Corporate Social Responbility Corporate Governance Enterprise and

Corporate Social Responbility & Corporate Governance Enterprise and its Business Environment © Goodfellow Publishers 2016 1

Lecture Overview To develop and understanding of both corporate governance and CSR: - what are they? - why are they important? - how are they implemented? - what do they offer to business organisations? Scrutinise the social contract between business and society (and role of CG and CSR in this Enterprise and its Business Environment © Goodfellow Publishers 2016 2

Trust in business Often consumers buy products without worrying about the impact of that product’s manufacturing upon societies and the environment because they trust businesses to do this for them. Business organisations do (or should do) this through activities such as corporate governance and CSR. When this fails trust can be damaged… Enterprise and its Business Environment © Goodfellow Publishers 2016 3

CSR & Corporate Governance Enterprise and its Business Environment © Goodfellow Publishers 2016 4

Early examples/foundations Enterprise and its Business Environment © Goodfellow Publishers 2016 5

Business and society Businesses are part of societies (locally, nationally, globally) therefore have a duty to act within their expectations and norms. By doing so they are able to operate successfully without harming the societies, communities and environments in which they operate (Sethi, 2003). Enterprise and its Business Environment © Goodfellow Publishers 2016 6

Corporate governance An essential aspect of ensuring confidence in democratic market economies (OECD, 2004). Managing the relationship between management, board members, shareholders and other stakeholders (OECD, 2004). Central to attracting and maintaining investment. Enterprise and its Business Environment © Goodfellow Publishers 7

Corporate governance defined? Corporate governance is the system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders’ role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place. The responsibilities of the board include setting the company’s strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship. The board’s actions are subject to laws, regulations and the shareholders in general meeting. The Cadbury Report (1992, paragraph 2. 5). Enterprise and its Business Environment © Goodfellow Publishers 2016 8

Corporate governance 1. Leadership 2. Effectiveness/capability 3. Accountability/transparency 4. Relations with shareholders 5. Sustainability …but this is an evolving concept and organisations must react to this. Enterprise and its Business Environment © Goodfellow Publishers 2016 9

CSR Difficult to define: - Because it is an evolving concept; - Because there is disagreement amongst businesses, governments, NGOs. Variety of models, measures and frameworks Enterprise and its Business Environment © Goodfellow Publishers 2016 10

CSR’s evolution Early definitions (1950 s-1970 s): broad and heavily rooted in the ‘social’ element ‘Conceptualisations’ and models (1970 s 1980 s): efforts to produce a model of CSR and its institutional role Business case grows (1980 s-): research turned towards analysing the financial impacts and competitive advantages offered. (See Carroll, 1999) Enterprise and its Business Environment © Goodfellow Publishers 2016 11

CSR Defined (1) World Business Council for Sustainable Development (1999): “The continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”. Enterprise and its Business Environment © Goodfellow Publishers 2016 12

CSR Defined (2) “CSR is the commitment of business to contribute to sustainable economic development-working with employees, their families, the local community and society at large to improve the quality of life in ways that are both good for business and good for development” (World Bank, 2008). “CSR is a commitment to improve community well-being through discretionary business practices and contributions of corporate resources”(Kotler & Lee, 2005). “Social responsibility of business is to encompass the economic, legal, ethical and discretionary expectations that society has of organizations at a given point in time” (Carroll, 1979). Enterprise and its Business Environment © Goodfellow Publishers 2016 13

CSR Defined (3) “Corporate social responsibility is essentially a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment. At a time when the European Union endeavours to identify its common values by adopting a Charter of Fundamental Rights, an increasing number of European companies recognise their social responsibility more and more clearly and consider it as part of their identity. This responsibility is expressed towards employees and more generally towards all the stakeholders affected by business and which in turn can influence its success. ” The Commission of the European Communities (2001, p. 4) Enterprise and its Business Environment © Goodfellow Publishers 2016 14

CSR Defined (3) Primum Non Nocere - First, do no harm. Hippocrates (460 -370 BC) Drucker (2007) Enterprise and its Business Environment © Goodfellow Publishers 2016 15

Models of CSR There are many! Carroll (1979): pyramid of corporate social performance one of the most cited models Dahlsrud (2008): five dimensions of CSR Enterprise and its Business Environment © Goodfellow Publishers 2016 16

Carroll’s pyramid Julie’s model? Enterprise and its Business Environment © Goodfellow Publishers 2016 17

Carroll’s pyramid Four areas: - Economic - Legal - Ethical - Philanthropic Enterprise and its Business Environment © Goodfellow Publishers 2016 18

Dahlsrud’s dimensions Dahlsrud (2008) reviewed several definitions of CSR in order to identify the areas in which CSR reached, finding five dimensions: - Environmental - Social - Economic - Stakeholder - Voluntariness Enterprise and its Business Environment © Goodfellow Publishers 2016 19

Business case Zadek (2004): shift from looking at CSR as managing risk to its role in creating value Davis (1960) highlighted that short-term costs may lead to long-term gains. How? Reducing emissions – efficient (cheaper) supply chains Employee retention – reduced recruitment and training costs Customer loyalty as result of CSR …but once CSR becomes a profit gaining activity does it cease to become CSR? Enterprise and its Business Environment © Goodfellow Publishers 2016 20

Large corporations – small business CSR causes implementation issues because one size does not fit all. Large corporations: standardisation and formulation Smaller business: organic structure, looser and informal. …this leads to significant differences in CSR approach Enterprise and its Business Environment © Goodfellow Publishers 2016 21

Large corporations – small business Large corporations often have a CSR policy which is developed at board level and implemented from the top down. CSR in smaller businesses often seen as an additional activity (Jenkins, 2004; Schaper & Savery, 2004). Academic research is dominated by analysis of CSR in larger organisations Enterprise and its Business Environment © Goodfellow Publishers 2016 22

A social contract? Foundations of CSR and corporate governance as old as the history of business (Bolton, Kim & O’Gorman, 2011). CSR and corporate governance central to managing the contemporary relationship between business and society CSR and corporate governance mutually beneficial and can add value to companies whilst maintaining a good relationship with society (Harjoto & Jo, 2011; Jo & Harjoto, 2011) Enterprise and its Business Environment © Goodfellow Publishers 2016 23

References Bolton, S. C. , Kim, R. C. , & O’Gorman, K. D. (2011) Corporate social responsibility as a dynamic internal organizational process: A case study, Journal of Business Ethics 101: 1, pp. 61 -74 Cadbury Report (1992), Report of the Committee on the Financial Aspects of Corporate Governance, London: Burgess Science Press. Carroll, A. (1979), ‘A three dimensional conceptual model of corporate performance’, Academy of Management Review, 4: 4, pp. 497 -505. Carroll, A. B. (1999). Corporate Social Responsibility: Evolution of a Definitional Construct. Business & Society, 38: 3, pp. 268 -295. Commission of the European Communities (2001) ‘Promoting a European framework for Corporate Social Responsibility’, EU Commission Green Paper COM(2001) 366. Dahlsrud, A. (2008), How corporate social responsibility is defined: an analysis of 37 definitions. orporate Social Responsibility C and Environmental Management, 15: 1, pp. 1– 13. Davis, K. (1960). Can business afford to ignore social responsibilities? California Management Review, 2(3), pp. 497 -505. Drucker, P. F. (2007). People and Performance: The Best of Peter Drucker on Management. Boston, MA: Harvard Business School Press. Jenkins, H. (2004). A critique of conventional CSR theory: An SME perspective. Journal of General Management, 29, pp. 37 -57. Kotler, P. and Lee, N. (2005) Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause, New Jersey: John Wiley and Sons, Inc. OECD (2004), OECD Principles of Corporate Governance, Paris: OECD. Schaper, M. T. , & Savery, L. K. (2004). Entrepreneurship and philanthropy: the case of small Australian firms. ournal of J Developmental Entrepreneurship, 9: 3, pp. 239 -250. Sethi, S. P. (2003) Setting global standards: guidelines for creating codes of conduct in multinational corporations , Wiley, Hoboken (New Jersey) World Business Council for Sustainable Development (1999) Corporate Social Responsibility: Meeting Changing Expectations, Geneva: World Business Council for Sustainable Development. Zadek, S. (2004) The path to corporate social responsibility, Harvard Business Review, 82: 12, pp. 125 -132 Enterprise and its Business Environment © Goodfellow Publishers 2016 24