investor ownership ownership by shareholders transferable shares owners change w-o affecting legal existence

Transcription

1 definition the corporation is an artificial legal person authorized to act as an individual on behalf of its members but legally distinct from them artificial person to acquire property to employ people to sign contracts to sue & be sued to make by-laws legally distinct investor ownership ownership by shareholders transferable shares owners change w-o affecting legal existence limited liability of shareholders, officers delegated management control by elected board perpetual succession continued existence even if shareholders withdraw

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3 defining Corporate Social Responsibility

4 Quick Recap Defining CSR CSR Evolution Key Concepts defining Corporate Social Responsibility

5 Quick Recap Why is CSR a pressing concern? almost everything is related behavior of a business firms affects its environment systems theory stakeholders business-society interdependence varying interests, modes of influence enormous impact of business on society business firms inflict great harm if they behave irresponsibly the modern business corporation performance expectations gap managing public issues (stakeholder concerns)

6 Defining CSR doing the right doing thing...doing business business right right Dr. Bernardo Villegas the corporation s accountability accountability for any for actions any actions that affect people, their communities, affecting others and their environment Post, Lawrence, and Weber, 2002 an organization s obligation obligation to safeguard to conduct society s business welfare in a way that safeguards the while welfare doing of society business while pursuing its own interests Holt & Wigginton, 2002 blending a firm s blending multiple multiple economic, responsibilities legal, & social without responsibilities into a comprehensive neglecting corporate any strategy of them without losing sight of any of its obligations balancing the balance benefits between firms gain profits against cost the (of cost profit) achieving them

7 Evolution of CSR 1920s Original Notion of CSR based on Philanthropy & Stewardship Charity universal principle: the wealthy should give to the poor corporate philanthropy emerged 1920s in response to inadequacies of business practice & individual philanthropy Stewardship as stewards or trustees of public interest, business firms should always act for the welfare of society

8 Key Concept iron law of social responsibility with great power comes great responsibility in the long run, those who don t use power in a responsible way will inevitably lose it

9 1960s-1970s Corporate Social Responsiveness emphasis on Systematic Responses to Public Issues Consumer Movement Environmentalism Vietnam War Civil Rights (MLK) Feminism & Gender Equality Work Safety Toxic Waste & Nuclear Energy multiple issues triggered shift towards Corporate Social Responsiveness & Corporate Citizenship

10 1960s & 1970s Corporate Social Responsiveness CSR doesn t just depend on management s generosity (philanthropy) and awareness of their responsibility as public trustees BUT lies in the processes a firm establishes to systematically address social demands and in the actions the firm takes which affect its stakeholders Post, Lawrence, Weber

11 Key Concept enlightened self-interest compromise between two extremes purely profitdriven firm without social conscience business firm driven by enlightened self-interest unprofitable firm too sociallyresponsible balance between profit & social responsibility or better, profitability because of social responsibility very often, CSR a question of prioritizing long-term gains over short-term profit

12 Key Concept Going Beyond the Legal Minimum laws reflect public expectations & therefore set the minimum standard for social responsibility but there s a lag: laws always a step behind public expectations constantly change but laws change much later hence, good CSR requires going beyond the legal minimum

13 1990s Corporate Citizenship involves proactively addressing social issues, building (collaborative) stakeholder partnerships, discovering business opportunities through social strategic goals, and transforming a concern for financial performance into a vision for corporate financial and social performance Post, Lawrence, Weber

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15 defining Corporate Social Responsibility common elements responsibility to all stakeholders not just stockholders balance in multiple obligations not just profit emphasis on exceeding minimum standards going beyond legal, social, economic minimum enlightened self-interest for long-term success hence focus on long-term gains, not short-term profits

16 Evolution of CSR Three Waves 1920s Original Notion of CSR based on Philanthropy & Stewardship 1960s-1970s Corporate Social Responsiveness emphasis on Systematic Responses to Public Issues 1990s Corporate Citizenship the firm as a Good Citizen of the Community

17 original csr corporate social responsiveness corporate citizenship origin 1920s 1960s 1990s basis charity & stewardship multiple demands by stakeholder groups collaborative partnerships with stakeholders focus moral obligations to society at large practical responses to stakeholders discovering business opportunities through partnerships action philanthropy, stewardship of public welfare social programs & activities managing corporate social & financial performance

18 original notion of csr corporate social responsiveness corporate citizenship charity & stewardship responding to public issues proactive citizen of the community bf as aware of public role bf as reacting to public issues bf as citizen, working proactively moral responsibility practical responses proactive citizen

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20 CSR 4G widespread and voluntary adoption of CSR standards 4th Generation CSR

21 UN Global Compact s Ten Principles WB-IMF CSR Categories Davenport s Principles of Corporate Citizenship Triple-Bottom Line Model of Sustainability

22 Ten Principles of the UN Global Compact Human Rights 1 support and respect human rights 2 not be complicit in human rights abuses Labour Standards 3 support freedom of association and collective bargaining 4 eliminate all forms of forced and compulsory labour 5 effectively abolish child labour 6 eliminate discrimination in employment and occupation Environment 7 support a precautionary approach to environmental challenges 8 undertake initiatives for greater environmental responsibility 9 encourage use of environmentally friendly technologies Anti-Corruption 10 work against all forms of corruption, including extortion and bribery

23 CSR Categories World Bank/IFC CSR Economic 1. employment & human resource development 2. procurement & supply chain management 3. technology transfer & intellectual property rights 4. monetary flows to the public sector CSR Environmental 5. environmentally safe production, products & services 6. environmental impact assessment & management 7. environmental reporting & management systems CSR Corporate Governance 8. rights & treatment of shareholders 9. governance policies & business principles 10. responsibilities of the board 11. information disclosure & reporting 12. customer end-user care CSR Social 13. employee health & safety 14. labor standards 15. corruption & bribery 16. human rights 17. violence & conflict 18. social impact assessment & management 19. community & stakeholder engagement 20. charitable giving 21. social investment 22. social reporting & management systems

24 Principles of Corporate Citizenship Kimberly Davenport, 1998 Ethical Business Behavior 1. Engage in fair and honest business practices 2. Set high standards for employee behavior 3. Exercise ethical oversight of executive and board levels Stakeholder Commitment 4. Manage the company for the benefit of all stakeholders 5. Initiate and engage stakeholders in genuine dialogue 6. Value and implement dialogue Community 7. Foster a reciprocal relationship with the community 8. Invest in the community where the firm operates Consumers 9. Respect the rights of consumers 10. Offer quality products and services 11. Provide information that is truthful and useful

25 Principles of Corporate Citizenship Kimberly Davenport, 1998 Employees 12. Provide a family-friendly work environment 13. Engage in responsible human resource management 14. Provide an equitable reward and wage system for employees 15. Engage in open and flexible communication with employees 16. Invest in employee development Investors 17. Strive for a competitive return on investment Suppliers 18. Engage in fair trading practices with suppliers Environmental Commitment 19. Demonstrate a commitment to the environment 20. Demonstrate a commitment to sustainable development

26 Triple Bottom Line TBL 3BL 3Ps People, Planet & Profit People care for human capital Planet sustainable environmental practices Profit economic gains

27 Triple Bottom Line TBL 3BL 3Ps People, Planet & Profit

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29 Malden Mills & Aaron Feuerstein Background Malden Mills Industries (f 1906) a small privately-owned firm known as only producer of Polartec & Polarfleece insulating material used by L.L. Bean, Land s End, Eddie Bauer, the North Face, Patagonia employs 3,000 from Methuen and Lawrence, small, economically depressed towns in Massachussets Aaron Feuerstein, CEO Feuerstein owned majority share Critical Incident Malden Mills burned down 11 December 1995, Feuerstein s birthday factory boiler explodes, burns down 3 century-old buildings in the facility, entire manufacturing capacity destroyed

30 Malden Mills & Aaron Feuerstein Dilemma 3 options close factory, walk away with US $300M fire insurance sell business to his industry rivals willing to buy him out rebuild & reopen factory, maintain workforce What would you have done? What did A Feuerstein do? rebuild & reopen factory, maintain workforce kept all 3,000 employees on payroll for 6 months (cost of US $25M) borrowed US $100M more on top of US $300M to rebuild a new factory bigger, modern, more environmentally & worker-friendly factory

31 Malden Mills & Aaron Feuerstein aftermath + + overwhelming public response donations pour in from local banks, citizens clients promise to wait rather than switch initial results positive 4 months later, most employees back at work, remainder given financial assistance 8 months later, 3 of 4 production lines running, only 500 out of work - financial difficulties because of 1998 slump in the apparel industry, firm forced to make many layoffs, accumulated US $120M in debt under new management, a turnaround in 1999, but large debt & poor sales still forced the company to declare bankruptcy in now under new management - financial performance improved with overseas and military contracts but A Feuerstein no longer in the picture + a feuerstein becomes a public hero, admired for his courageous example

32 For Online Discussion Read & Comment on Case 3 Malden Mills & Aaron Feuerstein Q: Did Aaron Feuerstein practice good CSR?

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