Corporate Political Activity Flashcards
Basic Premise of CSR
The basic premise of corporate social responsibility is that business and society are interwoven rather than distinct entities.
3 Perspectives of CSR
- Neo-Classical Economics Perspectives
- A moral approach linked to social expectations
- Enlightened self-interest or strategic approach
Neo Classical Economics
Considers responsibilities towards shareholders foremost. Social responsibility is limited to the creation of employment and paying taxes. “I’m only complying with the local laws, I’m prioritizing money.”
A moral approach linked to social expectations
Business is a part of society and has a social contract to meet its expectations. The business earns legitimacy by fulfilling the expectations of its stakeholders.
3 Theories Supporting A moral approach linked to social expectations
Stakeholder Theory
A firm should create value for all stakeholders and not limited to its shareholders. They should do a stakeholder analysis, understand their needs and expectations, and communicate and interact with stakeholder groups.
Social Contract Theory
Businesses ought to act in a responsible manner because it is part of how society implicitly expects businesses to operate. Firms ‘should’ use their power and resources in a positive way. They can, so they should
Legitimacy Theory
To gain legitimacy, the actions of a firm must be proper and appropriate within the social system of norms, values, beliefs, and definitions. CSR helps firms maintain legitimacy
Enlightened self-interest or strategic approach
It is in the economic interest of the business to do good.
Potential benefits of CSR
Branding benefits = advertise your initiatives
Reputation and legitimacy benefits = consumer loyalty
Capital benefits = These days ESG pays
Risk management benefits = avoid non-market disruptions
Political benefits = voluntarily adopt standards to keep gov out
Employee loyalty = Employees identify more with the firm
How CSR helps MNEs in foreign markets
Do-good CSR is quite effective in gaining legitimacy in foreign countries
Do-no-harm CSR may be counter-productive even with similar resource investment
CSR engagement of MNEs x Distance
decreases with increasing institutional distance
Reasons on why CSR Decreases with distance
Less Willingness - MNE managers may feel less empathetic towards host country stakeholders when they are not able to identify with them. 1
Less Ability – CSR investment in newer and different regulatory, economic, and cultural environments can be more costly and difficult. Return on such investment can be more uncertain.
