Corporate Social Responsibility : 8/30/2009 Xidas, Jabalpur 1 Corporate Social Responsibility “Need of the Hour” By:
Sudhir Kr. Pandey
Sushil Bandict Lakra History : 8/30/2009 Xidas, Jabalpur 2 History After 1960 word CSR has been wide used.
In the eighteenth century Adam Smith expressed the traditional or classical economic model of business. His model suggest that the needs and desires of society could best be met by the unfettered interaction of individuals and organizations in the marketplace.
However, even Smith recognized that the free market did not always perform perfectly and he stated that marketplace participants must act honestly and justly toward each other if the ideals of the free market are to be achieved. History : 8/30/2009 Xidas, Jabalpur 3 History In the late nineteenth century many tycoons practiced a philosophy that came to be called “Social Darwinism” and became greatest philanthropists.
In twentieth century a backlash against the large corporations began to gain momentum. Big business was criticized as being too powerful and for practicing antisocial and anticompetitive practices.
Civil rights movement;
Environmentalism. CSR is… : 8/30/2009 Xidas, Jabalpur 4 CSR is… The World Business Council for Sustainable Development (WBCSD) defines CSR as "The continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the work force and their families as well as of the local community and society at large”.
Mallin (2007)* defines CSR as voluntary actions that a company may take in relation to the management of social, environmental and ethical issues. Mallin (2007) quoting Carroll (1979)# expounds on CSR by explaining that the business has a responsibility to produce goods that it sells at a profit, to abide by legal requirements, to do what is right and fair and to do what might be desired of companies in terms of supporting the local community and making charitable donations. Why CSR? : 8/30/2009 Xidas, Jabalpur 5 Why CSR? Ethics in business has been an issue for academics, practitioners, and governmental regulators for decades, some believe that unethical, immoral, and/or illegal behaviour is widespread in the business world.
Numerous scandals in the late 1990s and early 2000s seemed to add credence to the criticism of business ethics. Eg:-WorldCom, Enron, ImClone, Arthur Andersen, etc. Cont… : 8/30/2009 Xidas, Jabalpur 6 Cont… Due to Scandals firm face the following problems:
huge financial losses,
bankruptcy or dissolution.
prison to some corporate officials,
many employees losing their jobs,
thousands of stockholders losing some or all of their savings invested in the firms. Cont… : 8/30/2009 Xidas, Jabalpur 7 Cont… Hence to improvement in perception of the company among:
Firms started to use CSR activities. Firm’s Motivational factor for CSR : 8/30/2009 Xidas, Jabalpur 8 Firm’s Motivational factor for CSR A/C to KPMG's International Survey of Corporate (Social) Responsibility Reporting 2005, which surveyed more than 1,600 companies worldwide and documented the top ten motivators driving corporations to engage in CSR for competitive reasons, the following emerged:
• Economic considerations
• Ethical considerations
• Innovation and learning
• Employee motivation
• Risk management or risk reduction
• Access to capital or increased shareholder value
• Reputation or brand
• Market position or share
• Strengthened supplier relationships
• Cost savings Justification of CSR : 8/30/2009 Xidas, Jabalpur 9 Justification of CSR The rise of the modern corporation created and continues to creates many social problems. Therefore the corporate world should assume responsibility for addressing the problems.
In the long run it is incorporation’s best interest to assume social responsibilities. It will the increase the chances that they will have a future and reduce the chances of increased governmental regulation.
Large corporation have huge reserves of human and financial capital. They should devote at least some of there resources to addressing social issues. Corporate Governance Vs CSR : 8/30/2009 Xidas, Jabalpur 10 Corporate Governance Vs CSR Robert Reich (2008) is of the opinion that …’’ investors are interested in better corporate governance. But better governance makes a firm more responsive to its investors -- not to its employees, communities, or society as a whole.’’ Contemporary Social Issues & CSR : 8/30/2009 Xidas, Jabalpur 11 Contemporary Social Issues & CSR Environmental Issues;
Global Issues; and
Technology Issues. References : 8/30/2009 Xidas, Jabalpur 12 References * Corporate Governance (second Edition) Christine A.Mallin
# Caroll,A.B (1979) ‘’ A Three –dimensional Conceptual Model of corporate Social Performance ‘’Academy of Management Review ,No.4 Slide 13: 8/30/2009 Xidas, Jabalpur 13