L1. Concepts and Theories

Question 1

Sustainability =

Answer 1

“Corporate Social Responsibility”, “Corporate Citizenship”, “Stakeholder Theory”, “Creating Shared Value”…

Question 2

‘common concept’ definition

Answer 2

Companies have wider responsibilities to society than simply providing customers with great products, creating jobs, paying taxes, or making profits for shareholders.

Question 3

CSR

Answer 3

a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis
(European Commission)
mostly an ethical concept, focus on expectations of society

Question 4

Shareholder value approach (Friedman)

Answer 4

The only one social responsibility of business is to increase profits

Question 5

Shareholder value approach (Friedman)

Reasons:

Answer 5

1. Only human beings have a moral responsibility for their actions
2. It is managers’ responsibility to act solely in the interests of shareholders
3. Social issues are the proper province of the state rather than corporate managers

Question 6

1. Only human beings have a moral responsibility for their actions (Moral responsibilities)
   Argument

Answer 6

Moral responsibilities related to business fall on individual managers, not the company itself. “Ought implies can” principle: moral responsibilities are connected to what an agent can actually do; and managers can do much less than companies.

Question 7

1. Only human beings have a moral responsibility for their actions (Social responsibilities)
   Counter-Arguments

Answer 7

i. Legal identity: companies can enter contracts with individuals and have the same rights and obligations as individuals.
ii. Agency: companies decide and act independent of their individual members, meaning that these decisions and actions cannot be reduced to those of these individuals.
iii. Organizational culture: companies have a set of beliefs and values that set out right or wrong within the firm. Culture may drive actual decisions.
iv. Functional identity: companies often present themselves to customers and other stakeholders as if they were people.

Question 8

2. It is managers’ responsibility to act solely in the interests of shareholders (Social responsibilities) Argument

Answer 8

Shareholders hire managers to make profits (for financial responsibility).

Question 9

2. It is managers’ responsibility to act solely in the interests of shareholders (Social responsibilities)
   Counter-Arguments

Answer 9

Companies have social responsibilities:

i. Business reasons: Companies takes on social responsibilities because doing so promotes making profits (“enlightened self-interest”, or “business case for CSR”)
i. Moral reasons: social responsibility is part of the duties of a company, irrespective of the financial benefits a company may draw from it.

Question 10

Business reasons +issue

Answer 10

• enhance revenue, by attracting customers, employees and other stakeholders
• reduce costs, by cutting out inefficiencies
• help the company manage risk and uncertainty, by avoiding accidents and government intervention
• preserve a company’s license to operate, granted by communities, the government, the public in general

However, problem of profitability of irresponsibility (e.g. tax avoidance).

Question 11

Moral reasons +issue

Answer 11

• Externalities: companies cannot escape responsibility for the huge impacts they have on society
• Power: companies are powerful (“with great power comes great responsibility”)
• Dependency: companies rely on stakeholders, so they have a duty to take into account their interests and goals

However, problem of unprofitability of responsibility, morality dependant on local cultures.

Question 12

Carroll’s Pyramid of CSR

Answer 12

1. Economic responsibilities (profitability), required by society
2. Legal responsibilities, required by society
3. Ethical responsibilities, expected by society
   Companies should do what is right even when they are not compelled by law.
   - Negative examples: Any infringement of the spirit of the law or abuse of corporate power.
   - Positive examples: Going beyond the law. See Facebook maternity leave.
4. Philanthropic responsibilities, merely desired by society

Question 13

Issues with Carroll’s Pyramid

Answer 13

• Possible conflicts between different layers

- Large international variation in definition of economic, legal, ethical, and philanthropic responsibilities

Question 14

Other CSR concepts

Answer 14

• Explicit vs. Implicit CSR

- Bolted-on (traditional) vs. built-in (contemporary) CSR