Emerging Issues in Management (Mgmt 440)

1. Emerging Issues in Management (Mgmt 440) Corporate Social Responsibility (Chapter 19) Professor Charles H. Smith Fall 2011

2. Introduction to Corporate Social Responsibility • Also known as CSR, corporate citizenship, stakeholder management, and sustainability. • Study of CSR usually involves company’s obligation to do something beyond the minimum legal requirement. • However, much debate as to what “something beyond” means or even if company should be doing “something beyond.”

3. Early History of CSR in the United States • In the 19th Century, great fortunes were made by individuals who were very charitable; e.g., John Rockefeller, Andrew Carnegie. • But, charity often influenced by “Social Darwinism” (Herbert Spencer) – best to donate to large institutions or grand projects (e.g., universities, concert halls) instead of giving to poor individual directly • Example – Carnegie once upbraided friend who gave a quarter to a beggar on the street; what is your opinion/practice when asked for money by panhandlers?

4. Competing Theories of CSR • Milton Friedman – “profit maximization.” • Business Roundtable – “existence [of a company] depends on society’s approval.” • Both theories look at “stakeholders” but in different ways.

5. Friedman’s Profit Maximization • The goal of management is to maximize the company’s profits • In other words, management is charged with working for the shareholders’ interests which makes shareholders the company’s leading stakeholder. • Engaging in CSR must be viewed through lens of how it will benefit shareholders. • Government is also a stakeholder in that the legislature levies taxes and the judiciary resolves disputes.

6. Business Roundtable • Management must balance legal and ethical obligations owed to stakeholders such as shareholders, employees, creditors, vendors, communities, customers, and the general public. • CSR is advocated for a variety of reasons • Some objectives can be achieved only through private enterprise; e.g., business may be more efficient at job training than public or educational institutions. • “Voluntary” restraint in seeking profits may prevent or influence government regulation; e.g., Title IX and college sports.

7. Stakeholder Theory • Definition of a stakeholder – “A person, group, or organization that has direct or indirect stake in an organization because it can affect or be affected by the organization’s actions, objectives, and policies” (http://www.businessdictionary.com/definition/stakeholder.html).

8. Stakeholder Theory cont.

9. Primary Stakeholders • Stockholders (owners). • Customers. • Employees. • Communities. • Governments.

10. Secondary Stakeholders • Media. • Competitors. • Suppliers (vendors). • Trade associations. • Political interest groups. • Creditors. • Unions.

11. Secondary Stakeholders cont. • Political parties. • Religious groups. • Earth’s biosphere. • Future generations. • The poor. • Educational institutions.

12. Who are the Stakeholders? • Start with the people/entities on the previous slides – one of the big issues with this model is identifying stakeholders. • Which stakeholders on these lists are more important to you generally? To the majority generally? Why? • Should any stakeholders on these lists be disregarded? Why?

13. Stakeholder Theory Case Studies • To be reviewed with small groups – who/what are the stakeholders as to Cal State Fullerton? • Would the stakeholders be different for issues such as • Class cutbacks. • Addition of academic programs. • Campus construction projects. • Bringing back Titan football.

14. One More Thing About the Stakeholder Theory • It will be the subject of the essay question on next week’s exam! • You will be called upon to identify all possible stakeholders and provide an explanation – truly a “volume” answer since more credit given for more stakeholders correctly identified and described. • Also, it might provide guidance for your group paper.