Chapter 7. Corporate Social Responsibility: The Concept

Chapter 7 Sections

Summary

• Rather than provide one definition of social responsibility, the chapter identifies the elements found in the majority of definitions. Corporate social responsibility is a reflection of the fact that business and society are interwoven and can be expressed in terms of three principles: legitimacy, public responsibility, and managerial discretion. The principle of legitimacy refers to societys granting of legitimacy and authority to business, along with business appropriate use of that power; the principle of public responsibility means business is responsible for outcomes related to its areas of involvement with society; and the principle of managerial discretion refers to managers as moral actors who are obligated to exercise such discretion as is available to them to achieve socially responsible outcomes. (LO 7.1)

• The debate as to whether social responsibility is an appropriate concept is summarized in arguments for and against corporate social involvement. Arguments for and against corporate social involvement are provided and supported with quotes from recent CSR reports and Milton Friedman. (LO 7.2)

• These arguments are reflected in Klonoskis summary of social responsibility theories, categorized according to three alternative views of the corporation as amoral, personal, and social. The arguments and theories are presented not to provide a definitive answer to the question of corporate social responsibility but to review the background to the debate. In fact, the debate has not been resolved to date, as evidenced by the critique of CSR in a leading business magazine. (LO 7.3)

• A pyramid of corporate social responsibilities is presented, based on economic, legal, ethical, and philanthropic responsibilities. A hierarchy of responsibilities exists; economic and legal obligations are primary and basic. In recent years, the ethical and philanthropic responsibilities have received more attention. (LO 7.4)

• Social responsibility has evolved and today other terminology is being used to describe the concept, including corporate sustainability, reputation management, social impact management, triple bottom line, and corporate citizenship. Definitions are provided so that a distinction can be made among the terms. (LO 7.5)

• Corporate citizenship is another term used interchangeably with CSR. It is an inclusive term to capture the economic, social, and environmental responsibilities of the corporation and relies on stakeholder theory. As with CSR various interpretations are given to the term, and it is argued that the term business citizenship would be even more inclusive as it is global or universal in scope. (LO 7.6)

• The VBA model is an attempt at unifying and integrating the various frameworks within CSR around three core concepts: value, balance, and accountability. This model reduces the confusion resulting from the various terminology used in the business and society and CSR field. (LO 7.7)

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Key Terms

• Corporate social responsibility (CSR)

• Corporate sustainability (CS)

• Reputation management

• Social impact management

• Triple-E (economic, ethical, and environmental) bottom line

• Corporate citizenship

• Business citizenship

Critical Thinking and Discussion Questions

1. Why should corporations and their management be concerned with corporate social responsibility?

2. Distinguish among Woods three principles of corporate responsibility: legitimacy, public responsibility, and managerial discretion.

3. Why do some corporations and their management oppose corporate social responsibility?

4. Is there any legitimacy to the argument put forth by Milton Friedman and The Economists article on corporate social responsibility?

5. Social responsibility is interpreted in many ways. State your understanding of corporate social responsibility.

6. List the ten stakeholders you think have the greatest influence on a corporations social responsibility.

7. Can the corporation have a conscience?

8. Do you agree that economic responsibilities are a component of corporate social responsibility?

9. What does a corporation have to do to have a good reputation?

10. Is the corporation a citizen of society?

Cases

7.1 WOULD YOU LIKE TO DONATE ...?

Suzanne Valentine had been noticing an increasing number of businesses asking their customers to donate to charities when they make a purchase, a practice known as checkout charity or point of sale fundraising. One example was the Shoppers Drug Mart SHOPPERS LOVE. YOU campaign, which encourages customers to purchase a leaf for $1, a butterfly for $5, an apple for $10 or a bird for $100. All proceeds go directly to the womens health organizations chosen by each Associate-owner, best reflecting local community needs. Over the past five years, $57 million has been contributed to local, regional and national women's health initiatives.

Many other corporations have similar programs including Indigo, Loblaw, Walmart, and McDonalds. Even Governor General David Johnstons My Giving Moment encourages participating in such programs.

Suzanne was directly affected by this type of corporate social responsibility fundraising. She worked part-time as a cashier at her neighbourhood grocery store where the owner established a donation scheme, Pennies for Pets. The owner was a strong supporter of animal causes and the donations were to support the local animal shelter. All cashiers were instructed to ask customers if they wanted to donate $1 or $2 to the shelter.

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Suzanne followed instructions but she had several reservations about the scheme. She felt awkward asking customers for the donation, particularly those who looked like they could not afford it. Some customers might be intimidated by the request and she did not believe that they should be put on the spot to say yes or no. Some customers may not wish to support this particular charity. As well, she was not convinced that the particular shelter deserved funding, as there had been some articles in the media about its poor management and treatment of animals. Lastly, she was not sure how much of the money collected was forwarded to the charity, and whether or not the owner matched the customer donations.

Questions

1. What are the ethical implications in this example of corporate social responsibility?

2. What information should the company provide to Suzanne and its customers?

3. Carroll has identified four corporate social responsibilities: economic, legal, ethical, and philanthropic. Which responsibilities are involved in Pennies for Pets or similar fundraising schemes?

4. How should Suzanne resolve her personal ethical dilemma?

Sources: Shoppers Drug Mart Inc., Growing Women's Health, accessed July 19, 2016, http://www.shoppersloveyou.ca/events/growing-womens-health-1026; and The Governor General of Canada, His Excellency the Right Honourable David Johnston, accessed July 19, 2016, http://www.gg.ca/document.aspx?id=15397.

7.2 THE TD GRADE ONE BOOK GIVEAWAY

The TD Bank Group (TD) supports several initiatives to encourage literacy and reading in Canada. TD believes that literacy is a key skill for the future. In 2000, TD established the Grade One Book Giveaway program after consulting ministries of education, school boards, and library organizations. The program is organized by the Canadian Childrens Book Centre (CCBC), a not-for-profit organization dedicated to the encouraging, promoting and supporting reading, writing and illustrating of Canadian books for young readers. CCBC focuses on books published in Canada and it is committed to raising awareness and the quality and variety of Canadian books for young readers.

The program is the largest free-book program to school aged children in Canada. About 500,000 Grade 1 English and French students receive the book compliments of TD. They can keep the book and take it home to read with their parents and caregivers. The book distribution is supported by an author/illustrator reading tour across Canada. The books printing and distribution costs are paid for by the bank and their logo appears on the front cover. Inside there is short letter from TDs CEO.

There has been some opposition to the program. In 2013, some school boards claimed that the books are corporate advertising and should not be distributed in the classroom. The boards claimed that it forces students to be exposed to advertising. As a result, the free book was not distributed in the classrooms that year but was made available at local public libraries in the area.

Defenders of the program state that the book has nothing to do with banking. Many Grade 1 students do not even know the letters T and D and the logo means nothing. The defenders suggest that the school boards have lost sight of their mission, that is, literacy. They state that there are all kinds of issues in the educational system and this is not one worthy of discussion.

Questions

1. Will the program promote a love of reading and a passion for books?

2. In whose best interests are the books being distributed?

3. Is TD being purely altruistic?

4. Are there other corporate programs there this issue exists?