1. Corporate Social Responsibility
• BE is the study of the business situation,
activities and decision where issues of right
and wrong are addressed
The Questions
1. Is there any need to analyse business
beyond the realm of profit maximization ?
2. Does the responsibility end with Providing
goods and services and pay taxes ?

2. Corporation Legal status
• The legal status : Corporations are typically
regarded as independent from those who
work in them, manage them , invest in them
or received product or services from them
• Perpetual succession : An entity that can
survive the death of any individual investor ,
employee or customer.
• Corporation is an artificial person

3. A corporation an artificial person :
Implication
• The company own the wealth not the
shareholders, who own the company
• Fiduciary responsibility of mangers /directors
to shareholders

4. The Social responsibility of Business is
to Increase Profit : Milton Friedman
• Only Human beings have moral responsibility
• Manager guided by purpose other than
maximize profit is committing theft.
(Managers have the sole responsibility to act in the interest of shareholders)
• Government, not corporation have the right/
duty to decide on social issues
( The issue of democracy & professional , competence )

5. Joel Bakan : The Corporation
A surprisingly rational and coherent attack on
capitalism's most important institution: Economist
• The hard hitting film Corporation : The
psychopath person
• Legally instituted to act as externalizing
machine ; No regard of the impact of their
action on society
• Dehumanize those who work in it

6. Bakan’s Conclusion & the Need
• Inability of corporation to act upon moral
reasons to refrain from harming others is
powerful
• Nevertheless society in general expect that
some degree of responsibility be accredited to
corporation albeit this is not the same and
certainly weaker than the moral
responsibilities of individuals

7. Two arguments for CSR
Corporate moral Agency review and implication : G. Moore
Journal of Business Ethics vol 21 ( 1999)
1. Corporation has legal independence to its
owners and is also an independent agency of
their members.
• Corporate internal decision structure & Predetermined goals
• There is purpose for decision
2. Organizational culture : Values and Beliefs
If legal then moral as well : Law is codified ethics

8. The Half Century Old Debate
The Rationale of CSR
(1)The Business Arguments
• Enlightened self interest takes corporation
beyond profit maximization
More satisfied consumer
Environmental Groups, Child labour & Boycott
of produce
( Green Peace, Centre for Science and Environment , Society for Common cause )
A B Carroll (1979 ) A three dimensional Model of CSR ,
Academy of management Review 4:497-505-

9. The Half Century Old Debate
Rationale of CSR: The Business Arguments
• Low attrition rate of employees : Self Esteem
• Forestalling Government legislation : Greater
Corporate Autonomy
( Recent increase price of steel price and Government’s threat to enforce ESMA, Rural
credit and Nationalization of Banks in India )
• Creating a more stable society and furthering
the interest of Business
( Many Examples of Latin American Countries, Copper Mines and Left Government in Chile and later long
spell of Dictatorship, Shell Company and capital punishment to Ken Sarabibo )

10. Business Arguments : Reality
Check
• Friedman does not dispute validity of these
argument but any thing done to promote
business , in his opinion is not CSR, it is act of
profit maximization “ under the cloak of Social
Responsibility”.
• Although motives of corporate may be varied and
the relationship between CSR and profit is difficult to
establish unambiguously nevertheless there are
indicators that both have some kind positive
relationship .

11. Business Arguments : Reality
Check
Hard and sufficient evidences are not there
to establish that CSR leads to profit but there
are indicators that financial success may
allow firms to indulge in the luxury of CSR.

12. The Half Century Old Debate
Rationale of CSR: (2) Compensatory Arguments
In their pursuit of profit maximization Business
create social problems
You pollute who will clean (?), you displace who will rehabilitate (?) . Heavy
Tax burden Vs winning friends
Corporate depend upon the various
stakeholders not only on shareholders
( Hence need to take into account their welfare)

13. Rationale of CSR: (2) Compensatory
Arguments
• Corporate draw a lot from the externalities
created by government and people must
compensate the cost ( Law and order , educated and rational citizen)
• Social Impact of activities of corporate :
product , employment : Positive , negative or
neutral ,
( Hollywood , Bollywood and Cultural Diversities, language etc )

14. Nature of CSR : Four Part Model
A consecutive layer with a Pyramid
Corporate social responsibility encompasses
the economic, legal, ethical and philanthropic
expectations, placed on organization by
society at given point of time
Archie carroll and A.K Buchholtz (2000): Business and Society Ethics and
Stakeholers Management

15. Outcomes of CSR
• Corporate Social performance can be observed
• Principles , process and outcomes
Three concrete areas
(A) Social policies : Values in the mission statement( .g. environment concerns)
(B) Social Programme
(c ) Social Impact
Fedrick W.C.(1994) From CSR1 to CSR2: The Maturing of
Business and Society thought Business and Society 33(2):
150-64

16. Stakeholders Theory of Firms
There are many, inter-alia , shareholders who have legitimate interest
in the corporation
The principals of
(A) Corporate right : Corporation has the obligation no to violate
the rights of others
(B) Corporate effect : companies are responsible for their
actions
A stakeholder is an individual or group which is either
harmed or benefited or whose rights can be violated
or have to be respected by the corporation
Evan W.M and Freeman R.E(1993)A stakeholder Theory of modern corporation Kantian capitalism
In NE Bowie (ed)Ethical Theory and Business Englewood Cliffs NJ Prentice Hall

17. Stakeholders Theory of Firms
Shareholders, customers, Employee, Supplier
( the traditional model of managerial capitalism )
adding
Government , competitors , Civil society,
makes it
The stakeholders model of capitalism

18. Why Stakeholder matter
The descriptive level
Legal perspective : concern only with those in legal
contract with the organization
The activities of firm has wider impacts even on those
who are not in contractual agreement with it
Economic Perspective
1. Externalities
2. Agency Problems : ownership of firms Vs Motive of Shareholders

19. Corporate Accountability Why ?
Government failure
Political institutions of modern societies are not able to
protect their citizens from the self –imposed consequences of
industrialization
Governments are part of problems and not of solution : Compulsion of
democratic system
Below the level of traditional governance or sub politics
Global warming , risk inherent in new technologies, SARS, Bird Flue , AIDS

20. Corporate Accountability Why ?
Increasing power of Corporate
Globalization & shifting of activities in to low
cost regions
Intricate laws difficult to implement to check
economic crimes
Public services are coming in private sectors
Unemployment etc could not be solved by govt ,

21. To Whom Corporate are Accountable ????
• De facto political institutions
• New Accounting Procedure : Environmental
and Social Accounting and Auditing
• Boarder communication with shareholders

22. A Pause !!!
To see and Evaluate
How your actions are impacting others
Thanks