10 - Socially Responsible Business

Question 1

How can companies contribute to a good society through good practices?

Answer 1

1. Well-founded societal mission statements

• What contributions to society does the company want to accomplish?
• Which bad practices are not acceptable for the company?
• Derive values as the basis of the company from the mission statement

2. Identification of relevant topic in exchange with the stakeholders
3. Orientation towards general standards
4. Strategic implementation in all departments of the company

Question 2

Stakeholders

Answer 2

“any group or individual who can affect or is affected by the achievement of the organization’s objective”

Question 3

Corporate Social Responsibility

Answer 3

A “firms” consideration of, and response to, issues beyond the narrow economic, technical and legal requirements of the firm to accomplish social benefits argon with the traditional economic gains which the firm seeks.

Question 4

Triple Bottom Line

Answer 4

The economic, social and environmental performance that simultaneously satisfies the demands of all stakeholder groups

Question 5

Sustainability

Answer 5

The ability to meet the needs of the present without compromising the ability of future generations to meet their needs around the world.

Question 6

Primary Stakeholder groups

Answer 6

The constituents on which the firm relies for its continuous survival and prosperity

Question 7

Secondary Stakeholder groups

Answer 7

Those who influence or affect, or are influenced or affected by, the corporation, but are not engaged in transactions with the corporation and are not essential for its survival.

Question 8

Non-governmental organizations (NGOs)

Answer 8

Organizations, such as environmentalists, human rights activists and consumer groups that are not affiliated with governments.

Question 9

Stakeholder Analysis

Answer 9

1. Identifying all stakeholders
2. Documenting stakeholders needs
3. Assessing and analyzing stakeholders interest/influence
4. Managing stakeholders expectations
5. Taking actions
6. Reviewing status & repeat.

Question 10

Primary stakeholders examples

Answer 10

• Employees
• Shareholders
• Customers
• Suppliers

Question 11

Secondary stakeholder examples

Answer 11

• Trade Unions
• Social Groups
• Industry associations
• Environmental groups

Question 12

Why do shareholders matter?
Instrumental View

Answer 12

A view that treating stakeholders may indirectly help financial performance

Question 13

Why do shareholders matter?
Normative View

Answer 13

A view that firms ought to be self-motivated to “do it right” because they have societal obligations

Question 14

Why do shareholders matter?
Shared value creation

Answer 14

An approach to CSR that focuses on activities that are good for both the firm and its stakeholders

Question 15

Pressures on MNE’s to lower standards

Answer 15

• Lowering costs by standards arbitrage, i.e. produce where regulations imposes least costs
• Using the heat of relocation to prevent governments from raising legal requirements

Question 16

Pressures on MNE’s to raise standards

Answer 16

• Closer monitoring by stakeholders at home and abroad
• Scale advantages of common practices and standards throughout the organization
• Opportunities for first mover advantages in new technologies and practices
• Lower risk of catastrophic disruptions

Question 17

Labour standards

Answer 17

Rules for the employment of laborers including working hours, minimum pay, union representation and child labour

Question 18

Footloose plants

Answer 18

Plants that can easily be relocated

Question 19

Poor Working Conditions

Answer 19

The misereable working conditions in some parts of the world are periodically highlighted in news reports and scholarly studies

Question 20

Standards of Engagement

Answer 20

• In Europe - many consumers - and NGOs expext that their shoes and their clothes are made by people being paid and treated fairly. This raises two questions:
  
  • Are MNE’s responsible for what happens in other firms, and
  • How can they be sure what actually happens in a sub-suppliers plant?
• MNE’s have standards of engagement that they impose on suppliers.
  
  • These establish minimum standards for working hours, age of workers, health and safety, wages and other aspects of operating a manufacturing plant
  • With these standards come monitoring and enforcement regimens that should help suppliers achieve higher standarsd, while - after appropriate warning - discontinuing relationships with non-compliant suppliers
• This allows MNEs to shift from a focus on compliance with the standards of engagement to a commitment approach that involves joint problem solving, informaiton exchange and the diffusion of best practices

Question 21

Debates and Extensions

Is CSR good for financial performance?

Answer 21

• Some studies indeed report a positive relationship, others find a negative relationship or no relationship
• Consistent CSR policies over long time periods seem to have a positive effect, while short-term or temporary initiatives do not

Question 22

Debates and Extensions

Is CSR good for society?

Answer 22

• Critics describe CSR activity as “window dressing” and assert that the firms only do what is good for themselves i.e. shareholders
• NGOs, journalists and politicians have asserted that firms also have other obligations to their stakeholders

Question 23

Debates and Extensions

Local norms versus hypernorms

Answer 23

Hypernorms are norms considered valid anywhere in the world

Question 24

Managing ethics overseas:

Three “middle of the road” approaches

Answer 24

• Respect for human dignity
• Respect for universal basic rights
• Good citizenship in the host society, respecting their institutional context