CHAPTER 4: BUSINESS & SOCIAL ENVIRONMENT

CORPORATE SOCIAL CORPORATE SOCIAL RESPONSIBILITY

Topics Learning Outcome

1) Distinguish between instrumental and social

contract approaches to corporate

management.

2) Summarize 2 foundation principles of CSR.2) Summarize 2 foundation principles of CSR.

CSR Definition

“The action of an organization that are targeted

towards achieving a social benefit over and

above maximizing profits for its stakeholders

and meeting all its legal obligation”and meeting all its legal obligation”

Also known as

“corporate citizenship” = company’s roles towards society or

“corporate conscience” = having integrity is doing right things when nobody watching you.

CSR in Malaysia

� In 2011 – increased awareness

� Framework - to describe actions that go beyond philanthropy or compliance with applicable lawswith applicable laws

� Example of CSR activities - safeguard the environment, communities, employees, shareholders and other affected parties’ interests

Example

Malaysia Airlines And MERCY Malaysia Unite To Raise Funds For Charity - purpose - this campaign is to generate contribution from

passengers on-board Malaysia Airlines with proceeds channeled to aid

organizations and charitable trusts.

– donation boxes placed at MAS tickets office.

Funds collected through this initiative will be channeled towards the

following humanitarian aid efforts identified:

1) Cleft Lip and Palate Programme in Bangladesh and Cambodia

2) Disaster Risk Reduction Programme for schools in Malaysia

3) Rehabilitation Health Centres set up in Cambodia

4) Oral Rehydration Therapy

5) Emergency Fund – Humanitarian reliefSource from www.mercy.org.my

Why CSR in Business???

6 reasons:

� Business Transparency

� Balance between Corporate Power with Social

ResponsibilitiesResponsibilities

� Discourage Government Regulation

� Promotion Long-term Profits for Business

� Improve Business Value and Reputation

� Corrects Social Problems caused by Business

Reasons why CSR

1) TransparencyWe live in an information-driven economy where business practices have become increasingly transparent. Companies can no longer sweep things under carpet –whatever they do, will be known, almost immediately around the world. known, almost immediately around the world. E.g. WikiLeaks.

2) Balances between Corporate Power with ResponsibilityResponsibility must accompany power. Businesses committed to social responsibility are aware that if they misuse they have, they might lose it.

Reasons why CSR (cont.)

3) Discourages Government Regulation

Voluntary social acts may avoid government regulation. Some regulation may reduce freedom for both business & society. E.g. If all bus drivers drive responsibly, government might not regulate drive responsibly, government might not regulate the installation of black box.

4) Promotes Long-term Profits for Business

Social initiatives by business produce long-run business profit – able to attract new customers, as well as support from governments and NGOs.

Reasons why CSR (cont.)

5) Improve Business Value and Reputation

Firm’s reputation is a valuable intangible asset, as it prompts repeat purchases by loyal customers and helps to attract and retain better employees to enhance productivity and employees to enhance productivity and profitability.

6) Corrects Social Problem caused by Business

Business has responsibility to compensate society for the harm it may sometime caused. E.g. if consumer injured due to product defect, the manufacturer should be responsible.

Principles of CSR

�2 Broads Principles of CSR:-

1) The Charity Principles1) The Charity Principles

2)The Stewardship Principles

Principles of CSR

2 broad CSR principles:

1) The Charity PrincipleBusiness should give voluntary aid to society’s needy persons and groups= the idea that the wealthiest members of society should = the idea that the wealthiest members of society should be charitable towards those less fortunate.

2) The Stewardship Principle= corporate executives see themselves as stewards, or trustees, who can act in the general public’s interest. Although the companies are privately owned & try to make profits for the shareholders, they are expected to act with a special degree of responsibility in making business decision.

3 Types of CSR

1) Ethical CSR

When organizations pursue a clearly defined sense of social responsibility 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 whole, and their ethical responsibilities to do the right thing for all stakeholders. Org. in this category typically incorporated their belief into their core operating philosophy.

E.g. Body Shop mission statement states “We will operate our business with strong commitment to the well being of our fellow humans and the preservation of the planet”.

3 Types of CSR (cont.)

2) Altruistic CSR

When org. engages into specific initiatives to give back to company’s local community.

E.g. Shell Oil Corp. responded to 2004 tsunami disaster with donations of fuel for transportation rescue and water tank for relief disaster with donations of fuel for transportation rescue and water tank for relief aid, on top of several million dollars of financial contribution.

3) Strategic CSROrganization targets programs that will generate the most positive publicity or goodwill for the organization.

i.e. good publicity brings more sales.