Corporate Social Responsibility

1. BOM 120 Corporate Social Responsibility

2. Corporate Social Responsibility • Is the concern businesses have for the welfare of society. • There are 3 categories to by which we can judge the social performance of a company. • 1) Corporate philanthropy • 2) Corporate responsibility • 3) Corporate policy

3. Corporate Philanthropy • Includes: • Charitable donations to non-profit groups of all kinds. • Amounts to billions of dollars in charitable donations each year. • Strategic philanthropy: involves companies making long-term commitments to one cause. • (For example: Ronald McDonald House.)

4. Corporate Responsibility • Is all encompassing because it includes: • Hiring minority workers • Making safe products • Minimizing pollution • Using energy wisely • Providing a safe work environment. • It scrutinizes the actions a company takes that could affect others.

5. Corporate Policy • Refers to the position a company takes on social and political issues and internal business ethics. • For example, it is the corporate policy of companies like Xerox, IBM and Wells Fargo to promote Social Service Leave for their employees.

6. Social Service Leave • Allows employees to leave for up to a year to work for a non-profit organization. • While on Social Leave, employees get full salaries and benefits, including job security.

7. Responsibility to Stakeholders • Customers: one responsibility of business is to satisfy customers by offering them goods and services of real value. • One of the surest ways of failing to please customers is by not being totally honest with them.

8. Customers • For example, in 1988 a consumer magazine reported that the Suzuki Samurai was likely to roll over if a driver swerved violently in an emergency. • When Suzuki executives denied there was a problem, sales plummeted.

9. Customers • The payoff for socially conscious behaviour could result in new business as customers switch from rival companies simply because they admire the company’s social efforts. • Consumer studies show that socially conscious companies are more likely to viewed favourably than less socially responsible competitors.

10. Investors • Ethical behaviour is good for shareholder wealth. • Many people believe that it makes financial as well as moral sense to invest in companies that are planning ahead to make.

11. Employees • Businesses have several responsibilities to employees. These include: • Creating jobs – it has been said that the best social program in the world is a job. • Fair compensation • Hope for a better future through upward mobility. • Respect and integrity. • Pension plans and health benefits.

12. The cost of replacing employees • Given that the cost of replacing an employee is approximately 150% of their annual salaries, retaining workers is good for business as well as for morale. • When employees feel they have been mistreated, they often strike back. • Getting even is one of the most powerful incentives for good people to do bad things. • It makes good sense for a company to be socially responsible to its employees.

13. Society and the Environment • One of business’s major responsibilities to society is to create new wealth. • They are also partially responsible for promoting social justice. • For its own well being, business depends on its employees being active in politics, church groups, arts, charities, etc…

14. Cont. • Businesses are also clearly taking responsibility for helping make their own environment a better place. • Environmental efforts may increase a company’s costs, but they also might allow the company to charge higher prices or increase market share • Environmental quality is a public good. • Everyone gets to enjoy it regardless of who pays for it. • The trick is for companies to find the right public good that will appeal to their target market.

15. Enron • Formerly a member of the Fortune 500 and the 6th largest energy company in the world. • Reported annual revenue in 2000 = 100 billion. • With the help of its accounting firm, Arthur Anderson, overstated shareholder equity by 1.2 billion dollars. • They had devised a vast web of fake investors and partnerships to hide Enron’s massive debt.

16. Enron • In 2001, the company declared bankruptcy, the largest company in the U.S. to do so, at that point. • Stock prices dropped from $90 to $1 in a matter of months. • Both Enron and Arthur Anderson were forced to close, putting thousands out of work. • CEO’s of both companies were sentenced to prison terms. • Stockholders lost billions.

17. Enron • http://www.youtube.com/watch?v=CFk4ivlvvrw • http://www.youtube.com/watch?v=Uxd9AeXft64

18. Sarbanes-Oxley • The downfall of Enron led to the creation of the Sarbanes-Oxley act. • Also known as the Corporate and Criminal Fraud Accountability Act, was passed in the United States in 2002.

19. Sarbanes-Oxley • SOX requires all public corporations to provide a system that allows employees to submit concerns regarding accounting and auditing issues both confidentially and anonymously.

20. Whistle-blowing Legislation in Canada • Bill C-11 was passed in November 2005. • It provides for significant powers to investigate wrongdoing; it contains clear legal prohibition of reprisal against those who make good-faith allegations of wrongdoing; and it proposes measures to protect the identity of persons making disclosures. • http://www2.parl.gc.ca/Sites/LOP/LegislativeSummaries/Bills_ls.asp?Parl=38&Ses=1&ls=c11#dpromotingethicalpractices

21. Other points to ponder • Every scenario is different. • Take time to reflect on your actions. • http://www.youtube.com/watch?v=l-nz0kojLv8&feature=related