Lecture_1-_Is_Corporate_Social_Responsibility_an_Oxymoron

8/7/2019 Lecture_1-_Is_Corporate_Social_Responsibility_an_Oxymoron

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GLOBAL CITIZENSHIP

CORPORATE SOCIAL

RESPONSIBILITY

&


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Why do you thinkyou are

required to take this course?


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CSRIs the term Corporate Social

Responsibility an Oxymoron?


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OxymoronA figure of speech that combines two usually contradictoryterms in a compressed paradox, as in the word bittersweetor

the phrase living death.Oxymoronic phrases, like Milton's darkness visible, wereespecially cultivated in 16th and 17th century poetry


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What does CSR Mean?

Integrating the interests of stakeholders intothe firms business policies and actions.

Aligning business operations with social

values.

Embracing two main conceptsaccountability

and transparency

Focusing on the social, environmental and

financial success of a company the Triple

Bottom Line.


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Global Corporate

Citizenship?

A moral and ethical disposition whichguides a firms understanding of local and

global contexts- and their responsibilities

within the different communitiesin which

they do business


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Where do we begin when

thinking about CSR? Who decides what is Socially Responsible?

The board of directors?

The C EO?

The management team? The stockholders/investors?

How does CSR differ from philanthropy?

Is compliance with a governments laws sufficient?

F

or multinationals, which laws should be followed? Local,Regional, National orWTO, etc?

Does a corporation owe a duty to society?


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Where do we begin when

thinking about CSR?

Doeshow the corporation treats*its

employees tell us anything about a

corporations values?

*Compensates, provides benefits, working environment, etc.


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Social good comes about

automatically when companiesmake a profit!

- Milton Friedman, Professor and dominant force in the

establishment of the University of the Chicago Boys,internationally influential economists.


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Basic Assumptions

Founders tend to establish the fundamental valuesystem for their corporations:

Johnson and Johnson (The Johnson Brothers) IBM (Watson)

Hewlett Packard (Hewlett and Packard) How were these value systems communicated

throughout the organization?

The value that these organizations placed theiremployees. This is more than extolling the notion that

People are our most important asset then you hear How many are laid off, downsized, reduced in benefits, offered

early retirement.


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A Question?How much is enough profit?


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How muchis enough profit?

Theoretically there is neverenough.

It is not that profits are good or bad:

Return to shareholders via dividends

Share with employees

Give to high level executives

Reinvest in the company

Buy back shares

Create foundations for good works

The recent sub-prime collapse is just one example of unsustainable

and irrational exuberance a la: Alan Greenspan There have been bubbles long before the first corporationDutch

Tulips, silkworms, gold, diamonds, Dot com and on and on!


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To achieve unrealistic short

term profits corporations must:

Downsize reduce the number of employees

Cut costs

Raise prices

Introduce new products

Forego needed maintenance and repairs

Reduce investment in research and

development


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In 2006, McKinsey conducted a

global survey of business executives

84% of the executives responding said

that profitability does NOT automaticallyenhance the public good


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Was Professor Freidman wrong?


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Employees

Stockholders

Society-Government

-Public in general

- the Community

In a perfect

capitalist world

Perfect equilibrium controlled by the

invisible hand of, long dead, Adam Smith!


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employees

Stockholders

SocietyGovernment

Public in

general the

Community

In the so-calledFree Market system, the assumption is that Market forces will act to

regulate corporate behavior so that all stakeholders are protected and considered

FREE MARKET


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The Power ofWall Street and

Gordon Gekko! Greed is good! Stockholder interests are paramount

Executives inflate the importance of their contributions

Employees are considered primarily as an expense

Short term profits control decisions and the allocation ofresources

Employees and employers have equal power indetermining their conditions of employment If you dont like what is happening, then you can find somewhere

else to work If you are no longer needed you can be surplussed with

impunity

Unions are viewed as destabilizing agents that interferewith the normal operation of the free market.


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Employees

Stockholders

Society-Government

-Public in general

- the Community

Social Capitalist Model*

*Generally EU, Nordic Countries, Great Britain, Chile, Singapore


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Social Capitalist Model

The free market concept is not viewed as valid

Corporate behavior is implicitly suspect and thereforemust be tightly regulated

Laws are enacted to protect employees from capriciousemployers

Unions are viewed as the legitimate representatives ofthe workers and are mandated often required to be on

the boards of directors.


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Social Capitalist Model continued

Voluntary compliance never works! Therefore there are

governmentally established mechanisms:

Laws, regulations, enforcement and oversight of all

financial and profit-making institutions and agencies


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Employees

Family Owned*

Society

-Government

-Public in general

- the Community

Highly dependent

on the perspective

of the owners

However they too have to balance their

operations with society

Have a very tough

challenge because of

legacy considerations.The patronis usually

focused onbuilding

something for posterity

and his familyhonor.

- Tata

- Barcardi

- Ferragamo

- Paed Group

- Heinz,- Campbells

- Hershey

- Parmalat-TheTanzis


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Family Owned Model

Generally a highly entrepreneurial, risk taking, visionary founder

who establishes and builds the family business.

Businesses are not necessarily related but become part of a

empire:

Bronfman Family (Seagram Company) business dynasty

Henry Ford, Henry Ford II, William Clay Ford

The Tata Group multinational conglomerate based in Mumbai has interests in

steel, automobiles, IT, communication, power, tea,, consulting and hotels.

Carlos Slim Helu (Telmex) plus educational services, and healthcare

The Family Business begins to exert significant influence on the

government either thru corruption (bribes), lobbying, or other ways.

Depending on the familys decision the business can be an outstanding

employer (paternalistic) or highly dictatorial, demanding and inhumane.

Management is through Blood Line or marriage.


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Employees

Privately Held

Society

-Government

-Public in general

- the Community

Those not identified with

a family, pension funds

or stockholders are truly

anonymous and areessentially answerable

only to the law and

their investors!

Hedge Funds, Venture

F

unds, Governments,Global Investors

A Growing Trend

Managing Cashis

always a challenge*

* Regardless of the amount!


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Employees

In Totalitarian Governments there are NO

Stockholderstherefore there canbe no CSR.

Society-Government

-Public in general

- the Community

?


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We are going to look at:

Corporations operating under so-called

Free Market Capitalism

Family Owned Businesses

Businesses operating under the Social

Capitalist Model

Privately

Held (non

-public entities)


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Why do you thinkyou are

required to take this course?

Now, are you beginning to get the reason?

Lecture_1-_Is_Corporate_Social_Responsibility_an_Oxymoron

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