7 - Social Environment

Question 1

what is corporate social responsibility?

Answer 1

• companies have social, not just economic, responsibilities
• companies should self regulate
• to have a ‘triple bottom line’ - profit, planet, people
• supported by ‘stakeholder theory

CRS aims to make sure businesses conduct activities ethically

Question 2

what are examples of ways in which companies can express CRS?

Answer 2

through their waste and pollution reduction and by implementing social and education services

• Walmarts Go Green to reeve environmental impact
• Nata Nappies ‘compostable and biodegradable’

Question 3

who created the stakeholder theory?

Answer 3

R. Edward Freeman 1984

Question 4

what is the stakeholder theory?

Answer 4

suggests that shareholders are merely one of many stakeholders in a company

stakeholder ecosystem involves anyone invested and involved in or affected by the company

Question 5

qaccording to stakeholder theory where does a companies success lie?

Answer 5

in satisfying all stakeholders, not just those who might profit

Question 6

what is the opposing theory to the stakeholder theory?

Answer 6

Milton Friedman
Shareholder theory

companies are compelled to make a profit to satisfy shareholders

in capitalism the only stakeholders a company should care about are shareholders

Question 7

how are Coca cola a CRS?

Answer 7

coca cola claim that CRS is ‘in our DNA’

• give back 1% of operating income to various initiatives and causes
• 2014 gave back over $100 mil (arabia)
• became water neutral in 2014
• been working with WWF since 2007 to improve water efficient by 25% and source key ingredients sustaibanily

Question 8

what is a fiduciary?

Answer 8

is one who acts legally on behalf to another

Question 9

what are the duties of fiduciaries?

Answer 9

• have a duty of care and a duty of loyalty to shareholders
• do not have a duty to maximise profits epecially short term
  (many still wont to the need to deliver financial returns)
• new concept is enlightened shareholder value introduced to clarify wide ranging duties of fiduciraries

Question 10

why is Fid duty a tricky subject?

Answer 10

in UK under s. 172 companies act Fid duty to the ‘corporation’ which can be interpreted to members of corporation

US are more open about the subject and Australia looking to impose fid duties towards sustainability

certain theories also offer light upon the subject such as Freeman and Shareholder value

Question 11

although fid duties give clear responsibilities why is it hard in practice to act in interest of every stakeholder?

Answer 11

shareholders who invest can pressurise CEOs to maximise short term profits, bug investors who don’t receive returns fast may threaten to leave

CEO and director bonuses are usually linked to stock price

Question 12

what did Milton Friedman say in regards to Fid duties and CRS not being done in businesses?

Answer 12

‘there is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits’

Question 13

what is shareholder primacy?

Answer 13

a theory is corporate governance holding that shareholder interest should be assigned first priority relative to all other corporate stakeholders

Question 14

what is an example of shareholder primacy?

Answer 14

Ford Vs. Dodge

Question 15

what happened with the Ford Vs. Dodge court case?

Answer 15

• Michigan Supreme Court had to decide whether corporation owe duty to shareH to maximise profits or whether they can add value to stakeH at the expense of shareH
• Henry Ford founder and majority shareholder wanted to stop special dividends and increase wages, in order to spread the benefit of his company further
• Court decided that Ford could not lower consumer prices and raise employee strategies, no CRS, business about making money not a charity

Question 16

what did the Dogde and Ford case show?

Answer 16

• that the financial bottom line is the primary pursuit of corporations

Question 17

how can governments be linked to CRS?

Answer 17

if you get rid of the sharholder theory the main aim of business is profit

more profit = more tax

tax = gov can invest

so do we want CRS programmes or government investing?

Question 18

what happened in 2015?

Answer 18

the VW emissions scandal

Question 19

how many people die per year due to emissions in the EU?

Answer 19

400,000

Question 20

what did VW do?

Answer 20

secretly programmed their cars to reduce NOx emissions when being tested in laboratories but increase by 40 times when on the road

Question 21

what is important about nitrous oxide?

Answer 21

has 289 times the atmospheric heat trapping ability of Co2

Question 22

what were the conscquneces of VW scandal?

Answer 22

• fines of $4bn
• stock fell by 30%
• around 1 million cars with software have emitted 100,000 additional NOx

Question 23

what is the complicity in the EU when trying to reduce the emissions cars produce?

Answer 23

• Germany, UK and france have all turned a blind eye to emissions fraud since 2007 to boost sales
• car hosting nations lobby EU for loop holes, Merkel said that the EU plan to limit emissions wasn’t possible as diff models should have diff levels
• Deisel producers employ 184 lobbysisr in Brussels who spent over $18 euros in 2018 on lobbying the EU

Question 24

what did Milton Friedman say in regards to the Ford Pinto

Answer 24

Friedman said that pinto was not morally wrong but had to question economic calculation

he stated that no human life is of infinite value, you wouldn’t spend $1billion to save a human as it would soak up resources needed for other lives

Question 25

what was the Ford Pinto?

Answer 25

sold between 1971 and 1980
it was subcompact and because of its design the gas tank would explode during rear end collision

1000 victims

Question 26

why should we use CRS?

Answer 26

• avoid government controls, can create factory towns which may have better education etc
• improve image and marketing
• maximise profits

Question 27

what are the main critiques of CRS?

Answer 27

• warps Ethical prioritise that should be left to the gov
• encourages deception (VW)
• encourages corporate takeover, gov loosing power
• focuses on visible and trivial not invisible and important

Question 28

how does CRS lead to deception?

Answer 28

through greenwashing

making a misleading claim about enviro benefits of a product

Question 29

what is an example of greenwashing

Answer 29

• Exxonmobil who said they were reducing GH but were increasing
• US clear skies initiate actuations;y weakens air pollution laws

Question 30

why can coca cola be criticised as a CRS?

Answer 30

the advertisement of dirty water is used in order to sell more coke, leading to more water deprivation but also health impacts

no actual measurement is taken in regards to being water neutral