Chapter 1:

Social Responsibility
Framework
Good Governance and Social Responsibility
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Learning Objectives
1. Define and understand the Corporation and
Corporate Social Responsibility
2. Explain the importance of Social
Responsibility and Good Governance
3. Discuss the history of CSR
4. Explain the drivers and barriers of CSR
5. Describe the Triple Bottom Line and its
impact in an organization.
The Corporation

❖ A corporation is a legal entity created by

an individual or group of shareholders
who have ownership of the corporation
(through shares of stocks issued by the
corporation) to engage in a business
activity.
The Corporation

❖ It is a structure established by law to

allow different parties to contribute to
capital expertise, and labor or the
maximum benefit of all of them (Monks
and Minow, 2011).
The Corporation

❖ Ownership of the corporation is

represented by holding of common stocks
(one share = one vote).

❖ Certain types of shares can have more

voting rights or dividend priority, as
expressed in the company bylaws.
The Corporation

❖ Not all corporations are formed with the

objective of profit-making:
a. Charitable Institutions
b. Non-profits
c. Nongovernmental organizations (NGOs)

❖ Majority of Corporations are formed to

provide a return for their shareholders.
Four Appealing Attributes of
the Corporation
1. Limited Liability
2. Transferability of ownership
3. Legal Personality
4. Central Management
Limited Liability
• In case of bankruptcy, owners of corporations
may protect their assets from being foreclosed
or confiscated, and creditors can only recover
debts incurred by the company through the
liquidation of remaining assets owned by the
company.
• Individual liability is avoided
Transferability of Ownership
• Transferability allows a shareholder to sell his
shares of stocks in the stock market freely
should he/she decides to let go a part or all of
his shares unless explicitly started in the
corporate bylaws.
Legal Personality
• Corporations are legal entities and are
sometimes defined as “legal persons.”

• They are allowed to perform human make:

a. Buying and selling properties
b. Owning copyrights, patents and trademarks
c. Engaging in any other business activities.

• Corporation have an indefinite life span that

can survive from generation to generation.
Central Management
• Corporations have the benefit of centralized
management.
• The executive managers and board of directors
are the ones responsible in the daily
management and governance.
• It allows the company to operate efficiently
without having individual shareholders
meddling with corporate affairs.
• Shareholders would normally look at the stock
price as a performance metric.
The Philippine Corporation

❖ Based on the 2019 Revised Corporation Code

(RCC), there is no minimum number of
incorporators (directors) but shall not have
more than 20, and each incorporators
(directors) must own at least one share of
stock.

❖ A corporation is granted a perpetual corporation

term (previously it was 50-year term).
The Philippine Corporation

❖ There is also a removal of the required

subscribed/paid-up capital, and residency of
incorporators was made to keep up with global
standards.

❖ It was also introduced the One Person

Corporation (OPC).
RCC’s Four Areas of Reform
1. Enhancement of ease of doing business in
the Philippines
2. Fortified stockholder protection and
institutionalized corporate governance
provisions
3. Emphasis on corporate social responsibility
4. Improved policies and regulatory corporate
framework.
Importance of Social Responsibility
and Good Governance
❖ The way a corporation conducts its business
has profound effects on individuals in the
societies they operate.
❖ Corporations have continued to grow and can
sometimes influence government policy
through political lobbying.
❖ There should be an entity who will become
accountable for the actions being taken and its
consequences.
Corporate Social Responsibility
❖ Corporate Social Responsibility (CSR) is a
manifestation of good corporate governance.

❖ CSR is the responsibility of companies to act

and behave ethically to satisfy their various
stakeholders’ needs.

❖ An on-going commitment of organizations to

ensure accountability to the stakeholders their
existence impacts.
Four Dimension of CSR
(Carrol 1991)
Four Dimension of CSR
(Carrol 1991)
Economic
• An expectation of profit is natural when
shareholders form corporations.
• Lowest later of the pyramid suggests that
companies must first be profitable after they
have paid their obligations to employees and
suppliers, and conform to consumers’ needs
and demands.
• This is the very foundation and required of all
corporation.
Legal
• A corporation is created through law and, as
such must abide by the rules and regulations
imposed for fairness and justice.
• Much like economic responsibilities, it is
required for companies to be legally compliant
as well
Ethical
• Doing what is right for stakeholders is what
ethical companies should aim for.
• Society expects companies to take on this
responsibility beyond what is required of them
legally.
Philanthropic
• To fulfill this responsibility, companies need to
truly embrace philanthropy, meaning, issues
that pertain to the improvement of human lives
must be addressed without compromised.

• The responsibility, however, is not required nor

expected but rather desired by companies.
A Brief History of CSR
❖ CSR can be traced back to the industrial revolution
when there was a growing concern for the well-being of
workers and its effect on their productivity.

❖ CSR started as a philanthropic endeavor of successful

businessmen who wanted to do good through their
donations to help the underprivileged.

❖ A rise in nations’ wealth brought about an increase in

philanthropists such as Carnegie and Rockefeller in the
United States.
A Brief History of CSR
❖ CSR was officially introduced in the early 1950s
through American economist and educator Howard
Bowen’s (1953) seminar work on social responsibility.

❖ Bowen paved the way for the succeeding academic

research and management practice of CSR.

❖ The last 40 years, beginning in the 1970s, saw marked

development in CSR as companies started to be more
aware of their social responsibility.
A Brief History of CSR
❖ In the 1980s and 1990s, more companied became
more responsive to the various stakeholders due to
social activism.

❖ At the turn of the twenty-first century, CSR has become

an integral part of organizational strategy and rightfully,
so companies do not exist in a vacuum.
In the Philippines
• CSR started as donations from various businesses
in the 1960s.

• In 1970s, more coordinated efforts have been

observed between companies and intermediaries.

• The end of the Marcos regime in the 1980s and its

adverse effects on the economy led to a closer
collaboration between donors and donees.
In the Philippines
• CSR flourished in the 1990s as companies
acknowledge their role as social catalyst.

• From the 2000s onwards, CSR has become an

essential part of company’s identity (Roman,
2002).

• Top companies started to approach CSR as an

integrative strategic management tool.

• CSR now is a universally accepted norm of good

corporate governance.
The Business Case
❖ Economist Milton Friedman (1970) argued that the
sole responsibility of corporations is to generate
profit for the shareholders and that it is the
government’s responsibility to provide for society’s
needs.

❖ Friedman’s view on CSR may be considered archaic,

given the growing empirical evidence that corporations
engaging in CSR actively increase their business,
thereby creating more value for the company.
The Business Case
The Business Case
❖ In the study of CSR, the business case has been a long-standing
argument in the academe and practice

❖ The business case for CSR refers to reasons why businesses

should support and accept the CSR agenda.

❖ By doing so, these companies will behave more responsibly.

❖ Supporters of CSR espouse this because studies have shown a

strong correlation between CSR and corporate financial
performance.
Drives and Barriers of CSR
Illustration of the opposing forces of CSR

DRIVERS BARRIERS
Regulation
Limited Financial
C Resources
Market Behavior
S Profit Maximization
Social Activism
R
Availability of
Culture
Human Resources
Strategy
Drivers:
• REGULATION

➢ Regulation and law provide a framework that

companies must comply with.

➢This is relation to the legal dimension of Carroll’s

CSR framework discussed previously. For instance,
in China, CSR is no longer a voluntary act but is
mandated by the central government.
Drivers:
• MARKET BEHAVIOR

➢ Benchmarks have been established because of

companies’ best practices that use CSR as a
builder of reputation; how the market behaves and
influences; and how companies engage in their
respective CSR initiatives and have become a
source of competitive advantage.
Drivers:
• SOCIAL ACTIVISM

➢ Benchmarks have been established because of

companies’ best practices that use CSR as a
builder of reputation; how the market behaves and
influences; and how companies engage in their
respective CSR initiatives and have become a
source of competitive advantage.
Drivers:
• CULTURE

➢ Culture is a mixture of beliefs, norms, symbol, and

the heritage that a particular country or geographic
area shares and practices.

➢This is built over time and becomes part of its

normative values.

➢For CSR and governance to thrive, a culture of

benevolence and philanthropy must be ingrained or
deeply embedded in an organization.
Drivers:
• STRATEGY

➢ Perhaps the most significant driver of CSR is strategy.

➢Integrating CSR in its planning from the different

functional areas of a company fortifies the relationship
and becomes a creator of value that benefits the
corporation in the long term. It is also important that the
focus and objectives of a company’s desired CSR
initiatives must be clearly articulated to its internal
(management) and external partners
(beneficiaries/intermediaries which will be discussed in
the next chapter).
Barriers:
• LIMITED FINANCIAL RESOURCES

➢As with Carroll’s economic perspective of CSR, a

company needs to be profitable and take care of its
own needs before it has the ability and resources to
engage effectively in social responsibility.

➢CSR requires a long-term stance in its commitment

of resources to truly see the benefits of its
initiatives.
Barriers:
• PROFIT MAXIMIZATION

➢A company that single-mindedly focuses on

operational efficiency is usually driven by profit
maximization.

➢According to Kolstad (2007), most executives

support the Friedmanian view of maximizing returns
to shareholders despite the growing literature on
CSR’s positive effect on corporate financial
performance, persistence, and acceptance of
maximizing profits act as barriers to CSR.
Barriers:
• AVAILABILITY OF HUMAN RESOURCES

➢No matter how good the intentions are in promoting

CSR in organizations, it will need efficient
mobilization through employee involvement and
engagement in its programs.

➢Without the support of human resources in its

implementation, CSR activities will be lackluster.
Measuring CSR
❖ The purpose of measurement is to understand what is being
measured better and lay the groundwork for improvement.

❖ CSR is a management concept that is not easy to measure.

❖ Unlike other functional areas where tangible measurements

have been developed for quite some time, market share,
customer satisfaction, attrition rate, turnaround time,
financial ratios, goodwill, loyalty, and social/environmental
impact are just some CSR concepts that cannot be
accurately measured.
Measuring CSR
❖ But these intangibles can be translated into measurable
variables that can provide indications of relationships and
outcomes.

❖ Measuring CSR provides several benefits, such as helping

organizations make better decisions on allocating resources
with the greatest impact, improving processes that will make
CSR initiatives more efficient, and providing more support
for the business case.
Balanced Scorecard
• It is an example of an integrated strategic
measurement system.

• Companies can include tangible and intangible

measurements that can identify if goals are met in each
of the four dimensions (financial, customer, processes,
and learning & growth).

• Metrics must be carefully identified for each objective.

• Application of this scorecard is dependent on the

specific need or circumstance of a company and may
be adjusted accordingly.
Balanced Scorecard
Triple Bottom Line or
Three Ps (People, Planet and Profit)
• It is an accounting framework that describes
three evaluation perspectives that contribute to
creating greater value for the organization.

• The increasing pressure from the government

and society to manage and assess the results
of their operations gave wat to scrutinizing
companies from their economic (profit), social
(people), and environment (planet) impact
(Elkington, 1998).
Triple Bottom Line or
Three Ps (People, Planet and Profit)
Triple Bottom Line or
Three Ps (People, Planet and Profit)
• With the growing emphasis on employee
happiness and good corporate governance,
ideal results such as employees’ well-being,
ethical behavior, and other factors have been
considered as part of company’s “bottom-line”,
and these contribute to multiple bottom-line
reporting.

• As human development continues to prosper in

the future, the traditional look at the bottom line
(profit) is already a thing of the past.
Leadership
❖ Leadership has a key role in influencing CSR. Both CSR and
leadership are founded on concepts of service, integrity, and
inspiration to others.

❖ The relationship between them is mutually empowering and

transforming.

❖ Employees and managers as members of organization are

naturally concerned about, contribute, and react to their
organization’s social consciousness, particularly to their
leaders’ commitment to CSR.
Leadership
❖ Leader perceptions provide evidence regarding their CSR
attitude and acts of the leaders can trickle down to affect
employees’ subsequent attitude, behavior, and actual
engagement through volunteerism.

❖ A leader must be able to communicate their CSR stories

internally and externally effectively.

❖ These stories through internal memos, press releases,

social media and others contribute to companies’ reputation.
Leadership
❖ It is critical that whatever accomplishments have been made by their
initiatives and programs, have to be made known to various stakeholders
for CSR to thrive and progress even further in the long term.

❖ The Filipino concept of “kapwa” (fellowship) is considered to be an

essential component of effective leadership (Ng and Riverra, 2018).

❖ “Kapwa” is defined as a shared identity with others. This is rooted in the

Filipino’s notion of “kapwa” which embraces both the categories of
‘outsider’ (ibang tao), and ‘one of us’ (hindi ibang tao) and sparks genuine
concern.

❖ The cultural basis of Philippine CSR may be viewed from the concept of
fellowship, which has parallel conceptual foundations with leadership.
Future of Philippine CSR
❖ Corporate Social Responsibility has become integral for
most companies as it becomes an opportunity to wholly and
directly engage stakeholders, creating shared value for both
the organization and communities it serves.

❖ It goes beyond profit. It becomes about serving the Filipino,

and is a clear reflection of the values that our company
stands for.

❖ The future of CSR in the Philippines is promising and

continually evolving. The main driver of this evolution is
awareness of the individual that his/her contribution to
society is ever-increasingly important.
Activity 1
1. You just graduated from the university and landed a job as a
management trainee in a multinational FMCG (fast-moving
consumer goods). Write a personal plan on how you can initiate
your participation in the company’s CSR engagements.
2. As a senior executive (corporate communications) in a
commercial bank, you were asked by the CEO to take-over the
CSR program due to the resignation of the previous manager.
The bank currently engaged in three different initiatives:

a. Planting trees as part of your environmental engagement in

collaboration with a local NGO.
b. Providing free education for deserving scholars directly managed by
your foundation
c. Participating in feeding programs for the poor in depressed areas,
also in collaboration with a local NGO.

How would you go about evaluating the impact of each of the

three initiatives? What are the key metrics that should be part of
your evaluation?
Reference
• Delos Santos, D. and Ng, L. (2021). Social responsibility
framework. In Good governance and social responsibility
(1st ed., pp. 1-11). Rex Book Store, Inc
 Chapter 1:
Social Responsibility
Framework
Good Governance and Social Responsibility
DYCBAMgt123