session 3 stakeholder perspective & csr 22-09-14

Session 3:

Stakeholder Perspective on CSR

September 22, 2014

Introduction Conceptualization of CSR within different views

regarding the role of business in society Why companies should or should not engage in CSR?

Debate on shareholder vs. stakeholder

What are the key arguments for and against CSR? Against CSR

Classical View

For CSR Stakeholder Perspective

22-09-14 Session 3: Stakeholder Perspective on CSR 2

Classical View

Two perspectives: Pure profit-making view: Constrained profit making view

Pure profit-making view (Carr 1968) Business has lower standard of ethics than society

Some degree of dishonesty is acceptable Deception is part of a strategy to be successful in business.

Company has legal right to shape its strategy No social responsibility (other than following the law).


Classical View Constrained Profit-making View (Milton Friedman

1970) Purpose of business is to maximize profits /wealth for

shareholders. Conduct business in accordance with the interests of the

owner/shareholders, not divert profit for social responsibility.

Create profits while abiding the rules of the game, acting honestly and in good faith (obey law and be ethical implicit).

Solving social problems should be left to the state. Contemporary debate has paid some attention to

stakeholders


Classical View Classical view is justified on the basis of neo-

classical economic theory: Free market, economic efficiency and profit

maximization. Shareholders own the corporation so, managers cannot

divert resources to further social goals, which cannot be directly related to profits.

Companys role is to produce wealth. Pursuing social responsibility may impact on its performance.

Managers are not equipped to deal with social responsibility. Government and other organizations can.


Classical View Changing perspective - CSR is useful in generating

long-term value for the business. Strategic CSR

the sole objective of business is to maximiseshareholder wealth and that a company should engage in CSR activities only if it allows value to be created.

CSR as strategic investment (a business case).


Stakeholder Perspective on CSR Background Basic Ideas of Stakeholder Perspective

What is stakeholder theory? Who are stakeholders Ethical Aspects of Stakeholder Theory

Practical Implications of Stakeholder Theory for Managers


Background How to translate vague construct of society towards

which the corporations have some responsibility? Something concrete, something that can translate into

management attention and action What exactly are a managers responsibility to this

abstract concept of society? Stakeholder theory helps us to find out pragmatic

answer to what is S in CSR in a given situation R. Edward Freeman

Father of stakeholder theory A managerial tool for strategic management


Basic Ideas What are the Salient Ideas of Stakeholder Theory? (video)

Socially aware view

Beyond shareholders, there are other groups or constituents who are affected by a companys activities and have to be considered in managers' decisions.

A company needs to work with the selected individuals or groups in society in order to fulfill its aims and every one of these stakeholders that may have an influence on the companys goals has to be taken into account.

Companies have social responsibility that requires it to consider the interests of all affected by its actions.

Companys goal is to benefit all stakeholders


Basic Ideas Who are stakeholders (video)

Stakeholders are: groups and individuals who benefit from or are harmed by, and whose rights are violated or respected by, corporate actions (Freeman, 1998)

For example Employees Creditors, Suppliers Customers Communities


Basic Ideas Typologies of Stakeholders

Primary: without whose continuing participation the company cannot

survive

Secondary Those who influence/affect or are influenced/affected by the

corporation, but they are not engaged in transaction with the company or are not essential for its survival

Difficulty in considering some stakeholders: Mute Stakeholder Natural Environment Absent Stakeholder Future generations, potential victims How to address this?


Basic Ideas Ethical aspects of stakeholder theory

Stakeholder theory is a theory of organizational management and ethics.

Individuals or groups who are affected by the company to reach its goal have a legitimate interest in the company.

Nature of stakes and power of influence Corporations are not only strategically rational but

morally right in considering the interests of the stakeholders they affect and are affected by.


Practical Implications Identifies new role for management

Instead of agents of shareholders only, managers have new role of assessing and balancing the interests of all stakeholders of the company. Mapping stakeholders (rational) Identifying influential players in the process (process-level) Managing relationships with diverse groups of stakeholders to

reach the goals (transactional level)

Given rise to new approaches to corporate governance Business Ethics and CSR (Video)


Case Analysis The company XYZ produces health products that are

potentially unsafe products which some time lead toadverse impact on the heath of customers. Thecompany is aware about this. After doing quick cost-benefit analysis, the company has found that thoughcustomers and their families can suffer, it is profitablefor the company to continue with the existing productsand disguise their adverse health impact throughadvertising campaign than improve the quality of itsproduct.

What are the key arguments for and against CSR fromdifferent perspectives on CSR?


Corporate Social Responsibility and DevelopmentIntroductionClassical ViewClassical View Classical View Classical ViewStakeholder Perspective on CSRBackgroundBasic IdeasBasic IdeasBasic Ideas Basic IdeasPractical ImplicationsCase Analysis

session 3 stakeholder perspective & csr 22-09-14

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