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Understand the corporate responsibilities towards external stakeholders like customers, suppliers, and society. Explore the principles of Corporate Social Responsibility (CSR) and its impact on business ethics.
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External Stakeholders • Customers/ consumers • Suppliers/ distributors • Communities/ Society • Competitors • Governments • Environment
You are a corporation, what can you do as corporate responsibilities for these external stakeholders?
External Stakeholders • Customers/ consumers • Suppliers/ distributors • Communities/ Society • Competitors • Governments • Environment
External Stakeholders, Moral Stakes, and Corporate Responsibilities Source: Based on the Caux Round Table’s Principles for Business. The principles are printed in Business Ethics magazine, 52 S. 10th St. #110, Minneapolis, MN 55403.
Responsibility toward Consumers • Duty to inform fully and truthfully • Duty not to misrepresent or withhold information • Duty not to force or take undue advantage of through fear or stress • Duty to take “due care” to prevent foreseeable injuries
Consumer Rights • Right to safety • Right to free and rational choice • Right to know, access information • Right to be heard (complain) • Right be to compensated for harm
Competitive Advantages for Socially Responsible Firms • Reputation • Successful social investment portfolios • Ability to attract quality employees
Corporate Social Responsibility (CSR) • Or Corporate Citizenship: imply that the organization is a responsible “citizen” in meeting all its obligations. • Or Corporate Conscience: imply that the organization is run with an awareness of its obligations to society • CSR = the actions of an organization that are targeted toward the achievement of a social benefit beside maximizing profits for its shareholders and meeting all its obligations
Corporate Philanthropy (Corporate Giving) • It’s a part of corporate social responsibility (CSR), it is the act of donating money, goods, services, time and/or effort to support a socially beneficial cause, with a defined objective and with no financial or material reward to the donor. (from: http://en.wikipedia.org)
3 Major Types of CSR: 1. Ethical CSR 2. Altruistic CSR 3. Strategic CSR
Ethical CSR • Represents the purest type of CSR where the org. pursue a clearly defined sense of social conscience in managing their financial responsibility to shareholders, their legal responsibilities to their local community and society as a whole, and their ethical responsibilities to “do the right thing” for all their stakeholders.
Ethical CSR • It is mandatory and means that a firm must obey all laws and avoid doing harm as a result of its business. This could include harm caused by pollution, faulty products, and unfair labor practices. Good laws and governmental policies will often alleviate ethical CSR problems (Lantos, 2002).
Ethical CSR Samples The Body Shop Ben & Jerry’s Home Made • Our Values The way we do business, the way we make products, the way we source ingredients, and the way we use our voice; we're different because of our Values
Values • Taking care of our people • Giving back to our communities • Doing the right thing • Excellent customer service • Creating shareholder value • Building strong relationships • Respect for all people
Altruistic CSR • Company takes a philanthropic approach by underwriting specific initiatives to “give back”to the company’s local community or to designated national or international programs
Altruistic CSR • It involves a firm helping to relieve external social problems and inequities through charitable funding whether it financially benefits the firm or not. This type of giving is at the stockholders’ expense and may not be legitimate (Lantos, 2002).
Altruistic CSR Samples Southwest Airlines Shell Corporation • Southwest Airlines supports the Ronal McDonald houses with donations of both dollars and employee-donated volunteer hours. • They do so because they see it as an appropriate part of their mission to give back to the communities in which they operate. • The devastation of the tsunami disaster in Asia in Dec. 2004 prompted the Shell Corp. to provide fuel for transportation rescue and water tanks for relief aid, in addition to financial commitments of several million dollars for disaster relief.
Strategic CSR • Philanthropic activities are targeted toward programs that will generate the most positive publicity or goodwill for the organization • It involves choosing philanthropic activities that will also benefit the company and help it to reach its strategic goals (Lantos, 2002).
Strategic CSR Samples • Ford spent millions on an ad campaign to raise awareness of the need for booster seats for children over 40 pounds and under 4’9” (most 4 to 8 years old) and gave away almost one million seats as a part of the campaign. • During the battle with Firestone Tires over who was to blame for the “rollover” problems with the Ford Explorer, Ford CEO at that time made a public commitment to spendup to $3 billion to replace 13 million Firestone defective tires for free on Ford Explorer because he saw them as an “unacceptable risk to our customers.”
No matter what purpose of doing CSR is to gain positive publicity or give back to community to get customer perception or else. If an organization commits to CSR initiatives, then they must be real commitments rather than short-term experiments.
Some of P&G Values: • We all act like owners, treating the Company's assets as our own and behaving with the Company's long-term success in mind. • We respect our P&G colleagues, customers and consumers, and treat them as we want to be treated. • We always try to do the right thing. • We are honest and straightforward with each other.
P&G Commitment • Sustainability: improving lives now and for generations to come For example: Live, Learn and Thrive Program is P&G’s global corporate devoted to improving life for children in need, the Children’s Safe Drinking Water Program is focused on reducing sickness and death resulting from drinking contaminated water
P&G Commitment • Product Safety For example: Safety and Ingredient Information which P&G make safety and ingredient information publicly available through product labeling, consumer services and the Web. Advancing Consumer Product Safety which P&G works with stakeholders in government, industry, academics and public-interest groups to contribute to scientific understanding.
P&G Commitment • Environmental Responsibility Samples of Environmental Policy: • Ensure P&G’s products, packaging and operations are safe for P&G’s employees, consumers and the environment. • Reduce, or prevent, the environmental impact of P&G’s products and packaging in their design, manufacture, distribution, use and disposal whenever possible. • Meet or exceed the requirements of all environmental laws and regulations.
External Corporate Responsibility Areas • Advertising • Product safety and liability • Environmental concerns
Deceptiveads? False advertising or deceptive advertising is the use of false or misleading statements in advertising Source: http://en.wikipedia.org/wiki/False_advertising
Advertising • By advertising very nature, is not complete information. It is biased in favor of the advertiser and the brand. • People expect advertisers to be proud of their products and probably don’t mind if they puff them a little. • But when advertiser cross the line and create false expectations, people begin to object.
“Subliminal ads", should advertisers use this kind of ad? “Advertisers intentionally create ads with sexual messages hidden in the illustrations to seduce consumers.”
Offensive ads? Abercombies ads are perceived as pornographic, thereby causing social cost that extended beyond the limited scope of merely selling clothes.
Beauty Functional Drink ad • Pinky white skin map from forehead, cheek, neck, shoulder, arm, thigh, and etc. Pinky White Forehead Pinky White Cheek Pinky White Neck Pinky White Sholder
