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Week: 7 1

Topic Overview – Corporate Social Responsibility, Business Ethics, and Stakeholder’

Management

Learning Outcome:

LO.1 explain the theory and practice of businesses (COI, CID, SID)

LO.2 describe a range of current problems and changes that organizations face in being successful (COI,

CID, IC, SID).

LO.3 critically evaluate research and theory to support decision-making and explain progress (COI, CID,

SID).

LO.5 students will discuss good practice for organization success (COI, CID, SID).

LO.6 undertake a critical audit of skills and capabilities for a professional career and identify areas

required for improvement (COI, CID, EID).

1.Corporate Social Responsibility (CSR)

CSR has been in longer term use as an explicit framework to better understand the business and society

relationship. One research paper claimed to find at least 37 different definitions of CSR. Obviously, we

cannot consider them all. Early on, CSR was used as a general term arguing that managers ought to

seriously consider their impacts on society. It was later thought to embrace those actions which

managers and organizations take to protect and improve the welfare of society along with business’s own

interests. In this view there are two active aspects of CSR, protecting and improving. According to

Epstein (1987), to protect society implies that companies need to avoid their negative impacts (e.g.

pollution, discrimination, unsafe products). To improve the welfare of society suggests that companies

need to create positive benefits for society (e.g. philanthropy, community relations). Another early thought

was that companies not only had economic and legal obligations but also certain responsibilities that

extended beyond those obligations, though these were not spelled out. In an attempt to spell out more

clearly what responsibility business had to society, this led me to articulate a view of social responsibility

that argued that CSR had to encompass the economic, legal, ethical, and discretionary (largely

philanthropic) expectations that society has of organizations at a given point in time (Aguinis & Glavas,

2012). My position was that the economic and legal expectations were required of business by society

and that the ethical responsibility was expected and the discretion ary/philanthropic was desired of

business by society. This broader view of CSR was thought to begin with and embrace those

responsibilities companies had to themselves and their owner/shareholders (economic) and those that

Week: 7 2

had been formalized by society through federal/state/administrative laws (legal). Businesses in their

various forms are creations of the public/government in that they receive their charters to operate in this

way. So, what are these ‘‘other’’ responsibilities that are not mandated by society? They are

encompassed by two additional categories of expectations: ethical and discretionary/ philanthropic.

Because laws are essential but not sufficient, society expects businesses to be ethical; that is, to

embrace those activities, practices and standardsthat are expected or prohibited by society even though

they may not (yet) be codified into laws. In this view, law may be seen as ‘‘codified’’ ethics (Carroll, 2015).

The ethical responsibility of business embodies the full scope of norms, standards, values and

expectations that reflect what consumers, employees, shareholders and other stakeholders regard as

fair, just and consistent with respect for protection of stakeholders’ moral rights. These expectations are

not codified into law, and there is a continuing debate as to what they are and how far they should be

carried. Finally, there are business’s discretionary or volun tary responsibilities. Though

notresponsibilities in a literal or legal sense, they are desired by society and over time they have come to

be expected of business by the public. Philanthropic contributions and community relations improvements

are the best examples of this category in which businesses seek to ‘‘improve’’ society or the community.

The amount and nature of these activities are voluntary or discretionary, guided only by business’s desire

to engage in social activities that are not mandated, not required by law and not generally expected of

business in an ethical sense, though this is changing. Today, the public has an expectation that business

will ‘‘give back,’’ and thus this type of responsibility is seen more and more to be expected as part of the

social contract between business and society. This discretionary/philanthropic category of expectations is

sometimes driven by ethical motives, but often it is driven by companies just wanting to be perceived as

good corporate citizens to enhance their reputational capital. As per Aguinis & Glavas (2012), today, CSR

is more commonly seen by consumers, employ ees and the public to embrace those activities that are

not required by law–—in other words, the ethical and discretion ary categories in the above four-part

definition. In this conception, however, the economic responsibility remains vital, because owners and

investors expect companies to provide them as a condition of existence fair-to-good returns, and the legal

responsibility continues to be relevant in that it clarifies and expresses minimum levels of behavior and

performance. By almost any measure, the number, breadth and depth of regulations being imposed on

business continues to proliferate. Regulations require compliance on the part of business, but not all

businesses comply with both the letter and the spirit of the laws, and this raises questions about their

ethics as well (Carroll, 2015).

2.Business Ethics (BE)

Week: 7 3

Although concerns about business ethics have been around for centuries, business ethics became a

popular framework in the 1980s and beyond. From the standpoint of academic philosophers, BE became

popular as an academic field and was rooted in moral philosophy. From the standpoint of practitioners

and the public, BE came to describe the illicit activities of firms and managers that were increasingly

becoming visible and offensive to all as technology and media expanded. Joyner & Payne (2002), stated

that business ethics may be seen as a management problem that was embedded in how stakeholders

were treated and managed. Business ethics is a system of thought that is rooted in moral duty and

obligations. It can also be seen as principles or values. Business ethics is concerned with the rightness or

fairness of business, manager and employee actions, behaviors and policies taking place in a

commercial context. Even as compliance has become more important in the past two decades, strong

business ethics has taken its place as a bellwether of successful companies. As a result of highly

publicized scandals, particularly those which could be attributed to named corporate leaders (Joyner &

Payne, 2002), the framework and terminology of business ethics took its place side by side with CSR as

a popular framework for evaluating business activity. Some analysts differentiated the two by arguing that

CSR referred to companies as a whole, whereas BE addressed the behaviors of specific corporate

leaders, but quite often the two terms were used interchangeably and their use hinged often on their

faddish status rather than any real technical difference. Having said this, business ethics as a concept

does help to capture and embrace the activities of middle and lower level managers and employees who

might not be as accurately accounted for using the CSR terminology (Carroll, 2015). Certainly, the CSR

framework presented earlier is replete with ethical issues and dimensions which cut through the

economic, legal, ethical and discretionary expectations. This is because business ethics is typically seen

as normative; that is, it prescribes what companies and managers ought to be doing or ought not to be

doing. However, business ethics does tend to place its greatest focus on the ethical and discretionary

responsibilities rather than the economic and legal categories, although they are intertwined. When seen

in this light, the complimentary nature of BE and CSR become evident. The business ethics framework

and language for describing and analyzing business behavior has taken its rightful place in the current

discussion and it does not appear to be slackening. At the same time it remains as a competitor to CSR

as a worthwhile framework for describing and analyz ing organizational behavior.

Week: 7 4

3.Stakeholder Management (SM)

As per Hillman & Keim (2001), the stakeholder approach to business and society relation ships became

popular in the middle 1980s and continues strongly today. It grew up side by side with the exploding field

of business ethics. The term stakeholder is a variant of the more familiar and traditional concept of

stockholder or shareholder. Like CSR, stakeholder theory or its more applied business nomenclature,

stakeholder management, is built upon the idea that there are multiple constituencies— individuals and

groups—that have a stake or interest in business decisions and operations. Primary stakeholders might

include those who have an official or legal stake in the enterprise—owners, employees, customers, local

communities. Secondary stakeholders might include those who have a general interest in the outcome of

business functioning—government, regulators, social pressure groups, activist groups, competitors,

media, and so on (Carroll, 2015). Over time the concept of the firm has transitioned through stages

wherein more stakeholders have become relevant to business functioning, and they have increasingly

voiced their stake in the business operations. These different stakeholder groups have varied in their

legitimacy (validity of their claims), power (ability to affect the organization) and urgency (timeliness of

their expectations)so the challenge to management has been to work through such vital questions as:

who are the firm’s stakeholders, what are the stakeholders’stakes, what opportunities/challenges are

posed, what responsibilities does the firm have toward its stakeholders and what strategies or actions the

firm should best take to address the different stakeholder groups. Stakeholder thinking or effective

stakeholder management is built upon managers and companies being able to improve their relationships

with stakeholders and to balance their responses so that stakeholders are fairly and effectively dealt with.

Companies have done thisthrough the development of a stakeholder culture and improving stakeholder

engagement and interactions. The stakeholder management framework is effortlessly consistent with

both CSR and business ethics. In a real sense, the stakeholder concept has given firms and managers

language and concepts for carrying out their missions with respect to people and groups with which they

interact and hold responsibilities. Stakeholder theory has continued to have a steady and growing

presence in academic circles and the language and practices of managing stakeholders has become

useful in both business and nonbusiness organizations. Whereas many major companies today have

CSR Officers or Business Ethics Officers, few of them have institutionalized Stakeholder Management in

terms of slots on organizational charts. Nevertheless, SM, in practice, has become a complimentary

language and concept to CSR and business ethics (Hillman & Keim, 2001).

Week: 7 5

4.Sustainability

According to Quarshie, Salmi, & Leuschner (2016), the concept of sustainability has become one of

business’s most pressing mandates in recent years. Sustainability discussions began with a concern

forthe natural environment. In its most prominent first use, sustainability was derived from the concept of

sustainable development when the Brundtland Commission, in 1987, coined what has become the most

often quoted definition of sustainable development: ‘‘Development that meets the needs of the present

without compromising the ability of future generations to meet their own needs.’’ The key to sustainability

is the future. Later, it became apparent that a broader concept than just the natural environment was

needed that embraced the wider scope of business’s operations and processes and applied to business’s

global role in development. Today, sustainability is understood to embrace environmental, economic and

social criteria depending on the user’s intent when articulating the concept. The framework of

sustainability began to gain adherents and popularity in the 1990s. It became very popular in the late

nineties when John Elkington introduced the notion of the ‘‘triple bottom line’’ and linked it to the idea of

sustain ability. In the triple bottom line, the emphasis was placed on the simultaneous pursuit of

economic prosperity, environmental quality, and social equity–called by some a concern for profits,

planet, and people. Like the other frameworks we have discussed, sustainability has experienced

hundreds of definitions as well, and some criticssay the conceptis still fuzzy, elusive and somewhat

ideological and controversial (Carroll, 2015). In spite of this, the concept and terminology has been

significantly adopted in both the business and academic communities. One reason for this may be that

the term does not elicit immediate objections from business people like the term CSR does, which implies

trying to pinpoint ‘‘responsibility.’’ Likewise, it does not try to concentrate on malevolent behavior as

business ethics is often perceived to do. Sustainability is somewhat neutral in that it seems so logical—

take care of the present, take care of the future—that virtually no one opposes it as a concept. Its primary

advantage is that it tends to stress the long-term perspective, encompasses economic, social and

environmental factors, and explicitly incorporates a concern for future generations, which have for

decades been a primary concern of environmentalists. Increasingly, businesses are using the concept in

a multitude of ways (Quarshie, Salmi, & Leuschner, 2016). Certainly, business has adopted the language

of sustainability even when carried no further. But, one of the most important realms in which business

has bought into the concept has been through its efforts to be transparent as it publishes annual social

reports. Today, about 95 percent of the Global Fortune 250 and many other companies volunta rily

(though often pressured by activist groups) publish reports that disclose their performance in social,

economic and environmental realms. These reports have been called many names over the years, but

Week: 7 6

Sustainability Reports seems to be one of the most recent and most popular descriptors. They variously

have been referred to as social reports, CSR reports, Corporate Citizenship reports and Corporate

Responsibility reports; but in recent years more firms have been adopting the Sustainability Report

language. If you look at these reports, they all seem to cover the same topics, and they seldom

specifically address details related to sustain ability definitions; you are left with the impression

businesses have just jumped on the sustainability bandwagon and are trying to select the most recent

buzzword to describe their CSR activities.

5.Corporate Citizenship (CC)

According to Hejazi & Nasiri (2015), it is stated that along with sustainability, corporate citizenship (CC) is

among the most recent and most popular of the terms adopted by business to characterize their CSR. It

became widespread in the ‘90s and has carried forward to today. Since the term was first adopted in the

business community, no strong definition was ever presented that clearly differentiated it from CSR. It

appeared in the business nomenclature as a more suitable collective term that for the most part was used

synonymously with CSR. If you think about companies as citizens of the communities and countries in

which they reside, corporate citizenship means that these companies, like people, have certain duties

and responsibilities they must fulfill to be perceived as legitimate and to be accepted. Good citizenship

suggests that one ‘‘gives back’’ to the community and strives to fit in as a good neighbor would—getting

along with everyone. Corporate citizenship, like sustainability, is one of those ideas that no one would

rightly oppose (Carroll, 2015). It was left to academics to try to make some specific sense of the

corporate citizenship language and to endeavor to give it some specific meaning other than as a

substitute for CSR. The citizenship metaphor is pretty straightforward, and attempting to explain it

through technical language is not space well spent. The framework has been thought of in two primary

ways, however, as a broad view and as a narrow view. The broad view presents it as a wide-ranging,

inclusive term that essentially embraces all that is implied in the concept of CSR (Hejazi & Nasiri, 2015).

It is all about serving stakeholders well by being an integral part of their lives. At one time I framed my

four-part definition of CSR as embracing the ‘‘four faces of corporate citizenship’’—economic, legal,

ethical and discretionary/ philanthropic. In this conception of CC, each ‘‘face,’’ or type of responsibility

category reveals an important facet that contributes to the whole. In this view, companies are expected to

fulfill these responsibilities just as individual citizens are. At the narrow end of the spectrum, CC typically

points to ‘‘corporate community relations’’ or just the discretionary/ philanthropy category of the four-part

definition of CSR. In this narrow view, CC suggests an interaction primarily with community groups—

Week: 7 7

citizens, nonprofits, and other entities at the community level. However, the framework of CC has also

been poised as Global Corporate Citizenship, in which the implication isthat companies need to fitinto the

counties and communitiesin which they do business whereverthis may be in the world. This is the beauty

of the word ‘‘community’’—it can be defined in many different ways to fit the needs of the user. In the final

analysis, the framework of CC has become popular because it carries with it a positive aura of companies

striving to be a good citizen, including paying their own way, abiding by the law, creating jobs, products

and services the community wants, living according to rights and duties understood in the community,

and giving back to others. Who could disagree with this? It is easy to see how the framework of

Corporate Citizenship, as an umbrella term, has become so popular among businesses even though its

precise meaning is somewhat vague and left open to interpretation. In summary, it is easy to see how

these five different frameworks–Corporate Social Responsibility, Business Ethics, Stakeholder

Management, Sustainability and Corporate Citizenship have so much in common that they often have

been used interchangeably by business organizations and managers (Carroll, 2015). Experience has

demonstrated that executives latch onto a term that seems to be in vogue and from time to time change

language and frameworks to always appear to be on the cutting edge (Hejazi & Nasiri, 2015). Doubtless

this trend will continue and other concepts will arrive on the scene and compete for popularity. Whether

they will ever be sufficiently distinct from CSR remains to be seen. Today, CSR, Sustainability and

Corporate Citizenship seem to have the most in common and are most frequently used by companies,

but other ideas and frameworks are always coming along serving as complementary or competing

notions those in this field are tempted to grasp upon. None of these frameworks, however, appear to be

sufficiently distinctfrom CSR thatthey are able to dislodge the traditional and accepted term of CSR. All of

these will continue in popular usage.

Week: 7 8

References

Aguinis, H., & Glavas, A. (2012). What we know and don’t know about corporate social responsibility: A

review and research agenda. Journal of management, 38(4), 932-968.

Carroll, A. B. (2015). Corporate social responsibility. Organizational dynamics, 44(2), 87-96.

Epstein, E. M. (1987). The corporate social policy process: Beyond business ethics, corporate social

responsibility, and corporate social responsiveness. California management review, 29(3), 99-114.

Hejazi, R., & Nasiri, S. S. (2015). Corporate Citizenship and Corporate Social Responsibility. Journal of

Accounting Research, 4(4), 163-183.

Hillman, A. J., & Keim, G. D. (2001). Shareholder value, stakeholder management, and social issues:

What's the bottom line?. Strategic management journal, 22(2), 125-139.

Joyner, B. E., & Payne, D. (2002). Evolution and implementation: A study of values, business ethics and

corporate social responsibility. journal of Business Ethics, 41(4), 297-311.

Quarshie, A. M., Salmi, A., & Leuschner, R. (2016). Sustainability and corporate social responsibility in

supply chains: The state of research in supply chain management and business ethics journals. Journal

of Purchasing and Supply Management, 22(2), 82-97.

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