Corporate Responsibility and Society MNGT 5990

1. Corporate Responsibility and SocietyMNGT 5990 Fall 2013 - Shanghai, PRC Robert Serben, Ph.D. Week 3 -

2. This week is about: 1. differing views, 2. stakeholder responsibility, and 3. complexity in CSR situations

3. This week Corporate Social Responsibililty

4. Milton Friedman – Charles Handy Classic Perspectives

5. Three arguments for CSR • Moral argument: • Successful operations reflects the values of the larger society • Rationalargument: • Maximize performance by minimizing restrictions • Economic argument: • Reflects concerns of stakeholders over medium to longer term Corporate Social Responsibililty

6. CSR debate: Friedman/Handy Milton Friedman Charles Handy

7. Friedman/Handy • Both are concerned about the survival of a competitive market • Both are concerned with doing the right thing • Both are concerned with duties - …. “beyond the maximization of profit”

8. Milton Friedman • Published in 1970 – rational argument • “Business has a social purpose” talk is illogical • Logically, business is only responsible to its owners to: • Make as much money as possible • Conform to the basic rules of society (law, custom, and ethics)

9. Milton Friedman • People have social responsibilities – businesses do not • Business leaders are not ethicists • What is the greater social purpose? • Spending someone else's money without consent– a form of taxation • If business is responsible for social outcomes, what is the role of the individual, the government?

10. Charles Handy • Published in 2002. Moral argument: • “The purpose of a business …is not to make a profit. It is to make a profit…to do something more of better.” • Three points • Focus on stock price and ownership can distort the business culture • Shareholders are rarely owners • Intellectual capital

11. Charles Handy • Sees business as a community of interested groups • To start the search he poses the question ,”If the business were not in existence , would we invent it?

12. Shareholders • “…the average holding period for stocks has dropped from five years in the mid-1970s to six months today. People aren’t investing in your company; they’re investing in your stock.” – Class text, p.44 Corporate Social Responsibility

13. Stakeholder responsibilities?

14. Questions • Can business ignore calls for greater social responsibility as long as they’re profitable ? • Doesn't profitability positively affect all stakeholders? If “yes,” why change? • Do stakeholders have responsibilities? • What are those responsibilities ?

15. SCSR • DOES: Business does a better job in reacting to CSR concerns rather than initiating them. Why? • T/F: Stakeholders need to care and to act for socially responsible action. Why? • True responsibility for initiating social responsible action is …………….

16. Point and question • Point in text: The CSR community may expect too much from firms – they react to change better than they initiate it. • What is the driving force that “pushes” CSR actions within firms and their strategic planning?

17. “Walmartmaybe both America's most admired and most hated company “ Text, p.66 Walmart Case Discussion – Complexity in CSR

18. Case discussion • Is it in the best interests of competitive, market-based environment, and the various stakeholders, for a company to be as big and powerful as Walmart?

19. Walmart • World’s largest retailer • 2009 – sales: $401 billion • Facilities • 4,200 – U.S. • 3,600 – 16 other markets worldwide • Two million (2,000,000) employees

20. Walmart • It’s big and smart! • “…the world’s largest grocer….” • Web location: http://news.walmart.com/walmart-facts/health-wellness-fact-sheet • Sophisticated technology – especially supply chain and customer insights. Web location: http://news.walmart.com/walmart-facts/walmart-economic-customer-insights-report-q3-2012 • Very competitive. Low prices. Dominates and sector it enters. Uses its size as a competitive tool.

21. Walmart – continuing reality “There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” • Sam Walton

22. Walmart - Hangzhou Wahaha • Chinese beverage maker Hangzhou Wahaha, for example, has built a $5.2 billion business against global competitors such as Coca-Cola and PepsiCo by targeting rural areas, filling product gaps that meet local needs, keeping costs low, and appealing to patriotism. Corporate Social Responsibility

23. Walmart • Key competency: identifying inefficiencies in the value chain and eliminating them to minimize costs • How does this competency affect: • Suppliers? • Employees? • Competitors? • You? What do you do look for at Walmat?

24. Walmart corporate mission • “Regardless of the market where we operate, the retail format or the website, Walmartserves customers with one core mission: to help people save money so they can live better.” • Source: Walmart 2013 Annual Report. Web location: http://stock.walmart.com/annual-reports

25. Walmart • How could a strategy of minimizing cost affect various stakeholders? • Employees • Suppliers • Communities • Competitors

26. Walmart • From the 1990s – 2000s,coalitions of unions, environmentalists, community organizations, state lawmakers, and academics attacked Walmart

27. Walmart– on one hand • Lower prices for consumers • Good jobs and economically deprived regions • Wide range of products • Redefinition of supply chain management and general pursuit of technologically driven efficiencies • Increased productivity

28. Walmart– on the other hand • Loss of jobs to overseas suppliers • Strong opposition against collective representation of workforce • Relatively low employee wages and benefits • Competitors go out of business, reducing competition and, ultimately, consumer choice • Litigation against Company on issues of alleged discrimination, etc.

29. A closer look – p.62 • Prices – strategy/tactics • Suppliers – very big sales - vulnerable • Jobs – jobs – 44% turnover • Competitors– Become better – out of business • Quality and variety – Top 10 in every category

30. A question • If CSR is central to a firm’s competitiveness in a global business environment, how is a firm like Walmart can apparently ignore calls for greater social responsibility from key stakeholders?

31. Walmart • President and CEO – Mike Duke: • New Commitments to dramatically increase energy efficiency and renewables • “… look at the future, energy costs may grow as much as twice as fast as our anticipated store and club growth • Walmart has also been cited by the U.S. Environmental Protection Agency (EPA) as America’s leading user of onsite renewables, using more onsite renewable power than any other company in the U.S” • Web locaton: http://news.walmart.com/news-archive/2013/04/15/walmart-announces-new-commitments-to-dramatically-increase-energy-efficiency-renewables

32. Walmart

33. Walmart

34. Walmart performance $466 billion – net sales Shareholder mentions 30 times Stakeholder mention 2 times

35. Walmart and sustainability • Walmart’senvronmental goals • “To be supplied 100% renewable energy • To create zero waste • To sell products that sustain our resources and environment”

36. Which do you like? Why? Walmart’s mission statement and its advertising slogan are the same

37. It’s not over

38. It’s not over

39. Albert Einstein: “Without changing our pattern of thought, we will not be able to solve the problems we created with our current patterns of thought.”

40. Corporate Social Responsibililty