CSR: Session 5

S K Tapasvi
MDI Gurgaon
18/3/2024
CSR: A Corporate Responsibility?
• Whose responsibility is CSR?

The term corporate social responsibility suggests that

such behavior is the responsibility of corporations--that
the corporation has a responsibility to society. Is this the
best way to think about CSR? Does it produce optimal
outcomes? In reality, where does the motivation for
socially responsible behavior come from?

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CSR: A Corporate Responsibility?
• What does it mean to be responsible?

To be responsible for something is to be accountable. If

there is no consequence for doing (or not doing)
something, there is no responsibility. Stakeholders define
the firm’s responsibility by rewarding behavior they like
and punishing behavior they dislike.

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Milton Friedman Versus Charles Handy

The business of business is business?

versus

Enlightened business?

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Milton Friedman

The business of business is business

• Note to Instructor: Video link embedded in hyperlink.

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• https://www.youtube.com/watch?v=Rls8H6MktrA
Milton Friedman Versus Charles Handy
• For Friedman:
• Profit is an end in itself.
• Value to society is maximized if individual actors pursue
their self-interest above all else.

• For Handy:
• Profit is only a means to a larger end.
• A firm should not remain in existence just because it is
profitable but because it is meeting a need that society
as a whole values.

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Milton Friedman versus. Charles Handy
• Are the articles so different? An example:
Does it make sense for a large financial firm to donate money
to a group researching the effects of climate change because
the CEO believes this is an important issue?

versus
Does it make sense for an oil firm to donate money to the same group
because it perceives climate change as a threat to its business model
and wants to mitigate that threat by investigating possible alternatives?

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 Milton Friedman’s Shareholder
Company Profit
non-CSR model (focus value

on profit)

Shareholder theory—responsibility to shareholders only

Edward Freemans Company Profit

Stakeholder
value
CSR model (focus
on stakeholders)

Stakeholder theory — responsibility towards society including environment

CSR/2019 Prabhakaran Paleri 9

CSR: A Stakeholder Responsibility?
The reason that fast-food companies pay the low wages that they do,
for example, is that they are able to staff all of their open positions at
that rate with employees who have the skill set needed to do the job. In
other words, employees value those jobs either because they have no
alternative or because any alternative pays at a lower rate. For this to
change, a stakeholder needs to act--either the government (by
increasing the minimum wage) or employees (refusing to work at that
wage rate) or consumers (by refusing to shop at McDonald’s because
they are unhappy with the wages the company is paying its employees).
Until one of its key stakeholders sends a serious message to McDonald’s
that its current wages are unacceptable, then McDonald’s will (and
should) continue doing exactly what it is doing.

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CSR: A Stakeholder Responsibility?
• The responsibilities of stakeholders are central to CSR:

Firms do not define our societal values; instead they

reflect them. Firms are very good at providing us with
what we actually want (rather than what we say we
want). As such, all stakeholders have an obligation to help
design the society in which they want to live and work.

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Corporate Stakeholder Responsibility

A responsibility among all of a firm’s stakeholders to

hold the firm to account for its actions by rewarding
behavior that meets expectations and punishing
behavior that does not meet expectations.

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Firm and Stakeholders as Independent Actors

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Firm and Stakeholders as Integrated Actors

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 Stakeholder typology according to power, legitimacy and urgency

Stakeholder typology Salience Attributes Sub categorisation

Power Dormant
Latent Low Urgency Demanding
Legitimacy Discretionary
Power and legitimacy Dominant
Expectant Medium Legitimacy and urgency Dependent

Power and urgency Dangerous

Definitive High Power, urgency and No sub
legitimacy categorisation.
Called definitive or
core stakeholder.

CSR/2019 Prabhakaran Paleri 15

 Stakeholders and Business

Stakeholders under stakeholder theory ( continued)

• Accordingly there are seven types of stakeholder sub

categorisation:

1. Dormant stakeholders. Imposes their power attributes.

2. Discretionary stakeholders. Receives corporate compassion.
3. Demanding stakeholders. Impatient stakeholders.
4. Dominant stakeholders. Organised and easy to appreciate. Stakeholders.
5. Dependant stakeholders. Legitimate an urgent. But doesn't have the power
to influence.
6. Dangerous stakeholders. Powerful and expedient.
7. Definitive stakeholders. Critical stakeholders with all the three attributes.

CSR/2019 Prabhakaran Paleri 16

Engaged Stakeholders
• Engaged stakeholders shape society, rather than
exist in a society shaped by others:

 Caring stakeholders (Non-profit Voluntary Org)

 Informed stakeholders (Professional Advocacy)
 Transparent stakeholders (Media and Social Media)
 Educated stakeholders (Business Managers)

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The Strategic CSR Window of Opportunity

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The CSR Sweet Spot Versus Danger Zone

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Perceptions of Business Executives

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Consumers’ Willingness to Pay for CSR (2011–2014)

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The United Nations PRME Principles

 Principle 1: Purpose
 Principle 2: Values
 Principle 3: Method
 Principle 4: Research
 Principle 5: Partnership
 Principle 6: Dialog

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A Stakeholder’s Responsibilities

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Is a Manager a Professional?
• There are three main characteristics that define what it
means to belong to a profession:

1. A sense of duty beyond the self.

2. A certified body of knowledge.
3. A code of ethics.

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Strategic CSR Debate
• Motion:

Walmart is the most socially responsible firm in the world.

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Questions for Discussion and Review
1. Who is responsible for CSR--firms or their stakeholders? Why? Is the
responsibility equal or does one party have a greater responsibility?
2. List three points in favor of Friedman’s view of the firm and its
responsibilities and three points in favor of Handy’s view. Which
position do you agree with? Why?
3. Would you report a classmate you suspected of cheating at school?
Why or why not? What is the role of the business school in teaching
ethics to its students?
4. Think about a recent example of a firm that changed its behavior in
response to a stakeholder’s demands. Is this an example of corporate
stakeholder responsibility?
5. If a firm’s stakeholders condone the irresponsible behavior of a firm,
should the firm keep acting this way or should it change? Why?

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