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the corporation is an artificial legal personauthorized to act as an individual on behalfof its members but legally distinct from them
to sue & be suedto acquire property
to employ people
to sign contracts
to make by-laws
transferable sharesowners change w-oaffecting legal existence
limited liability
of shareholders, officers
delegated managementcontrol by elected board
artificialperson
legallydistinct
investor ownershipownership by shareholders
perpetual successioncontinued existence even ifshareholders withdraw
definition
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defining
CorporateSocialResponsibility
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defining
CorporateSocialResponsibility
Quick Recap
Defining CSR
Key Concepts
CSR Evolution
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Why is CSR a pressing concern?
almost everything is relatedbehavior of a business firms affects its environment
enormous impact of business on society
business firms inflict great harm if they behave irresponsibly
systems theory
stakeholders
business-society interdependence
varying interests, modes of influence
the modern business corporation
performance expectations gap
managing public issues (stakeholder concerns)
Quick Recap
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doing business right
accountability for any actions
affecting others
blending multiple responsibilities without
neglecting any of them
obligation to safeguard societys welfare
while doing business
balance between profits cost (of profit)
doing the right thing...doing business right
Dr. Bernardo Villegas
the corporations accountability for any actions that affect
people, their communities, and their environmentPost, Lawrence, and Weber, 2002
blending a firms multiple economic, legal, & social responsibilities intoa comprehensive corporate strategy without losing sight of any of its
obligations
an organizations obligation to conduct business in a way that
safeguards the welfare of society while pursuing its own interestsHolt & Wigginton, 2002
balancing the benefits firms gain against the cost of achieving them
Defining CSR
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Evolution of CSR
Charity
1920s Original Notion of CSR
based on Philanthropy & Stewardship
Stewardship
universal principle:the wealthy should give to the poor
corporate philanthropy emerged 1920sin response to inadequacies of business practice &individual philanthropy
as stewards or trustees of public interest, business firmsshould always act for the welfare of society
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iron law of
social responsibility
in the long run, those whodont use power in a responsible waywill inevitably lose it
with great power comes
great responsibility
Key Concept
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Consumer Movement
Environmentalism
Vietnam War
Civil Rights (MLK)
Feminism & Gender Equality
Work Safety
Toxic Waste & Nuclear Energy
multiple issues triggered shift towards
Corporate Social Responsiveness&
Corporate Citizenship
1960s-1970sCorporate Social Responsivenessemphasis on Systematic Responses to Public Issues
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Corporate SocialResponsiveness
1960s & 1970s
CSR doesnt just depend on managementsgenerosity (philanthropy) and awareness of
their responsibility as public trustees
BUT lies in the processes a firm establishes to
systematically address social demands and in the
actions the firm takes which affect its stakeholdersPost, Lawrence, Weber
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enlightened self-interestcompromise between two extremes
purely profit-driven firm
without socialconscience
unprofitablefirm
too socially-responsible
business firmdriven by
enlightenedself-interest
balance betweenprofit & social responsibilityor better,profitabilitybecause ofsocial responsibility
very often, CSR a question of
prioritizing long-term gains over short-term profit
Key Concept
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Going Beyond the Legal Minimum
laws reflect public expectations &
therefore set the minimum
standard for social responsibility
but theres a lag:
laws always a step behind
public expectationsconstantly change
but laws change much later
hence, good CSRrequires going
beyond the legalminimum
Key Concept
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CorporateCitizenship
1990s
involves proactively addressing social issues, building
(collaborative) stakeholder partnerships, discoveringbusiness opportunities through social strategic goals,and transforming a concern for financial performanceinto a vision for corporate financial and socialperformance Post, Lawrence, Weber
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common elements
responsibility to all stakeholdersnot just stockholders
balance in multiple obligationsnot just profit
enlightened self-interest for long-term successhence focus on long-term gains, not short-term profits
emphasis on exceeding minimum standards
going beyond legal, social, economic minimum
defining
Corporate Social Responsibility
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Evolution of CSR
1920sOriginal Notion of CSRbased on Philanthropy & Stewardship
1960s-1970sCorporate Social Responsivenessemphasis on Systematic Responses to Public Issues
1990sCorporate Citizenshipthe firm as a Good Citizen of the Community
Three Waves
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originalcsr
corporate socialresponsiveness
corporatecitizenship
origin 1920s 1960s 1990s
basischarity &stewardship
multiple demands bystakeholder groups
collaborativepartnerships withstakeholders
focusmoral obligationsto society at large
practical responsesto stakeholders
discovering businessopportunities throughpartnerships
action
philanthropy,stewardship ofpublic welfare
social programs& activities
managing corporatesocial & financialperformance
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originalnotion of csr
corporate socialresponsiveness
corporatecitizenship
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4th Generation CSRCSR 4Gwidespread andvoluntary adoptionof CSR standards
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Davenports Principlesof Corporate Citizenship
Triple-Bottom LineModel of Sustainability
WB-IMF CSR Categories
UN Global CompactsTen Principles
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Human Rights
1 support and respect human rights2 not be complicit in human rights abuses
Labour Standards3 support freedom of association and collective bargaining4 eliminate all forms of forced and compulsory labour5 effectively abolish child labour6 eliminate discrimination in employment and occupation
Ten Principles of the UN Global Compact
Environment7 support a precautionary approach to environmental challenges
8 undertake initiatives for greater environmental responsibility9 encourage use of environmentally friendly technologies
Anti-Corruption10 work against all forms of corruption, including extortion and bribery
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CSR Categories World Bank/IFC
CSR Economic1. employment & human resource development
2. procurement & supply chain management3. technology transfer & intellectual property rights4. monetary flows to the public sector
CSR Environmental5. environmentally safe
production, products & services6. environmental impact
assessment & management7. environmental reporting &
management systems
CSR Social13. employee health & safety14. labor standards15. corruption & bribery16. human rights17. violence & conflict18. social impact assessment
& management
19. community & stakeholderengagement
20. charitable giving21. social investment22. social reporting &
management systems
CSR Corporate Governance8. rights & treatment of shareholders9. governance policies & business principles10. responsibilities of the board11. information disclosure & reporting12. customer end-user care
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Principles of Corporate CitizenshipKimberly Davenport, 1998
Ethical Business Behavior1. Engage in fair and honest business practices2. Set high standards for employee behavior3. Exercise ethical oversight of executive and board levels
Stakeholder Commitment
4.
Manage the company for the benefit of all stakeholders5. Initiate and engage stakeholders in genuine dialogue6. Value and implement dialogue
Community7. Foster a reciprocal relationship with the community8. Invest in the community where the firm operates
Consumers9. Respect the rights of consumers10. Offer quality products and services11. Provide information that is truthful and useful
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Employees12. Provide a family-friendly work environment13. Engage in responsible human resource management14. Provide an equitable reward and wage system for employees15. Engage in open and flexible communication with employees16. Invest in employee development
Investors17. Strive for a competitive return on investment
Suppliers18. Engage in fair trading practices with suppliers
Environmental Commitment19. Demonstrate a commitment to the environment20. Demonstrate a commitment to sustainable development
Principles of Corporate CitizenshipKimberly Davenport, 1998
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Triple Bottom LineTBL 3BL 3Ps
Peoplecare for human capital
Planetsustainable environmental practices
Profiteconomic gains
People, Planet & Profit
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Triple Bottom LineTBL 3BL 3Ps People, Planet & Profit
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Malden Mills & Aaron Feuerstein
Aaron Feuerstein, CEOFeuerstein owned majority share
Malden Mills Industries (f 1906)
a small privately-owned firm
employs 3,000from Methuen and Lawrence,
small, economically depressed towns in Massachussets
Malden Mills burned down
11 December 1995, Feuersteins birthday
factory boiler explodes,
burns down 3 century-old buildings in the facility,
entire manufacturing capacity destroyed
known as only producer of Polartec & Polarfleece
insulating material used by L.L. Bean, Lands End, Eddie
Bauer, the North Face, Patagonia
Critical Incident
Background
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Malden Mills & Aaron Feuerstein
Dilemma
3 options
close factory, walk awaywith US $300M fire insurance
sell business to his industry rivalswilling to buy him out
rebuild & reopen factory,maintain workforce
What would you have done?
What did A Feuerstein do?rebuild & reopen factory, maintain workforce
kept all 3,000 employees on payrollfor 6 months (cost of US $25M)
to rebuild a new factorybigger, modern, more environmentally & worker-friendly factory
borrowed US $100M more on top of US $300M
f h
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Malden Mills & Aaron Feuerstein aftermath
overwhelmingpublic response
donations pour in
from local banks, citizens
clients promise to wait
rather than switch
+
initial results
positive4 months later, most
employees back at work,
remainder given financial
assistance
8 months later, 3 of 4production lines running,
only 500 out of work
+
a feuerstein becomes a publichero, admired for his courageousexample
+
because of 1998 slump in the apparel
industry, firm forced to make many lay-
offs, accumulated US $120M in debt
financialdifficulties
-
under new management, a turn-
around in 1999, but large debt &
poor sales still forced the company
to declare bankruptcy in 2001
now+ under new managementfinancial performance improved
with overseas and military contracts
but A Feuersteinno longer in the picture-
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Read & Comment on Case 3Malden Mills & Aaron Feuerstein
For Online Discussion
Q:Did Aaron Feuerstein
practice good CSR?
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