CSR: An Overview

UNIT 5 CSR : AN OVERVIEW

Objectives
After reading this unit, you should be able to:
 Give an overview of CSR and its relationship with Shareholders
 Examine the Stakeholder relation with business
 Explore the relation of Government, Customers, Civil Society Organizations
with Business Responsibility
 Understand Corporate Citizenship and Business Responsibility
Structure
5.1 Introduction
5.2 CSR an overview
5.3 CSR from a shareholder to stakeholder primacy
5.4 Stakeholder relation to the firm
5.5 Stakeholders and Corporate Social Responsibility
5.6 Corporate Citizenship and Business
5.7 Summary
5.8 Keywords
5.9 Self-Assessment questions
5.10 References/Further Readings

5.1 INTRODUCTION
Corporate social responsibility has been a challenge to business and practitioners
of business. It is a normative challenge for corporations. Corporations should be
responsible to society as a whole and to the segments of society with each stakeholder.
The diverse group of stakeholders and corporations’ responsibility towards all these
entities is very complex. Initially, business relation was concentrated with the
shareholders but with expansion of business stakeholder community gained
prominence. A profit driven business corporations started serious engagements with
entities or groups who affect or get affected by business. Managers of business
entities should understand and communicate with stakeholders for the benefit of
business and stakeholders should acknowledge and be responsible to such initiatives.

5.2 CSR: AN OVERVIEW

Corporations have been the means to social and economic ends. Material wellbeing
has been made possible in significant way because businesses were established to
make way to create enormous wealth. But there have been side effects and unwanted
consequences. Corporate Social Responsibility can be a way to fight these side
effects. Despite it corporate responsibility remains a challenge to business and 67
Evolution and concept executives to do good and to do the right thing in the right way. It is a normative
of CSR
challenge arguing that corporations should be responsible to society as a whole and
to those segments of society with which each firm engages. For more than 120
years, the dynamism that has generated the discussion of corporate responsibility
is the combined effort of various segments of the public- employees, consumers,
investors, environmentalist and to urge change in corporate behavior. Whether to
end the unsafe practices in the Bangladesh Garment Industry, or to organize labor
unrest in the automobile industry, to stop dumping waste in the river, to block a
nuclear power plant, or to protect personal privacy in today’s social media world.
Corporate responsibility has been a challenge to prevailing ways of doing things
decade after decade producing social conflict that has often been met with resistance,
negotiation, dialogue, and on agreement (Carroll et al, 2012).
Many businesses have demonstrated awareness and willingness to address those
responsibilities through a wide range of policies and programs. Notwithstanding
its caveats, corporations has become defining institution in the economic transformation
of society that began with the industrial revolution and continues today(Carroll, p.12).
The factory system in Great Britain and America and issues related to the employment
of women and children led to the first burst of reform or welfare movement. The
industrial betterment and welfare movement set the motion for CSR in Europe and
America, Concern for employees and philanthropy were believed to be the initial
CSR strategy of corporations. Early practices of CSR illustrated business people’s
thinking and doing something about them within the context of their businesses. Profit
maximization phase started the development of social responsibility, trusteeship phase
made the corporate managers responsible towards claims from customers, employees,
and the community. Corporate contributions or philanthropy assumed a central role
in the development of CSR, though such contributions were seen in poor light.
A major change in the CSR goal came with the stakeholder concern. It had the
most significant impact in the business and society relation. The purpose of the
firm is to create wealth or value for its stakeholders by converting their stakes into
goods and services.
Activity1
Discuss major changes in business strategies from the industrial welfare policies till
the incorporation of the stakeholder demands.
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5.3 CSR FROM A SHAREHOLDER TO

STAKEHOLDER PRIMACY
Corporations have power and power entails responsibility, and this responsibility
is beyond the economic and legal framework. Business started off with a profit driven
mind set primarily based on the shareholder’s resources. The concept of social
68 responsibility though emphasized responsibility for business facing social problems
but did not get much support from supporters of shareholder primacy. Early CSR: An Overview
Shareholder primacy view was clearly against social responsibility of any form except
to make money for their stockholders. Others were vehemently against corporate
welfare. Many economists believed that market, instead of managers should have
control over the allocation of resources and returns, and not the managers. The
expected role of managers is to serve the interests of the shareholders. To make
the shareholder primacy view flexible, Peter F. Drucker (1954), a management expert
stressed the idea that profitability and responsibility were compatible, and the prime
challenge is to convert social problem into economic opportunities, economic benefit
into productive capacity, into human competence.
Today, it is accepted that under certain conditions the satisfaction of social interests
contributes to maximizing shareholder value and many large corporations pay attention
to CSR. Managing and governing a company towards maximization of shareholder
value is not only to enrich the shareholders but also achieve a better economic
performance of the whole system.
In practice, shareholder value maximization reflects short-term profits such as a
reduction in personnel expenses, rather than long-term profitability. Also, in the long
run economic success cannot be achieved with shareholder interests but also those
of other competing entities, like employees, customers, suppliers, local communities,
and others who have stakes with the companies. If a company is just concentrating
on shareholder’s interests, it is not always best for the company.
As against the shareholder predominance stakeholder view suggested that the prime
goal of CSR is to create value for stakeholders. Stakeholder concept provided a
new outlook towards strategic management. Though stakeholder as a concept was
first used in 1963, at the Stanford Research Institute, but the concept of constituencies
existed before (Freeman, 1984). The purpose of the firm is connected to the interests
of different individuals or groups who affect or are affected by the activities of the
firm. It maximizes stakeholder’s contribution rather than maximizing the shareholder
value. Here managerial duties are wider than management’s fiduciary duties towards
shareholders. Business has expanded and so its partners, relations, and alliances.
Business not only impacts its immediate beneficiaries but also those who have or
may not have direct engagement with it. Stakeholder perspective of business is very
clear in addressing concrete interests and practices and visualizing specific
responsibilities to specific group of people affected by business. After all one cannot
deny the fact that business’s progress is very much dependent on stakeholders and
same is also true for the stakeholder community. There is a possibility that balancing
stakeholder interest abandons an objective basis for evaluating business activities.
That is not the case because every stakeholder is concerned about the economic
growth of business, and their future depends on it. To some, Stakeholder
representation in corporate decision-making has difficulties in implementation and
justification. Though it is claimed that all stakeholders not just the shareholders have
voice in corporate governance but recognizing such claims might affect the economy.
Broadly speaking, this may not be the case because if the stakeholders are made
aware about the corporate governance system of a corporation probably, they can
contribute in whatever way they can. After all its benefits are reaped by both.
Stakeholder perspective paved the way for the inclusive character of CSR, which
further expanded and took a socially encompassing nature.
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Evolution and concept Activity 2
of CSR
Explain the socially encompassing nature of CSR.
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5.4 STAKEHOLDER RELATION TO THE FIRM

Corporations benefit when it adopts discretionary policies towards its stakeholders.
This creates value for all its stakeholders. Windsor (2006) emphasizes that all forms
of discretionary CSR represent a wealth transfer away from investors to society.
The prime objective for the managers is to seek to maximize the long-term market
value of the firm. All forms of discretionary CSR emphasize wealth transfer from
investors to society. Here, Windsor takes a stand that ethical responsibility and
economic responsibility does not go hand in hand. McWilliams and Siegel (2001)
further stated that firms that do CSR are likely to bear higher costs, and earn
competitive disadvantage, as against those firms who abstain from it. That is why
firms should offer that level of CSR for which the increased revenue equals the
higher cost. The resources provided by CSR shows the social cost curve intersecting
with social benefit curve. So, if a firm attracts more sales, more commitments, and
competent employees because of the reputation effects of their CSR expenditure,
then that is seen as a justification for the social investment.
CSR is not a mandatory activity, and it is purely done in a voluntary manner.
Management of a firm should make social investment decisions based on the core
values and objectives of the organizations. Social investment decisions are based
on the core values and objectives of the organizations. A firm is not going to engage
in any philanthropy or social initiatives because it is inconsistent with its core values.
Such firms even if it have resources would not assist any firms because it is inconsistent
with its social roles. In firm managers play a pivotal role in investing corporate assets.
Essentially, managers have the discretionary power to invest in social resources.
But they face problem of relatively few resources to allocate across a wide range
of possible investments. The question here is, whether stakeholder approach can
solve the problem in allocation of resources. When CSR is used from a stakeholder
perspective then two extreme positions can be possible? Stakeholders can use
their power positively to make the firm achieve its goal or negatively prevent the
firm from achieving its objectives.
Stakeholders’ interests are of intrinsic value to firm, but this will not solve the allocation
problem. It is impossible for firms to respond to all needs of their stakeholders.
Though there is little research on how the economic surplus generated by the firms
can be allocated to the stakeholders. It’s been more than 20 years since, Hosseni
and Brenner’s (1992) attempt to apply Saaty’s Analytic Hierarchy Process to
prioritizing or weighing competing claims of stakeholders. For instance, better terms
for creditors and higher salaries for employees means impact on the shareholder’s
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return. Again, better terms for suppliers or distributors, may mean higher prices for CSR: An Overview
consumers.
Suppose there are large number of stakeholders who could be potential beneficiaries
of such investments, the problem become extreme. Suppose a pharmacy giant changes
prices of drugs to help AIDS patients in Botswana, it thereby reduces its ability to
reprice drugs to equally deserving victims in other Sub-Saharan countries. Stakeholders
according to the discretionary CSR perspective are consistent with community norms.
Here community norms and law provide guidance concerning who may be considered
a stakeholder of a firm and may even treat certain parties as stakeholders. No one
can be considered as stakeholder if doing so would violate a norm. In between
mandatory and prohibited stakeholder considerations is a domain of discretion in
which managers are free to treat someone as a stakeholder, even though it is not
related to the organization. A company may consider cancer victims as stakeholders
even though they are not customers of the firm and have no other connection to
the firm. Though discretion is a large zone, it does not follow that an organization
should choose any stakeholders randomly. Instead, a firm should decide based on
its core values, combined with an assessment of its core competencies.
If a firm is good at improving and extending human health, then its social investments
should correlate to those values. Then the managers should evaluate core competencies
of the organization to determine which stakeholders they should support by
discretionary CSR. Further, firms can define core competencies in terms of attributes
that can give a firm a comparative advantage (Prahalad and Hamel, 1990). Firms
have unique capability that allows it to respond to a social need more effectively
than others. Core competencies are defined in terms of a particular social need.
For example, drug companies have core competencies to reduce the effect of disease
it is competent to deal. Similarly, a company having a capacity to deal with disaster
may immediately act upon it, or a company into bottling water may supply fresh
water in areas hit by natural disaster.
Activity 3
Identify the most appropriate way to understand stakeholders ’relation to the firm?
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5.5 STAKEHOLDERS AND CORPORATE SOCIAL

RESPONSIBILITY
As business expanded stakeholders have become strong drivers of CSR. Edward
Freeman came up with the idea of stakeholder in 1984, a new conceptual framework
in business management. Afterwards this framework was clarified and went through
some modifications. The stakeholder perspective shares the same convictions as
the shareholder perspective principles of market economy and democracy. But they
71
Evolution and concept are different in several grounds. According to the stakeholder perspective the purpose
of CSR
of the firm is connected to interests of individuals and groups who are positively or
negatively affected by it. Corporations should be managed for the benefit of its
stakeholders, managers, its customers, suppliers, owners, employees, local
communities, media, government and civil societies, environment etc. These
stakeholders may sometimes force the corporations to embrace CSR practices.
Here we will be considering few stakeholders adopting CSR practices as firm’s
demand and other stakeholder’s necessity.
Customers and Business Responsibility
Ethical consumerism is the personal consumption pattern made by consumers based
on human rights, social justices, the environment, or animal welfare. Earlier, consumers
were just happy with the product not about the quality. As quality became a huge
concern, consumers started getting involved with business. Not just quality, customers
have, became conscious about the production process of the product, working
condition, wage and benefit of the workers etc. Customers are demanding more
from business corporations and not just the product. Consumers consider corporate
social responsibility in their purchase and consumption behaviors. Consumers care
about issues of corporate responsibility. This impacts their purchase and consumption
pattern, and in turn provides incentives for companies to be socially and
environmentally responsible. Consumer has some authority in highly competitive
markets. This is consumer sovereignty. The domain of consumer sovereignty could
extend beyond the characteristics of the product to include corporate responsibility
practices of the producer. In South Africa during apartheid there are evidence of
consumers boycotting South African products. There was immense pressure on
several organizations to close their chapters in South Africa. Barclays Bank one of
the largest Bank in South Africa was forced to close its office. Similar evidence
was available in America customers came out openly against the Vietnam War. In
the late 1960s, customers boycotted products of Dow Chemical’s because of Dow’s
manufacture of napalm. Though this act didn’t end the Vietnam War, but Dow
discontinued production of napalm.
Greenpeace, an international NGO boycott against Shell Petroleum over its oil spill
in the Atlantic Ocean led to decline in sales of product of the company. Shell’s
problem was compounded by public reactions to environmental harm because of
its operation in Oganiland, Nigeria. Expressions of positive intention is not always
an extensive practice of ethical consumerism. A 2004 European study found that
75% of respondents indicating that they would modify purchase because of social
and environmental concern. But only 3 % modified their purchases and only 10-
12% made any effort to purchase environment friendly products. Rest continued
with their regular purchases without any concern for environmental concern. Even
though Consumer consciousness is on the rise, but socially oriented consumers may
amount to only 10 percent of the market (Schwartz and Gibb, 1999). However,
many people still do some of their purchasing based on the firm’s reputation.
What about marketer’s response?
Several firms have established their core policies on ethical values. Firms like Ben
and Jerry (specialized in ice cream) and Body Shop (cosmetics) are founded on
Ethical consumerism, but they are relatively small companies which were later acquired
by large companies. Ethical branding is a growing activity with companies either
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developing brands by emphasizing ethical values as brand meaning or differentiating CSR: An Overview
existing brands by emphasizing ethical brands as an important but not necessarily
central part of brand meaning.
Companies who stress on ethical branding are Innocent Drinks, Toyota Prius.
Toyota’s first electric hybrid car known as Toyota Prius became a success. It was
introduced in 1997 in Japan and later entered the US market. It became Toyota’s
third best-selling vehicle.
Ethical branding differentiates by emphasizing ethical values followed by firms. For
e.g., Co-op Food a grocery retailer a part of the Co-operative group in U.K retail
products adhering to Fair trade norms. But now it is facing a tough competition
from other retailing brands who are following the same strategy. Mark and Spencer,
another retailing giant adopted Fair trade rules and started selling Fair trade T-shirts,
socks and jeans in 2006 (Rigby,2006). But from 2007 it became U.K greenest
retailer and pledged to make the group carbon neutral and eliminate all waste to
landfill by 2012 (Rigby and Harvey, 2007).
Government and Business Responsibility
Corporate Social responsibility is an alternative to government setting rules and
regulations. Governments have been playing an important role in encouraging business
to adopt CSR practices. CSR is embedded in business-government and society
relation.
There are several ways by which governments can promote CSR. Mostly, the
government uses endorsements, exhortations, and partnership as tools to engage
with business organizations.
Governments can encourage CSR to solve public policy issues, like unemployment,
providing vocational training, dealing with mental illness and social exclusion. Even
education and health issues are dealt with business assistance. In countries like UK,
during Tony Blair’s Labour Government encouraged business participation in solving
important public policy issues. In fact, creation of the position of Minister for CSR
within the UK Department of Trade and Industry a unique step to establish CSR
by government.
Governments can facilitate CSR by setting a framework to guide business behavior.
It can be done by establishing code of conduct which are non-binding in nature.
Governments can initiate CSR as a tool to create mass employment. In UK and
Australia governments encouraged CSR as a response to unemployment and created
public policies which encouraged companies to participate by providing work
experience and training subsidies, and support for the processing of trainees and
design and support for qualification systems which companies could use in their
own employment decisions.
Government facilitating CSR is also evident in India, probably nothing at the level
found in the developed world. Trends by the Government for facilitating CSR in
India in the private sector is evident but it has not grown fully. The force behind
this trend comes from both internal and external factors. Some of the government
driven CSR initiatives are due to globalization. Multilateral organizations have found
the national commitments on the Multilateral Development Goals as a platform through
which initiatives emerged. Even many state governments in India have encouraged
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Evolution and concept public-private partnership for development of the state. Government interventions
of CSR
in the form of public-private partnership in education, specifically in IT education
is remarkable. Government- business partnership for development in several cities
in India, like Bengaluru, Karnataka to revamp the civic facilities and other public-
services are examples of Government initiated CSR. There are governance challenges
at the institutional level. This may be due to weak financial position, lack of
accountability to consumer.
Some partnership between corporations and government is still working in the IT
industry. It is known as the Mission 2007. The main partners are NASSCOM
Foundation, Microsoft Corporation India, and the International Crops Research
Institute for the Semi- Arid Tropics (ICRISAT). It is a partnership of 180 partners
comprising of governments, civil society, and industry set up in 2004. The aim of
this partnership is to provide IT skills and services at the individual and societal
levels. It also aids, with initiatives such as micro credit, disaster management and
security (Mitra, 2007).
NGOs or Civil Society organizations and Business Responsibility
With Globalization there has been a tremendous growth of CSR reflecting governance
issues. Economic globalization has created a structural imbalance between the size
and power of global firms and markets and the capacity and willingness and ability
of governments to regulate them. Transnational corporations appear to wield power
without responsibility. They are often as powerful as states and yet accountable.
These entities cannot replace the state, but they have created new mechanisms of
business regulations. NGOs have stepped into the regulatory vacuum created by
the ineffectiveness of both national governments and international institutions to regulate
MNCs by forging alliances with consumers, institutional investors, and companies
themselves (Newell,2000). These alliances cannot replace the role of the state but
has created alternative mechanisms of business regulations. These has given rise to
global private governance, which can be situated in the shortcomings of international
business regulations. For example, Friends of the Earth, an Environmental NGO
suggested the creation of an international forest certification regime under the
International Tropical Timber organization (ITTO). When the British Government
made such a suggestion at meeting of the ITTO in 1989, it was bitterly attacked by
timber-exporting countries. These countries argued that similar certification scheme
does not exist for the non-tropical countries, and such a scheme represented both an
on-tariff barrier to trade. Hence, the British proposal was taken off the agenda. At
times regulatory schemes by government may remain suggestive rather than mandatory.
Growth of private regulation of global firms is a direct outgrowth of the lack of
effective regulation of global firms. It is a direct result of the lack of effective regulation
of global firms at the international level. The regulation of transnational firms was
dropped from the agenda by UN- related initiatives i.e Agenda 21. It refused to
recommend the creation of global codes of conduct for multinational corporation
(MNCs). Similarly, the Commission on International Investment and Transnational
Corporation was unable to agree on a code of conduct for global firms due to conflict
between developed and under developed countries. Because these instruments are
weak and failed to make any impact and that is why NGOs have begun to target
with the MNCs with vigor. Many NGOs have actively campaigned for the inclusion
of labor, human rights, and environmental standards in trade agreements.
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In India recognizing the role of NGOs in development goes back to the First Five- CSR: An Overview
year plan. Only, from the seventh plan ((1985-90) this was heightened. The voluntary
sector found separate space for NGOs in the Plan document. In fact, the Eight
Plan (1992-97) called for a collaborative relationship between government and NGOs.
NGOs in India have been leveraging for change especially after liberalization. Though
NGOs adopt both confrontation and collaboration to engage with business, but Its
confrontationist approach is an active way to deal with crisis in business. Such
confrontation impacts corporate action. Civil society had formidable engagements
to deal with issues generated by business and the state. These engagements can
take place based on- the expansive scope of issues engulfing the state and the
corporates, the skillful leveraging of national and international networks to achieve
the goals. NGOs confrontationist approach helps to fight for rights-based issues.
Few cases will examine NGOs confrontationist role-
Case study 1
Chilka prawn culture fisheries cases- In 1986, the government in Orissa signed a
deal with Tata Aquatic Farms Ltd to lease 1400 hectares of land in Chilka for prawn
culture in which the government had a 10 per cent share. Fisherman perceived this
gesture as a threat to their traditional fishing techniques. As per the deal the property
rights accorded to the corporates for fishing was also perceived to be threat to the
traditional entitlements of the fishermen to grazing grounds for fish.
On the other side, the corporates were forming hopes of employment generation
and a market for their products. But Chilka being a reserved wetland and therefore
not open for lease to any individual or company by the government. Civil Society
protest the corporate and the state inadequacies sat heavily on the corporate partner
as well (Source: Mohanty in Mira Mitra, p.100).
Case study 2
Centre for Science and Environment (CSE), an Indian NGO in 2003 published a
report against Coca-Cola and Pepsi beverages. The report provided evidence of
the presence of pesticides, to a level exceeding European standards in a sample of
a dozen Coca-Cola and PepsiCo beverages sold in India. With that evidence at
hand, the CSE called on the Indian government to implement legally enforceable
water standards. The report gained ample public and media attention, resulting in
almost immediate effects on Coca-Cola revenues. The main allegation was that it
sold products containing unacceptable levels of pesticides, it extracted large amounts
of groundwater and it had polluted water sources.
Indian government undertook several investigations. The tests found the presence
of pesticides that failed to meet European standards, but they were still considered
safe under local standards. Therefore, it was concluded that Coca-Cola had not
violated any national laws. However, the Indian government acknowledged the need
to adopt appropriate and enforceable standards for carbonated beverages.
In 2006, after almost three years of ongoing allegations, the CSE published its second
test on Coca Cola drinks, also resulting in a high content of pesticide residues times
higher than European Union standards, which were proposed by the Bureau of Indian
Standards to be implemented in India as well. CSE published this test to prove
that nothing had changed, alleging that the stricter standards for carbonated drinks 75
Evolution and concept and other beverages had either been lost in committees or blocked by powerful
of CSR
interests in the government. Finally, in 2008 an independent study undertaken by
The Energy and Resources Institute (TERI) ended the long-standing allegations by
concluding that the water used in Coca-Cola in India is free of pesticides. However,
because the institute did not test the final product, other ingredients could have
contained pesticides. This had a bigger implication, public reaction was very severe,
especially in the U.S.A. as a result, the company suffered huge financial losses (Cristina
[Link] al. 2012).
Shareholders and Corporate Social Responsibility
Shareholder responsibility has till date received limited academic focus. Now the
primary focus is on the direct model of individual share ownership, to the peculiarities
of the present-day assets owned by managers. With high levels of institutional
ownership concentration. The question of what it means to be a responsible
shareholder and to whom shareholders are responsible are significant because it is
only with this understanding that a more sustainable financial system can be created.
Shareholders have evolved from being single individuals to groups, organizations,
institutions. Ideally Shareholders relation to business was purely profit driven, and
only consideration for share benefit. Shareholders can be active driver of CSR by
adopting shareholder activism. Shareholder activism can take place by corporate
engagement or dialogue (communicating with management on issues), shareholder
resolutions (filing or supporting shareholder proposals on social and environmental
issues), proxy voting (establishing policies for voting shares on social and environment)
and divesting shares (selling of shares).
Shareholders as social investors may include in their investment decision processes
over and above consideration of financial risks and return. It may be a combination
of ethical, social, and environmental issues.
Shareholders seek to change corporate behavior via proxy resolutions and negotiation
and management.
Shareholders construct portfolios using a process known as screening, a method
of excluding objectionable investment according to decision rules established
beforehand. This can also exclude objectionable investments according to decision
rules established beforehand, to exclude companies involved in tobacco, alcohol,
or gambling. Some shareholders want to invest in companies with positive social
records, a process known as positive screening. Shareholders may refer to investments
that is beyond the traditional financial channels and are regarded as having high
social impact. It may take the form of micro finance (small loans to entrepreneurs
essentially, in developing countries) or social venture capital or community lending.
Shareholders as activist can also contribute to CSR
Procedures of Shareholder Activism
Shareholder activists influence the behavior of a firm by exercising their ownership
rights. There are two main ways of exercising their rights:
- By preparing shareholder proposals which are voted on by all shareholders at
the company’s annual shareholders.
- By entering a dialogue with the company’s management.
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Case study CSR: An Overview

BP Amoco and Shareholder activism

BP Amoco shareholders have supported an agenda raised by shareholder activists
concerning its strategic positioning over climate change. A resolution was taken to
halt BP’s North slope field in Alaska. The shareholder activism was part of a larger
campaign launched by a group of activists. The Alaska subsidiary of BP pleaded
guilty to prevent a crude spill across a swath of delicate tundra region. It is one of
the largest spill ever in the vast, oil-rich region of Arctic Alaska known as the North
Slope, Management at BP Amoco encouraged a positive response to the proposal
from the company. The campaign allowed many shareholders and build a long-term
dialogue with the company. The activists argued that the company had to acknowledge
the threat of global climate change and that it would mean a substantial reduction
in the use of oil and gas.
This activism was not able to generate any good response. In 2002, the Worldwide
Fund for Nature (WWF) launched a campaign on BP in collaboration with a large
group of shareholders from the NGO, SRI, and Institutional Investor
[Link] used its own shares to launch the campaign and advertised in
popular newspapers. The resolution led by WWF stresses BP to disclose how it
analyses and minimises the risk to shareholder value from operating in environmentally
or culturally sensitive areas. In their response to the resolution, BP recognised the
need for increased disclosure and asked the shareholders to withdraw the proposals
on the grounds that it already performed risk assessments (Source: Oil Spill History
and Ecotoxicology | BP’s Alaskan Well Blowout ([Link]).
Activity 4
Discuss different types of Stakeholder activism and their role in business responsibility.
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5.6 CORPORATE CITIZENSHIP AND BUSINESS

The idea of the firm as citizen had been put forward by many pioneers of CSR. A
firm is not just socially responsible if it merely complies with the law only, because
this is what a good corporate citizen would do (Davis, 1973). In the late 1980s,
scholars in business and society stated that good corporate citizenship is reflected
in company assistance to community well-being through its financial and non-monetary
contributions (Epstein, 1989). In the 1990s the concept of corporate citizenship
attracted positive business attention. Corporate citizenship is about the relationship
that a company develops with its stakeholders. This involves building good relationships
with its stakeholders and that citizenship and such citizenship is the very same thing
as doing business well. Corporate citizenship is related to social expectation, but it
is mostly adopted from an ethical perspective. Business Ethic regards corporations 77
Evolution and concept as a citizen. Corporations like individuals are part of the communities that created
of CSR
them and the responsibilities they bear are intrinsic to their existences as social beings
(Solomon, 1992).
Corporate Citizenship is about the relationship a company develops with its
stakeholders. Being good citizen basically means having respect for each other. It
can be also defined as legal and ethical responsibility that many corporations owe
to the society where they operate. It is an act of giving back to the community. Its
prime aim is to improve the living standards of people in the community and empower
them. In the process of achieving its motive to empower the community, the company
should ensure that the resources invested in harmonizing these projects are within
their financial reach. Ethics is an acceptable way of conduct by an individual or an
organization. It is also referred as the guidelines or principles that govern the
organization. When organizations participate in ethical practices will excel in their
business as they build a very strong network of association with their consumer
and gain trust of its stakeholders.
Case study
Abbot Laboratories and corporate citizenship
Abbott is an international broad- based firm that is involved with the manufacture
of pharmacy products, food supplements and other health care products. It has
invested in scientific research so that they can discover better health care facilities
and drugs that cater to the needs of the consumers.
The company provides a continuum of medical care starting from surgical apparatus
to nutritional and veterinary services. With a workforce of 90,000 and distribution
of its products over 130 countries across the globe hence they have been known
for their safe quality medical products worldwide and it has remained in the top of
the pharmaceutical market for more than 120 years. The cornerstone for its
achievement lies in their commitment to ethical practices.
The company’s code of conduct condones any malpractices in the harshest way
possible. If any employee is suspected or caught breaking any of the rules. Corruption
and bribery was abhorred at any level. Its books of account must be accurate and
reflect exactly what is happening in the company. Any forgery or artificial entry is
treated as a bridge of the company’s code of conduct hence penalized accordingly.
Because of these strict rules the firm could scale great heights in the field of medicine
and stand out from the rest. The company was also committed to offering services
to people who were in dire need of it. That is why Abbott has taken the initiative
to ensure that the underprivileged and the less fortunate in the society get access
to quality medical care. Besides the company has been active in philanthropic activities
and donated relief funds for people affected by disaster and other natural calamities
specially in countries like Pakistan, Chile and Haiti.
Abbott had a very active customer relation. It had worked hard to maintain a good
corporate citizenship. As a company it was concerned about the opinions of the
customers towards the services it offered. They are very responsive to act on any
issues arising from the use of their products and communicate back to their consumers
and related stakeholders on the way forward. The company also offers many
educational programmes to help its clients or patients learn about diagnosis of disease,
its prevention and cure. The company train them to effectively use the products
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and provide them with reliable full time customer care contacts. Such commitment CSR: An Overview
for clients displays their concern for their better lives.
The firm has been into environmental sustainability and taking serious measures for
the communities living adjacent to the firms. It is committed to reducing the impact
of carbon emissions by its manufacturing plants. It has established an environmentally
friendly program to manage and keep watch of the direct emissions. They are investing
in low carbon energy with the aim of cutting down on the level of carbon emission
to the environment. The company is keen to practice proper waste disposal and
encourage recycling of its resources to clean up the ecosystem.
Abbott partnered with the state to strengthen several public issues. In Tanzania the
company allied with the government to strengthen the health care system. This
partnership yielded positive outcome with Tanzania witnessing an overhaul of the
health care system. This new facility could deal with critical health problems like
AIDS, Cancer, and other chronic diseases. It has also upgraded all the labs in the
country and increased its efficiency, created intensive care unit and trained medical
staff to provide medical services to the public. Hence, the ten long year partnership
was able to bring about transformation of the whole medical system of the country
(Source: Policies | Business Conduct and Decisions | Abbott U.S.).

5.7 SUMMARY
Businesses economic drive is of utmost importance to business and its partners.
But this drive should not be at social or community cost. Shareholder relation to
business is about fiduciary gain and that’s considered as the first responsibility of
business. This view of social responsibility was firmly established by the law. Social
contributions, philanthropy of businesses was not acceptable. Later social contributions
were acceptable when such contributions were made profitable, presenting CSR
as a question of self-interest. Under certain conditions the satisfaction of social interest
contributes to maximizing shareholder value and large companies pay attention to
CSR, particularly in considering the interests of people with a stake in the firm,
i.e., the stakeholders. It’s not just the shareholders but the authentic responsibility
of a firm is to create value for its stakeholders. The purpose of the firm is related
to the interests of different groups and individuals who are directly or indirectly
associated with it. As the engagement with the stakeholders increase firms consider
itself as corporate citizen. Hence, firms as corporate citizen involve developing good
relations with its stakeholders.

5.8 KEYWORDS
Shareholder Primacy : Shareholder primacy is a shareholder-centric form of
corporate governance that focuses on maximizing the
value of shareholders before considering the interests
of other corporate stakeholders, such as society, the
community, consumers, and employees.
Corporate Citizenship : Corporate citizenship involves the social responsibility
of businesses and the extent to which they meet legal,
ethical, and economic responsibilities, as established by
shareholders. 79
Evolution and concept Social Responsibility : Social responsibility means that businesses, in addition
of CSR
to maximizing shareholder value, must act in a manner
benefiting society, not just the bottom line.
Conscious : Conscious consumerism means consumers deliberately
Consumerism make purchasing decisions that they believe have a
positive impact.
Socially Responsible : Socially responsible investment, or SRI, is a strategy that
Investment considers not only the financial returns from an investment
but also its impact on environmental, ethical or social
change.

5.9 SELF-ASSESSMENT QUESTIONS

1. Draw out a clear distinction between Shareholder centric CSR and Stakeholder
centric CSR?
2. Do you think Socially Responsible Investment is one form of Shareholder
activism?
3. Do you agree that global expansion of business has hastened consumer
consciousness movement? Explain.
4. Discuss the role of civil society in regulating business?
5. Why Corporate Social Responsibility is concerned with supply chain management
especially the global supply chain?

5.10 REFERENCES/FURTHER READINGS

Carroll et al (2012) Corporate Responsibility, The American Experience, Cambridge
University Press.
Cristina [Link] al (Nov. 2012), ‘Four Case Studies on Corporate Social Responsibility.
Do conflicts affect a Company’s Corporate Social Responsibility Policy ?, Ultrecht
Law Review, Vol 8, Issue 3.
Davis, K. (1973) ‘The Case for and Against Business Assumption of Social
Responsibilities’ in Academy of Management Journal.16: 312-22.
Epstein, E.M. (1989) ‘Business Ethics, Corporate Good Citizenship and the
Corporate Social Policy Process: A view from the United States.’ Journal of Business
Ethics, 8(8):583-95.
Andrew et al (edt) (2008) The Oxford Handbook of Corporate Social
Responsibility. Oxford University Press.
Drucker, P.F. (1954) The Practice of Management, New York: Harper.
Freeman, R.E. (1984) Strategic Management: A stakeholder Approach. Boston:
Pittman.
Windsor (2006). Corporate Social Responsibility: Three key approaches, Journal
of Management Studies,43 (1):93-114.
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McWilliams & Siegel (2001). Corporate Social Responsibility: A Theory of the Firm CSR: An Overview
Perspective, Academy of Management Review,26 (1):117-27.
Hosseni & Brenner (1992). The Stakeholder Theory for the Corporation: Concepts,
Evidence, Implications,’ Academy for Management Review, 20 (1): 65-9.
Prahalad and Hamel. (1990) ‘The Core Competency of the Corporation,’ Harvard
Business Review, May-June, 78-91.
Schwartz & Gibb (1989), Where Good Companies. Do Bad things: Responsibility
and Risk in Age of Globalization. Wiley and [Link].
Rigby,E. (2006) “Ethical Consumer: Supermarkets and Clothes Chains alike have
realized that Shoppers view the Ethics of Sustainability & Ecological Responsibility
as Core to their Buying decisions,’ Financial Times,12 June:4.
Rigby and Harvey (2007). “M&S Vows to Spend $200 m Going Green.” Financial
Times,15 Jan.
Mitra,M. (2007). It’s Only Business! India’s Corporate Social Responsiveness in
a Globalized World. Oxford University Press, New Delhi.
Newell, (2000). “Environmental NGOs and Globalization: The Governance of TNCs,in
R. G Cohen and S. Rai (eds, Global Social Movements. London: Athlone Press,2000
Davis, (1975). Five Propositions for Social Responsibility Horizons, 18 (3): 19-
24. 1975.
Epstein, E.M. (1989)” Business Ethics, Corporate Good Citizenship, and the
Corporate Social Policy Process: A View from the United States’. Journal Of Business
Ethics,8 (8): 583-95.
Solomon,C.R. (1992) Ethics and Excellence: Cooperation and integrity in Business.
New York: Oxford University Press.
Posted April 17, 2017 by admin under N. (2017, April 18). BP’s Alaskan Well
Blowout. Oil Spill History and Ecotoxicology. Retrieved October 10, 2022, from
[Link]
Policies: Abbott India Limited. Policies | Abbott India Limited. (n.d.). Retrieved
October 10, 2022, from [Link]

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