? Or does she pull the items and apologize for the item being out of stock, with
the risk that upset customers will ask to speak to the manager?
After a few minutes, Claire hits upon a solution – rainchecks! She’ll work the register for the rest of the day
(Mr. Jones was only going to have her do paperwork anyway) and anyone that picks-up the expired
medicine will be issued a raincheck at the sale price with a sincere apology.
By closing time, six rainchecks had been issued. Claire was able to clear the shelf of the remaining expired
items – who wouldn’t expect an item to be out of stock after a one-day sale? The good news was they
would have a new delivery would by tomorrow afternoon.
1. Did Claire do the right thing here?
Ultimately yes. Putting the expired product at the back of the shelf was a compromise driven more by a
need for continued employment, but the raincheck solution proved to be a creative (and ethical)
resolution to the dilemma.
2. What would the consequences have been for MegaDrug, if Claire had not done this?
MegaDrug would have faced a legal liability for deliberately stocking expired items. Ironically, if they
had done ‘the right thing’ by pulling all the expired items once the error had been discovered, they
might also have been at risk for a lawsuit for false advertising.
3. What do you think Mr. Jones will do when he finds out?
We don’t have enough information on Mr. Jones’ personality to know if he will lose his temper over
Claire’s apparent insubordination. Hopefully he will see that she did the right thing for MegaDrug
and kept their customers happy. If not, he may write Claire up for failing to follow directions. Should
she choose to challenge the write-up with Mr. Jones’ supervisor, one would hope that Claire would
prevail.
END OF CHAPTER QUESTIONS

Review Questions:
1. Review the CSR Policies of a company of your choice. Would you classify their policies as ethical,
altruistic, strategic, or a combination of all three? Provide examples to support your answer.
Answers will vary.
2. Would the CSR Policies of an organization influence your decision to use their products or services?
Why or why not?
Answers will vary.
3. Both Ben & Jerry’s and The Body Shop have been purchased by larger companies – Ben & Jerry’s by
Unilever in 2000 for $326 million and The Body Shop by L’Oreal for $1.14bn in March 2006. Do you
think this will impact their CSR policies? How and Why?
Answers will vary. Research will reveal that both companies went to great lengths to ensure that their
CSR policies and procedures were clearly protected in the purchase agreements. In both cases, the
original founders continued to serve in an executive capacity under the new ownership.
4. Consider the company you currently work for (or one you have worked for in the past). What
initiatives could they start to be more socially responsible? How would you propose such changes?
Answers will vary.
Review Exercise:
Problems at Global Oil
1. What ethical violations did Global Oil commit here?
From a CSR perspective, Global Oil managed to violate every element of the ‘triple bottom line’
approach – economic, social, and environmental. Their reticence to be a good neighbor will now most
likely cost them more money than they saved by cutting corners so aggressively in the name of
‘maximizing shareholder value’.
2. What ethical violations did Jon Bennett commit?
Bennett was a good corporate employee who followed the mandates of his executive officers.
Unfortunately, when the story of the tragic death of the humanitarian leader broke, he was as much
concerned about his own situation as he was about the demands being placed upon him by his bosses.
In this context, he panicked and delivered a set of initiatives that he thought would placate the critics
without taking the time to consider what would be the best solution for the Odone people and Global’s
continued presence in the region.
3. Were Global’s community projects examples of ethical, altruistic, or strategic CSR? Explain your
answer.
Answers will most likely be either Altruistic or Strategic. Altruistic CSR suggests that a philanthropic
approach has been taken by underwriting specific initiatives to “give back’ to the company’s local
community. However, the fact that the underlying motive was to generate the most positive publicity or
goodwill for the organization, means that Global’s community projects were clearly examples of
Strategic CSR.
4. How could Global Oil have handled things differently?
From a CSR perspective, Global could have been a better neighbor from the outset of their arrival in
the region. Making a concerted effort to work with the Odone people rather than simply funding a few
local initiatives to feed the Public Relations engine could have built some trust and credibility that
would have allowed Global to work through the inflammatory actions of the environmental activists.
Once the tragic death of the human rights leader had occurred, Global’s efforts appeared to be ‘too
little too late’, and the convenient timing carried an implied guilt on their part. Rather than rushing to
‘knee-jerk’ actions to show evidence of activity, they should have taken the time to involve the Odone
leaders and committed to initiatives that would have had the greatest positive impact for the Odone
people and then announced those initiatives in conjunction with the Odone leaders.
Internet Exercise:
1. Locate the Website for Business for Social Responsibility. What is the stated mission of the BSR?
What does the BSR do? List four benefits that BSR claims that corporations can achieve through CSR
Programs? List four well-known companies who are members of BSR.
www.bsr.org
Mission: Business for Social Responsibility seeks to create a just and sustainable world by working
with companies to promote more responsible business practices, innovation and collaboration.
“Business for Social Responsibility (BSR) is a global organization that helps member companies
achieve success in ways that respect ethical values, people, communities and the environment. BSR
provides information, tools, training and advisory services to make corporate social responsibility an
integral part of business operations and strategies. A nonprofit organization, BSR promotes cross
sector collaboration and contributes to global efforts to advance the field of corporate social
responsibility.”
Companies: refer to: http://www.bsr.org/Meta/MemberList.cfm
2. Locate the Website for ‘IdealsWork’. What is the goal of the ‘IdealsWork’ organization? What
services does the organization offer? How does the mission of the BSR differ from that of
‘IdealsWork’?
www.idealswork.com
“IdealsWork, Inc. is a leading provider of technology and web-based services for individuals and
organizations that are thoughtful about social and financial issues. Our mission is to empower
individuals and organizations to align their actions with their values…..Our financial solutions make it
easy for investment advisors to evaluate the social and financial performance of companies and find
good companies, in both senses of the word…..Our consumer focused tools make it easy to evaluate
the social performance of brands and the companies behind them.”
Difference in missions: BSR helps organizations to make corporate social responsibility initiatives a
part of their internal organizational culture. Idealswork takes an external perspective in the
development of tools to help organizations and individuals measure the CSR performance of
companies.
3. Locate the Website for the Corporate Social Responsibility newswire CSRWire. What does CSR do?
List four CSRWire members and explain the services they receive from CSRWire. Find the CSR
Events page and identify the next scheduled event. Briefly summarize the location and planned agenda
for the event. If the event has a website, visit the site and record the name of one of the keynote
speakers.
www.csrwire.com
“CSRwire is the leading source of corporate social responsibility and sustainability, press releases,
reports and information. CSRwire members are companies and NGOs, agencies and organizations
interested in communicating their corporate citizenship, sustainability, and socially responsible
initiatives to a global audience through CSRwire's syndication network and weekly News Alerts.
CSRwire content covers issues of Diversity, Philanthropy, Socially Responsible Investing (SRI)
Environment, Human Rights, Workplace Issues, Business Ethics, Community Development and
Corporate Governance.”
Refer to: http://www.csrwire.com/membership/members/
Refer to: http://www.csrwire.com/events
Team Exercise:
1. Instrumental or Social Contract?
Divide into two teams. One team must prepare a presentation advocating for the instrumental model of
corporate management. The other team must prepare a presentation arguing for the social contract model
of corporate management.
INSTRUMENTAL:
 Organizations are not charities (unless formed as non-profits).
 Corporations are formed to deliver products and/or services at a reasonable profit to
reward investors for the risk they took in investing their capital in the corporation.
 Their profits belong to their shareholders.
 Managers have no authority to mandate CSR policies that may not be agreed upon by all
the shareholders.
 They meet their legal obligations in the payment of appropriate taxes and licenses – any
‘welfare’ obligations beyond that are the responsibility of the respective state and federal
agencies.
SOCIAL CONTRACT:
 Corporations cannot operate in isolation.
 Their economic actions have consequences and they should be held accountable for
those consequences – if they pollute, they should pay to clean it up.
 Corporations have a responsibility to other stakeholders than just their shareholders.
 ‘Profit at all costs’ overlooks the longer-term consequences of such an approach –
environmental, social, and economic.
 If corporations allow communities to develop around their large production facilities,
they cannot ethically abandon those communities if the facility no longer meets their
strategic needs.
 If corporations receive financial and tax incentives to partner with a community, they are
obligated to honor that partnership by working with the community in times of economic
hardship, rather than just walking away.
2. Ethical, Altruistic or Strategic?
Divide into three groups. Each group must select one of the following types of CSR – Ethical CSR;
Altruistic CSR, or Strategic CSR. Prepare a presentation arguing for the respective merits of each approach
and offer examples of initiatives that your company could engage in to adopt this strategy.
ETHICAL CSR:
Organizations pursue a clearly defined sense of social conscience in managing their financial
responsibilities to shareholders, their legal responsibilities to their local community and society as a
whole, and their ethical responsibilities to ‘do the right thing’ for all their stakeholders.
Examples will vary.
ALTRUISTIC CSR:
Organizations take a philanthropic approach by underwriting specific initiatives to “give back’ to the
company’s local community or to designated national or international programs.
Examples will vary.
STRATEGIC CSR:
Philanthropic activities are targeted towards programs that will generate the most positive publicity or
goodwill for the organization.
Examples will vary.
Discussion Exercise 4.1:
Wal-Mart
1. How would you describe the managerial philosophy of Wal-Mart? What principles are involved? What
are the overriding aims, values, and goals of Wal-Mart?
The management would describe Wal-Mart as a business that “was built upon a foundation of
honesty, respect, fairness and integrity”, with three “basic beliefs” attributed to the founder Sam
Walton: respect for individuals, service to customers, and striving for excellence. In reality, their
operational philosophies focus on one issue – achieving the lowest prices in their stores. By having the
lowest prices, it is argued, they are offering the best retail opportunities to their customers (“service to
customers”), but as the case study reveals, the tactics they have adopted to achieve the lowest prices
would seem to contradict the other aims, values, and goals to which they commit so publicly.
2. Evaluate the management philosophy of Wal-Mart from the point of view of stockholders, employees,
customers, the local community, and suppliers.
It would appear that every stakeholder is fair game in the incessant drive to achieve the lowest
possible price. Suppliers are pushed for lower and lower prices; local communities can be harmed by
the loss of local vendors who are unable to compete with Wal-Mart; employees receive low wages and
no benefits; customers are offered lower quality goods to achieve those low prices; and stockholders
are now facing a lowered stock price as financial analysts respond to the increasing number of class
action lawsuits against Wal-Mart in response to their alleged predatory business practices.
3. Should business management always seek the lowest prices for its customers and the highest rate of
return on investment? What reasons might there be for seeking something less for customers and
stockholders?
Answers will vary. The retail industry does operate on wafer-thin margins, and so the pursuit of low
prices is standard operating practice. However, the pursuit of those low prices at the expense of all
other stakeholder relationships is now coming back to haunt Wal-Mart as they fight a new media
profile. They are no longer the ‘friend of the working family’ with their “everyday low prices”. Wal-
Mart is now perceived by many as a corporate bully, driving local vendors out of business, and
abusing both its’ suppliers and its’ employees in the process. The question now remains as to whether
the multi-million dollar settlements that will surely come in these class-action lawsuits will have a
severe financial impact on Wal-Marts performance. If so, have all these draconian operating practices
really benefited stockholders in the long run? If you were an investor in 1970 and held on to your
stock through eleven splits, your answer would probably be yes.
4. Economists define costs in terms of opportunities forgone. What opportunities are foregone by Wal-
Mart’s “everyday low price” marketing strategy? Who pays the costs of Wal-Mart’s low prices?
A single focus on price excludes components of the retail shopping experience that many of Wal-
Mart’s competitors have chosen to focus on as a differentiator. Target, for example, offers brighter,
cleaner, less-cluttered stores with more colors and design options. The prices may be higher, but
Target customers describe their shopping experience as being far more positive. In addition, the
constant pressure on suppliers to reduce costs ultimately stifles research and development as the profit
margins are progressively eroded to a point where they sell through Wal-Mart as a loss leader to
maintain market exposure. Further cost pressure impacts the quality of the product itself as suppliers
reduce material specifications to achieve the cost level specified by Wal-Mart.
5. Wal-Mart’s wages are above the legally required minimum wage, and health benefits are not legally
mandated. Are there reasons for a business to take actions not required by law but which might reduce
profits?
Wal-Mart appears to treat their employees as part of their delivery mechanism – i.e. just as they
monitor the efficient operation of their trucking fleet in delivering merchandise to their stores, they
monitor the labor cost in managing the retail transaction with their customers. This ‘commoditization’
of the labor contract achieves a short-term cost objective, but in markets where they are unable to
draw from a large enough local population, Wal-Mart might have to break that practice in order to
have enough people to staff the store. In addition, with a better wage and benefits package they would
not be facing the class action lawsuits from those employees.
In the long-term, happy employees provide a positive retail experience for customers, and happy
customers spend more money. Employees who feel undervalued by their employer with minimal hours
at minimum wage with no benefits are unlikely to have an interest in providing a positive retail
experience.
6. Does Wal-Mart have any responsibilities to its suppliers other than those specified in their contracts?
From a CSR perspective, if Wal-Mart demands the lowest price and detailed product specifications
from its suppliers, and then becomes the largest customer for those suppliers, there should be an
obligation to work with those suppliers to maintain their long-term survival. Regrettably, Wal-Mart
has a proven track record of driving prices down to a point where domestic suppliers can no longer
compete and then taking those contracts overseas, where the cost point can be met, but often with an
inferior product. In that event, it is unlikely that the employees of those suppliers who are inevitably let
go in an attempt to cope with a loss of one third or more of their sales as a result of the loss of the
Wal-Mart business, will ever become raving fans of Wal-Mart. Ironically, when trying to make ends
meet on unemployment checks, Wal-Mart would be the best place to shop to stretch their dollars.
Discussion Exercise 4.2:
The Pesticide DDT
1. Did the Montrose Chemical Corporation, in manufacturing and selling DDT to the public, violate any
ethical standards?
By the time they started producing it, DDT had already developed a track record of significant success
in the reduction of deaths due to malarial infection. Since there was no conclusive evidence of
dangerous side effects yet, they weren’t violating any ethical standards. However, to continue
production in the 1960’s after the book ‘Silent Spring’ exposed evidence of the harmful effects of DDT
on the environment, shows a greater concern for profits than for corporate social responsibility.
2. What should they have done differently?
Answers will vary, but the author would argue that once the harmful side effects of DDT were made
apparent and the EPA banned its sale and use in the USA, Montrose should have pursued an
alternative product and ended its production and sale of DDT anywhere in the world.
3. Was it ethical to manufacture and sell DDT to other countries after the Environmental Protection
Agency (EPA) banned its use in the United States due to its harmful effects?
Answers will vary. Countries facing thousands of deaths as a result of malarial infection were
obviously willing to take a utilitarian approach and argue that the ends justified the means in
continuing to use DDT.
4. Did the EPA make the right decision when it banned DDT?
The EPA reacted to current data and an extremely vocal population in the USA that was unhappy with
the damage being done to the environment as a result of DDT usage. However, subsequent studies
have shown that the use of DDT in much smaller quantities can still be effective in combating malarial
infection. This suggests that the EPA didn’t really do its homework in requiring an outright ban in the
production and sale of DDT.
5. Should Muller’s Nobel Prize be taken away now that DDT has been found to be harmful?
Answers will vary. The author’s position is that Muller did not develop DDT to be used in such a
large-scale application. Therefore it would be unreasonable to hold him accountable for the
environmental damage that resulted from it.
6. Is the ability to save lives worth the risk to the environment?
Answers will vary. Third world countries facing thousands of deaths with DDT as their only
preventative solution would say yes. More ‘developed’ nations with better health care systems would
say no.
DVD NOTES:
Title 1: Clearing the Air
Summary
The video documents the actions of municipalities who are banding together to curb the emission of
greenhouse gases in their cities. Championed by the Mayors of these cities, both conservatives and liberals,
the initiatives represent a commitment to the goals of the Kyoto Protocol in which carbon-dioxide
emissions will be reduced by 7% from 1990 levels by the year 2012.
President George W. Bush withdrew the USA from the Kyoto treaty in 2001 claiming that the science of
global warming was unclear and that the supporting data for the treaty was “fatally flawed in fundamental
ways”. The Mayors of the cities represented in the video feel that there is sufficient evidence outside of the
Treaty to warrant action against CO2 emissions.
Discussion Questions
1. The City of Seattle offered tax incentives to developers to encourage them to construct
‘environmentally friendly’ buildings. An alternative approach would be to introduce tax penalties for
developers who don’t follow environmental codes. From a business ethics perspective, which would be
the better approach?
2. Supporters of President Bush’s withdrawal from the Kyoto treaty argue that changes should be made
gradually and that industries should be called upon to voluntarily reduce emissions. Would a voluntary
reduction program still count as environmental responsibility?
3. Critics of the Kyoto treaty argue that a forced reduction in emissions would increase operating costs
for businesses and result in job losses. Does the preservation of jobs constitute an ethical argument for
not reducing emissions?
Discussion Answers
1. Your individual comfort level with either approach represents a demonstration of your value system. A
utilitarian perspective argues that the end justifies the means, so that as long as the emissions are
reduced, either approach is acceptable. An alternative position would be that ‘you catch more flies
with honey then vinegar’. In other words, mandating a reduction with the threat of tax penalties may
produce compliance to a stated minimum, whereas encouraging environmentally-friendly development
with incentives may produce a more positive outcome.
2. Companies that are electing to reduce their CO2 emissions (such as New Belgium Brewery) without
the added incentive of tax breaks or the threat of tax penalties can be said to be acting in an
environmentally responsible manner. The question remains, however, as to whether the ‘voluntary’
status allows companies to leave the decision until the last possible moment.
3. From a CSR perspective, using job preservation as a justification for not reducing emissions cannot be
seen as an ethical business practice. If you are committed to economic, environmental, and social
performance, then the reduction of CO2 emissions would carry an equally high priority to the
maintenance of long-term job security.
Title 2: Starbucks: Building Grower Relationships
Summary
The video documents Starbucks’ “enlightened self-interest” in working with their coffee growers to
guarantee the future availability of coffee beans at prices that are economically viable for the growers.
Starbucks’ need for specialty Arabica beans grown at elevations between 3500 and 6000 feet represents a
very narrow product market. At the time the video was made, Starbucks 6500+ outlets represented 16% of
the specialty coffee market but specialty coffee represented only 10% of world coffee bean production.
Growers need a price per pound of >80 cents to make their crop economically viable. After many years of
bumper crops, the world market price for coffee had fallen to 50 cents per pound. For Starbucks to
guarantee a supply of coffee beans at the quality they require, they typically pay $1.20 per pound and more.
Their long-term commitment to their growers extends far beyond the price paid per pound. They are
negotiating longer-term contracts to guarantee both the availability of product and future revenue for the
growers to enable them to make secure capital investments into their farms. In addition, Starbucks is
partnering with 3rd party financing agencies to extend credit to growers to enable them to pay their pickers
in advance, prior to receiving payment for their coffee crop.
1. Do the business practices demonstrated by Starbucks represent Corporate Social Responsibility? Why
or why not?
2. Critics of Starbucks’ business relationships with their coffee growers argue that their sole interest is in
maintaining a stable supply of coffee beans. Is that a fair assessment? Why or why not?
3. From a CSR perspective, how could Starbucks approach this issue differently?
Discussion Answers
1. The evidence presented in the video is that Starbucks is working with their growers on economic,
social and environmental levels, which would meet the definition of Corporate Social Responsibility.
Their true intent behind such initiatives, however, remains open for debate.
2. Answers will vary. Cynics will argue that many of the initiatives mentioned in the video are simply
window-dressing for the key objective of guaranteeing an uninterrupted supply of coffee beans.
Supporters would argue that the development of schools and clinics and the co-development of the
‘shade-grown Mexico’ coffee represent a genuine commitment to a long-term and mutually beneficial
business relationship.
3. As mentioned in the video, they have the funds to buy the farms outright as part of a vertical
integration initiative and simply employ the farmers as managers of those farms. This would guarantee
employment for the farmers as well as the supply of coffee beans. However, this would not be
Starbucks core competency and could prove to be a significant distraction from the efficient operation
of the rest of the business.
Title 3: Environmental Responsibility: New Belgium Brewery
Summary
New Belgium Brewery was founded by an electrical engineer and a social worker. Despite humble
beginnings as a ‘home brew’ manufacturer, the company has gone on to set the standard in environmentally
responsible beer production by embracing new technologies, reducing waste production wherever possible,
and seeking out alternative forms of energy.
The video provides an excellent example of environmental responsibility on a small and highly efficient
scale. All of the NBB co-workers who have been with the company for more than a year have a vote in
how the place is run, and they have gone as far as backing their commitment to socially responsible
business by dipping into their own bonus money to help fund a long-term contract for wind power.
The case of NBB demonstrates that the ideals of environmental responsibility are achievable – and any
company with a corporate title of ‘Sustainability Goddess’ has to be serious about environmental
responsibility!
1. Do you consider your company to be environmentally responsible? If so, provide some examples. If
not, explain why not.
2. The employees of NBB dipped into their own bonus money to help fund a long-term commitment to
wind power. Do you think the employees at your company would support environmental responsibility
like that? Why or why not?
3. The video describes the traditional view of environmental responsibility as being ‘no-win’: you help
the environment and kill the business, or help the business and kill the environment’. NBB obviously
found another way. How do their business ethics fit into their solution for environmental
responsibility?
Discussion Answers
1. Answers will vary. Most students will not find their companies to be environmentally responsible
beyond standard recycling programs. Students that do work for environmentally conscious companies
should be encouraged to connect those policies to business ethics and the corporate code of ethics.
2. Such a strong commitment to environmental responsibility begins with the hiring process. NBB hires
people that share their vision of a socially responsible business model. Most students would not expect
their colleagues to step-up to such a commitment unless they already work for an environmentally
responsible business. They may acknowledge some anticipated support, but it would be unlikely to
achieve a unanimous vote.
3. NBB was built on a commitment to a socially responsible business model. That commitment drove the
other business decisions that led them to embrace new technologies, seek out alternative forms of
energy, and to reduce waste.

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Understanding Ethics – Ghillyer

CHAPTER 4 – Corporate Social Responsibility

o Corporate Social Responsibility

Upon completion of this chapter, the students will be able to:

KEY TERMS AND CONCEPTS

Term Definition Page

10 to 30 Chapter 4  Corporate Social Responsibility Textbook

2. This definition assumes that the corporation is

3. Many companies’s take an instrumental

Teaching tip: Ask students if they agree with

 Management without Conscience

2. The modern social contract approach argues

Upon completion of this chapter, the student will be

1. Define corporate social responsibility (CSR).

2. Distinguish between the instrumental and

3. Summarize the five driving forces behind

4. Distinguish between the three types of CSR.

5. Understand the key components of a

Teaching tip: Ask students if they believe a

 The Driving Forces Behind Corporate Social

2. Knowledge: The transition to an information-based

3. Sustainability: The earth’s natural systems are in

4. Globalization: It represents a new stage of capitalist

5. The failure of the public sector: Many if not most

Teaching tip: Ask students if CSR initiatives

 The Triple Bottom Line

2. While it may be easy to support the idea of

Teaching tip: Ask students if they agree with this old

However, Mr. Jones’ response catches Claire by surprise:

No. Mr. Jones should find an alternative solution to this problem.

3. What should Claire do now?

2. Altruistic CSR takes a philanthropic approach to

3. Strategic CSR are philanthropic activities targeted

Teaching tip: Ask students which CSR approach

Progress Check Questions:

1. Define Corporate Social Responsibility.

3. Give four examples of a Corporation’s Legal Obligations.

5. Do investors always invest money in companies to make a profit?

6. What is the instrumental model of Corporate Management?

7. What is the social contract model of Corporate Management?

8. Do you agree or disagree with the social contract model? Why?

9. List the five major trends driving CSR.

10. Which one do you think is the most important? Why?

11. Explain why organizations are struggling to adopt CSR initiatives.

12. Why would customers be cynical of CSR initiatives?

13. Explain the term ‘Triple Bottom-Line’.

14. Explain the term ‘Ethical CSR’.

15. Explain the term ‘Altruistic CSR’.

16. Explain the term ‘Strategic CSR’.

Case 4.1: Malden Mills4

His approach was a classic example of CSR. As he is quoted in the case:

3. Could Feuerstein have done anything more for his workers?

Case 4.2: Banning The Real Thing7

1. Which ethical standards are being violated here?

‘A Stocking Error’ – Claire makes a decision

1. Did Claire do the right thing here?

3. What do you think Mr. Jones will do when he finds out?

END OF CHAPTER QUESTIONS

Answers will vary.

Answers will vary.

Answers will vary.