CHAPTER 1
SOCIAL RESPONSIBILITY FRAMEWORK
CORPORATION: DEFINITION
A corporation is an artificial being created by
operation of law, having the right of succession
and the powers, attributes, and properties
expressly authorized by law or incidental to its
existence (Sec. 2 of the Revised Corporation Code
of the Philippines).
As distinguished from PARTNERSHIP: By the
contract of partnership, two or more persons bind
themselves to contribute money, property or
industry to a common fund, with the intention of
dividing the profit among themselves (1st
paragraph of Art. 1767 of the Civil Code of the
Philippines).
COMPOSITION OF A CORPORATION
This is the basic hierarchy of most corporations,
the stockholders elect the board of directors, and
the board of directors chooses the CEO.
• A corporation is a legal entity created by an
individual or a group of shareholders who have
ownership of the corporation (through shares
of stocks issued by the corporation) to engage
in business activities.
Their ownership of the corporation is generally
represented by their holding of common stock
(one share = one vote).
FOUR APPEALING ATTRIBUTES OF A
SAN MIGUEL CORPORATION
These are the following: 4 AREAS OF REFORM UNDER THE RCC
1. Limited Liability; 1. Ease of doing business (Ex. “Paspas Permit”);
2. Transferability of Ownership; 2. Fortified stockholder protection;
3. Separate Legal Personality; 3. CORPORATE SOCIAL RESPONSIBILITY; and
4. Centralized Management. 4. Improved policies and regulatory corporate
LIMITED LIABILITY RULE framework.
The liability of stockholders in Philippine
corporations is limited only to the extent of
their capital contribution thereto. Other
properties, holdings or assets of stockholders
are not within the reach of corporate creditors.
Note: Compare this from Partnership. Up to
what extent is the liability of the partners in
case the partnership debt exceeds the capital?
CORPORATE SOCIAL RESPONSIBILITY (CSR)
• It is a manifestation of good corporate
governance.
• It is the responsibility of companies to act and
behave ethically to satisfy various stakeholders'
needs.
• It is an ongoing commitment of organizations
to ensure accountability to the stakeholders
their existence impacts.
STRUCTURE OR FRAMEWORK THAT
CHARACTERIZES COMPANIES’
RESPONSIBILITIES WITHIN THE SOCIETY
CSR IN THE PHILIPPINES
From 2000 onwards, CSR has become an
essential part of a company’s identity.
1. ECONOMIC – It is required that companies be CSR is now a universally accepted norm of good
profitable first after they have complied with corporate governance.
their respective obligations to their employees
and suppliers. This is the very foundation and
required of all corporations.
2. LEGAL – A corporation must abide by the
rules and regulations imposed for fairness and
justice. Companies are required to be legally
compliant as well.
3. ETHICAL – Doing what is right. Society
expects companies to take on this responsibility
beyond what is required of them legally.
4. PHILANTROPHIC – Issues that pertain to the
improvement of human lives must be addressed
without compromise. This responsibility is not
required nor expected but rather desired by the
companies.
BRIEF HISTORY OF CRS: INDUSTRIAL
REVOLUTION
THE BUSINESS CASE
• The industrial revolution was responsible for
The business case for CSR to reasons why
the economic growth of nations. But the
businesses should support and accept the CSR
downside of this contributed to social problems
agenda.
such as increased in poverty and unfair labor
ADVANTAGES:
practices.
1. Companies would behave more responsibly.
• CSR started as a philanthropic endeavor of
2. Studies have shown a strong correlation
successful businessman who wanted to do good
between CSR and corporate financial
through their donations to help the
performance.
underprivileged.
DISTINGUISHED FROM THE POINT OF VIEW OF
FRIEDMAN:
The sole responsibility of corporations is to
generate profit and it is the government’s and philanthropy must be ingrained or deeply
responsibility to provide for society’s needs. embedded in an organization.
• STRATEGY
DRIVERS & BARRIERS OF CSR
BARRIERS
LIMITED FINANCIAL RESOURCES – A company
needs to be profitable and take care of its own
needs before it has the ability and resources to
engage effectively in social responsibility.
PROFIT MAXIMIZATION – A company that
single-mindedly focuses on operational
efficiency is usually driven by profit
maximization.
DRIVERS AVAILABILITY OF HUMAN RESOURCES – No
• REGULATION – Regulation and law provide a matter how good the intentions are in
framework that companies must comply with. promoting CSR in organizations, it will need
For instance, in China, CSR is no longer a efficient mobilization through employee
voluntary act but is mandated by the central involvement and engagement in programs.
government. Without the support of human resources in its
implementation, CSR activities will be lackluster.
MEASURING CSR
The purpose of measurement is to understand
what is being measured better and lay the
groundwork for improvement.
Measuring CSR provides many benefits such as:
-helping organizations make better decisions on
allocating resources with greatest
impact;
• MARKET BEHAVIOR - More or less, how the
-improving processes that will make CSR
market behaves and influences
initiatives more efficient; and
• SOCIAL ACTIVISM - How stakeholders in
-providing more support for the business case.
society react and voice out their concerns to
• Kaplan & Norton’s Balance Scorecard
corporations publicly through various means
Note: Application of this scorecard is
have impacted how organizations behave.
dependent on the specific need or circumstance
• CULTURE - It is a mixture of beliefs, norms,
of a company and may be adjusted accordingly.
symbols, and the heritage that a particular
country or geographic area shares and
practices. This is built over time and becomes
part of its normative values. For CSR and good
governance to thrive, a culture of benevolence
MEASURING CSR: TRIPLE BOTTOM LINE APPRECIATION
CSR is an “ongoing commitment” of
organizations.
This is to ensure accountability to the
stakeholders its existence has an impact on.
STRATEGIC CSR EXPLAINED
• It is a process in which businesses evaluate
their various stakeholders’ changing demands
COMPANY’S BOTTOM LINE and how these demands are to be met or
Old Concept - Profit satisfied.
New Concept - employee happiness & good NOTE: In creating a Strategic CSR, it must
corporate governance. involve a thought-out planning and execution.
Whatever the company’s plans have on its CSR,
LEADERSHIP - acts of the leader can trickle it cannot be effective unless the strategy aligns
down to affect employee’s subsequent attitude, its stakeholder concerns with corporate goals.
behavior and actual engagement through
volunteerism. STRATEGY
• It is defined as a plan of action taken to
KAPWA - The Filipino concept of “kapwa” achieve objectives.
(fellowship) is considered to be an essential • It involves three (3) steps: FORMULATION,
component of effective leadership. “Kapwa” is IMPLEMENTATION and EVALUATION.
defined as a shared identity with others.
STRATEGIC MANAGEMENT
FUTURE OF CSR IN THE PHILIPPINES • It is the process of creating a competitive
• It is promising & continuously evolving. advantage over its competitors and sustaining
• The main driver of this evolution is the this advantage long term.
awareness of the individual that his/her PROCESS OF STRATEGIC MANAGEMENT
contribution to the society is ever increasingly
important.
• It is the individual, not corporations that will
act as the catalyst for the socio-political-
economic influence of the nation.
• VOLUNTEERISM & ACTIVISM will be one of
the key drivers in furthering the progress of
CSR.
ESTABLISHED GOALS - This is initially performed
CHAPTER 2 by creating and / or clarifying your business
STRATEGIC MANAGEMENT OF STAKEHOLDER vision / mission and identifying goals /
RELATIONSHIP objectives.
See the illustration as provided in the book with
VISION - What the company envisions itself to regard to industrial waste.
be in the future or to become EXAMPLE:
MISSION - It describes what the company is all • To illustrate, when a manufacturing company
about, who they are, what and how they do produces industrial waste and dumps it into a
things, and for whom river, residents affected by this unethical
GOALS - Desired outcomes of planning, broader practice will demand the proper disposal of
than objectives. chemicals as it affects their right to clean air and
OBJECTIVES - Aimed targets that are needed to water.
achieve goals • Employees of the company may also be
SCAN ENVIRONMENT - Perform a thorough exposed to the toxic chemicals in making the
analysis and assessment of the INTERNAL and product and have the right to demand
EXTERNAL environment of the company. protective gear and processess that will not be
EXTERNAL - Looks at the external opportunities harmful to them.
and threats, given the dynamics of a particular Note: These residents and employees do not
industry have any financial or managerial participation
INTERNAL - Looks at a company’s strengths and except maybe buying the products or helping
weaknesses by assessing its resources produce them, but their concerns should be
FORMULATION - Develops top-level strategies heard and be a part of the company's decisions.
that can be trickled down to the rest of the • This is a moral claim exercised by a
organization. stakeholder, and forms part of a company's
IMPLEMENTATION - Executes developed plans desired ethical behavior.
by providing detailed objectives and action STRATEGIC CSR
plans • Strategic CSR starts within an organization
EVALUATION - Measures and assesses results, when it embeds and aligns its CSR initiatives as
and recommends changes for improvement if part of the company's overall strategy.
necessary. This simply means that a company's objectives,
STAKEHOLDERS - Are individuals or group of strategies and core values take into
people who can be affected by the activities consideration the impact its operation have on
engaged in by corporations in achieving their the stakeholders.
goals. Encircled at right are the core or critical parts of
KEY STAKEHOLDERS - They are shareholders a strategic CSR framework:
Investors, Owners, Partners, or Anyone who has
a financial stake in the company Customers,
Employees, Suppliers and Society (Gov’t, Civil
Society, Institutions.
STAKEHOLDER THEORY - This theory states that
companies are responsible for generating
reasonable profits for their shareholders but
should also be responsible for their
stakeholders’ well-being.
Similar to the process of strategic planning, an community's best interest upfront - everything
effective CSR strategy would entail performing becomes natural, cohesive, and authentic. It
the following steps: becomes a value-added experience, not just for
1. Identify the goals/objectives of the company. the beneficiaries, but also for your own
2. Scan the environment by looking at the employees.
internal and external situations by which the NOTE: A champion is necessary for CSR to
company operates. thrive in organizations.
The internal assessment looks at the vision, • Support from top management is also a
mission, resources, strengths and weaknesses critical area since resources usually will be
of the company. coming from the board or executive
The external assessment looks at the needs of management's approval.
the stakeholders, considering the given
opportunities and threats that are in line with EMPLOYEE ENGAGEMENT
corporate goals and objectives. • One of the ways on how CSR can be
Note: Step 2 provides a foundation and aids in strengthened is through employee
developing a strategic CSR program. volunteerism.
3. Formulate a CSR strategy that is aligned with • This can be done through the giving out of
corporate operations. incentives.
The company must identify how they will Positively influence employee attituted and
approach their CSR initiatives (corporate behavior at work.
donation, work with foundations, or • Apart from feeling good about helping the
intermediaries) and programs (single, focused community, employees involved in CSR develop
or multi-program activities), and understand the better morale and feel proud of their
needs of your target beneficiaries. workplace.
4. Implement the CSR program with consistency
Cohesiveness of the entire process is an COLLABORATION
important element of strategic CSR. When organizations opt to work together, they
5. Evaluate the program if it has achieved its build social capital as relationships develop over
desired objectives and outcomes. time.
If not, remedial efforts.
COMMUNICATION
SUCCESS INDICATORS Informing the various stakeholders on these
• For CSR to be strategic, companies must success stories, no matter how small will
manage stakeholder relationships effectively, increase public trust and legitimacy.
for social responsibility is primarily about
stakeholders' well-being. VALUE CREATION
The ultimate goal of business is to create
LEADERSHIP sustainable value for its stakeholders.
• Passion: Most importantly-follow the lead of Companies that create value for stakeholders
"Management's Heart." Authenticity is key. through sustainable use of natural resources,
When you see that Management's heart is the risk reduction, reputation, trust, benevolence,
one leading, and when you keep the transparency, collaboration and many more
value-added initiates will have truly performed
their roles as ethical and legitimate
corporations in our society.