Corporate Social Responsibility

NAME : AKOSUA KOSEI KWARTENG INDEX NO: 7111810018

Definitions of CSR
A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis- Commission of the European Communities 2001 Corporate social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large- World Business Council for Sustainable development A business operating in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business- Business for Social Responsibility (2000) www.bsr.org

Theories of CSR
There are 4 groups of theories in CSR- they are explained below.

1. A first group in which it is assumed that the corporation is an instrument for wealth creation and that this is its sole social responsibility. Only the economic aspect of the interactions between business and society is considered. So any supposed social activity is accepted if, and only if, it is consistent with wealth creation. This group of theories could be call instrumental theories because they understand CSR as a mere means to the end of profits.

2. A second group in which the social power of corporation is emphasized, specifically in its relationship with society and its responsibility in the political arena associated with this power. This leads the corporation to accept social duties and rights or participate in certain social cooperation. We will call this group political theories.

3. A third group includes theories which consider that business ought to integrate social demands. They usually argue that business depends on society for its continuity and growth and even for the existence of business itself. We can term this group integrative theories

4. A fourth group of theories understands that the relationship between business and society is embedded with ethical values. This leads to a vision of CSR from an ethical perspective and as a consequence, firms ought to accept social responsibilities as an ethical obligation above any other consideration. We can term this group ethical theories.

Models of CSR
The models explained below illustrate what the group of theories above explains.
Instrumental theories- classical model political theories- stakeholder model integrative theories- Social Demandingness Theory Ethical theories- Social Activist model

 The Classical Model argues that society is best served by a variety of institutions, each of which serve a particular function. The primary function of corporations should be economic rather than social. The primary goal of the corporation should be to maximize profit and the primary obligation of managers are to act in the interest of their shareholders while not breaking the law. According to classical theorists, this invisible handindividuals operating together in mutually satisfying (or profitable) exchangesleads to the most efficient economic system. In order to fulfil their institutional responsibility to society, corporations should limit any social activities that add costs and reduce their profits. The only

Assumptions of the classical model Shareholders benefit because they make a greater return on their investment. If a company spends money for social causes, it reduces the wealth of the shareholders. As dissatisfied shareholders sell of their shares, the value of the stock drops, and the company has less capital for future growth. Consumers benefit because prices stay low. For example, the deli doesnt charge an extra $.50 per sandwich, which he can then donate to his local food bank. Workers are happy because higher profits help the company to expand, creating more jobs, better wages, and other benefits. Society as a whole benefits because these successful businesses and their workers all pay taxes to the government, which then fulfills its social functions: education, roads, social services, etc. The government also acts in the interest of society to determine the laws by which these companies must abide.

 Stakeholder Model :Proponents argue that the company should be driven by the interests of their stakeholders, rather than the interests of the stockholders alone (as argued in the Classical Model) Stakeholders include: Stockholders, workers, consumers, suppliers, creditors, competitors, government agencies overseeing the firm, professional groups representing individuals within the company and residents of local communities in which the facilities or plants are located In addition to earning a profit, this model includes consideration of the impact upon major stakeholders when making a decision.

 The Social Demandingness Theory says that the corporation exists to carry out the demands of the broad public. Unlike the Stakeholder theory, this theory maintains that management is directly responsible to the general public. They are responsible to serve the general public and the general public is also responsible to uphold the corporation. In this sense the general public has a generalized ownership relation to corporate assets and a responsibility to monitor the conduct of managers and hold them accountable for poor decisions.

 Social Activist Model- Much like the Social Demandingness model, this model assumes that corporations are responsible to the whole of society. Proponents of both of these models argue that executives should be social and moral leaders in the community and that corporations should be addressing major issues like poverty and global health. Unlike the Social Demandingness theory, however, the social activism (or moralism) model assumes that there is a universal standard for determining these responsibilities.

These theorists advocate a wide variety but here are a few responsibilities: to voluntarily disclose the contents of products to examine the ethical impact of their actions to disclose the results of their social performance to restructure the corporate board to include independent members and watchdogs to implement a code of conduct to hire specialists in social or ethical decision-making to advise executives to conduct social impact studies before a major decision is made to be more generous in charitable giving to implement social responsibility planning

Approaches to CSR and CSI

1. CSR as Profit Maximization The Nobel Prize-winning economist Milton Friedman argued that socially responsible companies are those that operate most profitably. A company is doing good by generating profit, providing labour, goods and services that are demanded and by paying taxes. Friedman does not believe that corporate philanthropy or any social programs achieve their goals. Further, they interfere with the concept of personal freedom and take away money that belongs to shareholders. In this traditional approach the company gives a higher priority to the interests of shareholders than to those of other stakeholders.

2. CSR as Altruism Companies with an altruistic alignment use financial excesses to make a positive contribution to society, to groups or causes that are not essentially related to their business activities. Corporations in this category act with a philanthropic standpoint. Company resources are distributed in a reactive way according to social value and social and moral principles.

3. CSR as Enlightened Self-Interest According to this approach business leaders recognise that giving back to the community and protecting the environment ensure indirect returns to their companies. Causes are related to business activities and create a variety of benefits for the partners involved. Support for community groups or causes is viewed as a business investment. There is a clear rationale for any expenditure.

4. CSR as Corporate Citizenship Goes beyond the previous models. CEOs recognise the need for sustainability and for social investment strategies in business. Corporate citizenship refers to the relationship a company has with the wider society, rather than merely with selected stakeholder groups. With an increase in wealth and freedom and the internationalisation of operations, corporations are increasingly realising a new sense of responsibility. The approach suggests that stakeholders are not only being managed but also integrated in decision making. Corporations want to be held responsible for any actions that affect people, their communities and the environment.

Sources
http://projectcsr.wordpress.com/ quoting- Brummer J. Corporate Responsibility and Legitimacy: An Interdisciplinary Analysis www.instituteforpr.org The State Chamber of Commerce (2001), An Overview of Corporate Social Responsibility in Australia, Australia Business for Social Responsibility (2000) www.bsr.org

Garriga E & Mel D, (2004) Corporate Social Responsibility Theories: Mapping the Territory, Journal of Business Ethics 53: 5171. Kluwer Academic Publishers. Netherlands