10 - Socially Responsible Business Flashcards
How can companies contribute to a good society through good practices?
- 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
- Identification of relevant topic in exchange with the stakeholders
- Orientation towards general standards
- Strategic implementation in all departments of the company
Stakeholders
“any group or individual who can affect or is affected by the achievement of the organization’s objective”
Corporate Social Responsibility
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.
Triple Bottom Line
The economic, social and environmental performance that simultaneously satisfies the demands of all stakeholder groups
Sustainability
The ability to meet the needs of the present without compromising the ability of future generations to meet their needs around the world.
Primary Stakeholder groups
The constituents on which the firm relies for its continuous survival and prosperity
Secondary Stakeholder groups
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.
Non-governmental organizations (NGOs)
Organizations, such as environmentalists, human rights activists and consumer groups that are not affiliated with governments.
Stakeholder Analysis
- Identifying all stakeholders
- Documenting stakeholders needs
- Assessing and analyzing stakeholders interest/influence
- Managing stakeholders expectations
- Taking actions
- Reviewing status & repeat.
Primary stakeholders examples
- Employees
- Shareholders
- Customers
- Suppliers
Secondary stakeholder examples
- Trade Unions
- Social Groups
- Industry associations
- Environmental groups
Why do shareholders matter?
Instrumental View
A view that treating stakeholders may indirectly help financial performance
Why do shareholders matter?
Normative View
A view that firms ought to be self-motivated to “do it right” because they have societal obligations
Why do shareholders matter?
Shared value creation
An approach to CSR that focuses on activities that are good for both the firm and its stakeholders
Pressures on MNE’s to lower standards
- 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
Pressures on MNE’s to raise standards
- 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
Labour standards
Rules for the employment of laborers including working hours, minimum pay, union representation and child labour
Footloose plants
Plants that can easily be relocated
Poor Working Conditions
The misereable working conditions in some parts of the world are periodically highlighted in news reports and scholarly studies
Standards of Engagement
- 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
Debates and Extensions
Is CSR good for financial performance?
- 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
Debates and Extensions
Is CSR good for society?
- 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
Debates and Extensions
Local norms versus hypernorms
Hypernorms are norms considered valid anywhere in the world
Managing ethics overseas:
Three “middle of the road” approaches
- Respect for human dignity
- Respect for universal basic rights
- Good citizenship in the host society, respecting their institutional context
