Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
What is CSR?
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PT
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 What is CSR? (Werther & Chandler, 2010)

 Three words, corporate, social, responsibility

EL
“A view of the corporation and its role in
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
society that assumes a responsibility among
N
firms to pursue goals in addition to profit
maximization & a responsibility among a firm’s
stakeholders to hold the firm accountable for its
actions.”
 Corporate philanthropy
 Philanthropy (Oxford English Dictionary): “The
practice of helping people in need”

EL
PT
Corporate philanthropy: The desire of profit
 N
making organizations to help people in need or
promote welfare of people in need.
 Strategic corporate philanthropy
(Michael Porter & Mark Kramer in Werther & Chandler, 2010)

 “The acid test of good corporate philanthropy

is whether the desired social change is so

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beneficial to the company that the organization

PT
would pursue the change even if no one ever
N
knew about it.”

 A balance between the “… ends of economic

viability and the means of being socially
responsible.”
 The CSR Pyramid
(Carroll, 1991, in Schwartz & Carroll, 2003)

Be a good citizen Desired

EL
Philanthropic

PT
Be ethical N Ethical
Expected

Required
Obey the law Legal

Required
Be profitable Economic
 The CSR Hierarchy
(Carroll, 1991, in Werther & Chandler, 2010)

Discretionary

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Responsibilities

PT
N Ethical
Responsibilities

Legal
Responsibilities

Economic
Responsibilities
 The CSR Hierarchy (Contd.)
(Carroll, 1991, in Werther & Chandler, 2010)

 Economic responsibility: “…to produce an

acceptable return on its owners’ investments”
Legal responsibility: “… a duty to act within the

EL

legal framework drawn up by the government &
PT
judiciary” N
 Ethical responsibility: “… to do no harm to its
stakeholders & within its operating environment”
 Discretionary responsibility: “… proactive, strategic
behaviors that can benefit the firm & society, or
both”
 The culture & context (Werther & Chandler, 2010)

 Rich and poor societies: Who can afford what

 Individualistic and collectivistic cultures:

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Different needs, different priorities, different

PT
agendas for CSR N
 A moral argument for CSR
(Werther & Chandler, 2010)

 The existence of an organization and the

expectations of the community and wider

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society it functions in.

PT
N
 The iron law of social responsibility
(Davis & Blomstrom, 1966, in Werther & Chandler, 2010)

“In a democratic society, power is taken away

from those who abuse it.”

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PT
N
 CSR and profits (Werther & Chandler, 2010)

“While CSR does not increase profits, higher

profits lead to greater CSR.”

EL
PT
N
 Why is CSR important?
(Werther & Chandler, 2010)

 Growing affluence
 Ecological sustainability

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Globalization
PT


 The free flow of information N

 The public image of an organization
N
PT
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 EL
Thank You
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PT
 EL
Theories of CSR
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N
 Legitimacy Theory
(Fernando & Lawrence 2014)

 The society gives organizations their resources.

So, the organizations are expected to fulfil the

EL
expectations of the society they function in

PT
N
 “Organizations can only continue to exist if the
society in which they are based perceives the
organization to be operating to a value system that
is commensurate with the society’s own value
system.” (Gray et al., 2010, in Fernando & Lawrence, 2014)
 How do organizations legitimize
their operations? (Fernando & Lawrence, 2014)

 “To educate relevant stakeholders about their actual

performance”: Reporting

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 Change the perceptions of the relevant stakeholders
about the underlying issue without changing the
PT
organization’s behavior”: Public impression management
N
 “Distract or manipulate the attention away from the
issue of concern and seek to divert the attention to a
favorable issue”: CSR Activities and advertising
 “Seek to change external expectations about the
organization’s performance”
 Limitations of Legitimacy Theory
(Gray et al., 2010, in Fernando & Lawrence, 2014)

 Legitimacy gap: Dynamic nature of the

expectations of the society versus

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organizational objectives

PT
Legitimization threats: Unexpected occurrences
 N
affecting the organization’s reputation, such as
a financial threat, major accident, scandal, etc.
 Vagueness regarding disclosure: If and why
and how much should organizations disclose
 Stakeholder Theory (Fernando & Lawrence, 2014)

 “… the management of an organization is

expected to perform its accountability towards

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its stakeholders by undertaking activities

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deemed important by its stakeholders, and by
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reporting information”
 Who are stakeholders?
(Florea & Florea, 2013)

“Stakeholders are the persons, institutions,

organizations, formal & non formal groups which

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are interested or can be affected or which could

PT
influence the company decisions or actions.” (Freeman,
1980, in Florea & Florea, 2013)
N

21
 Types of stakeholders (Florea & Florea, 2013)

Based on involvement:
 “Internal stakeholders have a range of interests in
the different parts of the company [or organization

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or community] and its activities.”
PT
N
 “External stakeholders are individuals, companies
or groups outside the companies which are
influenced or could influence company [or
organization or community] decisions and
activities.”
 Types of stakeholders (Contd.)
(Florea & Florea, 2013)

Based on how they are influenced by decisions/ actions

 “Primary stakeholders are the people or groups which are directly
affected, in a positive or negative way, by a strategy, decision or

EL
action of a company, organization [or community].”

PT
 “Secondary stakeholders are people or groups that are indirectly
N
affected, either positively or negatively by a company [or
organization or community] decision or action.”
 “Key stakeholders play an important role in [the] decision making
process & also in its implementation because they are involved in
company management or financing [or management & financing of
the organization or community], [e.g.] policy makers, officials,
important professionals or community personalities having a
strong position or influence.”
23
 Types of stakeholders (Contd.)
(Florea & Florea, 2013)

Based on the amount of power and influence they have:

 “Promoters have both great interest in the decision & the

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power to help make it successful (or to fail it)”

PT
 “Defenders have a vested interest & can voice their
N
support in the community, but have little actual power to
influence the decision in any way.”
 “Latents have not particular interest or involvement in
the decision, but have the power to influence it greatly if
they become interested.”
 “Apathetics have little interest & little power, & may not
even know the decision exists.”
 Perspectives of stakeholder theory
(Fernando & Lawrence, 2014)

 Ethical perspective:
 “Irrespective of the stakeholder power, all the
stakeholders have the same right to be treated

EL
fairly by an organization.”
PT
“”Managers of an organization are expected to
 N
manage the business for the benefit of all
stakeholders, regardless of whether management of
stakeholders leads to improved financial
performance.”
 Limitation: very difficult to manage different
and contradictory interests of stakeholders
 Perspectives of stakeholder theory
(Contd.) (Fernando & Lawrence, 2014)

 Managerial perspective: “ an organization is

expected to be accountable to its economically

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powerful stakeholders.” The more powerful or

PT
critical the stakeholder, the more accountable
N
the organization is to her or him.
 Challenge: Deciding the priority list
 Institutional theory (Fernando & Lawrence, 2014)

 Social acceptance
 “Institutional theory views organizations as

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operating within a social framework of norms,

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values, & taken-for-granted assumptions about
N
what constitutes appropriate or acceptable
economic behavior.”
 Dimensions of institutional theory
(Fernando & Lawrence, 2014)

 Isomorphism: “A constraining process that

forces one unit in a population to resemble
other units that face the same set of

EL
environmental conditions.”
PT
 N
Coercive isomorphism: Pressure from people and
institutions that matter
 Mimetic isomorphism: Copying others’ practices
when one fails to do something unique on one’s
own
 Normative isomorphism: Doing good just like
everyone else…
 Dimensions of institutional theory
(Contd.) (Fernando & Lawrence, 2014)

 Decoupling: “… situation in which the formal

organizational structure or practice is separate

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and distinct from actual organizational

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practice.” N
 Social and environmental disclosures help construct
an image of the organization that may or may not
match the real image.
 Theoretical Framework
(Fernando & Lawrence, 2014)

Convergent predictions Convergent motivations

Integrated of organizational of CSR practice
Theories behavior & motivations

1. An organization seeks 1. To legitimize the business or

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Legitimacy survivability & stability of organization (legitimacy
its business motive)

PT
Theory
2. To perform accountability to
2. An organization seeks the organization’s
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legitimacy of its business stakeholders, sometimes
based on the extent of the
3. An organization tries to be
stakeholders’ power
Stakeholder accountable to its
(accountability motive)
Theory stakeholders
3. To conform to social norms &
4. An organization tries to beliefs those are largely
conform to procedures & imposed on an organization,
structures of other which ultimately leads to
organizations which are homogeneity in organizations
Institutional in the same field (isomorphic
within a particular
Theory motive)
organizational field
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
Theories of CSR
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(Contd.)
N
PT
(Garriga & Mele, 2004)
 Broad categories of theories
(Garriga & Mele, 2004)

 Instrumental theories
 Political theories

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Integrative theories
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

 Ethical theories N
 Instrumental theories (Garriga & Mele, 2004)

 “The corporation is an instrument for wealth

creation & this is its sole social responsibility

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 “Any supposed social activity is accepted if, and

PT
only if, it is consistent with wealth creation:
N
 “CSR is a mere means to the end of profits.”
 Groups of instrumental theories
(Garriga & Mele, 2004)

 Maximising the shareholder value:

 “Any investment in social demands that would

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produce an increase of the shareholder value

PT
should be made, acting without deception & fraud”
N
 “In contrast, if the social demands only impose a
cost on the company, they should be rejected.”
 “… the socio-economic objectives are completely
separate from the economic objectives”
 Groups of instrumental theories
(Contd.) (Garriga & Mele, 2004)

 Strategies for achieving competitive advantage:

 “… focussed on how to allocate resources in order

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to achieve long-term social objectives & create a

PT
competitive advantage”
N
 Approaches:
 “Social investments in competitive contexts
 Natural resource-based view of the firm & its dynamic
capabilities
 Strategies for the bottom of the economic pyramid”
 Approaches to strategies for achieving
competitive advantage (Contd.)
(Garriga & Mele, 2004)

 Social investments in a competitive context:

Philanthropic investments are perceived as having
better social value than any other investment (Porter &

EL
Kramer, 2002, in Garriga & Mele, 2004)

“When philanthropic activities are closer to a

PT

company’s mission, they create greater wealth
N
than other kinds of donations.” (Burke & Lodgson, 1996, in Garriga &
Mele, 2004)

 “… philanthropic investments by members of

cluster, either individually or collectively, can have
a powerful effect on the cluster competitiveness &
the performance of all its constituents’
companies.” (Porter & Kramer, 2002, in Garriga & Mele, 2004)
 Approaches to strategies for achieving
competitive advantage (Contd.)
(Garriga & Mele, 2004)

 Natural resource based view of the firm (RBV)

& dynamic capabilities:

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 RBV:

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“… the ability of a firm to perform better than its

N
competitors depends on the unique interplay of human,
organizational, & physical resources over time.”
 Resources for competitive advantage “… should be
valuable, rare, and inimitable, and the organization must
be organized to deploy these resources effectively”
 Natural resource-based view of the
firm & dynamic capabilities approach
(Contd.) (Garriga & Mele, 2004)

 ‘Dynamic capabilities’ approach:

 “drivers behind the creation, evolution, &

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recombination of the resources into new sources of

PT
competitive advantage”

N
“organizational & strategic routines by which managers
acquire resources, modify them, integrate them, &
recombine them to generate new value-creating
strategies”
 Natural resource-based view of the
firm & dynamic capabilities approach
(Contd.) (Garriga & Mele, 2004)
 Social & ethical capabilities include,
 “process of moral decision making
process of perception, deliberation & responsiveness or

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

capacity of adaptation

PT
 development of proper relationships with the primary
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stakeholders: employees, customers, suppliers, &
communities”
 Hart (1995): Strategic capabilities model:
 Interconnected capabilities: “pollution prevention, product
stewardship, sustainable development”
 Critical resources: “Continuous improvement, stakeholder
integration, & shared vision”
 Approaches to strategies for achieving
competitive advantage (Contd.)
(Garriga & Mele, 2004)

 Strategies for the bottom of the economic

pyramid:
Strategies that can “serve the poor & simultaneously

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
make profits”

PT
 Disruptive innovations: “Products & services that do not
N
have the same capabilities& conditions as those being
used by customers in mainstream markets; as a result
they can be introduced only for new or less demanding
applications among non-traditional customers, with a
low-cost production & adapted to the necessities of the
population.” (Christensen & Overdorf, 2000; Christensen et al., 2001, in Garriga &
Mele, 2004) e.g. a low cost basic cell phone
 Groups of instrumental
theories (Contd.) (Garriga & Mele, 2004)

 Cause related marketing :

 “… the process of formulating & implementing marketing
activities that are characterized by an offer from the firm to

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contribute a specified amount to a designated cause when

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customers engage in revenue-providing exchanges that
satisfy organizational & individual objectives.” (Varadarajan & Menon,
N
1988, in Garriga & Mele, 2004)

 Goal: “… to enhance company revenues & sales or customer

relationship by building the brand through the acquisition of,
& association with the ethical dimension or social
responsibility dimension”
 “… seeks product differentiation by creating socially
responsible attributes that affect company reputation.”
 Political theories (Garriga & Mele, 2004)

 “… the social power of the corporation is

emphasized, specifically in its relationship with

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society & its responsibility in the political arena

PT
associated with this power. This leads the
N
corporation to accept social duties & rights or
participate in certain social cooperation.”
 Political theories (Contd.) (Garriga & Mele, 2004)

 Principles for managing social power (Davis, 1967, in

Garriga & Mele, 2004):

EL
 Social power equation: “… the social responsibilities

PT
of businessmen arise from the amount of social
N
power that they have”
 Iron law of responsibility: “Whoever does not use
his social power responsibly shall lose it.”
 Corporate constitutionalism
(Davis, 1967, in Garriga & Mele, 2004)

 “The constituency groups of corporations

define conditions of the responsible use of

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power by corporations, “… and channel

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organizational power in a supportive way and
N
to protect other interests against unreasonable
organizational power.”
 Groups of political theories
(Garriga & Mele, 2004)

 Integrative social contract theory

 Corporate citizenship

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PT
N
 Integrative social contract theory
(Garriga & Mele, 2004)

 Donaldson & Dunfee (1994, 1999):

 Assumption of a social contract between the society and
business

EL
 “Social responsibilities come from consent”

PT
 Macrosocial contract: “provides rules for any social contracting.
N
These rules are called the ‘hyper-norms’; they ought to take
precedence over other contracts.”
 Microsocial contract:
 “… show explicit or implicit agreements that are binding within an
identified community, industry, companies or economic systems.”
 “generate ‘authentic norms’.”
 “… based on the attitudes & behaviors of the members of the norm-
generating community and, in order to be legitimate, have to accord
with the hyper-norms.”
 Groups of political theories (Contd)
(Garriga & Mele, 2004)

 Corporate citizenship: Profit making

organizations are responsible citizens of the

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community they flourish in

PT
N
 Integrative theories (Garriga & Mele, 2004)

 “… consider that business ought to integrate

social demands.”

EL
 “… argue that business depends on society for

PT
its continuity & growth & even for the existence
N
of business itself.”
 “… focused on the detection & scanning of, &
response to, the social demands that achieve
social legitimacy, greater social acceptance &
prestige”
 Groups of integrative theories
(Garriga & Mele, 2004)

 Issues management
 The principle of public responsibility

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Stakeholder management
PT


 Corporate social performance N

 Issues management (Garriga & Mele, 2004)

 “… the process by which the corporation can

identify, evaluate & respond to those social &

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political issues which may impact significantly

PT
upon it.” N
 Social responsiveness: action, the how of CSR
 The principle of public responsibility
(Garriga & Mele, 2004)

 “… public policy includes not only the literal text of law

& regulation but also the broad pattern of social
direction reflected in public opinion, emerging issues,

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formal legal requirements, & enforcement or

PT
implementation practices.” (Preson & Post, 1981, in Garriga & Mele, 2004)

N
Scope of managerial responsibility:
 Primary: “… essential task of the firm, such as locating &
establishing its facilities, procuring suppliers, engaging
employees, carrying out its production functions, &
marketing products.”
 Secondary: “… come as a consequence of the primary. e.g.
career & earning opportunities for some individuals, etc.”
 Ethical theories (Garriga & Mele, 2004)

 “… the relationship between business & society

is embedded with ethical values.”

EL
 “… firms ought to accept social responsibilities

PT
as an ethical obligation above any other
N
consideration”
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
Why CSR?
EL
PT
N
 Approaches to CSR (Lee, 2011)

 Obstructionist strategy: Ignorance of social

demands for greater responsibility: We do not
care!

EL
Defensive strategy: Legal compliance only. We will
PT

do only as much as is required.
N
 Accommodative strategy: Legal compliance and
stakeholder interests. We will do what is required
and try to keep stakeholders happy.
 Proactive strategy: We will actively work for the
welfare of the community whether or not we get
noticed.
 Approaches to CSR (Contd.) (Lee, 2011)

Institutional pressure
Stakeholder Weak Intense
pressure

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Weak Obstructionist: Absence of Defensive: Institutional pressure

PT
external pressures without stakeholder support
N
Intense Accommodative: Stakeholder Proactive: Synchrony in external
pressure without institutional pressures
legitimacy
 Antecedents of CSR (Depending
on conditions) (Campbell, 2007)

 Economic conditions
 Institutional conditions

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PT
N
 Economic antecedents of CSR
(Campbell, 2007)

 Corporations will be less likely to act in socially

responsible ways when

EL
 “they are experiencing relatively weak financial

PT
performance”
N
 “when they are operating in a relatively unhealthy
economic environment where the possibility for
near-term profitability is limited.”
 if there is either too much or too little competition.”
 Institutional antecedents of CSR
(Campbell, 2007)

Corporations will be more likely to act in socially

responsible ways if:

EL
 The regulations and laws mandate it and the

PT
punishment for non-compliance is tangibly
N
severe, especially if these compliance measures
have been developed collaboratively
 “There is a system of well-organized & effective
industrial self-regulation in place to ensure such
behavior”
 Institutional antecedents of CSR
(Contd.) (Campbell, 2007)

Corporations will be more likely to act in socially

responsible ways if:
“There are private, independent organizations, including

EL

NGOs, social movement organizations, institutional

PT
investors, & the press, in their environment, who
N
monitor their behavior, & when necessary, mobilize to
change it.”
 “They operate in an environment where normative calls
for such behavior are institutionalized in important
business publications, business school curricula, & other
educational venues in which corporate managers
participate.”
 Institutional antecedents of CSR
(Contd.) (Campbell, 2007)

Corporations will be more likely to act in socially

responsible ways if:

EL
“They belong to trade or employer associations
PT

[that] are organized in ways that promote
N
socially responsible behavior.”
 “They are engaged in institutionalized dialogue
with unions, employees, community groups,
investors, & other stakeholders.”
 Antecedents of CSR based on level of
involvement (Aguilera et al., 2007)

 Individual level
 Organizational level

EL
National level
PT


 N
Transnational level
 Individual level Antecedents of CSR
(Aguilera et al., 2007)

Based on a sense of perceived fairness by

employees
 Instrumental motives: If the organization cares

EL
PT
for the environment, it will care for them. So,
they feel more in control. N
 Relational motives: Belongingness: CSR fosters
positive social relationships, which in turn lead
to a feeling of belongingness
 Morality based motives: A need to do what is
right
 Individual antecedents of CSR
(Contd.) (Aguilera et al., 2007)

 “Individual employees’ needs for control, for

belongingness, and for a meaningful existence

EL
will lead them to push firms to engage in social

PT
change through CSR”N
 Organizational Level antecedents
of CSR (Aguilera et al., 2007)

 “Internal and external organizational actors’ (Shareholders’,

managers’, consumers’) shareholder interests, stakeholder
interests, & stewardship interests will lead them to push
firms to engage in social change through CSR.”

EL
PT
 “A downward hierarchical ordering of motives among insider
N
organizational actors (i.e., Top Management Teams) will lead
to stronger pressure on firms to engage in social change
through CSR.”

 “An upward hierarchical ordering of motives among outsider

organizational actors (i.e. consumers) will lead to stronger
pressure on firms to engage in social change through CSR.”
 Antecedents of CSR at the
national level (Aguilera et al., 2007)

 Instrumental motives: Promotion of

international competitiveness

EL
 Relational motives: Promotion of social

PT
cohesion and social partnership between
N
different strata of society and marginalized
groups
 Moral motives: Collective responsibility to the
betterment of society
 Antecedents of CSR at the
national level (Contd.) (Aguilera et al., 2007)

 “Governments’ interests in establishing

competitive business environments, promoting
social cohesion, & fostering collective

EL
responsibility for the betterment of society will
PT
lead them to push firms to engage in social
N
change through CSR.”

 “A compensatory relationship of motives in

governments will lead to stronger pressure on
firms to engage in social change through CSR.”
 Antecedents of CSR at the
transnational level (Aguilera et al., 2007)

 Instrumental motives:
 Power to facilitate NGOs and social welfare groups

EL
 Promotion of competitiveness among businesses

PT
 Relational motives: N
 Collaborative relationships among Inter Government
Organizations (IGOs)
 Moral motives: Altruism: “…trying to make the
world a better place to live in”
 Antecedents of CSR at the
transnational level (Contd.) (Aguilera et al., 2007)

 “NGOs need for power for alignments/ collaborations, &

for altruism will lead them to push firms to engage in
social change through CSR”

EL
PT
 “IGOs interests in promoting competition, social
cohesion, & collective responsibility will lead them to
N
push firms to engage in social change through CSR.”

 “The existence of a multiplicative relationship of motives

among transnational actors will lead to stronger firm
pressure to engage in social change through CSR,
depending on the density & intensity of positive NGO,
governmental, & intergovernmental action.”
 CSR Motives at multiple levels
of analysis (Aguilera et al., 2007)

Transnational
Motives Individual Organizational National Intergovernment Corporate
al entities interest groups &
NGOs

EL
Instrumental Need for control Shareholder interests Competitiveness Competitiveness Power (obtain
(Short Term) scarce

PT
resources)
Relational Need for
belongingness
N
•Stakeholder interests Social cohesion Social cohesion
•Legitimation/
Interest
alignment,
collective identity collaboration &
(long term) quasi-regulation
Moral Need for •Stewardship interests Collective Collective Altruism
meaningful •Higher-order values responsibility responsibility
existence
Interactions Upward •Insider downward Compensatory Compensatory Multiplicative
hierarchical hierarchical
•Outsider upward
hierarchical
 Why CSR? (Carroll & Shabana, 2010)

 “Reducing cost & risk

 Strengthening legitimacy & reputation

EL
Building competitive advantage
PT


 N
Creating win-win situations through synergistic
value creation”
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
Evolution of CSR

EL
(Carroll, 1999)

PT
N
 1953: Howard R. Bowen
Father of CSR
 Social Responsibilities of the Businessman:
 “… several hundred largest businesses were vital
centers of power and decision making & that the

EL
actions of these firms touched the lives of citizens at

PT
many points.”

N
“What responsibilities to society may businessmen
reasonably be expected to assume?”
 “[Social responsibilities of businessmen refer] to the
obligations of businessmen to pursue those policies, to
make those decisions, or to follow those lines of action
which are desirable in terms of the objectives & values
of our society.”
 1960: Keith Davis
 Iron Law of Responsibility:
 “Social responsibilities of businessmen need to be

EL
commensurate with their social power.”

PT
 “… the avoidance of social responsibility leads to
N
gradual erosion of social power”
 1963: Joseph McGuire
 Business and Society
 “The idea of social responsibilities supposes that the

EL
corporation has not only economic & legal

PT
obligations but also certain responsibilities to
N
society which extend beyond these obligations.”
 1967: Clarence C. Walton
 Corporate Social Responsibilities:
 “... The new concept of corporate social

EL
responsibility recognizes the intimacy of the

PT
relationships between the corporation and society
N
and realizes that such relationships must be kept in
mind by top managers as the corporation and the
related groups pursue their respective goals.”
 1971: Harold Johnson
 “A socially responsible firm is one whose
managerial staff balances a multiplicity of
interests. Instead of striving only for larger

EL
profits for its stakeholders, a responsible
PT
enterprise also takes into account employees,
N
suppliers, dealers, local communities, & the
nation.”
 “Social responsibility states that businesses
carry out social programs to add profits to their
organization.”
 1971: Harold Johnson (Contd.)
 “Utility maximization […] the enterprise seeks
multiple goals rather than only maximum

EL
profits.”

PT
 “Lexicographic view of social responsibility […]
N
stongly profit motivated firms may engage in
socially responsible behavior. Once they attain
their profit targets, they act as if social
responsibility were an important goal – even
though it isn’t.”
 1971: Committee for Economic
Development
 Social Responsibilities of Business Corporations
 “business functions by public consent and its

EL
basic purpose is to serve constructively the

PT
needs of society – to the satisfaction of
N
society.”
 1971: Committee for Economic
Development (Contd.)
 Concentric circles definition of social responsibility:
 “Inner circle includes the clear-cut basic responsibilities
for the efficient execution of the economic function –

EL
products, jobs & economic growth

PT
 “Intermediate circle encompasses responsibility to
exercise this economic function with a sensitive
N
awareness of changing social values & priorities, e.g.
fair treatment of employees, environmental concerns,
etc.”
 “Outer circle outlines newly emerging and still
amorphous responsibilities that business should assume
to become more broadly involved in actively improving
the social environment.”
 1972: Manne & Wallich
 “To qualify as socially responsible action, a
business expenditure or activity must be one
for which the marginal returns to the

EL
corporation are less than the returns available
PT
from some alternative expenditure, must be
N
purely voluntary, and must be an actual
corporate expenditure rather than a conduit for
individual largesse.”
 Purely voluntary expenditure vs. expenditure in
response to social norms
 1972: Prof. Wallich in Manne
& Wallich
 Elements of the exercise of CSR:
 “Setting of objectives

EL
 Decision whether to pursue given objectives

PT
 Financing of these objectives”
N
 1970s
 Increasing mention of Corporate Social
Performance (CSP)

EL
PT
N
 1973: Keith Davis
 “It is the firm’s obligation to evaluate in its
decision-making process the effects of its

EL
decisions on the external social system in a

PT
manner that will accomplish social benefits
N
along with the traditional economic gains which
the firm seeks.”
 Moving beyond the law
 1973: Eilbert & Parket
 Good neighborliness:
 “… not doing things that spoil the neighborhood”

EL
 “… the voluntary assumption of the obligation to

PT
help solve neighborhood problems”
N
 1974: Eells & Walton
 “… the corporate social responsibility
movement represents a broad concern with

EL
business’s role in supporting & improving that

PT
social order” N
 1975: S. Prakash Sethi
 “Social obligation is corporate behavior ‘in
response to market forces or legal constraints’.”

EL
 “… social responsibility implies bringing

PT
corporate behavior up to a level where it is
N
congruent with the prevailing social norms,
values, & expectations of performance”
 1975: Preston and Post
 Public responsibility: “… the scope of
managerial responsibility is not unlimited, as
the popular conception of ‘social responsibility’

EL
PT
might suggest, but specifically defined in terms
N
of primary and secondary involvement areas.”
 1976: H. Gordon Fitch
 “Corporate social responsibility is defined as the
serious attempt to solve social problems caused

EL
wholly or in part by the corporation.”

PT
 We take responsibility for our actions!
N
 1979: Abbott & Monsen
 Social Involvement Disclosure (SID) Scale: 28
issues categorized under
Environment

EL


PT
 Equal opportunity

 Personnel
N
 Community involvement

 Products

 Other

Measured by the number of times they were

mentioned
 1979: Archie B. Carroll
 “For managers to engage in Corporate Social
Performance, they needed to have:

EL
 “A basic definition of CSR

PT
 An understanding/ enumeration of the issues for
N
which a social responsibility existed (or in modern
terms, stakeholders to whom the firm had a
responsibility, relationship, or dependency),
 A specification of the philosophy of responsiveness
to the issues”
 1980: Thomas M. Jones
 CSR is a process not an outcome
 CSR, when engaged in as a process of decision

EL
making, should constitute CSR behavior

PT
N
 1983: Rich Strand
 Systems paradigm of organizational social
responsibility, responsiveness, and responses

EL
 How social policies and activities within the

PT
organization are affected by the organization and
N
the outer environment, and in turn affect the
activities within and outside the environment
 1983: Archie B. Carroll
 Four constituent parts of CSR:
 Economic

EL
 Legal

PT
 Ethical N
 Voluntary or philanthropic
 1985: Wartrick & Cochran
 Corporate Social Performance Model:
 Principles: Corporate Social Responsibilities

EL
 Processes: Corporate Social Responsiveness

PT
 Policies: Social issues management
N
 1991: Archie B. Carroll
 CSR Pyramid
 “The CSR firm should strive to make a profit,

EL
obey the law, be ethical, and be a good

PT
corporate citizen”N
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
CSR: Global Timeline
EL
(Katsoulakos, 2004)

PT
N
 1946 – 1958: Fair Trade
(http://wfto.com/about-us/history-wfto/history-fair-trade)

 1946: Self Help Crafts began buying

needlework from Puerto Rico

EL
 1958: First formal Fair Trade shop opened in

PT
USA N
 1960
 OECD (Organization for Economic Cooperation &
Development) created in Paris (came into force on
30/09/61) to:

EL
 “achieve the highest sustainable economic growth &

PT
employment & a rising standard of living in Member
countries, while maintaining financial stability, & thus to
N
contribute to the development of the world economy
 “contribute to sound economic expansion in Member as
well as non member countries in the process of
economic development”
 “contribute to the expansion of world trade on a
multilateral, non-discriminatory basis in accordance with
international obligations”
 1961: George Goyder
 The Responsible Company
 First mention of social auditing: “… a social audit

EL
can act as both a useful management tool & offer

PT
stakeholders a platform for challenging &
N
influencing companies”
 1961: World Wildlife Fund
 WWF created at Morges, Switzerland

EL
PT
N
 1962: Rachel Carson
 Silent Spring, by Penguin Books:
http://www.rachelcarson.org/SilentSpring.aspx

EL
 “... bringing together research on toxicology,

PT
ecology, & epidemiology to suggest that
N
agricultural pesticides are building to catastrophic
levels.”
 1966
 International Covenant on Economic, Social &
Cultural Rights (ICESCR) adopted by the UN
(http://www.ohchr.org/Documents/ProfessionalInterest/cescr.pdf):

EL
Part 1: Right to self determination: People are free to

PT

“determine their political status and freely pursue their
N
economic, social and cultural development”, and
dispose off their natural wealth, and the State has a
responsibility to facilitate this
 Part 2: Right to be recognized without discrimination
 Part 3: Rights to fair and respectful treatment at work,
and the responsibility of organizations to facilitate the
balancing of work and personal life of their employees
 1968: Club of Rome
 “…commissioned a study […] to model and
analyze the dynamic interactions between

EL
industrial production, population, environmental

PT
damage, food consumption & natural resource
N
usage.” – published as Limits to Growth in 1972
(https://www.clubofrome.org/report/the-limits-to-growth/)
 1969: UNESCO
 “Provided a forum Conference for Rational Use
& Conservation of Biosphere for early

EL
discussions of the concept of ecologically

PT
sustainable development.”
N
 1969: US Congress
 Passed the National Environmental Policy Act
(NEPA) creating the first national agency for

EL
environmental protection (EPA)

PT
(https://www.epa.gov/nepa)
N
 1969: Commonwealth
Arbitration Commission
 “Adopted the principle of equal pay for equal
work regardless of gender”

EL
(http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/

PT
Browse_by_Topic/employmentlaw/Historyemploymentlaw)
N
 1970
 “The first Earth Day was held as a national
awareness campaign on the environment. An

EL
estimated 20 million (2 crore) people

PT
participated in peaceful demonstrations all
N
across the USA.”
 1971
 “Man and Biosphere program founded by
UNESCO (http://www.unesco.org/new/en/natural-sciences/environment/ecological-

EL
sciences/man-and-biosphere-programme/)

PT
 Henderson Poverty Index developed in
Australia
N
 In France, companies with more than 300
employees required by law to produce an
employee report: The Bilan Social.”
 1970s
 “Germany engaged in the social model of
corporate management
Council on Economic Priorities and others in USA

EL

began to rate companies publicly on their social &
PT
environmental performance”
N
 “United Nation’s Code of Conduct for Transnational
Corporations was an early attempt to define
principles of CSR for businesses in terms of ethics,
product standards, competition, marketing, &
disclosure of information.”
 1972
 “United Nations Conference on the Human
Environment considered the need for a

EL
common outlook and for common principles to

PT
inspire & guide the peoples of the world in the
N
preservation and enhancement of the human
environment”
 United Nations Environment Program established
 1972
 Nordhaus and Tobin: Is growth obsolete?
Article in Economic Research: Retrospect and

EL
Prospect, Volume 5 – developed the Measure of

PT
Economic Welfare as an alternative to crude
N
GDP as a measure of economic progress
(http://www.nber.org/chapters/c7620.pdf)
 1974
 “Rowland & Molina release a seminal work on
Chloro Fluoro Carbons in Nature magazine

EL
calculating that if use of CGC gases is to

PT
continue at an unaltered rate, the ozone layer
N
will be depleted soon.”
 1979: Tata Steel
 Chairman asks “audit committee to report on
‘whether, and the extent to which the company
has fulfilled the objectives … regarding the social

EL
PT
and moral objectives”
N
Advertisements: “We also make steel”
https://www.youtube.com/watch?v=qYBkbYaCUuw
https://www.youtube.com/watch?v=Iw4CQIeWGHo
https://www.youtube.com/watch?v=AnXUJXApoNc
 1980: International Union for
the Conservation of Nature
 “World Conservation Strategy released by IUCN
as ‘the modification of the biosphere & the

EL
application of human, financial, living & non-

PT
living resources to satisfy human needs &
N
improve the quality of human life’.”
(https://portals.iucn.org/library/efiles/documents/
wcs-004.pdf)
 1982
 “Business in the Community is founded by UK
based business organizations focussed on CSR”

EL
http://www.bitc.org.uk/

PT
N
 1984
 Edward Freeman: Strategic Management: A
Stakeholder Approach: Classic textbook

EL
integrating CSR with mainstream management

PT
theory N
 1986: USA
 “Toxics Release Inventory established under
the Emergency Planning and Community Right

EL
to Know Act”

PT
https://www.epa.gov/toxics-release-inventory-
N
tri-program
 1987: United Nations
 “Brundtland Commission appointed by the United
Nations to study the connection between
development & the environment publishes report:

EL
PT
‘Our Common Future’. The report introduces the
N
term ‘sustainable development’ defining it as
‘development that meets the needs of the present
without compromising the ability of future
generations to meet their own needs.”
 http://www.un-documents.net/our-common-
future.pdf
 1988
 “The Co-Operatives UK publishes its first Social
Report”

EL
 Ben & Jerry’s in USA produces its first Social

PT
Performance Assessments”
N
 1989: UK
 Profs. David Pearce, Anil Markandya & Edward
Barbier: Blueprint for a Green Economy.

EL
Earthscan Publishers

PT
 “Introduction of the concept of natural capital and
N
definition of sustainable development as non-
declining per capita human well-being over time.”
 1989: Netherlands
(http://wfto.com/about-us/history-wfto)

 International Federation of Alternative Trade

established (IFAT)

EL
 1993: “… aim of IFAT was to ‘improve living

PT
conditions for the poor’ through ‘promoting fair
N
trade internally/ externally’ with the ‘anticipated
result’ of ‘a higher level of trust and
cooperative among members thus achieving
the aim of IFAT’. ”
 1991
 “IUCN/UNEP/WWF publish “Caring for the
Earth: 2nd World Conservation Strategy’

EL
focussing on ‘sustainable society’, ‘sustainable

PT
living’, & ‘sustainability’ itself”
N
 1992: USA
 Business for Social Reponsibility founded
 https://www.bsr.org/en/

EL
PT
N
 1994
 “European Universities Charter for Sustainable
Development agreed to promoting University
education for the training of decision-makers &

EL
teachers, oriented towards sustainable
PT
development & fostering environmentally aware
N
attitudes, skills & behavior patterns, as well as a
sense of ethical responsibility.”
 Currently adopted as Copernicus Guidelines by United
Nations Economic Commission for Europe (UNECE):
http://www.unece.org/fileadmin/DAM/env/esd/informati
on/COPERNICUS%20Guidelines.pdf
 1994: INSEAD (Institut Européen d'Administration des

Affaires)/ European Institute of Business Administration) France

 Caux Round Table Principles for Business

adopted: “The CRT Principles for Business

EL
articulate a comprehensive set of ethical norms

PT
for businesses operating internationally or
N
across multiple cultures. ”
http://www.cauxroundtable.org/index.cfm?&menuid=28&parentid=2
 1995
 World Business Council for Sustainable
Development (WBCSD) established with a view

EL
to “… provid[ing] business leadership as a

PT
catalyst for change toward sustainable
N
development, & to promot[ing] the role of co-
efficiency, innovation, & CSR”
 http://www.wbcsd.org/
 1995: United Nations Framework
on Climate Change (UNFCC)
 Conference of Parties (COP) constituted in
Berlin, Germany
Article 3.1: "The Parties should protect the climate

EL

system for the benefit of present and future
PT
generations of humankind, on the basis of equity
N
and in accordance with their common but
differentiated responsibilities and respective
capabilities. Accordingly, the developed country
Parties should take the lead in combating climate
change and the adverse effects thereof;”
(https://unfccc.int/resource/docs/cop1/07a01.pdf)
 1996: Organization for Economic
Cooperation & Development (OECD)

 “Introduced the concept of Environmentally

Sustainable Transportation (EST)”

EL
PT
N
 1996: European Commission
 57 European companies got together and
established CSR Europe “… to help companies

EL
achieve profitability, sustainable growth &

PT
human progress by placing CSR in the
N
mainstream of business practice”
 http://www.csreurope.org/
 1996: USA
 “… Social Accountability International (SAI)
Advisory Board was created to establish a set

EL
of workplace standards in order to ‘define and

PT
verify implementation of ethical workplaces’.”
N
 Source:
http://www.history.ucsb.edu/labor/sites/secure.lsit.ucsb.edu.hist.d7_labor/files/sitefiles/CSR_Re
search_Files/SAI%20and%20SAAS%20Summary.pdf
 1997: Framework Convention
on Climate Change
 Kyoto Protocol negotiated: Clear directions
regarding active measures to reduce in

EL
greenhouse gas emissions

PT
N
 1997: USA
 Social Accountability International launched the SA8000
standard to ensure accountability of social performance
in the following areas:

EL
 “Child Labor

PT
 Forced or Compulsory Labor
 Health and Safety N
 Freedom of Association and Right to Collective Bargaining
 Discrimination
 Disciplinary Practices
 Working Hours
 Remuneration
 Management System”
 1997
 John Elkington: Cannibals with Forks- The
Triple Bottom Line of the 21st Century,

EL
Capstone Publishing Limited, Oxford

PT
 Coined the term, ‘Triple Bottom Line’
N
 Focussed on People, Planet & Profit
 Review of the book available at
http://appli6.hec.fr/amo/Public/Files/Docs/148_en.p
df
 1997
 “Global Reporting Initiative launched to develop
Sustainability Reporting Guidelines”
Focus on

EL
PT
 actively reducing greenhouse emissions,
N
 protecting natural habitats, especially of
endangered species of flora & fauna
 reporting sustainability efforts in a systematic
manner
https://www.globalreporting.org/Information/about-
gri/Pages/default.aspx
 1999: UK
 Quality of Life Counts: Indicators for a Strategy
for Sustainable Development for the UK: A

EL
Baseline Assessment.

PT
 Update in 2004: N
http://www.nies.go.jp/db/sdidoc/qolc2004.pdf
 1999
 Paul Hawken, Amory Lovins, Hunter Lovins:
Natural Capitalism: The Next Industrial

EL
Revolution

PT
N
 1999: US
 Global Sullivan Principles of CSR launched
 “The objectives of the Global Sullivan Principles are to
support economic, social and political justice by companies
where they do business; to support human rights and to

EL
encourage equal opportunity at all levels of employment,

PT
including racial and gender diversity on decision making
N
committees and boards; to train and advance disadvantaged
workers for technical, supervisory and management
opportunities; and to assist with greater tolerance and
understanding among peoples; thereby, helping to improve
the quality of life for communities, workers and children with
dignity and equality.”
 http://hrlibrary.umn.edu/links/sullivanprinciples.html
 1999: UN
 Global Compact launched with a view to “…
bring companies together with UN agencies,

EL
labor & civil society to support ten principles in

PT
the areas of human rights, labor & the
N
environment”
 https://www.unglobalcompact.org/
 1999: UK
 “UK Corporations Disclosure Legislation passed.
The Turnbull Report on corporate governance

EL
added reputation, probity, & other non-financial

PT
risks to the necessary criteria for reporting risk
N
to shareholders.”
 1999
 Meeting held in Bonn to discuss Kyoto
Agreement and penalties associated with non-

EL
compliance

PT
N
 2000
 “UK Pension Act amended to require the
trustees of occupational pension schemes to

EL
disclose their policy on socially responsible

PT
investment in their Statement of Investment
N
Principles”
 2001: UK
 Launch of the FTSE4Good Index: Ethical
investment stock market index

EL
PT
N
 2002: UK
 “Business in the Community launches first
Corporate Responsibility Index”

EL
http://www.bitc.org.uk/services/benchmarking/cr

PT
-index N
 2004
 “There are over 60 Government initiatives of
relevance for CSR.

EL
 The UK Parliament has two all-party groups on

PT
corporate citizenship:
N
 The All-Party Parliamentary Group on CSR
 The All-Party Parliamentary Group on Socially
Responsible Investment”
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
CSR in India
EL
PT
N
 Evolution of Indian CSR
(Deo, 2017; Sundar, 2000, in Dhanesh, 2015)

 Phase 1 (1850 to 1914)

 Phase 2 (1910 to 1960)

EL
Phase 3 (1950 to 1990)
PT


 Phase 4 (1980 N
onwards)
 Pase 1 (1850 to1914)
(Deo 2017; Sundar, 2000, in Dhanesh, 2015)

 Economic Phase: Industrialization

 What did the rulers do in the name of

EL
development?: Colonial time, extraction

PT
 Corporate CSR: Dynastic charity
N
 Phase 2 (1914-1947)
(Deo, 2017; Sundar 2000, in Dhanesh, 2017)

 Economic Phase: Trade barriers

 What did the rulers do in the name of

EL
development?: Colonial time, exploitation

PT
 Corporate CSR: Support freedom struggle
N
 Phase 3 (1947-1960)
(Deo, 2017; Sundar, 2000, in Dhanesh, 2017)

 Economic Phase: Socialism, protectionism

 What did the Government do for

EL
development?: Make five year plans

PT
 Corporate CSR: Support new state; launch own
N
rural initiatives
 Phase 4 (1960-1990)
(Deo, 2017; Sundar, 2000, in Dhanesh, 2015)

 Economic Phase: Heavy regulations

 What did the Government do for

EL
development?: Licensing, failed at development

PT
efforts N
 Corporate CSR: Corporate trusts
 Phase 5 (1991 to 2013)
(Deo, 2017; Sundar 2000, in Dhanesh, 2015)

 Economic Phase: Liberalization

 What did the Government do for development?:

EL
Shrinking in production; expanding in social

PT
provision
N
 Corporate CSR:
 Family trusts, private-public partnerships, NGO
sponsorship
 2009 (Updated in 2011): Ministry of Corporate Affairs:
National Voluntary Guidelines on Social, Environmental
& Economic Responsibilities of Business
 Phase 6 (2013 to Present)
(Deo, 2017; Sundar, 2000, in Dhanesh, 2015)

 Economic Phase: Globalization

 What did the Government do for

EL
development?: Realized the need to manage

PT
inequality; New reforms to liberalize further
N
 Corporate CSR: Addition of 2% mandatory CSR
spending to Companies Act
 Models of social responsibility
in India (Balasubramaniam et al., 2005, Arevalo & Aravind, 2011)

 Gandhian model/ Ethical model: “Voluntary commitment

to public welfare based on ethical awareness of broad
social needs

EL
 Statist model/ Nehruvian model: “State-driven policies

PT
including state ownership & extensive corporate
N
regulation & administration”
 Liberal model/ Friedman model: “Corporate
responsibility primarily focused on owner objectives”
 Stakeholder/ Freeman model: “Stakeholder
responsiveness which recognizes direct & indirect
stakeholder interests”
 Discussion points for forum
On the course forum, please list and provide
links to Indian organizations following these

EL
models of social responsibility through their

PT
outreach activities
N
 CSR drivers in Indian organizations
(Balasubramaniam et al., 2005)

 Genuine concern for the society

 “Concern for social improvement

EL
 Ethics and values

PT
 Need to care for society N
 Belief in stewardship (Gandhian philosophy)”
 CSR drivers in Indian organizations
(Contd.) (Balasubramaniam et al., 2005)
 Profit:
 “Corporate reputation

EL
 Employee & customer relations

PT
 Stakeholder impactN
 Responsiveness to local communities
 Legal compliance
 Strategic/ corporate planning at board level”
 Discussion points for forum
 On the course forum, please list examples of
Indian corporate organizations whose work

EL
highlights each of these focus areas, i.e.

PT
genuine concern and profits
N
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
CSR in India
EL
(Contd.)
N
PT
 National Voluntary Guidelines (2011)
(http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf)

 Applicable to all businesses, irrespective of

sector or size

EL
PT
N
 Principles of NVG
(http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf)

 “Principle 1: Businesses should conduct & govern

themselves with Ethics, Transparency & Accountability

EL
 Principle 2: Businesses should provide goods & services
that are safe & contribute to sustainability throughout
PT
their life cycle N
 Principle 3: Businesses should promote the well-being of
all employees
 Principle 4: Businesses should respect the interests of, &
be responsive towards all stakeholders, especially those
who are disadvantaged, vulnerable & marignalized.”
 Principles of NVG (Contd.)
(http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf)

 “Principle 5: Businesses should respect & promote human

rights
Principle 6: Businesses should respect, protect, & make

EL

efforts to restore the environment

PT
 Principle 7: Businesses, when engaged in influencing
N
public & regulatory policy, should do so in a responsible
manner
 Principle 8: Businesses should support inclusive growth &
equitable development
 Principle 9: Businesses should engage with & provide
value to their customers & consumers in a responsible
manner
 Principle 1: Businesses should conduct &
govern themselves with Ethics,
Transparency & Accountability

 Core elements:
1. “Businesses should develop governance structures, procedures, & practices
that ensure ethical conduct at all levels; & promote the adoption of this

EL
principle across its value chain

PT
2. Businesses should communicate transparently & assure access to information
about their decisions that impact relevant stakeholders
3.
N
Businesses should not engage in practices that are abusive, corrupt, or anti-
competition
4. Businesses should truthfully discharge their responsibility on financial & other
mandatory disclosures
5. Businesses should report on the status of their adoption of these Guidelines as
suggested in the reporting framework of the NVG document
6. Businesses should avoid complicity with the actions of any third party that
violates any of the principles contained in these guidelines.”
 Principle 2: Businesses should provide goods &
services that are safe & contribute to
sustainability throughout their life cycle

 Core Elements:
1. “Businesses should assure safety & optimal resource use over
the life-cycle of the product – from design to disposal - & ensure

EL
that everyone connected with it – designers, producers, value
chain members, customers & recyclers are aware of their

PT
responsibilities
N
2. Businesses should raise the consumer’s awareness of their
rights through education, product labelling, appropriate &
helpful marketing communication, full details of contents &
composition & promotion of safe usage & disposal of their
products & services
3. In designing the product, businesses should ensure that the
manufacturing processes & technologies required to produce it
are resource efficient & sustainable.”
 Core elements of Principle 2
(Contd.)
4. “Businesses should regularly review & improve upon
the process of new technology development,
deployment & commercialization, incorporating social,

EL
ethical, & environmental considerations.

PT
5. Businesses should recognize & respect the rights of
N
people who may be owners of traditional knowledge, &
other forms of intellectual property
6. Businesses should recognize that over-consumption
results in unsustainable exploitation of our planet’s
resources, & should therefore promote sustainable
consumption, including recycling of resources.”
 Principle 3: Businesses should promote
the well-being of all employees
 Core Elements:
1. “Businesses should respect the right to freedom of
association, participation, collective bargaining, & provide

EL
access to appropriate grievance redressal mechanisms

PT
2. Businesses should provide & maintain equal opportunities
N
at the time of recruitment as well as during the course of
employment irrespective of caste, creed, gender, race,
religion, disability, or sexual orientation
3. Businesses should not use child labor, forced labor, or any
form of involuntary labor, paid or unpaid
4. Businesses should take cognizance of the work-life balance
of its employees, especially that of women”
 Core elements of Principle 3
(Contd.)
5. “Businesses should provide facilities for the wellbeing of its employees
including those with special needs. They should ensure timely payment of
fair living wages to meet basic needs & economic security of the
employees.

EL
6. Businesses should provide a workplace environment that is safe, hygienic,

PT
human, & which upholds the dignity of the employees. Business should
communicate this provision to their employees & train them on a regular
basis N
7. Businesses should ensure continuous skill & competence upgrading of all
employees by providing access to necessary learning opportunities, on an
equal & non-discriminatory basis. They should promote employee morale &
career development through enlightened human resource interventions.
8. Businesses should create systems & practices to ensure a harassment free
workplace where employees feel safe & secure in discharging their
responsibilities.”
 Principle 4: Businesses should respect the
interests of, & be responsive towards all
stakeholders, especially those who are
disadvantaged, vulnerable & marginalized.”

 Core Elements:
1. “Businesses should systematically identify their
stakeholders, understand their concerns, define purpose &

EL
scope of engagement, & commit to engaging with them

PT
2. Businesses should acknowledge, assume responsibility, &
N
be transparent about the impact of their policies, decisions,
product & services & associated operations on the
stakeholders
3. Businesses should give special attention to stakeholders in
areas that are underdeveloped
4. Businesses should resolve differences with stakeholders in
a just, fair, & equitable manner”
 Principle 5: Businesses should
respect & promote human rights
 Core Elements:
1. “Businesses should understand the human rights
content of the Constitution of India, national laws &

EL
policies, & the content of International Bill of Human

PT
Rights. Businesses should appreciate that human
N
rights are inherent, universal, indivisible, &
interdependent in nature.
2. Businesses should integrate respect for human rights
in management systems, in particular through
assessing & managing human rights impacts of
operations, & ensuring all individuals impacted by the
business have access to grievance mechanisms.
 Core Elements of Principle 5
(Contd.)
3. “Businesses should recognize & respect the
human rights of all relevant stakeholders &
groups within & beyond the workplace, including

EL
that of communities, consumers & vulnerable &
PT
marginalized groups
N
4. Businesses should, within their sphere of
influence, promote the awareness & realization of
human rights across their value chain
5. Businesses should not be complicit with human
rights abuses by a third party”
 Principle 6: Businesses should
respect, protect, & make efforts to
restore the environment
 Core Elements
1. “Businesses should utilize natural & manmade resources in an
optimal & responsible manner & ensure the sustainability of

EL
resources by reducing, reusing, recycling, & managing waste.

PT
2. Businesses should take measures to check & prevent pollution.
N
They should assess the environmental damage & bear the cost
of pollution abatement with due regard to public interest.
3. Businesses should ensure that benefits arising out of access &
commercialization of biological & other natural resources &
associated traditional knowledge are shared equitably.
4. Businesses should continuously seek to improve their
environmental performance by adopting cleaner production
methods, promoting use of energy efficient & environment
friendly technologies & use of renewable energy.
 Principle 6: Businesses should
respect, protect, & make efforts to
restore the environment
 Core Elements
1. “Businesses should utilize natural & manmade resources in an
optimal & responsible manner & ensure the sustainability of

EL
resources by reducing, reusing, recycling, & managing waste.

PT
2. Businesses should take measures to check & prevent pollution.
N
They should assess the environmental damage & bear the cost
of pollution abatement with due regard to public interest.
3. Businesses should ensure that benefits arising out of access &
commercialization of biological & other natural resources &
associated traditional knowledge are shared equitably.
4. Businesses should continuously seek to improve their
environmental performance by adopting cleaner production
methods, promoting use of energy efficient & environment
friendly technologies & use of renewable energy.
 Core elements of Principle 6
(Contd.)
5. “Businesses should develop Environment Management
Systems (EMS) & contingency plans & processes that
help them in preventing, mitigating & controlling
environmental damages & disasters, which may be

EL
caused due to their operations or that of a member of

PT
its value chain. N
6. Businesses should report their environmental
performance, including the assessment of potential
environmental risks associated with their operations, to
the stakeholders in a fair & transparent manner
7. Businesses should proactively persuade & support their
value chain to adopt this principle.”
 Principle 7: Businesses when engaged in
influencing public & regulatory policy,
should do so in a responsible manner

 Core Elements
1. “Businesses, while pursuing policy advocacy,

EL
must ensure that their advocacy positions are

PT
consistent with the Principles & Core Elements
N
contained in these Guidelines.
2. To the extent possible, businesses should
utilize the trade & industry chambers &
associations & other such collective platforms
to undertake such policy advocacy.”
 Principle 8: Businesses should
support inclusive growth & equitable
development
 Core Elements
1. “Businesses should understand their impact on social &
economic development, & respond through appropriate

EL
action to minimize the negative impacts.

PT
2. Businesses should innovate & invest in products,
N
technologies, & processes that promote the wellbeing of
society.
3. Businesses should make efforts to complement & support the
development priorities at local & national levels, & assure
appropriate resettlement & rehabilitation of communities who
have been displaced owing to their business operations.
4. Businesses operating in regions that are underdeveloped
should be especially sensitive to local concerns.”
 Principle 9: Businesses should engage
with & provide value to their customers &
consumers in a responsible manner
 Core Elements
1. “Businesses, while serving the needs of their customers, should
take into account the overall well-being of the customers & that

EL
of society.

PT
2. Businesses should ensure that they do not restrict the freedom
N
of choice & free competition in any manner while designing,
promoting, & selling their products.
3. Businesses should disclose all information truthfully & factually,
through labelling & other means, including the risks to the
individual, to society, & to the planet from the use of the
products, so that the customers can exercise their freedom to
consume in a responsible manner. Where required, businesses
should also educate their customers on the safe & responsible
usage of their products & services.”
 Core Elements of Principle 9
(Contd.)
4. “Businesses should promote & advertise their
products in ways that do not mislead or confuse
the consumers or violate any of the principles in

EL
these Guidelines.

PT
5. Businesses should exercise due care & caution
N
while providing goods & services that result in
over exploitation of natural resources or lead to
excessive conspicuous consumption.
6. Businesses should provide adequate grievance
handling mechanisms to address customer
concerns & feedback.”
 Indian Companies Act (2013)
 Chapter IX, Section 135: Corporate Social Responsibility:
1. CSR Committee
CSR Policy

EL
2.

Formulation

PT
1.

Public disclosure
3.
2.
N
“The Board of every company […] shall ensure that the company
spends, in every financial year, at least 2%, of the average net
profits of the company made during the three immediately
preceding financial years, in pursuance of its CSR policy:
1. Provided that the company shall give preference to the local area &
areas around it where it operates, for spending the amount earmarked
for CSR activities
2. Provided further if the company fails to spend such amount, the Board
shall, in its report […] specify reasons for not spending the amount.”
 Homework
 Please go through the Business Responsibility
Reports of various organizations and spot

EL
examples of these principles and discuss them

PT
on the Forum. N
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
Stakeholders

EL
N
PT&
CSR
 Who are stakeholders?
(Florea & Florea, 2013)

“Stakeholders are the persons, institutions,

organizations, formal & non formal groups which

EL
are interested or can be affected or which could

PT
influence the company decisions or actions.” (Freeman,
1980, in Florea & Florea, 2013)
N

193
 Who are stakeholders?
 “… those groups without whose support the
organization would cease to exist.” (Stanford Research
Institute, 1963, in Donaldson & Preston, 1995)

EL
“… those who benefit from or are harmed by, &
PT

whose rights are violated or respected by,
N
company actions. (Evan & Freeman, 1988, in Shin, 2011)
 “Participants in ‘the human process of joint
value creation’.” (Freeman, 1994, in Shin, 2013)
 “… are or which could impact or be impacted
by the firm/ organization.” (Brenner, 1995, in Shin, 2013)
 Types of stakeholders (Florea & Florea, 2013)

Based on involvement:
 “Internal stakeholders have a range of interests in
the different parts of the company [or organization

EL
or community] and its activities.”
PT
N
 “External stakeholders are individuals, companies
or groups outside the companies which are
influenced or could influence company [or
organization or community] decisions and
activities.”
 Types of stakeholders (Contd.)
(Florea & Florea, 2013)

Based on how they are influenced by decisions/ actions

 “Primary stakeholders are the people or groups which are directly
affected, in a positive or negative way, by a strategy, decision or

EL
action of a company, organization [or community].”

PT
 “Secondary stakeholders are people or groups that are indirectly
N
affected, either positively or negatively by a company [or
organization or community] decision or action.”
 “Key stakeholders play an important role in [the] decision making
process & also in its implementation because they are involved in
company management or financing [or management & financing of
the organization or community], [e.g.] policy makers, officials,
important professionals or community personalities having a
strong position or influence.”
196
 Types of stakeholders (Contd.)
(Florea & Florea, 2013)

Based on the amount of power and influence they have:

 “Promoters have both great interest in the decision & the

EL
power to help make it successful (or to fail it)”

PT
 “Defenders have a vested interest & can voice their
N
support in the community, but have little actual power to
influence the decision in any way.”
 “Latents have not particular interest or involvement in
the decision, but have the power to influence it greatly if
they become interested.”
 “Apathetics have little interest & little power, & may not
even know the decision exists.”
 The company & its stakeholders (Shin, 2013)

On-line Info-System Providers

Hardware Providers Software Providers Network Providers Service Website
Corporate Citizen
Community Community Member
Shareholders
Administration
Creditors Government Supervision
Laws & Regulations

EL
Employee Friendship
Foreign Government
Conflicts Relationship

Non-Market
Company

PT
Supplier Consumer Association
Social activity groups Environmental Protection
N
Market

Retailer Internet
Media Broadcast & TV
Consumer Newspapers, Magazines
Positive Opinions
The Public
Competitor Negative Opinions
Industry & Business Associations
Supportive Groups University, Research Institute
Industry Associations

On-line Consumer Info Broadcaster Online Regulation Online Competitor

Formulator
Online Stakeholders
 Benefits demanded by stakeholders
(Shin, 2013)

 Offline stakeholders:
 Shareholder: High investment returns, sustainable
development

EL
Employee: Stable income, good corporate image, good

PT

benefits, congenial work environment, fair treatment,
N
sustainable development
 Creditor: Capital recovery rate, capital recovery period,
credit scope
 Supplier: Loan recovery rate, level of difficulty of access to
raw materials, supply price
 Retailer: Supply assurance, commodity market conditions,
adaptability of existing company facilities
 Benefits demanded by stakeholders
(Contd.) (Shin, 2013)
 Offline stakeholders (Contd.):
 Consumer: High quality goods, good service, low price,

EL
easy to use

PT
 Competitor: Price level, conditions of commodity
N
production & competitiveness
 Government: Require the company to abide by the law,
timely & full payment of taxes
 Foreign Government: Protect the interests of domestic
enterprises, access to foreign exchange earnings
 Benefits demanded by stakeholders
(Contd.) (Shin, 2013)

 Online stakeholders:
 Hardware provider: Company scale, commodity

EL
price

PT
 Software provider: Company scale, commodity
N
price, capital
 Network provider: Facilities to enhance speed,
supply price, demand requirements
 Service website: The content the company
demands, function, price
 Benefits demanded by stakeholders
(Contd.) (Shin, 2013)
 Offline stakeholders (Contd.):
 On-line consumer: Business to assure data security &
personal privacy of the consumers, providing information

EL
truly, accurately, and in a timely manner, provide timely

PT
delivery of product, low cost

N
Online regulation formulator: Internet [presence of the]
company to abide by the law, protection of intellectual
property rights
 Online competitor: Exchange business information, fair
competition
 Information broadcaster: Timely & accurate broadcast
abundant information
How do stakeholders
influence firm
EL
PT
N
performance?
(Frooman, 1999)
 Resource Dependence Theory
(Frooman, 1999)

 “… a firm’s need for resources provides

opportunities for others to gain control over it.”

EL
PT
N
 Why control resources? (Frooman, 1999)

 To convince/ persuade the firm to change some

behavior

EL
PT
N
 Resource control strategies
(Frooman, 1999)

 Withholding strategies:
 “… determining whether a firm gets the resources”

EL
 Stakeholder’s “… ability to articulate a credible

PT
threat of withdrawal.” (Pfeffer & Leon, 1977, in
Frooman, 1999) N
 Usage strategies:
 “… determining whether it can use the resources in
the way it wants”
 “… attach[ing] conditions to the continued supply of
that resource.”
 Basis for resource control
(Frooman, 1999)

 Withholding strategy:
 “Stakeholder is prepared to shut off the flow of resources”,
implying that the stakeholder is able to “… simply walk away
from the relationship with no harm to itself” -> “firm is

EL
unilaterally dependent on the stakeholder.”

PT
Major portion of the cost of changing behavior to be paid by

firm N
 Usage strategy:
 Stakeholder is not prepared to shut off the flow of
resources.
 Mutual dependence between firm & stakeholder
 Cost of changing behavior to be shared by stakeholder &
firm
 Types of influence pathways
(Frooman, 1999)

 Direct strategies: “…stakeholder itself manipulates flow of

resources to the firm”
 Indirect strategies: Indirectly weakening the position of the

EL
firm by influencing others to take advantage of the firm’s

PT
vulnerabilities.
N
e.g. “stakeholder informs a potential ally about:
1. “a firm’s behavior
2. why the stakeholder perceives that behavior to be undesirable
3. what the ally ought to do (i.e. initiate a resource strategy
against the firm or a communication strategy directed at an ally
of the ally)”
 Typology of resource relationships
(Frooman, 1999)

Is the stakeholder dependent on the firm?

EL
Is the firm dependent
on the stakeholder?

PT
No Yes
N
No Low interdependence Firm power

Yes Stakeholder power High interdependence

 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
 What is the stakeholder approach
(Freeman & McVea, 2001)

 “… managers must formulate & implement

processes which satisfy all & only those groups

EL
who have a stake in the business.”

PT
N
 Characteristics of the stakeholder
approach (Freeman & McVea, 2001)

 “… intended to provide a single strategic

framework, flexible enough to deal with
environmental shifts without requiring managers to

EL
regularly adopt new strategic paradigms.”

PT
 Strategic management process: “… actively plots a
N
new direction for the firm & considers how the firm
can affect the environment as well as how the
environment may affect the firm.”
 Directed towards the survival of the firm, and in
doing so “… direct[ing] a course for the firm not
merely optimiz[ing] current output.”
 Characteristics (Contd.)
(Freeman & McVea, 2001)

 “… encourages management to develop

strategies by looking out from the firm &

EL
identifying, & investing in, all the relationships

PT
that will ensure long-term success.”
N
 “… both a prescriptive & descriptive approach,
rather than purely empirical & descriptive.”
 “… stakeholder relationships can be created &
influenced, not just taken as given.”
 Characteristics (Contd.)
(Freeman & McVea, 2001)

 “… about concrete ‘names & faces’ for

stakeholders rather than merely analyzing

EL
particular stakeholder roles.”

PT
 Not the whole society, but specific stakeholders
N
 “… calls for an integrated approach to strategic
decision making […] managers must find ways
to satisfy multiple stakeholders
simultaneously.”
 Why pay so much attention to
stakeholders? (Freeman & McVea, 2001)

 Normative theory:
 The definitions of right and wrong.

EL
 “above & beyond the consequences of stakeholder

PT
management, is there a fundamental & moral
requirement to adopt this style of management?”
N
 “… managers should make corporate decisions
respecting stakeholders’ well being rather than treating
them as means to a corporate end.”
 “… an ethics of care emphasizes the primacy of the
network of relationships that create the business
enterprise.”
 Why pay so much attention to
stakeholders? (Contd.)
(Kochan & Rubenstein, 2000, in Freeman & McVea, 2001)

 “… stakeholder firms will emerge when the

stakeholders hold critical assets, expose these

EL
assets to risk & have both influence & voice.”

PT
 Along the lines of Frooman’s paper regarding
N
influence exerted by stakeholders.
 Managing stakeholders
(Freeman & McVea, 2001)

 Buffering: “… aimed at containing the effects of

stakeholders on the firm. Includes activities

EL
such as market research, public relations, &

PT
planning.” N
 Bridging: “… involves forming strategic
partnership […] requires recognizing common
goals & lowering the barriers around the
organization. Partnering is proactive & builds
on interdependence.”
 EL
Thank You
N
PT
Stakeholders
EL
&
PT
N

CSR
(Clarkson, 1995)
 Stakeholder issues vs. social issues
(Clarkson, 1995)

 Identification of boundaries between stakeholders and

the society in general
“… necessary to distinguish between stakeholder issues

EL

& social issues because corporations & their managers

PT
manage relationships with their stakeholders & not with
society.”
N
 “… necessary to conduct analysis at the appropriate
level: institutional, organizational, or individual.”
 Analysis & evaluation of “… both, the social performance
of a corporation & the performance of its managers in
managing the corporation’s responsibilities to, &
relationships with, its stakeholders.”
 Typical corporate & stakeholder
issues (Clarkson, 1995)

1. Company:
1. Company history

EL
2. Industry background

PT
3. Organization structure
N
4. Economic performance
5. Competitive environment
6. Mission or purpose
7. Corporate codes
8. Stakeholder & social issues management systems
 Typical corporate & stakeholder
issues (Contd.) (Clarkson, 1995)

2. Employees
1. General policy 11. Dismissal & appeal
2. Benefits 12. Termination, layoff, & redundancy

EL
3. Compensation & rewards 13. Retirement & termination counseling

PT
4. Training & development 14. Employment equity & discrimination
5. Career planning
N
15. Women in management & on the board
6. Employee assistance 16. Day care & family accommodation
program
7. Health promotion 17. Employee communication
8. Absenteeism & turnover 18. Occupational health & safety
9. Leaves of absence 19. Part-time, temporary, or contract employees
10. Relationships with unions 20. Other employee or human resource issues
 Typical corporate & stakeholder issues
(Contd.) (Clarkson, 1995)

3. Shareholders:
1. General policy

EL
2. Shareholder communications & complaints

PT
3. Shareholder advocacy
N
4. Shareholder rights
5. Other shareholder issues
 Typical corporate & stakeholder issues
(Contd.) (Clarkson, 1995)

 4. Customers:
1. General policy

EL
2. Customer communications

PT
3. Product safety N
4. Customer complaints
5. Special customer services
6. Other customer issues
 Typical corporate & stakeholder issues
(Contd.) (Clarkson, 1995)

5. Suppliers:
1. General policy

EL
2. Relative power

PT
3. Other supplier issues
N
 Typical corporate & stakeholder issues
(Contd.) (Clarkson, 1995)

6. Public stakeholders:
1. Public health, safety, & protection

EL
2. Conservation of energy & materials

PT
3. Environmental assessment of capital projects
N
4. Other environmental issues
5. Public policy involvement
6. Community relations
7. Social investment & donations
 Difference between stakeholder &
social issues (Clarkson, 1995)

 Social issue: Enactment of legislations or

regulations developed over a period of time by

EL
a particular society (Municipal, state, or

PT
national) N
 Stakeholder issue: No such legislation or
regulation, but organization identifies it and
considers it necessary
 Groups of stakeholders (Clarkson, 1995)

 Primary
 Secondary

EL
PT
N
 Primary stakeholder group
(Clarkson, 1995)

 “… one without whose continuing participation the

corporation cannot survive as a going concern
“…typically comprised of shareholders & investors,

EL

employees, customers, & suppliers, together with
PT
what is defined as the public stakeholder group:
N
the governments & communities that provide
infrastructures & markets whos laws & regulations
must be obeyed, & to whom taxes & other
obligations must be due.”
 “high level of interdependence between the
corporation & its primary stakeholder groups.”
 Secondary stakeholder group
(Clarkson, 1995)

 “… those who influence or affect, or are

influenced or affected by the corporation, but
they are not engaged in transactions with the

EL
corporation & are not essential for its survival.”
PT
e.g. media, special interest groups
N
 “… may be opposed to the policies or programs
that a corporation has adopted to fulfill its
responsibilities to, or to satisfy the needs &
expectations of, its primary stakeholder
groups.”
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
Stakeholder theory
perspectives
EL
PT
N
 Bases for stakeholder theory
 “The very purpose of the firm is […] to serve as
a vehicle for coordinating stakeholder

EL
interests.” (Evan & Freeman, 1993, in Donaldson & Preston, 1995)

PT
 Based on Social Contract Theory: i.e. The
N
expectations of the society that we live in are a
result of the contract that binds us to that
society. The context decides what the society
expects us to do in exchange for letting us be a
part of it.
 Social contract, stakeholders & CSR
(Secchi, 2007)

 “The analysis of corporation-stakeholder

relations leads to the definition of hypernorms,

EL
macro- & micro-social contracts.”

PT
 “Social responsibility is expressed through
N
stakeholder relations & defines corporate
existence.”
 CSR Perspectives based on
stakeholder-firm relationship (Secchi, 2007)

 Utilitarian
 Managerial

EL
Relational
PT

N
 Utilitarian perspective (Secchi, 2007)

 Social cost
 Functionalism

EL
PT
N
 Managerial perspective (Secchi, 2007)

 Corporate social performance

 Social accountability, auditing, & reporting

EL
Social responsibility of multinationals
PT

N
 Relational perspective (Secchi, 2007)

 Business & society

 Stakeholder approach

EL
Corporate global citizenship
PT


 N
Social contract theory
 Facets of stakeholder theory
 Convergent stakeholder theory
 Divergent stakeholder theory: Proposal

EL
PT
N
 Convergent stakeholder theory
(Jones & Wicks, 1999)

 “Managerial maxim: Managers should strive to

create & maintain mutually trusting & cooperative
relationships with corporate stakeholders.

EL
PT
 Normative core: Relationships characterized by
N
mutual trust & cooperation are morally desirable.
 Supporting instrumental theory: Firms whose
managers establish & maintain mutually trusting &
cooperative relationships with their stakeholders
will achieve competitive advantage over those
whose managers do not.”
 Divergent stakeholder theory:
Proposal (Freeman, 1999)

 Acknowledging that:
 “There is more than one way to be effective in

EL
stakeholder management.”

PT
 “There is more than one vision for creating value or
N
for what consequences count as valuable.”
 Requirement: Conversation encouraging
divergent views & discarding views “… that are
not useful, not simple, & that do not show us
how it is possible to live better.”
 Types of stakeholder theories
(Freeman, 1999)

 “Descriptive stakeholder theory: Describe[s]

how organizations manage or interact with
stakeholders”

EL
PT
 “Normative stakeholder theory: Prescribe[s]
N
how organizations ought to treat their
stakeholders.”
 “Instrumental theory:[…] ‘If you want to
maximize shareholder value, you should pay
attention to key stakeholders’.”
 What stakeholder theory is not
(Phillips, Freeman & Wicks, 2003)

 “… an excuse for managerial opportunism” (Jensen,

2000; Marcoux, 2000; Sternberg,2000, in Phillips, Freeman & Wicks, 2003)

Unable to “… provide a sufficiently specific

EL

objective function for the corporation” (Jensen, 2000, in
PT
Phillips, Freeman & Wicks, 2003) N
 “… primarily concerned with distribution of
financial outputs” (Marcoux, 2000, in Phillips, Freeman & Wicks, 2003)
 insistent on treating all stakeholders equally (Gioia,
1999; Marcoux, 2000; Sternberg, 2000, in Phillips, Freeman & Wicks, 2003)
 What stakeholder theory is not
(Contd.) (Phillips, Freeman & Wicks, 2003)

 Insistent on “… changes to current law” (Hendry, 2001

a, b; Van Buren, 2001, in Phillips, Freeman & Wicks, 2003)

“… socialism, and refers to the entire economy”

EL

(Barnett, 1997; Hutton, 1995; Rustin, 1997, in Phillips, Freeman & Wicks, 2003)

PT
 “… a comprehensive moral doctrine” N (Orts & Strudler,
2000, in Phillips, Freeman & Wicks, 2003)

 Applicable only to corporations (Donaldson & Preston, 1995, in

Phillips, Freeman & Wicks, 2003)
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
Stakeholder theory in
EL
action
PT
N
 Steps in ethical decision making:
PASCAL (Goodpaster, 1991)

 Perception
 Analysis

EL
Synthesis
PT


 Choice N
 Action
 Learning
 PASCAL (Contd.) (Goodpaster, 1991)

 “Perception: Or fact gathering about the options

available & their short & long-term implications.

EL
Analysis of these implications with specific
PT

attention to affected parties & to the decision-
N
maker’s goals, objectives, values, responsibilities,
etc.

 Synthesis of this structured information according

to whatever fundamental priorities obtain in the
mindset of the decision-maker.”
 PASCAL (Contd.) (Goodpaster, 1991)

 “Choice among the available options based on the

synthesis.

EL
 Action or implementation of the chosen option

PT
through a series of specific requests to specific
N
individuals or groups, resource allocation,
incentives, controls, & feedback.
 Learning from the outcome of the decision,
resulting in either reinforcement or modification
(for future decisions) of the way in which the
above steps have been taken.”
 Stakeholder analysis (Goodpaster, 1991)

 Perception
 Analysis

EL
PT
N
 Stakeholder synthesis (Goodpaster, 1991)

 “… offers a pattern or channel by which to

move from stakeholder identification to a

EL
practical response or resolution.”

PT
 N
Synthesis, Choice, Action & Learning from
PASCAL
 Strategic stakeholder synthesis
(Goodpaster, 1991)

 “The essence of a strategic view of

stakeholders is not that stakeholders are

EL
ignored, but that all but a special group

PT
(stockholders) are considered on the basis of
N
their actual or potential influence on
management’s central mission. The basic
normative principle is fiduciary responsibility
(organizational prudence) supplemented by
legal compliance.”
 Process of strategic stakeholder
synthesis (Goodpaster, 1991)

 “… defining ethical behavior partly in terms of

the nonstrategic decision-making values behind

EL
it.”

PT
“…recognizing that too much optimism about
 N
the correlation between strategic success &
virtue runs the risk of tailoring the latter to suit
the former.”
 Multi-fiduciary stakeholder synthesis
(Goodpaster, 1991)

 Balancing the (often conflicting) fiduciary needs

of and commitments to multiple stakeholders of

EL
the organization: Where and how does one

PT
draw the line? N
 Stakeholder paradox: It is the obligation of the
managers to make money for investors/
shareholders. However, if the organization does
that, it could be disadvantaging other stakeholders
who are affected but may not have invested.
 Stages of corporate moral
development (Reidenback & Robin, 1991, in Iamandi, 2007)

 “Amoral organization
 Legalistic organization

EL
Responsive organization
PT


 N
Emerging ethical organization
 Ethical organization”
 Amoral organization
(Reidenback & Robin, 1991, in Iamandi, 2007)

 ‘Win at all costs’

“Driven by greed & short term orientation”

EL


PT
 “It is ethical as long as we don’t get caught”
N
 “Ethical violations, when caught, are considered
to be a cost of doing business.”
 “No meaningful code of ethics or other
documentation”
 Legalistic organization
(Reidenback & Robin, 1991, in Iamandi, 2007)

 ‘Obey the law’

 “Driven by concern for economic performance”

EL
 “Uses damage control through public relations

PT
when social problems occur”
N
 “Reactive approach to ethics”
 “If it is legal, it is okay”
 “Avoids writing codes of ethics, as this can create
legal problems later on; however, if a code of
ethics exists, this is an internal document.”
 Responsive organization (Iamandi, 2007)

 ‘Ethics pays’
 “Characterized by a growing concern for balance
between profits & ethics, taking also into account

EL
corporate stakeholders other than owners.”
PT

N
“Management […] understands the value of not
acting solely on a legal basis”
 “Approach to ethics […] based on the profits that
ethics may [bring].”
 “Codes of ethics are more externally oriented &
reflect a concern for other publics.”
 Emerging ethical organization
(Reidenback & Robin, 1991, in Iamandi, 2007)

 ‘Do the right thing’

 “Demonstrates an active concern for ethical outcomes,

EL
providing support & measures of ethical behavior,

PT
although it lacks organization & long-term planning.”
N
 “Shared ethical values provide corporate guidance in
some situations”
 “Corporate culture is less reactive & more proactive to
social problems when they occur.”
 “Codes of ethics become action documents.”
 Ethical organization
(Reidenback & Robin, 1991, in Iamandi, 2007)

 ‘Integrate ethics with economics’

 “Thoroughly integrates questions of ethical behavior

EL
with developing strategy & mission, thereby addressing

PT
the fundamental issue of organizational integrity.”
N
 “Totally ethical profile, with carefully selected core
values”
 “Corporate culture is planned & managed to be ethical.”
 “Corporate codes focus on the ethical profile & core
values.”
 Business ethics without
stakeholders (Heath, 2006)

 Dilemmas:
 What is ethical behavior when it comes to profit

EL
making organizations?

PT
 Who are stakeholders and how responsible should
N
the corporation be to them?
 Stakeholder paradox in the context of multi-
fiduciary stakeholder theory:
 Business ethics without
stakeholders (Contd.) (Heath, 2006)

 Stakeholder paradox in the context of multi-fiduciary

stakeholder theory:
Blurring of “… traditional goals in terms of entrepreneurial

EL


risk-taking”

PT
 Slowing down decision making “… because of the dilemmas
N
posed by divided loyalties”
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
 Stakeholder
EL
identification
N
PT
 Basis for stakeholder identification
(Mitchell, Agle & Wood, 1997)

 Stakes in the organization

 Claimants vs. influencers

EL
 Actual vs. potential relationship

PT
N
 Claimants vs. influencers
(Mitchell, Agle & Wood, 1997)

 Claimants: “… may have legitimate claims or

illegitimate ones, & they may or may not have any
power to influence the firm.”

EL
PT

N
Influencers: “… have power over the firm, whether
or not they have valid claims or any claims at all &
whether or not they wish to press their claims.”
 Actual vs. potential relationship
(Mitchell, Agle & Wood, 1997)

 Actual: Current, existing, relationship

EL
Potential: “… stakeholders who ‘are or might be
PT

influenced by, or are or potentially are
N
influencers of some organization’.” (Clarkson, 1994, in
Mitchell, Agle & Wood, 1997)
 Sorting of rationales for stakeholder
identification
(Mitchell, Agle & Wood, 1997)

 A relationship exists
 Power dependence: Stakeholder dominant

EL
Power dependence: Firm dominant
PT


 N
Mutual power dependence relationship
 Basis for legitimacy of relationship
 Stakeholder interests: Legitimacy not implied
 A relationship exists
(Mitchell, Agle & Wood, 1997)

 The firm & stakeholder are in relationship:

 “… having some legitimate, non-trivial relationship

EL
with an organization (such as) exchange

PT
transactions, action impacts& moral responsibilities”
N
 “… interact with & give meaning & defintion to the
corporation”
 The stakeholder exercises voice with respect to
the firm: ‘Can and are making their actual
stakes known’.”
 Power dependence: Stakeholder
dominant
(Mitchell, Agle & Wood, 1997)

 The firm is dependent on the stakeholder

 The stakeholder has power over the firm”

EL
PT
N
 Power dependence: Firm
dominant
(Mitchell, Agle & Wood, 1997)

 The stakeholder is dependent on the firm:

 “the firm is significantly responsible for their well-

EL
being, or they hold a moral or legal claim on the

PT
firm”
N
 The firm has power over the stakeholder:
 “asserts to have one or more of the kinds of stakes
in busines”
 Mutual power-dependence
relationship
(Mitchell, Agle & Wood, 1997)

 The firm & stakeholder are mutually

dependent:

EL
 “are depending on the firm in order to achieve their

PT
personal goals & on whom the firm is depending for
its existence”
N
 “driven by their own interests & goals are
participants in a firm, & thus depending on it & on
whom for its sake the firm is depending”
 Basis for legitimacy of relationship
(Mitchell, Agle & Wood, 1997)

 The firm & stakeholder are in contractual

relationship:

EL
 “constituents who have a legitimate claim on the

PT
firm… established through the existence of an
N
exchange relationship” who supply “the firm with
critical resources (contributions) & in exchange
each expects its interests to be satisfied (by
inducements)”
 Basis for legitimacy of relationship
(Contd.) (Mitchell, Agle & Wood, 1997)

 The stakeholder has a claim on the firm

 “groups to whom the corporation is responsible”

EL
 “asserts to have one or more of these kinds of

PT
stakes” – “ranging from an interest to a right (legal
N
or moral) to ownership or legal title to the
company’s assets or property”
 Basis for legitimacy of relationship
(Contd.) (Mitchell, Agle & Wood, 1997)

 The stakeholder has something at risk:

 “bear some form of risk as a result of having

EL
invested some form of capital, human or financial,

PT
something of value, in a firm” or “are placed at risk
N
as a result of a firm’s activities”
 Basis for legitimacy of relationship
(Contd.) (Mitchell, Agle & Wood, 1997)

 The stakeholder has a moral claim on the firm:

 “benefit from or are harmed by, & whose rights are

EL
violated or respected by corporate actions”

PT
 “identified through the actual or potential harms &
N
benefits they experience or anticipate experiencing
as a result of the firm’s actions or inactions.”
 Stakeholder interests: Legitimacy
not implied (Mitchell, Agle & Wood, 1997)

 The stakeholder has an interest in the firm:

 “have an interest in the actions of an organization

EL
and … have the ability to influence it”

PT
 “have, or claim, ownership, rights, or interests in a
N
corporation & its activities”
Stakeholder salience
EL
(Mitchell, Agle & Wood, 1997)

PT
N
 What is stakeholder salience?
(Mitchell, Agle & Wood, 1997)

 “The degree to which managers give priority to

competing stakeholder claims”

EL
PT
N
 Stakeholder salience depends on
(Mitchell, Agle & Wood, 1997)

 Power
 Legitimacy

EL
Urgency
PT

N
 Power
(Dahl, 1957, Pfeffer, 1981, Weber, 1947, in Mitchell, Agle & Wood, 1997)

 “A relationship among social actors in which

one social actor, A, can get another social

EL
actor, B, to do something that B would not

PT
have otherwise done” N
 Bases of power
(Mitchell, Agle & Wood, 1997)

 “Coercive: force/ threat

 Utilitarian: material/ incentives

EL
Normative: symbolic influences”
PT

N
 Legitimacy
(Suchman, 1995; Weber, 1947, in Mitchell, Agle & Wood, 1997)

 “A generalized perception or assumption that

the actions of an entity are desirable, proper,

EL
or appropriate within some socially constructed

PT
system of norms, values, beliefs, definitions”
N
 Bases for legitimacy
(Mitchell, Agle & Wood, 1997)

 “Individual
 Organizational

EL
Societal”
PT

N
 Urgency (Mitchell, Agle & Wood, 1997)

 “The degree to which stakeholder claims call

for immediate attention”

EL
PT
N
 Bases for urgency
(Mitchell, Agle & Wood, 1997)

 “Time sensitivity: the degree to which

managerial delay in attending to the claim or

EL
relationship is unacceptable to the stakeholder

PT
N
 Criticality: the importance of the claim or the
relationship to the stakeholder”
Sorting of stakeholders

EL
based on salience
PT
N
(Mitchell, Agle & Wood, 1997)
Stakeholder typology
(Mitchell, Agle & Wood, 1997)
POWER

Dormant

Dangerous Dominant

EL
LEGITIMACY

PT
N Definitive

Demanding
Dependent Discretionary
Nonstakeholder

URGENCY
 Classes of stakeholders based on
salience (Mitchell, Agle & Wood, 1997)

 Latent stakeholders
 Expectant stakeholders

EL
Definitive stakeholders
PT

N
 Latent stakeholders
(Mitchell, Agle & Wood, 1997)

 Do not acknowledge the firm

 Possess only one attribute

EL
Classes
PT


 Dormant stakeholders N
 Discretionary stakeholders
 Demanding stakeholders
 Dormant stakeholders
(Mitchell, Agle & Wood, 1997)

 Attribute: Power
 “Possess power to impose their will on a firm,

EL
but by not having a legitimate relationship or

PT
an urgent claim, their power remains unused.
N
 e.g.
 “… those who have a loaded gun (Coercive)”
 “…those who can spend a lot of money (Utilitarian)”
 “… those who can command the attention of the
news media (Symbolic)”
 Discretionary stakeholders
(Mitchell, Agle & Wood, 1997)

 Attribute: Legitimacy
 “… have no power to influence the firm & no
urgent claims.”

EL
PT
 In the absence of “… power & urgent claims,
N
there is absolutely no pressure on managers to
engage in an active relationship with such a
stakeholder, although managers can choose to
do so”
 E.g. donation dependent non profit
organizations
 Demanding stakeholders
(Mitchell, Agle & Wood, 1997)

 Attribute: Urgency
 “… those with urgent claims but having neither

EL
power nor legitimacy”

PT
 “… irksome but not dangerous, bothersome but
N
not warranting more than passing management
attention”
 e.g. non-violent protestors on the street
 Expectant stakeholders
(Mitchell, Agle & Wood, 1997)

 Stakeholders expect something

 Two attributes

EL
Classes:
PT


 Dominant N
 Dependent
 Dangerous
 Dominant stakeholders
(Mitchell, Agle & Wood, 1997)

 Attributes: Power & legitimacy

 Stake legitimate claims upon the organization and
are able “…to act on these claims (rather than as a

EL
forecast to act on their claims)”
PT
 N
Organization formalizes mechanisms to deal with
them
 e.g.
 Corporate boards of directors
 Representatives of owners
 Significant creditors
 Dependent stakeholders
(Mitchell, Agle & Wood, 1997)

 Attributes: Urgency & legitimacy

 “… lack power but have urgent legitimate claims
and depend on others for the power necessary to

EL
carry out their will.

PT
 “Because power in this relationship is not
N
reciprocal, its exercise is governed either through
the advocacy of guardianship of other
stakeholders, or through the guidance of internal
management values.”
 e.g. environmental stakeholders affected by
pollution
 Dangerous stakeholders
(Mitchell, Agle & Wood, 1997)

 Attributes: Urgency & power, no legitimacy

 “… stakeholder may become coercive &

EL
possibly violent, making the stakeholder

PT
“dangerous” to the firm” N
 e.g. wildcat strikes, sabotage, & terrorism
 Definitive stakeholders
(Mitchell, Agle & Wood, 1997)

 Attributes: Legitimacy, Power, Urgency

 “… managers have a clear & immediate

EL
mandate to attend to & give priority to that

PT
stakeholder’s claim.” N
 EL
Thank You
N
PT
Stakeholder
EL
management
N
PT
 Comprehensive
stakeholder management
EL
PT
N
process model
(Preble, 2005)
 Step 1: Stakeholder identification
 Primary
 Public

EL
Secondary
PT

N
 Step 2: General nature of stakeholder
claims & power implications

 Equity
 Economic

EL
Influencers
PT

N
 Step 3: Determine performance
gaps
 Define stakeholder expectations
 Conduct performance audits

EL
Reveal gaps
PT


 N
Explore stakeholder influence strategies
 Step 4: Prioritize stakeholder
demands
 Determine stakeholder salience (Power,
legitimacy, urgency)

EL
 Assess the strategic importance of various

PT
stakeholders N
 Step 5: Develop organizational
responses
 Direct communication
 Collaboration/ partnering

EL
Set performance goals
PT


 N
Develop policies/ strategies/ programs
 Allocate resources
 Revise Statement of Purpose
 Step 6: Monitoring & Control
 Continually check stakeholder positions
 Evaluate strategic progress

EL
Conduct social/ environmental audits
PT

N
 Step 7
 Go back to step 1

EL
PT
N
Assessing stakeholders

EL
(Savage et al., 1991)

PT
N
 Factors affecting stakeholders’ potentials
for threat & cooperation (Savage et al, 2005)
Stakeholder’s Stakeholder’s
potential for potential for
threat cooperation

Stakeholder controls key resources Increases Increases

Stakeholder does not control key resources Decreases Either
Stakeholder more powerful than organization Increases Either

EL
Stakeholder as powerful as organization Either Either

PT
Stakeholder less powerful than organization Decreases Increases
N
Stakeholder likely to take action (supportive of the org) Decreases Increases
Stakeholder likely to take unsupportive action Increases Decreases
Stakeholder unlikely to take any action Decreases Decreases
Stakeholder likely to form coalition with other Increases Either
stakeholders
Stakeholder likely to form coalition with organization Decreases Increases
Stakeholder unlikely to form any coalition Decreases Decreases
Strategies for managing
stakeholders
EL
PT
N
(Savage et al, 1991)
 Diagnostic typology of organizational
stakeholders (Savage et al, 2005)
STAKEHOLDER’S POTENTIAL THREAT TO ORGANIZATION
COOPERATION WITH ORGANIZATION
STAKEHOLDER’S POTENTIAL FOR

HIGH LOW

EL
PT
Stakeholder Type 4: Stakeholder Type 1:
HIGH
N
Mixed Blessing Supportive

Strategy: Collaborate Strategy: Collaborate

Stakeholder Type 3 Stakeholder Type 2:

Nonsupportive Marginal
LOW
Strategy: Defend Strategy: Monitor
 Managing stakeholders: Types
& strategies (Savage et al., 2005)

 Type 1: The supportive stakeholder:

 Low potential threat, high potential cooperation

EL
 Strategy: “Involve the supportive stakeholder” in

PT
decision making, relevant issues, etc.
N
 Managing stakeholders: Types
& strategies (Contd.) (Savage et al., 2005)

 Type 2: Marginal stakeholder

 “… neither highly threatening, nor especially

EL
cooperative”

PT
 Strategy: Monitor the marginal stakeholder
N
 Managing stakeholders: Types
& strategies (Contd.) (Savage et al., 2005)

 Type 3: The nonsupportive stakeholder

 “… high on potential threat, low on potential

EL
cooperation”

PT
 e.g. competing organizations, employee unions, &
N
sometimes news media
 “Strategy: Defend against the nonsupportive
stakeholder”
 Managing stakeholders: Types
& strategies (Contd.) (Savage et al., 2005)

 Type 4: The mixed blessing stakeholder

 High potential threat & cooperation

EL
 e.g. employees with specialized training

PT
 Strategy: “Collaborate with the mixed blessing
N
stakeholder”
 Transforming typical stakeholder
relationships (Savage et al., 2005)

1. “Identify key organizational stakeholders

2. Diagnose them along two critical dimensions

EL
of potential for threat & potential for

PT
cooperation N
3. Formulate appropriate strategies both to
enhance or change current relationships with
those key stakeholders & to improve the
organization’s overall situation
4. Effectively implement these strategies”
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
Stakeholder

EL
dialogue
PT
N
 Stakeholder dialogue (Kaptein & Van Tulder, 2003)

 “In the dialogue with stakeholders (both

primary & secondary) opinions are exchanged,

EL
(future) interests & expectations are discussed,

PT
& standards are developed with respect to
N
business practices.”
 Stakeholder debate vs. stakeholder
dialogue (Kaptein & Van Tulder, 2003)

Stakeholder Debate Stakeholder Dialogue

Competition with a single Cooperation where everyone is
winner or only losers (either-or a winner (and-and thinking)

EL
thinking)

PT
Egocentric where the other N Empathetic where the other
party is a threat or a means to party is an opportunity and
personal profit represents an intrinsic interest
Putting yourself in a better light Being yourself
Speaking, to which others have Listening to others before
to listen speaking yourself
Influencing Convincing
 Stakeholder debate vs. stakeholder
dialogue (Contd.) (Kaptein & Van Tulder, 2003)
Stakeholder Debate Stakeholder Dialogue
Confronting, combative & destructive, Constructive &, from a point of mutual
whereby the weaknesses & wrongs of understanding & respect, looking for

EL
the other party are sought out & the similarities from which to consider the

PT
similarities are negated differences
N
A closed & defensive attitude because A vulnerable attitude because there
you personally know the truth are many truths & where parties are
open to criticism about their own
performance & they can use this to
learn from each other
Taking & keeping Giving & receiving
Divide & rule Share & serve
Separate/ isolated responsibilities Shared responsibilities
 Preconditions for effective
stakeholder dialogue (Kaptein & Van Tulder, 2003)

 “To know & be understood

 Trust & reliability
Clear rules for the dialogue

EL

A coherent vision on the dialogue
PT


 Dialogue skills N
 Expertise on the subject matter
 Clear dialogue structure
 Valid information as basis
 Consecutive meetings
 Feedback of results”
 Why stakeholder dialogue?
(Kaptein & Van Tulder, 2003)

 “To identify trends & future issues at an early stage & to

prioritize these
 To gain insight into the stakeholders’ appreciation for the

EL
organization & the evaluation of the current of current

PT
performance

N
To allow the organization & stakeholders to gain a better
understanding of each other’s interests & dilemmas, & broader
support for the decisions companies make
 To resolve specific tensions in the relationship with
stakeholders
 To gather suggestions & ideas for improving the company’s
performance in the social area, as well as KPIs for the
sustainability report.”
 Why stakeholder dialogue? (Contd)
(Kaptein & Van Tulder, 2003)

 “To increase sensitivity within the organization for

the stakeholders’ expectations & to heighten the
sense of responsibility for social issues.

EL
To create a greater mutual buffer of trust,
PT

whereby possible problems can be dealt with more
N
effectively.
 To avoid incidents that receive wide pubic & media
attention.
 To create a basis for joint projects, alliances, &
partnerships.”
 Issues to consider when setting up a
dialogue with stakeholders
(Kaptein & Van Tulder, 2003)

 “How do we clarify for ourselves what the specific

objectives of the stakeholder dialogue are?

EL
 How do we decide which stakeholders we are

PT
going to talk to?
N
 How do we determine the topics for discussion?
 Who will represent the organization in the
meetings?
 How can we determine the order of the
meetings?”
 Issues to consider when setting up a
dialogue with stakeholders (Contd.)
(Kaptein & Van Tulder, 2003)

 “How often should the meetings take place?

 How do we avoid leaving out stakeholders, as a result of

EL
which they may feel excluded & cause a big fuss?

PT
 How do we retain our freedom to make decisions &
N
carry our responsibility for these?
 How do we avoid stakeholders abusing the trust we vest
in them & the information we share with them?
 How do we avoid stakeholders developing the feeling,
also in hindsight, that they have been abused?”
 Issues to consider when setting up a
dialogue with stakeholders (Contd.)
(Kaptein & Van Tulder, 2003)

 “How can we learn the most from the meetings?

How do we avoid creating overly high expectations
among the stakeholders about the content &

EL
follow-up of the stakeholder dialogue?

PT
 How do we prevent a stakeholder dialogue from
N
becoming a time-consuming exercise?
 How can the dialogue be embedded in the
management systems & the sustainability report
that may be published?
 How can we know that the stakeholder dialogue
satisfies the wishes of the stakeholders?
 Inappropriate/ Inadequate attention
to the above issues leads to
(Kaptein & Van Tulder, 2003)

 “Stakeholders feeling ignored

 Stakeholders feeling abused

EL
Meetings becoming a repetition of sets
PT


 N
Internal support for the meetings crumbling
 Misuse of confidential information”
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
 Management

EL
of Stakeholder
N
PT

Dialogue
 Stakeholder dialogue: Levels of
engagement (Pedersen, 2006)
Level of engagement

Low High
Inclusion Only a few privileged stakeholders All relevant stakeholders are

EL
are included in the dialogue included in the dialogue

PT
Openness Dialogue is structured around a Dialogue is structured around open
N
fixed set of questions/ problems/ questions/ problems/ issues
Dimension

issues
Tolerance One position has priority over all New, alternative & critical voices
the others are respected
Empower- One stakeholder dominates the Freedom & equality in dialogue as
ment dialogue & decisions well as in decisions
Transpa- No access to information about the Full access to information about the
rency process & outcomes of the process & outcomes of the
stakeholder dialogue stakeholder dialogue
 Types of stakeholder dialogue
(Kaptein & Van Tulder, 2003)

 Proactive dialogue
 Organization takes initiative

EL
 Inclusive

PT
 Prioritization of issues & prompt communication to
N
stakeholders
 Stakeholder panel
 Organization takes initiative
 Usually in response to a crisis
 Concrete plan of action developed & action taken
 Types of stakeholder dialogue
(Contd.) (Kaptein & Van Tulder, 2003)

 Selective reactive stakeholder dialogue

 Selective about stakeholders

EL
 In response to a crisis

PT
 Very cautiously dealt with – spread of problem
N
controlled
 Defensive dialogue
 Usually in response to a crisis
 Purpose is to defend the reputation of/ minimize
risk to the organization
 Dimensions of stakeholder
dialogue (Kaptein & Van Tulder, 2003)

 Type of issue (social & / or environmental)

 No. of stakeholders involved in the dialogue

EL
Frequency of conversations
PT


 N
No. of issues per conversation
 No. of stakeholders per conversation
 Orientation toward problems (identifying
problem and/ or problem solving)
 Dimensions of stakeholder
dialogue (Contd.) (Kaptein & Van Tulder, 2003)

 Orientation toward time (prospective/

retrospective)

EL
 Participants of the organization (support

PT
management, operational management and/ or
N
employees
 Organizational level (head office and/ or local)
 Monitoring of dialogue quality
 Inclusion in annual report
 Filters in stakeholder dialogue
(Pedersen, 2006)

 “Selection Filter: “[…] about the access to the

dialogue ‘arena’.”

EL
 “Interpretation filter: […] concerns the

PT
transformation of the multiple voices from the
N
dialogue into a limited number of decisions.”
 “Response filter: […] relates to the activities
that take place when the decisions move out of
the dialogue arena.”
 Phases of stakeholder dialogue
(Pedersen, 2006)

Selection Interpretation Response

Filter Filter Filter

Customers

EL
PT
Suppliers

Distributors N
Stakeholder Implementation
Employees Decision
dialogue & Impact
Investors

Community

Etc.
 Factors affecting operationalization
of stakeholder dialogue (Pedersen, 2006)

 Commitment: Willingness
 Consciousness: Knowledge & awareness

EL
PT
 Consensus: Harmony/ conflict between
N
stakeholders & organization
 Capacity: Available resources
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
Planning of CSR activities:
Responsibility paradigms
EL
PT
N
 Paradigms of responsibility
 The CSR Pyramid
 Intersecting circles

EL
Concentric circles
PT

N
 The CSR Pyramid
(Carroll, 1991, in Schwartz & Carroll, 2003)

Be a good citizen Desired

EL
Philanthropic

PT
Be ethical N Ethical
Expected

Required
Obey the law Legal

Required
Be profitable Economic
Intersecting Circles (Schwartz & Carroll, 2003)

Purely Ethical

EL
PT
Economic/
Legal/
Ethical
NEthical/ Ethical
Legal/
Economic
Purely Economic Purely Legal
Economic/
Legal
 Intersecting circles (Contd.)
(Schwartz & Carroll, 2003)

 Economic Domain:
 “… those activities which are intended to have

EL
either a direct or indirect positive economic impact

PT
on the [organization]”
N
 Criteria for positive impact:
 “… maximization of profits” and/ or
 “… maximization of shared value”
 Intersecting circles (Contd.)
(Schwartz & Carroll, 2003)

 Legal Domain:
 “Compliance:

EL
 Passive

PT
 Restrictive
 Opportunistic”
N
 Avoidance of civil litigation
 Anticipation of the law”
 Legal Domain (Contd.)
(Schwartz & Carroll, 2003)

Type of legal motive Typical corporate/ managerial response

Passive compliance “Well, looking back on it, we did happen to
(Outside legal domain) comply with the law”

EL
Restrictive compliance “We wanted to do something else but the law

PT
prevented us.”
N
“We did it in order to comply with the law”
Opportunistic compliance “Well, the law allows us to do it”
“We operate in that jurisdiction because of the
less stringent legal standards”
Avoidance of civil “We did it because we might get sued otherwise”
litigation “Lawsuits will be dropped”
“Anticipation of the law “The law is going to be changed soon”
“We wanted to pre-empt the need for legislation”
 Intersecting circles (Contd.)
(Schwartz & Carroll, 2003)

 Ethical domain:
 “Conventional standard: “… those standards or norms
which have been accepted by the organization, the

EL
industry, the profession or society as necessary for the

PT
proper functioning of business”
N
 “Consequentialist standard: “… an action can be
considered eithical […] when it promotes the good of
society or […] when the action is intended to produce
the greatest net benefit (or lowest net cost) to society
when compared to all of the other alternatives.”
 Deontological standard: “… those activities which reflect
a consideration of one’s duty or obligation”
 Intersecting circles (Contd.)
(Schwartz & Carroll, 2003)

 Economic/ Ethical: “good ethics is good business”

e.g. green products, social marketing etc.

EL
 Economic/ Legal: using legal loopholes for

PT
economic benefit, e.g. eco-dumping, social
N
dumping etc. (offshoring activities to countries
with lower environmental or work safety
standards)
 Legal/ Ethical: e.g. installing devices because they
are legally required & ethical even with no
economic benefit
 Intersecting circles (Contd.)
(Schwartz & Carroll, 2003)

 Economic/ Legal/ Ethical: All three domains.

e.g. withdrawing defective/ potentially harmful

EL
products from the market. Maggi Noodles case

PT
– mono sodium glutamate & lead found in
N
Maggi noodles.
https://www.youtube.com/watch?v=ko8pIdcr5
xk
Concentric model (Geva, 2008)

Philanthropic

EL
Ethical

PT
Legal
N Economic
 Concentric model (Contd.)
(Geva, 2008)

 Interdependence of various circles

 Economic circle: Generation of wealth towards improving
overall standard of living, fair price selling, provision of jobs

EL
etc.

PT
 Legal circle: Following the law: Obey the law & justify your
N
reasons for not being able to follow the law when you are
not able to follow the law
 Ethical circle: Doing good rests on good economics & legal
compliance
 Philanthropic circle: “… contributions of business firms to
humanitarian & social causes, which are usually considered
outside the firms’ natural line of business”
 Comparison of the three paradigms
(Geva, 2008)

CSR Pyramid Intersecting Circles Concentric Circles

General Hierarchy of separate Nonhierarchical set of Integration of
Description responsibilities intersecting responsibilities: all
responsibilities sharing a central core

EL
Theoretical Normative restraints Classification Incurred obligation to

PT
assumptions: of responsiveness framework: No work for social
Nature of CSR normative guidance betterment
Scope of Narrow
N Split Wide
responsibilities
Total CSR Conjunction Disjunction Integration
Order of Hierarchy: Economic No prima facie order Inclusion system:
importance Responsibility first economic circle at the
core
Role of “Icing on the cake” Subsumed under Integral part of CSR
philanthropy economic/ ethical
responsibilities
 Comparison of the three paradigms
(Contd.) (Geva, 2008)

CSR Pyramid Intersecting Circles Concentric Circles

Research Constant-sum CSR portraits Representative range

EL
implications: method of measures

PT
Operationalization
CSR-CFP Positive N
Positive, negative or Non-linear
relationship neutral

Justification for Ethics pays Strategic Normative obligation

ethics considerations
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
 CSR Design

EL
&
PT
N

Implementation:
Stakeholder Integration
(Maon, 2009)
 Cramer’s framework (2005)
(in Maon et al., 2009)

 CSR Conception:
 World Business Council for Sustainable

EL
Development (WBCSD) definition: “… the

PT
commitment of business to contribute to
N
sustainable economic development, working with
employees, their families, the local community &
society at large to improve their quality of life”
 Cramer’s (2005) framework (Contd.)
(Maon et al., 2009)

 CSR integration process:

1. “Listing the expectations & demands of the stakeholders

EL
2. Formulating a vision & a mission with regard to corporate
social responsibility and, if desired, a code of conduct

PT
3. N
Developing short- and longer-term strategies with regard
to CSR & using these to draft a plan of action
4. Setting up a monitoring & reporting system
5. Embedding the process by rooting it in quality &
management systems
6. Communicating internally & externally about the approach
& the results obtained.
 Cramer’s (2005) framework (Contd.)
(Maon et al., 2009)

 Stakeholders’ role in the process:

 Primarily stakeholder dialogue

EL
PT
N
 Khoo & Tan’s (2002) framework
(Maon et al., 2008)

 CSR conception:
 “Business commitment to CSR should ‘envelop all

EL
employees (i.e. their health & well being), the quality of

PT
products, the continuous improvement of processes, &
the company’s facilities & profit-making opportunities.
N
[…] Sustainable manufacturing & development is
further defined as ‘the integration of processes, decision
making & the environmental concerns of an active
industrial system that seeks to achieve economic
growth, without destroying precious resources or the
environment”
 Khoo & Tan’s (2002) framework
(Contd.) (Maon, 2009)

 CSR Integration Process:

1. “Preparation (involving leadership & strategy

EL
planning)

PT
2. N
Transformation (involving people & information
management)
3. Implementation (involving the embedment of
sustainability in the company processes)
4. Sustainable business results (involving the review
of the system’s performance)”
 Khoo & Tan’s (2002) framework
(Contd.) (Maon, 2009)

 Stakeholders’ role: “… addressing the well-

being of employees & needs & expectations of

EL
customers.”

PT
N
 Maignan et al.’s, (2005) framework
(Maon et al., 2009)

 CSR Conception:
 “Business commitment to CSR is viewed as, ‘at a

EL
minimum, adopt values & norms along with

PT
organizational processes to minimize their negative
N
impacts & maximize their positive impacts on
important stakeholder issues’. The CSR of an
organization is issue specific. Also commitment to
CSR is best evaluated at the level of an individual
business unit.”
 Maignan et al.’s (2005) framework
(Contd.) (Maon et al., 2009)

 CSR integration process:

1. “Discovering organizational values & norms
Identifying stakeholders & their respective salience

EL
2.

Identifying the main issues of concern to the identified

PT
3.
stakeholders
4.
N
Assessing a meaning of CSR that fits the organization of
interest
5. Auditing current practices
6. Prioritizing & implementing CSR changes & initiatives
7. Promoting CSR by creating awareness & getting stakeholders
involved
8. Gaining stakeholders’ feedback”
 Maignan et al.’s (2005) framework
(Contd.) (Maon et al., 2009)

 Stakeholders’ role in the process: Feedback

loops:

EL
 “Stakeholders’ feedback to be used as input for the

PT
next audit. Consequently, the sequence linking
N
steps five to eight should be performed on a regular
basis (bi-annual audits of current practices)
 Stakeholders’ feedback as an input to reassess the
first three steps of the CSR management process in
the long run (approximately every four years)
 Panapanaan et al.’s (2003)
framework (Maon, 2009)

 “CSR ‘encompasses three dimensions –

economic, environmental, & social’ […] & is

EL
about ‘doing business sustainably & ethically as

PT
well as treating or addressing stakeholders’
N
concerns responsibly”
 Panapanaan et al.’s (2005)
framework (Contd.) (Maon et al., 2009)

 CSR integration process:

1. Assessment of CSR (identification of the main CSR

EL
areas & identifications of the relevant CSR

PT
parameters)
N
2. Decision whether to proceed in managing CSR:
1. Organization & structure
2. Planning
3. Implementation
4. Monitoring & evaluation
5. Communication & reporting”
 Panapanaan et al.’s (2003)
framework (Contd.) (Maon et al., 2009)

 Stakeholders’ role in the process:

 Step 1: Social risk assessment & its role in

EL
developing CSR programs by “… considering

PT
stakeholders’ clusters (employees, community,
N
customers, community, suppliers)& their issues.
 Werre’s (2003) framework
(Maon et al., 2009)

 CSR conception:
 “… the strategic choice to take responsibility for the

EL
impact of business with respect to economic,

PT
environmental & social dimensions.”
N
 Werre’s (2003) framework
(Contd.) (Maon, 2009)

 CSR integration process: Main phases in a

Corporate Responsibility implementation model:

EL
1. “Raising top management awareness

PT
2. Formulating a CSR vision & core corporate values
N
3. Changing organizational behavior
4. Anchoring the change”
 Werre’s (2003) framework (Contd.)
(Maon et al., 2009)

 Stakeholders’ role in the process:

 Involvement of internal stakeholders

EL
PT
N
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
 CSR Design

EL
&
PT
N

Implementation:
Stakeholder Integration
(Maon, 2009)
 Stakeholder expectations
(Longo et al., 2005, in Jamali, 2008)

Stakeholder Expectations divided into value classes

Employees Health & safety at work
Development of workers’ skills
Wellbeing & satisfaction of workers

EL
Quality of work

PT
Social equity
Suppliers N
Partnership between ordering company & suppliers
Selection & analysis systems of suppliers

Customers Product quality

Safety of customer during use of product
Consumer protection
Transparency of consumer product information
Community Creation of added value to the community
Environmental safety & production
 Integrative framework for
designing & implementing CSR
(Maon et al., 2009)

 Sensitize:
 Unfreeze: Plan

EL
 Move:

PT
 Do N
 Check/ improve
 Refreeze: Mainstream

While engaging continuously in a dialogue with

stakeholders
 Integrative framework (Contd.)
(Maon et al., 2009)

 Sensitize:
 Step 1: Raise CSR awareness through:

EL
 Social drivers

PT
 Political drivers

N
Managers’ personal values
 Economic drivers
 Integrative framework … (Contd.)
(Maon et al., 2009)

 Unfreeze: Plan:
 Step 2: Assess corporate purpose in a social context:
Uncover organizational systems, as well as corporate norms &

EL


values

PT
 Identify key stakeholders & critical stakeholder issues

N
Step 3: Establish a vision & a working definition for CSR
 Step 4: Assess current CSR status
 Audit current CSR norms, standards, practices
 Benchmark competitors’ CSR practices, norms, standards,
practices
 Step 5: Develop a CSR-integrated strategic plan: Embed
CSR in organizational strategy
 Integrative framework … (Contd.)
(Maon et al., 2009)

 Move:
 Do:

EL
 Step 6: Implement CSR integrated strategic plan:
Implement organizational initiatives & strategies linked to

PT
CSR N
 Step 7 (Steps 6, 8 & 9 feed into this and this is ongoing
till the end of the process): Communicating about CSR
commitments & performance
 Check/ Improve:
 Step 8: Evaluate CSR integrated strategies &
communication: Evaluate, verify & report on CSR
progress
 Integrative framework … (Contd.)
(Maon et al., 2009)

 Mainstream:
 Step 9: Institutionalize CSR: Anchoring changes into

EL
organizational systems, as well as corporate culture

PT
& values
N
 Critical success factors in the CSR
process (Maon et al., 2009)

Plan Do Check/ Improve Mainstream

Corporate •Connecting CSR vision & - Considering mistakes as an -
Level initiatives with organization’s opportunity to learn &
core values & competencies improve CSR programs &
•Formalizing CSR vision policies

EL
through official documents

PT
•Getting key people’s commitment (directors, owners, senior managers)
•Engaging participation of key stakeholders in the CSR process
Organizational Building upon N
•Ensuring the •Considering Emphasizing
Level existing organization has mistakes as an relationships
organizational internal skills to make opportunity to between new
structures & the transformation learn & improve organizational
process •Training employees in CSR programs & behavior & success
CSR issues policies
•Fostering the presence of moral/ CSR champions
•Thinking in terms of long-term engagement rather than quick fix solutions
Managerial Creating enthusiasm & credibility around Rewarding people that
Level CSR create CSR success
Recognizing the critical role of leadership
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
 CSR Activities:

EL
Corporate Social Performance
PT
N
 How do corporations take decisions
about their social behavior (Sethi, 1975)
 Behavior of corporations is adjusted to their
understanding of what they need to do for the
society:

EL
PT
 State One: Social obligation: Proscriptive
(Prohibitive)
N
 State Two: Social responsibility: Prescriptive
(Solutions)
 State Three: Social responsiveness: Anticipatory &
preventive
 1975: S. Prakash Sethi
 “Social obligation is corporate behavior ‘in
response to market forces or legal constraints’.”

EL
 “… social responsibility implies bringing

PT
corporate behavior up to a level where it is
N
congruent with the prevailing social norms,
values, & expectations of performance”
 Dimension of behavior: Legitimacy
(Sethi, 1975)

 State One: Social obligation:

 “… does not violate laws; profitable operations with fulfilling
social expectations”

EL
State Two: Social responsibility:
PT



N
“Willing to consider & accept broader – extralegal & extra-
market criteria for measuring corporate performance &
social role.”
 State Three: Social responsiveness:
 “Accepts its role as defined by the social system & therefore
subject to change; recognizes importance of profitable
operations but includes other criteria”
 Dimension of behavior: Ethical norms
(Sethi, 1975)

 State One: Social obligation:

 “Considers business value neutral; managers expected to behave
according to their own ethical standards.”

EL
State Two: Social responsibility:

PT


 N
“Defines norms in community related terms, i.e. good corporate
citizen. Avoids taking moral stand on issues which may harm its
economic interests or go against prevailing social norms.”
 State Three: Social responsiveness:
 “Takes define stand on issues of public concern, advocates
institutional ethical norms even though they may be detrimental
to its immediate economic interest or prevailing social norms.”
 Dimension of behavior: Social
accountability for corporate actions
(Sethi, 1975)

 State One: Social obligation:

 “Construes narrowly as limited to stockholders;
jealously guards its prerogative against outsiders.”

EL
PT
 State Two: Social responsibility:

N
“Construes narrowly for legal purposes, but
broadened to include groups affected by its actions;
management more outward looking”
 State Three: Social responsiveness:
 “Willing to account for its actions to other groups,
even those not directly affected by its actions.”
 Dimension of behavior:
Operating strategy (Sethi, 1975)

 State One: Social obligation

 “Exploitative & defensive adaptation. Maximum externalization of costs.”
State Two: Social responsibility

EL


PT
 “Reactive adaptation. Where identifiable internalize previously external
costs. Maintain current standards of physical & social environment.
N
Compensate victims of pollution & other corporate related activities even
in the absence of clearly established legal grounds. Develop industry-
wide standards.”
 State Three: Social responsiveness
 “Proactive adaptation: Takes lead in developing & adapting new
technology for environmental protectors. Evaluates side effects of
corporate actions & eliminates them prior to the actions being taken.
Anticipates future social changes & develops internal structures to cope
with them.”
 Dimension of behavior: Response
to social pressures
(Sethi, 1975)

 State One: Social obligation:

 “Maintains low public profile, but if attacked, uses

EL
PR methods to upgrade its public image;

PT
 denies any deficiencies;
N
 blames public dissatisfaction on ignorance or failure
to understand corporate functions
 Discloses information only where legally required”
 Dimension of behavior: Response to
social pressures (Contd.) (Sethi, 1975)

 State Two: Social responsibility:

 “Accepts responsibility for solving current problems

EL
 Will admit deficiencies in former practices & attempt

PT
to persuade public that its current practices meet
N
social norms
 Attitude towards critics conciliatory
 Freer information disclosures than state one”
 Dimension of behavior: Response to
social pressures (Contd.) (Sethi, 1975)

 State Three: Social responsiveness:

 “Willingly discusses activities with outside groups

EL
 Makes information freely available to public

PT
 Accepts formal & informal inputs from outside
N
groups in decision making
 Is willing to be publicly evaluated for its various
activities”
 Dimension of behavior: Activities
pertaining to governmental actions
(Sethi, 1975)

 State One: Social obligation

 “Strongly resists any regulation of its activities

EL
except when it needs help to protect its market

PT
position
N
 Avoids contact
 Resists any demands for information beyond that
legally required”
 Dimension of behavior: Activities pertaining
to governmental actions (Contd.) (Sethi, 1975)

 State Two: Social responsibility

 “Preserves management discretion in corporate

EL
decisions, but cooperates with government in

PT
research to improve industry-wide standards
N
 Participates in political processes & encourages
employees to do likewise”
 Dimension of behavior: Activities pertaining
to governmental actions (Contd.) (Sethi, 1975)

 State Three: Social responsiveness

 “Openly communicates with government

EL
 Assists in enforcing existing laws & developing

PT
evaluations of business practices
N
 Objects publicly to governmental activities that it
feels are detrimental to the public good”
 Dimension of behavior: Legislative
& political activities (Sethi, 1975)

 Step One: Social obligation:

 “Seeks to maintain status quo

EL
 Actively opposes laws that would internalize any

PT
previously externalized costs
N
 Seeks to keep lobbying activities secret”
 Dimension of behavior: Legislative
& political activities (Contd.) (Sethi, 1975)

 Step Two: Social responsibility:

 “Willing to work with outside groups for good

EL
environment laws

PT
 Concedes need for change in some status quo laws
N
 Less secrecy in lobbying than state one”
 Dimension of behavior: Legislative
& political activities (Contd.) (Sethi, 1975)

 Step Three: Social responsiveness:

 “Avoids meddling in politics & does not pursue

EL
special-interest laws

PT
 Assists legislative bodies in developing better laws
N
where relevant
 Promotes honesty & openness in government & in
its own lobbying activities”
 Dimension of behavior: Philanthropy
(Sethi, 1975)

 State One: Social obligation:

 “Contributes only when direct benefit to it clearly

EL
shows

PT
 Otherwise views contributions as responsibility of
N
individual employees”
 Dimension of behavior: Philanthropy
(Contd.) (Sethi, 1975)

 State Two: Social responsibility:

 “Contributes to noncontroversial & established

EL
causes

PT
 Matches employee contributions”
N
 Dimension of behavior: Philanthropy
(Contd.) (Sethi, 1975)

 State Three: Social responsiveness:

 “Activities of state two plus support & contributions

EL
to new, controversial groups whose needs it sees as

PT
unfulfilled & increasingly important”
N
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
CSR Process
EL
PT
N
 Phases & steps within the CSR
process (O’Riordan, 2006, in O’Riordan & Fairbass, 2008)

 Phase 1: CSR strategy development:

 Values

EL
 Vision/ mission

PT
 Objectives
 Scope
N
 Phase 1: CSR Strategy Development
(Contd.) (O’Riordan, 2006 in O’Riordan & Fairbass, 2008)

 Alternatives:
 Stakeholder priorities

EL
 Causes supported

PT
 Methods of support N
 Practices/ Policies
 Phase 1: CSR Strategy Development
(Contd.) (O’Riordan, 2006 in O’Riordan & Fairbass, 2008)

 Strategy:
 Selection

EL
 Combination

PT
 Based on: N
 Value
 Fit
 Phases & steps within the CSR
process (Contd.) (O’Riordan, 2006, in O’Riordan & Fairbass, 2008)

 Phase 2: Implementation:
 Implement/ Control

EL
 Communicate

PT
 Stakeholder dialogue
N
 Output
 Goodwill
 Reputation
 Image
 Model for managing CSR
(Bakic, 2012, in Bakic, Kostic, Neskovic, 2015)

1. “Ensuring compliance & commitment of the top

management of an organization
Analyzing existing business policies, processes &

EL
2.
performances in the context of social
PT
responsibility N
3. Identifying key aspects of business used by a
company to influence local community
4. Identifying problems of local community& their
connection to business interests
5. Defining goals, strategies & operational plans”
 Model for managing CSR (Contd.)
(Bakic, 2012, in Bakic, Kostic, Neskovic, 2015)

6. “Providing necessary human & material resources”: Budget

for
 “Management, coordination of activities & communication,

EL
Specific costs of implementation activities”

PT


7. N
Implementation of programs & plans
8. Measuring results & effects
9. Reporting & communicating the results
10. Researching the perception & attitudes of internal &
external stakeholders”
11. Go back to step 5
 Steps for building

EL
a strategy for
PT
N
responsible business
(National Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Business,
Ministry of Corporate Affairs, Govt. of India, 2011)
 Step 1: Analyze your business
 “Key business drivers
 Opportunities & threats, Strengths &

EL
weaknesses

PT
 Articulate the responsible business policy”
N
 Step 2: Identify risks & issues
 “Identify issue
 Network

EL
Prioritize”
PT

N
 Step 3: Develop a strategy
 “Operational/ strategic
 Compliance/ Beyond compliance

EL
PT
N
 Step 4: Plan & implement strategy
 “Roadmap
 Clear objective

EL
Training
PT


 Low-hanging fruit N
 Adoption of indicators for each principle”
 Step 5: Monitor & review progress
 “Monitor
 Measure

EL
Learn & refine processes”
PT


 N
Go back to Step 1 if required
 Step 6: Communicate
 “Convey rationale
 Listen

EL
Embed in communications
PT


 Report” N
 Go back to Step 1
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
CSR Activities
EL
(Peloza & Shang, 2011)

PT
N
 Categories of CSR Activities
(Peloza & Shang, 2011)

 Philanthropy: “other oriented… relies on

supporting others in need, valued for its own

EL
sake”

PT
 Business practices: Activities related to how
N
companies do what they do
 Product [or service] related: Activities related
to the actual output of profit making
organizations
 Types of CSR Activities
(Peloza & Shang, 2011)

 Single activities: Independent

 Focused activities: “Multiple activities within the

EL
same category”

PT
 Diffuse activities: “Activities from [several]
N
categories”
 Single activities (Peloza & Shang, 2011)

 Philanthropy:
 “Cause-related marketing: e.g.

EL
https://www.youtube.com/watch?v=C1s65IGuRMM

PT
 Charity events
N
 Employee volunteerism
 Cash donations
 Public service announcement sponsorship
 Customer donations”
 Single activities (Contd.)
(Peloza & Shang, 2011)

 Business practice:
 Environmental protection
 Child labor/ sweatshop prevention

EL
 Decreased product use messages
Diversity

PT


 Prevention of false/ misleading information

N
 Ethical behavior
 Socially responsible company
 Fair trade
 Supply chain responsibility
 Fortune rankings
 Customer relations
 Employee relations
 Packaging
 Single activities (Contd.)
(Peloza & Shang, 2011)

 Products:
 Organic products

EL
 Residue free products

PT
 Green products N
 Focused activities (Peloza & Shang, 2011)

 Philanthropy:
 “Employee volunteerism

EL
 Cash donations

PT
 Cause related marketing

N
Licensing agreements
 Cause related marketing
 Promotion of social issues
 Product donation
 Advocacy advertising
 Non-specific charity support”
 Focused activities (Contd.)
(Peloza & Shang, 2011)

 Business practices:
 “Controlled animal testing
 Employee relations

EL
 Environmental protection

PT
 Community satisfaction
 Supplier satisfaction N
 Competitor satisfaction
 Socially responsible advertisements
 Animal testing
 Campaigns against false advertising
 Protection of human rights
 Domestic supply chain”
 Diffuse activities
(Peloza & Shang, 2011)

 “Philanthropy and business practices:

 Employee rights

EL
 Community involvement

PT
 Environmental protection N
 Cash donations
 Product donations
 Ethical conduct
 Customer relations”
 Diffuse activities (Contd.)
(Peloza & Shang, 2011)

 “Business practices & products:

 Organic products
 Healthy products

EL
 Green products
Packaging

PT


 Supply chain responsibility:N

 Sweatshop labor issues: e.g. Goodweave Campaign:
https://www.youtube.com/watch?v=xVsxCT8ogb0
 Animal byproducts
 Animal testing
 Biodegradability
 Fair trade
 Honest advertising
 Environmental protection”
 Diffuse activities (Contd.)
(Peloza & Shang, 2011)

 Philanthropy, business practices & products:

 Environmental protection

EL
 Community involvement

PT
e.g.

N
https://www.youtube.com/watch?v=V1WfVOW6mKc&ind
ex=6&list=PLJiJfCKScn5iI6YOxpJdr0oYkLAw6DxW3
 Diversity
 Product issues
 Product quality
 Controversial products
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
Evaluating CSR
EL
PT
N
 Starting the evaluation process
(Clarkson, 1995)

 “Socially responsible to whom?

 Socially responsive about what?

EL
Social performance judged by whom & by what
PT

standards?” N
 Basis for evaluation (Clarkson, 1995)

 Obligations to & expectations of stakeholders

vis-à-vis what they are given

EL
PT
N
 Tests of the effectiveness of CSR
(Peloza & Shang, 2011)

 Single activity tests involving philanthropy:

 Degree of logical fit between the firm and the work
done - Improvement of consumer attitudes towards the

EL
firm & purchase intentions (Barone et al, 2007, Basil & Herr, 2006, Becker-Olsen et

PT
al., 2006, Bigne-Alcanz et al., 2009, Ellen et al., 2006, etc. in Peloza & Shang, 2011)

 Donation level – Improvement of consumer attitudes

N
towards the firm & donation intentions (Hajjat, 2003, in Peloza & Shang,
2011)

 Proactive donations – Improvement of attitudes

towards the activity, firm & purchase intentions (Ricks, 2005, in
Peloza & Shang, 2011)

 Strategic CSR (higher fit, longer tenure & higher

donations) – Improvement of attitudes towards the firm
(van den Brink et al., 2006, in Peloza & Shang, 2011)
 Tests of the effectiveness of CSR
(Contd.) (Peloza & Shang, 2011)

 Single activity tests involving business

practices:

EL
 “Proximity of environmental damage positively

PT
impacts purchase intentions, though some
N
moderators exist” (Russel & Russell, 2010, in Peloza & Shang, 2011)
 Tests of the effectiveness of CSR
(Contd.) (Peloza & Shang, 2011)

 Single activity tests involving products/

services:

EL
 “Environmental appeals improve purchase

PT
intentions & attitudes toward the ad for those who
N
are less involved with the environment” (Schuhwerk & Leikoff
Hagius, 1995, in Peloza & Shang, 2011)
 Tests of the effectiveness of CSR
(Contd.) (Peloza & Shang, 2011)

 Focused activity tests involving philanthropy

 Licensing associations – Improvement of attitudes

EL
towards the firm

PT
 Cause related marketing/ Non-specific charity
N
support – Improvement of attitudes towards the
firm
 Cash donations – Improvement of attitudes toward
the firm
 Employee volunteerism – Improvement of attitudes
toward the firm
 Tests of the effectiveness of CSR
(Contd.) (Peloza & Shang, 2011)
 Focused activity tests involving business
practices:

EL
 Environmental indicators

PT
Improvement of customer attitudes
 Customer relations
N
 Tests of the effectiveness of CSR
(Contd.) (Peloza & Shang, 2011)

 Tests across CSR categories:

 Product responsibility (Anselmsson & Johansson, 2007, in Peloza & Shang, 2011)

EL
 Human responsibility (Anselmsson & Johansson, 2007, in Peloza & Shang, 2011)

PT
 Community relations & diversity (Luce et al., 2011, in Peloza & Shang,
2011) N
 Philanthropy & environmental protection (Oppewal et al., 2006,
in Peloza & Shang, 2011)

 Product related messages (Phau & Ong, 2007, in Peloza & Shang, 2011)
 Institutionalized CSR programs rather than
promotional CSR programs – Generation of
purchase intention (Pirsh et al., 2007, in Peloza & Shang, 2011)
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
Measurement of
EL
CSR
PT
N
 The benchmark for CSR
 SDG: United Nations Sustainable Development
Goals:

EL
 http://www.un.org/sustainabledevelopment/

PT
 https://www.youtube.com/watch?v=89tInECFdQ4
N
 Indexes to rate CSR (Jankalova, 2016)

 “… those that explore the structure of

sustainability indexes”

EL
 “… those that explore the purpose of

PT
sustainable indexes”
N
 “… those that explore other dimension, such as
their application by the evaluation of CSR
activities of companies”
 Sustainability indexes
 Dow Jones Sustainability Index:
 http://us.spindices.com/indexology/esg

EL
 http://www.sustainability-indices.com/index-family-

PT
overview/djsi-diversified-family-overview/index.jsp

N
http://www.robecosam.com/en/sustainability-
insights/about-sustainability/corporate-
sustainability-assessment/index.jsp
 http://eu.spindices.com/index-family/esg/djsi
 RobecoSAM :
http://www.robecosam.com/images/sample-
questionnaire-diversified-consumer-services.pdf
 Sustainability indexes (Contd.)
 FTSE Russell (UK): http://www.ftserussell.com/
 Ethibel Sustainability Index (Belgium):
http://forumethibel.org/content/ethibel_sustainabil

EL
ity_index.html
PT
 N
Global Challenges Index (Germany):
http://gcindex.boersenag.de/en/
 STOXX Global ESG Leaders
 Heng Sustainability Index Series (Hong Kong):
http://www.hsi.com.hk/HSI-Net/HSI-
Net?cmd=navigation&pageId=en.indexes.hssus
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
An example of CSR Evaluation:
RobecoSAM Sustainability Index

EL
PT
N
 Introduction to RobecoSAM
 https://www.youtube.com/watch?v=Gpa1INdR
aug

EL
https://www.youtube.com/watch?v=HciTqzUiF
PT

g8 N
 RobecoSAM Criteria
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 Economic dimension
 Environmental dimension

EL
Social dimension
PT

N
 Economic dimension
 Corporate governance
 Materiality
 Risk & crisis management

EL
 Codes of business conduct

PT
 Customer relationship management
 Policy influence
N
 Brand management
 Tax strategy
 Impact measurement & valuation
 Information security & cybersecurity
 Privacy protection
 Corporate Governance
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 “CG systems ensure that a company is managed in the interests of

shareholders” – checks and balances for control & alignment of
shareholder and management interests.
Board structure

EL


 Non-executive chairman/ Lead director

PT
 Responsibilities & committees
Diversity policy


 Gender diversity
N
 Board effectiveness
 Average tenure
 Board industry experience
 Executive compensation
 Management ownership requirements
 Compensation disclosure
 Media & stakeholder analysis: Consistency of management behavior during
crisis situations
 Materiality
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 “… [assessment of] company’s ability to identify

the sources of long-term value creation,

EL
understand the link between long-term issues

PT
& the business case, […] and what targets are
N
set to address these issues”
 Material issues: economic, environmental, social
 Materiality disclosure
 Risk & crisis management
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 Development of internal control processes &

compliance with existing regulations &
proactive development of control mechanism

EL
PT
 Risk governance
 Risks correlation N
 Sensitivity analysis & stress testing
 Emerging risks
 Risk culture
 Media and stakeholder analysis: Risk & crisis
management
 Codes of business conduct
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 Codes of conduct
 Coverage

EL
 Corruption & bribery

PT
 Systems & procedures N
 Anti-competitive practices
 Corruption & bribery cases
 Reporting on breaches [against codes of
conduct/ ethics]
 Media & stakeholder analysis: Business ethics
 Customer relationship management
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 Online strategies & customers online

 Satisfaction management

EL
Media & stakeholder analysis: CRM
PT

N
 Policy influence
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 Contributions & other spending

 Largest contributions & expenditures

EL
PT
N
 Brand management
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 “… how brand management strategies support

a company’s brand strength & align its

EL
approach to sustainability”

PT
 Brand values N
 Brand strategy & sustainability strategy
 Brand management metrics
 Media & stakeholder analysis: Brand management
 Tax strategy
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 Tax strategy
 Tax reporting

EL
Taxation governance & risks
PT


 N
Media & stakeholder analysis: Tax strategy
 Impact measurement & valuation
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 “… to assess whether companies have business

programs for social needs & if they are

EL
measuring & valuing their broader societal

PT
impacts” N
 Business programs for social needs
 Impact valuation
 Valuation disclosure
 Information security & cybersecurity
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 Information security/ cybersecurity strategy &

governance

EL
 Responsibilities & employees

PT
 Process & infrastructure N
 Information security/ cybersecurity breaches
 Privacy protection
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 Responsibility for data privacy

 Privacy policy: Systems/ Procedures

EL
Customers’ information
PT


 N
Media & stakeholder analysis: Privacy
protection
 Environmental dimension
 Environmental reporting
 Environmental policy & management systems

EL
Operational eco-efficiency
PT

N
 Environmental reporting
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 “Maintaining transparency through appropriate

reporting, & monitoring it at the board level”

EL
 Coverage

PT
 Assurance N
 Quantitative data
 Environmental policy & management
systems
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 Corporate environmental policy, areas

 Environmental Management System:

EL
Certification/ Audit/ Verification

PT
 Media & stakeholder analysis: Environmental
N
management
 Operational eco-efficiency
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 “… reducing the overall environmental

footprint”

EL
 “… minimizing natural resource consumption

PT
and waste generating activities” N
 Effective and eco-friendly waste management
 Operational eco-efficiency (Contd.)
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 Direct greenhouse gas emissions

 Indirect greenhouse gas emissions

EL
Energy consumption & use
PT


 Water consumption & use N

 Waste management
 Social dimension
 Social reporting
 Labor practice indicators

EL
Human rights
PT


 N
Human capital development
 Talent attraction & retention
 Corporate citizenship & philanthropy
 Occupational health and safety
 Stakeholder engagement
 Social reporting
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 Coverage
 Assurance

EL
Quantitative data
PT

N
 Labor practice indicators
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 Diversity
 Equal remuneration

EL
Freedom of association
PT

N
 Human rights
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 Commitment
 Due diligence process

EL
Assessment
PT


 Disclosure N
 Media & stakeholder analysis: Human rights
 Human capital development
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 Training & development inputs

 Employee development programs

EL
Human capital return on investment
PT


 N
Return on employee development investment
 Talent attraction & retention
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 Type of individual performance appraisal

 Long term incentives

EL
Employee turnover rate
PT


 Trend of employee engagement N

 Media and stakeholder analysis talent attraction
& retention
 Corporate citizenship & philanthropy
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 “… creation of value for both beneficiaries &

shareholders”

EL
 Alignment of programs with UNSDG

PT
N
 Corporate citizenship & philanthropy
(Contd.)
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 Group-wide strategy for providing guidance to

corporate citizenship/ philanthropic activities

EL
 Type of philanthropic activities

PT
 Input N
 Occupational health & safety
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 Absentee rate
 Health, safety & well-being

EL
Healthy lifestyle incentive
PT

N
 Stakeholder engagement
(http://www.robecosam.com/images/sample-questionnaire-diversified-consumer-services.pdf)

 Governance
 Review

EL
Media & stakeholder analysis: External
PT

engagement N
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
CSR Evaluation in
EL
India N
PT
National Voluntary Guidelines (2011)
(http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf)
 Principle 1: Ethics, transparency &
accountability
(http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf)

 “Governance structure of the business, including

committees under the Board responsible for
organizational oversight. In case no committee is
constituted, then the details of the individual responsible

EL
for the oversight

PT
 N
Mandate & composition (including no. of independent
members &/or non-executive members) of such
committee with the no of oversight review meetings
held
 State whether the person/ committee head responsible
for oversight review is independent from the executive
authority or not. If yes, how?
 Principle 1: Ethics, transparency &
accountability (Contd.)
(http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf)

 “Mechanisms for shareholders & employees to

provide recommendations or direction to the
Board/ Chief Executive

EL
Processes in place for the Board/ Chief Executive
PT

to ensure conflicts of interest are avoided
N
 Internally developed statement on Ethics, Codes of
Conduct & details of the process followed to
ensure that the same are followed
 Frequency with which the Board/ Chief Executive
assess BR performance”
 Principle 2: Product’s life cycle
sustainability
(http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf)

 “Statement on the use of recyclable raw materials

used
Statement on use of energy-efficient technologies,

EL

designs & manufacturing/ service delivery
PT
processes N
 Statement on copyrights issues in case of the
products that involve use of traditional knowledge
& geographical indicators
 Statement on use of sustainable practices used in
the value chain”
 Principle 3: Employees’ well-being
(http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf)

 “Total no. of employees with percentage of employees that are engaged

through contractors
 Statement on non-discriminatory employment policy of the business
entity

EL
Percentage of employees who are women

PT


 No. Of persons with disabilities hired

N
 Amount of the least monthly wage paid to any skilled & unskilled
employee
 No. of training & skill upgradation programs organized during the
reporting period for skilled unskilled employees
 No. of incidents of delay in payment of wages during the reporting
period
 No. of grievances submitted by the employees”
 Principle 4: Stakeholder engagement
(http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf)

 “Statement on the process of identification of

stakeholders & engaging with them

EL
Statement on significant issues on which formal
PT

dialogue has been undertaken with any of the
N
stakeholder groups”
 Principle 5: Human rights
(http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf)

 “Statement on the policy of the business entity

on observance of human rights in their

EL
operation

PT
Statement on complaints of human rights
 N
violations filed during the reporting period”
 Principle 6: Environment
(http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf)

 “Percentage of materials used that are recycled input

materials

EL
 Total energy consumed by the business entity for its
operations
PT

N
Statement on use of energy saving processes & the total
energy saved due to use of such processes
 Use of renewable energy as percentage of total energy
saved due to use of such processes
 Total water consumed & the percentage of water that is
recycled & reused”
 Principle 6: Environment (Contd.)
(http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf)

 “Statement on quantum of emissions of

greenhouse gases & efforts made to reduce the

EL
same

PT
Statement on discharge of water & effluents
 N
indicating the treatment done before discharge
& the destination of disposal
 Details of efforts made for reconstruction of
bio-diversity”
 Principle 7: Policy advocacy
(http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf)

 “Statement on significant policy advocacy

efforts undertaken with details of the platforms

EL
used”

PT
N
 Principle 8: Inclusive growth
(http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf)

 “Details of community investment &

development work undertaken indicating the

EL
financial resources deployed & the impact of

PT
this work with a longer term perspective
N
 Details of innovative practices, products &
services that particularly enhance access &
allocation of resources to the poor & the
marginalized groups of society”
 Principle 9: Customer value
(http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf)

 “Statement on whether the labelling of their

products has adequate information regarding

EL
product-related customer health & safety,

PT
method of use & disposal, product & process
N
standards observed
 Details of the customer complaints on safety,
labeling & safe disposal of the products
received during the reporting period”
 http://www.itcportal.com/about-itc/shareholder-value/annual-
reports/itc-annual-report-2016/pdf/business-reponsibility-report.pdf
 http://www.emamiltd.in/investor-
info/pdf/Business_Responsibility_Reports.pdf

EL
 www.emamiltd.in/investor-

PT
info/pdf/Business_Responsibility_Policy.pdf
 N
https://www.mindtree.com/sites/default/files/mindtree-business-
responsibility-report-2015-2016.pdf
 https://www.mindtree.com/about-us/investors/annual-report-2015-
16/directors-report
 https://www.mindtree.com/corporate-social-responsibility-policy
 http://www.dabur.com/in/en-us/investor/reports/brr
 http://www.dabur.com/img/assets/138-reference-only-dabur-brr-
inside.pdf
 Challenges to/ concerns regarding
CSR evaluation (Peloza & Shang, 2011)

 “How does the form of CSR impact consumer

perceptions of value?”
“CSR activities in the categories of philanthropy or

EL

business practices enhance other-oriented value.

PT
Product-related CSR activities enhance other & self-
N
oriented value.”
 “When CSR activities provide other-oriented value,
consumers will perceive trade-offs with self-oriented
value”
 “Faced with a choice, consumers will prioritize CSR
categorized as product-related over philanthropy and
business practices”
 Challenges to/ concerns regarding
CSR evaluation (Contd.) (Peloza & Shang, 2011)

 “Do all consumers view value from different

forms of CSR?”

EL
 “CSR activities categorized as philanthropy or

PT
business practices will create other-oriented value
N
for self-transcendent consumers, but not for self-
enhancement consumers. CSR activities categorized
as product features will enhance self-oriented value
for all consumers.”
 Challenges to/ concerns regarding
CSR evaluation (Contd.) (Peloza & Shang, 2011)

 “Are all consumers equally aware of different

forms of CSR?”

EL
 “Consumers will be more aware of product-related

PT
CSR activities when compared to philanthropy &
N
business practices”
 “Consumers will perceive product-related CSR
activities to require more firm commitment & effort
when compared to philanthropy & business
practices”
 Challenges to/ concerns regarding
CSR evaluation (Contd.) (Peloza & Shang, 2011)

 “Is value from different forms of CSR consistent

across product categories?”

EL
 “Other oriented/ intrinsic value increases in salience

PT
for experiential products, other-oriented/ extrinsic
N
value increases in salience for symbolic products, &
self-oriented value increases in salience for
functional products.”
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
Corporate
EL
Governance
PT
N
What is corporate
EL
governance?
N
PT
 Definitions
 Corporate governance “… comprises the laws &
practices by which managers are held

EL
accountable to those who have a legitimate

PT
stake in the corporation.” (Jacoby, 2005)
N
 “CG is conceptualized as the creation and
implementation of processes seeking to
optimize returns to shareholders while
satisfying the legitimate demands of
stakeholders” (Durden, 2008, in Mason & Simmons, 2014)
 Definitions (Contd.)
 “Corporate governance is maximizing the
shareholder value in a corporation while ensuring
fairness to all stakeholders – customers,

EL
employees, investors, vendors, the government &
PT
society at large. Corporate governance is about
N
transparency & raising the trust & confidence of
stakeholders in the way the company is run.” (Murthy,
2011-12)

 “Corporate governance relates to the structure of

rights & responsibilities among the parties with a
stake in the firm.” (Aoki, 2001, in Aguilera, Filatochev, Gospel, & Jackson, 2008)
 Definition (Contd.)
 OECD Definition (1999): “Corporate governance is
a system through which business companies are
managed & controlled. The structure of corporate

EL
PT
governance defines the division of rights & duties
N
between the individual stakeholders in a company
& lays down detailed rules & procedures for the
decision-making on business matters of a
company. On this basis a structure is created that
establishes the company goals & the means of
reaching the goals & monitoring performance.”
 Definition (Contd.)
 OECD (2004): “Corporate governance ‘specifies
the distribution of rights & responsibilities

EL
among the different participants in the

PT
organization – such as the board, managers,
N
shareholders & other stakeholders – & lays
down the rules & procedures for decision-
making’.”
 CG includes
 Methods used by financers to assure return on
investment (Shleifer & Vishny, 1997)

EL
“… the determination of the broad uses to
PT

which organizational resources will be deployed
N
& the resolution of conflicts among the myriad
participants in organizations.” (Daly, Dalton & Cannella, 2000)
 A legal & financial framework for management
of a profit making organization (Werder, 2011)
 Specific activities covered under
CG (Werder, 2011)

 “determination of the overall goal of a

company;

EL
selection of structures, processes & persons at
PT

the top of the company for pursuing this goal;
N
 periodical evaluations of the implemented
structures, processes, & persons;
 securing of an adequate transparency of the
company’s activities via communication.”
 Concept of global governance
(Crowther & Aras, 2008)

 “… formal political institutions that aim to

coordinate & control interdependent social

EL
relations & that have the ability to enforce

PT
decisions.” N
 “… global governance can be considered as the
management of global processes in the
absence of form of global government.”
 Players in CG (Murthy, 2011-12)

 “Shareholders who have invested their money

in the corporation.

EL
 The executive management that runs the

PT
business & is responsible to the board of
N
directors.
 The board of directors which is elected by the
shareholders & is accountable to them.”
 Where does all this begin (Klein, 1999)

 “In the production-function approach, money

capital is treated as a factor of production. The

EL
manager’s objective is to maximize the

PT
difference between total revenues & total costs,
N
with the cost of capital treated simply as
another cost (& typically assumed to be
exogenous). The residual, ‘profit’, is retained by
the manager.”
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
Theories of corporate
governance
EL
PT
N
 Some theories of corporate
governance
 Agency theory
 Resource dependence theory

EL
Stewardship theory
PT


 N
Class hegemony theory
 Social comparison theory
 Signalling theory
 Stakeholder approach
 Resource dependence theory
(Daly, Dalton & Cannella, 1992)

 “… provides a theoretical foundation for

directors’ resource role. Proponents of this

EL
theory address board members’ contributions

PT
as boundary spanners of the organization & its
N
environment.[…] In this role, outside directors
provide access to resources needed by the
firm.”
 Stewardship theory (Daly, Dalton & Cannella, 1992)

 “… stewardship theorists describe [executives &

directors] as frequently having interests that

EL
are isomorphic with (imitably similar to) those

PT
of shareholders (e.g. Davis et al., 1997). […] stewardship
N
theorists […] recognize that there are many
situations in which executives conclude that
serving shareholders’ interests also serves their
own interests. (Lane, Cannella, & Lubatkin, 1998)
 Stakeholder approach (Mason & Simmons, 2014)

 “… facilitates consideration of a wider range of

corporate governance issues, contributes to
stakeholder management decisions on who & what

EL
really counts (Mitchell et al., 1997, in Mason & Simmons, 2014), &

PT
extends company director duties to include formal
consideration of stakeholder perspectives &
N
agendas. Stakeholder approaches also facilitate a
heightened awareness of CSR, business ethics, &
business practices that enable more informed
decisions on stakeholder salience (Fassin, 2010, in Mason &
Simmons, 2014) & more robust CSR evaluations (Fassin &
Buelens, 2011, in Mason & Simmons, 2014)”
 Problem with the stakeholder
approach (Mason & Simmons, 2014)

Profit making is the primary concern & priority

of profit making organizations, & any attention

EL
to stakeholder interests is influenced by this.

PT
N
 Agency theory
 “… shareholders (as principals) hire managers
(as their agents) to run the company. (Werder, 2011)

EL
PT
N
 Agency theory
(Fiss, 2008)

Someone owns, someone controls

 “… a variety of incentive mechanisms to control the

EL
behavior of managers, focusing mostly on

PT
compensation, the composition of the board of
N
directors, & the market for corporate control as the
three primary control issues”
 Agency Theory (Contd.)
 “Principal-agent theory postulates that by
delegating the management of companies to

EL
managers (agents), the owners (principals)

PT
have to create mechanisms to align the agents’
N
interests with their own.” (Machold, Ahmad & Faquhar, 2008)
 Agency theory: Limitations on
monitoring: Limits on board
effectiveness (Lipton & Lorsch, 1992)

 Lack of time & board size

 Complexity of information

EL
Lack of cohesiveness
PT


 N
Power of top management
 Confused accountabilities
 Agency problem
(Shleifer & Vishny, 1997)

 “… separation of ownership & control.”

 “… separation of management & finance, or

EL
[…] of ownership & control.”

PT
N
 Why does the agency problem
arise? (O’Connor & Rafferty, 2012)

 People who own the company are not the same

as people who run the company. People who

EL
own the company (shareholders) have different

PT
priorities and different stakes than people who
N
run the company on a salary (executives).
 How does the agency problem
influence CG? (O’Connor & Rafferty, 2012)

 “Shareholders have the ability to diversify away firm specific

risk because they can hold a broad portfolio of assets. In
contrast, much of an executive’s wealth in the form of
salary, perquisites, & professional reputation is directly tied

EL
to the firm. Hence, executives are usually more risk averse

PT
than shareholders, so executives will usually prefer a
N
strategy that emphasizes low-risk/ low-return assets over
high-risk/ high-return assets. When agency problems exist,
the set of customs, rules & institutions known as corporate
governance will determine the relative importance of these 2
different sets of preferences in determining corporate policy.
If the agency problem is severe enough, then executives
may reduce risky investment strategies (like innovative
activity) in favor of much less risky investment.”
 Comparison of various theories of CG
(Chambers et. Al., 2013)

Agency Stewardship Resource Stakeholder

Dependency
Composition •Representatives of •Unitary •Experts, •Representatives
owners boundary

EL
spanners

PT
•Tendency to
homogeneity
N
•Tendency to •Balance
homogeneity between
•Tendency to
heterogeneity
homogeneity &
heterogeneity

•Tendency to small •Tendency to •Board size •Tendency to

boards small boards varies large boards
 Comparison of various theories of CG
(Contd.) (Chambers et al., 2013)
Agency Stewardship Resource Stakeholder
Dependency
Focus •Supervision of •Strategic •Policy •Supervision of
management thinking as task formulation as management
board task

EL
•More focus on •More focus on •Focus on

PT
compliance improvements in compliance
performance
N
•Type of fiduciary •Type 2 strategic •Type 3 •Type 1 fiduciary
governance (Guarding governance (Focus Generative governance
resources & their use) on performance as
opposed to
governance
(Leadership &
conformance) development)
•Monitoring of
•Monitoring of performance
performance against against targets &
targets & objectives objectives
•Use of
•Conformance of board resources •Conformance as
task board task
 Comparison of various theories of CG
(Contd.) (Chambers et al., 2013)
Agency Stewardship Resource Stakeholder
Dependency
Dynamics •High challenge •Appreciative •Predominantly •Predominantly
style to achieve external focus external focus
goals

EL
•Controlling •Collaborative •Tendency to be

PT
active in relation to
sectional or
•Critical style to
achieve goals
N
•Well-functioning
board
political interests
committees
 A typology of corporate governance
theories & ethics (Machold, Ahmad & Farquhar, 2008)
 Shareholder theories
Source Concepts & reasoning Normative basis
Friedman Responsibility to shareholders, private Utilitarian, virtue ethics
(1970) property rights, individual assumption of
social responsibilities, ‘open & free

EL
competition without deception of fraud’

PT
Jensen & Property rights, agency costs, contracts, Utilitarianism – Principals
Meckling
(1976) agents
N
conflict of interest between principals & seek to maximize their
own utility
Fama & Firm as a nexus of contracts, separation of Survival of the fittest –
Jensen risk bearing & decision making naturalist ethics
(1983)
Pound (1993) Shareholder power & legitimacy to influence Utilitarianism – pursuit of
managers, political mechanisms to solve self interest by harnessing
conflicts between principals & agents political processes
La Porta et al. Investor rights, contract enforcement, legal Prima facie moral duty to
(2000) systems comply with laws
 A typology of corporate governance
theories & ethics (Machold, Ahmad & Farquhar, 2008)
 Stakeholder theories
Source Concepts & reasoning Normative basis
Evan & Principles of corporate rights & effects, Kantian duties,
Freeman management bears fiduciary duty to stakeholders as ends &

EL
(1988) stakeholders not means
Freeman & Multilateral contractarian perspective, Rawlsian justice

PT
Evan (1990) managers contract with multiple
stakeholders N
Goodpaster Fiduciary & non-fiduciary duties & Kantian perfect &
(1991) obligations imperfect duties

Jones in Social contracts, agent morality, social Kantian duties

Starik (1994) responsibility

Collins in Democratic & undemocratic management Rawlsian justice

Starik (1994)
 A typology of corporate governance
theories & ethics (Machold, Ahmad & Farquhar, 2008)
 Stakeholder theories (Contd.)
Source Concepts & reasoning Normative basis
Donaldson & Legitimacy of stakeholder interests, Distributive justice,
Preston (1995) property rights Kantian ends not means

EL
Jones (1995) Contracting, corporate morality, Virtue ethics
competitive advantage through

PT
relationships based on honesty & trust
Mitchell et al. N
Stakeholder salience defined by power, Pragmatism
(1997) urgency, legitimacy
Phillips (1997) Competing stakeholder claims, Principle of fairness
stakeholder identification, & the ‘duty of (drawing on Mills & Rawls)
fair play’
Freeman & Individuals with rights &reason engage Liberatarianism
Phillips (2002) voluntarily in agreements
Jensen (2002) Trade-offs among stakeholders based on Teleological
value maximization
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
Why corporate

EL
governance?
PT
N
 The problem (Werder, 2011)

 “possible opportunistic behavior of the

management” may lead to exploitation of

EL
company’s resources, which is likely to lead to

PT
“compromising the interests of the
N
stakeholders”.
 Why CG?
 “ [to deal with] the detrimental effect of
deregulated labor markets on workers’ conditions,
employment hours & protection, wage levels &

EL
training.” (Zumbansen, 2006)
PT

N
“… realignment of incentives, commonly through
some type of penalty for premature termination,
[…] creation of a specialized governance structure
to resolve disputes, […] & […] the introduction of
trading regularities that support & signal intentions
of continuity.” (Williamson, 1984)
 Why CG? (Contd.)
 “… to ensure that we do not create asymmetry
of benefits between different sections of

EL
shareholders – generally, the owner-managers

PT
of a company & the rest of the shareholders.”
N
(Murthy, 2011-12)

 “… minimizing agency cost or the cost of

managers who manage the corporation on
behalf of shareholders.” (Murthy, 2011-12)
 Why CG? (Contd.) (Love, 2011)

 Improvement of performance in terms of:

 “Operating performance (Profitability or Return on

EL
Assets or Return on Equity)

PT
 Market Value: Market capitalization relative to book
N
value
 Stock returns: Relative change in stock prices over
time (Return on investment), often controlling for
risk & other factors affecting returns”
 Why CG? (Contd.) (Love, 2011)

 Improvement of operating performance in the

following ways:
“With better oversight, managers are more likely to

EL

invest in value maximizing projects & be more efficient

PT
in their operations

N
Fewer resources will be wasted on nonproductive
activities (perquisites consumption by the management,
empire-building, shirking)
 Better governance reduces the incidence of tunneling,
asset-stripping, related party transactions, & other ways
of diverting firm assets or cash flows from equity
holders
 Why CG? (Contd.) (Love, 2011)

 Improvement of operating performance

(Contd.)

EL
 If investors are better protected & bear less risk of

PT
losing their assets, they should be willing to accept
N
a lower return on their investment. This will
translate into a lower cost of capital for firms &
hence higher income.
 The availability of external finance may also be
improved, allowing firms to undertake an increased
number of profitable growth opportunities.”
 Bottomline
 The above are likely to increase trust of
stakeholders in the organization (Kocmanová, Hřebiček,

EL
Dočekalová, 2011)

PT
N
 What does good governance do?
(Crowther & Aras, 2008)

 Creating sustainable value

 Ways of achieving the firm’s goals
Increasing stakeholders’ satisfaction

EL

Efficient & effective management
PT


 Increasing credibility N
 Ensuring efficient risk management
 Providing an early warning system against all risk
 Ensuring a responsive & accountable corporation
 Describing the role of a firm’s units
 Developing control & internal auditing
 What does good governance do?
(Contd.) (Crowther & Aras, 2008)

 Keeping a balance between economic & social

benefit

EL
 Ensuring efficient use of resources

PT
 Controlling performance
N
 Distributing responsibility fairly
 Producing all necessary information for
stakeholders
 Keeping the board independent from management
 Facilitating sustainable performance
 Benefits of good governance
(Crowther & Aras, 2008)

 “Increasing the firm’s market value

 Increasing the firm’s rating
 Increasing competitive power

EL
 Attracting new investors, shareholders & more equity

PT
 More or higher credibility N
 Enhancing flexible borrowing condition/ facilities from
financial institutions
 Decreasing credit interest rate & cost of capital
 New investment opportunities
 Attracting better personnel/ employees
 Reaching new markets”
 Good corporate governance is
influenced by (Mitchell & Wee, 2004)

 Politics
 Economics

EL
Management
PT


 Accounting N
 Ethics
 The law
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
 Models & Systems

EL
of
PT
N
Corporate Governance
 Systems of governance
(Crowther & Aras, 2008; Macdonald & Beattie, 1993)

 Anglo Saxon model of governance

 UK model of governance

EL
 Latin model of governance
Ottoman model of governance
PT
 N
 African model of governance
 German model of governance
 Japanese model of governance
 Anglo-Saxon model of governance
(Crowther & Aras, 2008)

 “Found on rules which must be codified & can

therefore be subject to a standard
interpretation by the appropriate adjudicating

EL
body”
PT

N
“Governance on the other hand, is concerned
with the processes & administrative elements of
governing rather than its antagonistic ones”
(Solomon, 2007, in Crowther & Aras, 2008)

 Shareholders appoint directors, who in turn

appoint managers to run the company
 UK governance model (Macdonald & Beattie, 1993)

 “The company is a legal entity quite separate from its

owners
 The power to govern the company is derived from

EL
ownership

PT
 The company exists in perpetuity since its shares may
be transferred N
 The board oversees the running of the company &
reports regularly to the members on the stewardship of
their investment, &
 Independent auditors, appointed by the members,
report on whether the financial statements show a true
& fair view.”
 UK Governance model (Contd.)
(Macdonald & Beattie, 1993)

Appoint Independent
Members auditors
Report to

EL
PT
N
Board of Directors

The business

Suppliers/ Employees
creditors

Customers Providers of non-

equity finance
 Latin model of governance
(Crowther & Aras, 2008)

 “… based on the fact that extended families are

associated with all other family members and
therefore feel obligated. And older members of the

EL
family are deemed to have more wisdom &
PT
therefore assume a leadership role because of the
N
respect accorded them by other family members.
As a consequence there is no real need for formal
codification of governance procedures & the
system of adjudication does not need to be
formalized – it works very satisfactorily on an
informal basis.”
 Ottoman model of governance
(Crowther & Aras, 2008)

 “All parties must be fully aware of the risks

attendant on a particular course of action & be
accepting of equal liability for the outcomes, good

EL
PT
or bad.”
N
 “The governance system was effectively a form of
patronage which operated in a hierarchical manner
but with the systems & procedures being
delegated in return for the benefits being shared in
an equitable manner – devolved form of
governance that operated in Asia, Europe & Africa”
 African model of governance
(Crowther & Aras, 2008)

 Governance through networks, kinship, tribal

membership and shared belonging to various

EL
networks.

PT
 “… network of weak ties (Granovetter, 1973, in Crowther & Aras,
N
2008) which are based upon social interaction

around a commonality of interests & upon

shared memberships rather than based upon
friendship."
 German governance model
(Macdonald & Beattie, 1993)

 “The supervisory board has no executive power over direction

or executive action, but it exercises its authority by the right to
appoint, approve or remove the Management Board.

EL
PT
 Accountability role is fulfilled by a representative membership
of the Supervisory Board elected by shareholders & employees.
N
 Supervisory board cannot take part in the active management
of the company,
 The management board must report to the supervisory board
at regular intervals on matters of policy, profitability, the course
of business, turnover, the state of the company’s affairs, & any
transaction of significant importance for the company.”
 German governance model
(Macdonald & Beattie, 1993)

Supervisory Board

EL
PT
Employees
N
Management Board Shareholders

Customers Creditors Auditors

 Japanese governance model
(Macdonald & Beattie, 1993)

 “Banks frequently own shares in companies & are often one

of the […] largest shareholders of a public company […]
[and as a result are] involved in major investment decisions
of the company.”

EL
PT
 “… disconnection between shareholders & the board has led
to management & the board becoming fused, with all board
N
members being insiders in the sense that they are managers
as well as board members.”
 “The informal information flows which result from the role of
‘insiders’ & the lack of influence of shareholders means that
there is less need to communicate information via the
corporate report or employee reports than is the case in
other countries.”
 Japanese governance model (Contd)
(Macdonald & Beattie, 1993)

 “Audit:
 Statutory auditors [are] responsible for auditing

EL
both the financial statements & the operations of

PT
the company, i.e. monitoring the activities of
N
directors in the discharge of their duties & ensuring
that no fraud or illegal acts take place.
 Accountant auditors’ role is to audit the company’s
financial statements.”
 Japanese governance model (Contd)
(Macdonald & Beattie, 1993)

Statutory auditors
Banks Independent
accountant
auditors

EL
PT
Shareholders NBoard of directors

Business
Employees
Customers

Suppliers/ creditors
 Homework
 Please go through the descriptions of these
models and discuss on the forum:

EL
1. The similarities and differences between these

PT
models
N
2. The appropriateness of these models for various
types of organizations
3. The appropriateness of these models keeping in
mind the social fabric of rural and urban India
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
Implementing
EL
Corporate
PT
N

Governance
 Policies to implement CG (Siebens, 2002)

 “Self-regulation: The organizations spontaneously proceed to

observe certain standards or targets in their sector or area.
 Publicity system: The organizations strive for possibly widest

EL
& most evident range of information about activities &

PT
results
 Best-practices
N
 Normative recommendations
 Legislation, decisions, regulation
 Peer groups: By means of mutual contacts about this theme
the organizations can learn from each other.”
 Policies to implement CG (Contd.)
(Siebens, 2002)

Market incentives
Best practices
Benchmarking
Recommendations

EL
PT
Requirements of exchange
Regulation NCG Self-regulation
Deontology (Ethical
Legislation
processes leading to
ethically achieved ends)

Peer review
 How does corporate
governance take place?
 “In most general terms, the financiers & the
manager sign a contract that specifies what the

EL
manager does with the funds, & how the

PT
returns are divided between him & the
N
financiers.” (Shleifer & Vishny, 1997)
 How does corporate governance
take place? (Contd.)
 “Effective CG uses mechanisms to ensure that
executives respect the rights & interests of

EL
company stakeholders, & that those

PT
stakeholders are held accountable for acting
N
responsibly regarding the protection,
generation, & distribution of wealth invested in
the firm.” (Aguilera, Filatochev, Gospel & Jackson, 2008)
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
Board of Directors
EL
PT
N
 What is the board of directors?
(Siebens, 2002)

 The board of directors is “… a circle of wise

men [and women] reflecting, together with the

EL
management, about the day-by-day policy [of

PT
an organization].” N
 What does the board of directors do?
(Siebens, 2002)

 “… the board [of directors] focuses on the long

term & on the ‘longest’ term, the organization’s

EL
ethics, among other things in view of the

PT
confidence in & the reputation of the
N
enterprise. Both internal & external.”
 Duties of the Board of Directors
(Lipton & Lorsch, 1992)

Duties Specific activities

Strategic • Approving a corporate philosophy
planning • Annually reviewing & approving the corporation’s strategy
Capital allocation • Reviewing & approving the corporation’s capital allocations

EL
Long range goals • Reviewing & approving the corporation’s long range goals

PT
• Reviewing & approving the corporation’s financial standards,
policies & plans
Performance
N
• Approving annually the performance of the board & taking steps
appraisal to improve its performance
• Appraising top management
• Comparing review results with:
• Corporate philosophy
• Goals
• Competition
Manpower • Electing/ selecting top management
planning • Making sure that management succession is provided for
Strategic • Ensuring that the status of organizational strength & manpower
planning planning is equal to the requirements of the long range goals
 Competencies desired in a good
director (Siebens, 2002)

 “Personal qualities
 Relational qualities

EL
Professional qualities
PT


 Ethical qualities N
 Motivation
 Being complementary within the board as a
whole”
 Critical considerations in the
appointment of a director (Siebens, 2002)

 “The motivation
 The skills needed
The value added to board and & enterprise

EL


The time available

PT


 The incompatibilitiesN
 The degree of similarity between personal ethics &
deontology & the ethical codes followed up by the
enterprise
 The degree of similarity between vision (declaration of
assignments) & strategy within the board
 The presence of an assurance for personal liability”
 Self evaluation by the board
(Siebens, 2002)

 “… the board can only demand quality from its

management & employees if its own working is

EL
[of good quality].”

PT
 “… no authority without credibility.”
N
 “Walk the talk.”
 Qualitative streams of information
& communication, & the scorecard
(Siebens, 2002)

 “Being short of information leads to unbalanced

decisions. Having too much information, often in
combination with a shortage of preparation time,

EL
leads to partial decisions.”
PT

N
To ensure quality, the information received by the
board, & sent by the board should be:
 Adequate: Neither too much, nor too little
 Sent in time to people who are going to use that
information to make critical decisions about the
organization
 Balanced Scorecard
(Hall, in Gilmore & Williams, 2009)

 Kaplan and Norton (1996): Performance measurement system to Performance

management system
 Perspectives to managing performance:
 Customer: Customer value proposition

EL
 Business processes (operational): The internal processes & systems

PT
 Innovation & learning (people): The human contribution through knowledge
& skills

N
Goals: Strategic goals at the top level of an organization and then ‘translated’
into appropriate goals at lower levels such as business units, teams, &
individuals
 Process of translating and ‘cascading’ strategic aims into goals at every level
throughout an organization guides and encourages people to contribute towards
the overall performance of the organization
 Strategic mapping: Definition of strategic aims and relation of these aims to
organizational activities to serve as a basis for specifying goals within the
different performance perspectives
 Balanced Scorecard
(Hall, in Gilmore & Williams, 2009)

Financial
perspective
How we
satisfy our
shareholders

Customer

EL
Operational perspective

PT
perspective
How our
Vision and
How we excel
at what we do
N strategy
customers
view us

People
perspective
How our
employees
contribute
 Example of a Balanced Scorecard
(Hall, in Gilmore & Williams, 2009)

Goal Measure or Objective/ target Development

(Broad objective) ‘metric’ actions
Achieve ‘excellent’ % of customers lost Less than 10% loss Develop ‘lost
customer over 12 months of customers in 6 customers’ report

EL
satisfaction months time

PT
% of customers More than 80% of Use customer
completed a CSN customers complete feedback to improve
survey in past 6 a CS survey this CS survey
months year
Level of CS More than 75% of Develop employee
customers to rate competencies in CS
our service as
‘excellent’
Quartile for CS Upper quartile in Develop
compared to sector industry sector by benchmarking within
end of financial year sector
 Qualities of a good scorecard
(Siebens, 2002)

 “It should meet certain quality standards: clear,

plainly structured, […] but complete, up-to-

EL
date and accurate, correct, comparative with

PT
the past, comparative to similar organizations,
N
subject to standards, readable.”

 Primary purpose of a scorecard: Accountability

 Committees (Siebens, 2002)

 Committees work “… under the order of &

within the board. The actual authority to make

EL
decisions stays with the board.”

PT
N
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
 Types of boards (Molz, 1995)

 Managerial dominated board

 Pluralist board

EL
PT
N
 Managerial dominated board
(Molz, 1995)

 “… serves three main functions:

 To fire the CEO

EL
 To declare dividends

PT
 To affirm & approve the actions of management”
N
 “Captive of management
 Does not take on a normative role
 Its influence on the direction of the firm is limited
to those times it is forced to act in changing the
CEO or responding to hostile takeover bids”
 Pluralist board (Molz, 1995)

 “This board is active and participative in

determining the normative goals & objectives

EL
of the firm.

PT
 Not a captive of management but rather is
N
sensitive & responsive first to society followed
by shareholders & lastly management.”
 Characteristics of managerial
dominated & pluralist boards (Molz, 1995)

Theorist Managerial Mid-range Pluralist

Lynch (1979) Passive Activist
Vance (1983) Constitutional Consultive, Collegial

EL
Communal

PT
Baserman & Managerial Financial, Class Multilevel limited
Schoorman
N Hegemony, rationality
(1983) Reciprocity
Molz (1985) Managerial Review & approve, Social
Control by
exception,
Normative,
Strategic
 Differences between the two
types of boards (Molz, 1995)

Managerial dominated Pluralist

Infrequent board meetings Frequent board meetings
Few board committees Many active board committees

EL
Many inside directors Many outside directors

PT
‘Old boy’ network N Diversity in directors
CEO is chairman CEO is not chairman
Significant blocks of inside stock No significant blocks of inside stock
represented represented
Chairman/ CEO as dominant power Chairman/ CEO does not have
dominant power
 Working instruments for better
corporate governance (Siebens, 2002)

 “Complete openness
 Spreading of knowledge in the board’s composition

EL
 Frequent meetings

PT
 Splitting up of special functions
N
 Thorough preparation & recording of all meetings
 Replacement of weak or regularly absent directors
 Sufficient time to discuss.”
 An ethical code for directors
(Siebens, 2002)

 “To exercise in good faith the mandate of a director,

representing all the stakeholders. To devote oneself
actively & in all loyalty to the enterprise means, among
other things:

EL
To be present at & participate actively in the meetings of the

PT

board N
 To prepare & study thoroughly the documents received
 To read the reports carefully
 To observe the duty of discretion towards sensitive
differences of opinion or pieces of information within the
board
 To avoid contradictory interests or to inform the chairman of
the board at the first occasion.”
 An ethical code for directors (Contd)
(Siebens, 2002)

 “To look in the first place after the interests of the

enterprise, taking into account social interests in a
broader issue & from a long term view.

EL
 To observe the necessary distance in relation to some of

PT
the stakeholders or employees in the company
N
 To inform oneself on one’s own initiative & on a regular
basis about the state of affairs in the enterprise by way
of the appropriate channels, by showing openness
towards the questions posed by other internal directors
or by making contracts oneself. This should be
mentioned first to the chairman of the board & be
elaborated with his permission.”
 An ethical code for directors (Contd)
(Siebens, 2002)

 “To support the existing deontologic or ethical

standards (possibly codes) subscribed by the
enterprise or applicable to its line of action & to

EL
take care to fill them in actively at the level of
the board. PT
N
 The board’s line of action & the actual
performance of all of its members should be
evaluated & adjusted regularly. Therefore, all
the directors are to be prepared for discussions
about & evaluations of their performances.
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
Principles of Corporate

EL
Governance
PT
N
 Principles of corporate governance
(Crowther & Aras, 2008; Mitchell & Wee, 2004)

 Transparency
 Accountability

EL
Disclosure
PT


 Discipline N
 Responsibility
 Fairness
 Incentives
 Principles of CG recommended by ASX
Corporate Governance Council,
Australia, 2010
1. “Lay solid foundations for management & oversight: A
listed entity should establish & disclose the respective roles
& responsibilities of its board & management & how their
performance is monitored & evaluated.

EL
Structure the board to add value: A listed entity should

PT
2.
have a board of an appropriate size, composition, skills &
N
commitment to enable it to discharge its duties effectively.
3. Act ethically & responsibly: A listed entity should act
ethically & responsibly.
4. Safeguard integrity in corporate reporting: A listed entity
should have formal & rigorous processes that independently
verify & safeguard the integrity of its corporate reporting.”
 Principles of CG recommended by ASX
Corporate Governance Council,
Australia, 2010 (Contd.)
5. “Make timely & balanced disclosure: A listed entity should make
timely & balanced disclosure of all matters concerning it that a
reasonable person would expect to have a material effect on the
price or value of its securities.

EL
6. Respect the rights of security holders: A listed entity should respect

PT
the rights of its security holders by providing them with appropriate
information & facilities to allow them to exercise those rights
effectively. N
7. Recognize & manage risk: A listed entity should establish a sound
risk management framework & periodically review the effectiveness
of their framework.
8. Remunerate fairly & responsibly: A listed entity should pay director
remuneration sufficient to attract & retain high quality directors &
design its executive remuneration to attract, retain & motivate high
quality senior executives & to sign their interests with the creation
of value for security holders.”
 Principles of CG (OECD 2015)

 http://www.oecd-
ilibrary.org/docserver/download/2615021e.pdf?

EL
expires=1502454530&id=id&accname=guest&c

PT
hecksum=85E5107BE10097B49F704E379C91E3
N
03
 OECD principles of corporate governance 2015
 Principles of CG recommended
by OECD 2004 (Summarized in Pintea, 2015)

Principle Content (“The corporate framework should …)

Ensuring the Basis for … Promote transparent & efficient markets, be
an Effective Corporate consistent with the rule of law & clearly

EL
Governance articulate the division of responsibilities among
Framework different supervisory, regulatory & enforcement

PT
authorities.”
The Rights of
N
… Protect & facilitate the exercise of
Shareholders & Key shareholders’ rights.”
Ownership Functions
The Equitable … Ensure the equitable treatment of all
Treatment of shareholders, including minority & foreign
Shareholders shareholders. All shareholders should have the
opportunity to obtain effective redress for
violation of their rights.”
 Principles of CG recommended
by OECD 2004 (Contd.) (Summarized in
Pintea, 2015)

Principle Content (“The corporate framework should …)

The Role of … Recognize the rights of stakeholders
Stakeholders in established by law or through mutual agreements
Corporate Governance & encourage active cooperation between

EL
corporations & stakeholders in creating wealth,

PT
jobs, & the sustainability of financially sound
enterprises.”
Disclosure &
N
… Ensure that timely & accurate disclosure is
Transparency made on all material matters regarding the
corporation, including the financial situation,
performance, ownership, & governance of the
company.”
The Responsibilities of … Ensure the strategic guidance of the company,
the Board the effective monitoring of management by the
board, & the board’s accountability to the
company & the shareholders.”
OECD Principles 2015
EL
(http://www.oecd-

PT
ilibrary.org/docserver/download/2615021e.pdf?expires=1504159320&id=id&accname=guest&c
hecksum=A11738E42039EDCD57C8B2331E6F26D2)
N
Principle 1: Ensuring the
basis for an effective
EL
PT
N
corporate governance
framework
 Description of Principle 1
(oecd-ilibrary.org)

 “The corporate governance framework should

promote transparent and fair markets, and the

EL
efficient allocation of resources. It should be

PT
consistent with the rule of law and support
N
effective supervision and enforcement.”
 Principle 1 (Contd.) (oecd-ilibrary.org)

A. “The corporate governance framework should be

developed with a view to its impact on overall economic
performance, market integrity and the incentives it

EL
creates for market participants and the promotion of

PT
transparent and well-functioning markets.
N
B. The legal and regulatory requirements that affect
corporate governance practices should be consistent with
the rule of law, transparent and enforceable.
C. Stock market regulation should support effective
corporate governance. ”
 Principle 1 (Contd.) (oecd-ilibrary.org)

C. Supervisory, regulatory and enforcement authorities

should have the authority, integrity and resources to
fulfil their duties in a professional and objective

EL
manner. Moreover, their rulings should be timely,
PT
transparent and fully explained.
N
D. Cross-border co-operation should be enhanced,
including through bilateral and multilateral
arrangements for exchange of information.”
Principle 2: The rights and
equitable treatment of
EL
PT
N
shareholders and key
ownership functions
(oecd-ilibrary.org)
 Principle 2: Description (oecd-ilibrary.org)

 “The corporate governance framework should

protect and facilitate the exercise of

EL
shareholders’ rights and ensure the equitable

PT
treatment of all shareholders, including
N
minority and foreign shareholders. All
shareholders should have the opportunity to
obtain effective redress for violation of their
rights.”
 Principle 2 (Contd.) (oecd-ilibrary.org)

A. “Basic shareholder rights should include the right to: 1) secure

methods of ownership registration; 2) convey or transfer
shares; 3) obtain relevant and material information on the
corporation on a timely and regular basis; 4) participate and

EL
vote in general shareholder meetings; 5) elect and remove
members of the board; and 6) share in the profits of the

PT
corporation. N
B. Shareholders should be sufficiently informed about, and have
the right to approve or participate in, decisions concerning
fundamental corporate changes such as: 1) amendments to
the statutes, or articles of incorporation or similar governing
documents of the company; 2) the authorisation of additional
shares; and 3) extraordinary transactions, including the
transfer of all or substantially all assets, that in effect result in
the sale of the company.”
 Principle 2 (Contd.) (oecd-ilibrary.org)

C. “Shareholders should have the opportunity to

participate effectively and vote in general shareholder
meetings and should be informed of the rules,
including voting procedures, that govern general

EL
shareholder meetings:

PT
1. N
Shareholders should be furnished with sufficient and timely
information concerning the date, location and agenda of
general meetings, as well as full and timely information
regarding the issues to be decided at the meeting.
2. Processes and procedures for general shareholder meetings
should allow for equitable treatment of all shareholders.
Company procedures should not make it unduly difficult or
expensive to cast votes.”
 Principle 2 (Contd.): Opportunities
for effective participation of
shareholders (Contd.) (oecd-ilibrary.org)
3. “Shareholders should have the opportunity to ask questions
to the board, including questions relating to the annual
external audit, to place items on the agenda of general
meetings, and to propose resolutions, subject to reasonable

EL
limitations.

PT
4. Effective shareholder participation in key corporate
N
governance decisions, such as the nomination and election
of board members, should be facilitated. Shareholders
should be able to make their views known, including
through votes at shareholder meetings, on the
remuneration of board members and/or key executives, as
applicable. The equity component of compensation
schemes for board members and employees should be
subject to shareholder approval.”
 Principle 2 (Contd.): Opportunities
for effective participation of
shareholders (Contd.) (oecd-ilibrary.org)
5. “Shareholders should be able to vote in person
or in absentia, and equal effect should be
given to votes whether cast in person or in

EL
PT
absentia.
N
6. Impediments to cross border voting should be
eliminated.”
 Principle 2 (Contd.) (oecd-ilibrary.org)

D. “Shareholders, including institutional shareholders, should be

allowed to consult with each other on issues concerning their basic
shareholder rights as defined in the Principles, subject to exceptions
to prevent abuse.

EL
E. All shareholders of the same series of a class should be treated

PT
equally. Capital structures and arrangements that enable certain
shareholders to obtain a degree of influence or control
N
disproportionate to their equity ownership should be disclosed.
1. Within any series of a class, all shares should carry the same rights. All
investors should be able to obtain information about the rights
attached to all series and classes of shares before they purchase. Any
changes in economic or voting rights should be subject to approval by
those classes of shares which are negatively affected.
2. The disclosure of capital structures and control arrangements should be
required.”
 Principle 2 (Contd.) (oecd-ilibrary.org)

F. “Related-party transactions should be approved

and conducted in a manner that ensures proper
management of conflict of interest and protects

EL
the interest of the company and its shareholders.
PT
1.
N
Conflicts of interest inherent in related-party
transactions should be addressed.
2. Members of the board and key executives should be
required to disclose to the board whether they,
directly, indirectly or on behalf of third parties, have a
material interest in any transaction or matter directly
affecting the corporation.”
 Principle 2 (Contd.) (oecd-ilibrary.org)

G. “Minority shareholders should be protected from abusive actions by,

or in the interest of, controlling shareholders acting either directly or
indirectly, and should have effective means of redress. Abusive self-
dealing should be prohibited.

EL
Markets for corporate control should be allowed to function in an

PT
H.
efficient and transparent manner.
1.
N
The rules and procedures governing the acquisition of corporate
control in the capital markets, and extraordinary transactions such as
mergers, and sales of substantial portions of corporate assets, should
be clearly articulated and disclosed so that investors understand their
rights and recourse. Transactions should occur at transparent prices
and under fair conditions that protect the rights of all shareholders
according to their class.
2. Anti-take-over devices should not be used to shield management and
the board from accountability.”
Principle 3: Institutional
investors, stock markets,
EL
PT
N
and other intermediaries
(oecd-ilibrary.org)
 Principle 3: Description (oecd-ilibrary.org)

“The corporate governance framework should

provide sound incentives throughout the

EL
investment chain and provide for stock markets

PT
to function in a way that contributes to good
N
corporate governance.”
 Principle 3 (Contd.) (oecd-ilibrary.org)

A. “Institutional investors acting in a fiduciary capacity

should disclose their corporate governance and voting
policies with respect to their investments, including the
procedures that they have in place for deciding on the

EL
use of their voting rights.

PT
B. N
Votes should be cast by custodians or nominees in line
with the directions of the beneficial owner of the
shares.
C. Institutional investors acting in a fiduciary capacity
should disclose how they manage material conflicts of
interest that may affect the exercise of key ownership
rights regarding their investments.”
 Principle 3 (Contd.) (oecd-ilibrary.org)

D. “The corporate governance framework should require that proxy

advisors, analysts, brokers, rating agencies and others that
provide analysis or advice relevant to decisions by investors,
disclose and minimise conflicts of interest that might compromise

EL
the integrity of thei

PT
E. Insider trading and market manipulation should be prohibited
N
and the applicable rules enforced.r analysis or advice.
F. For companies who are listed in a jurisdiction other than their
jurisdiction of incorporation, the applicable corporate governance
laws and regulations should be clearly disclosed. In the case of
cross listings, the criteria and procedure for recognising the
listing requirements of the primary listing should be transparent
and documented.
G. Stock markets should provide fair and efficient price discovery as
 Principle 4: The role of
stakeholders in corporate
EL
PT
N
governance
(oecd-ilibrary.org)
 Principle 4: Description (oecd-ilibrary.org)

“The corporate governance framework should

recognise the rights of stakeholders established

EL
by law or through mutual agreements and

PT
encourage active co-operation between
N
corporations and stakeholders in creating
wealth, jobs, and the sustainability of
financially sound enterprises.”
 Principle 4 (Contd.) (oecd-ilibrary.org)

A. “The rights of stakeholders that are established by law

or through mutual agreements are to be respected.
Where stakeholder interests are protected by law,

EL
B.
stakeholders should have the opportunity to obtain

PT
effective redress for violation of their rights.
N
C. Mechanisms for employee participation should be
permitted to develop.
D. Where stakeholders participate in the corporate
governance process, they should have access to
relevant, sufficient and reliable information on a timely
and regular basis.”
 Principle 4 (Contd.) (oecd-ilibrary.org)

E. Stakeholders, including individual employees and

their representative bodies, should be able to
freely communicate their concerns about illegal or

EL
unethical practices to the board and to the
PT
competent public authorities and their rights
N
should not be compromised for doing this.
F. The corporate governance framework should be
complemented by an effective, efficient
insolvency framework and by effective
enforcement of creditor rights.”
Principle 5: Disclosure
EL
& Transparency
N
PT
(oecd-ilibrary.org)
 Principle 5: Description (oecd-ilibrary.org)

“The corporate governance framework should

ensure that timely and accurate disclosure is

EL
made on all material matters regarding the

PT
corporation, including the financial situation,
N
performance, ownership, and governance of
the company.”
 Principle 5 (Contd.) (oecd-ilibrary.org)

A. Disclosure should include, but not be limited to, material

information on:
1. The financial and operating results of the company.
Company objectives and non-financial information.

EL
2.

3. Major share ownership, including beneficial owners, and voting rights.

PT
4. Remuneration of members of the board and key executives.
5. N
Information about board members, including their qualifications, the
selection process, other company directorships and whether they are
regarded as independent by the board.
6. Related party transactions.
7. Foreseeable risk factors.
8. Issues regarding employees and other stakeholders.
9. Governance structures and policies, including the content of any
corporate governance code or policy and the process by which it is
implemented.”
 Principle 5 (Contd.) (oecd-ilibrary.org)

B. Information should be prepared and disclosed in accordance with

high quality standards of accounting and financial and non-financial
reporting.

EL
C. An annual audit should be conducted by an independent, competent
and qualified, auditor in accordance with high-quality auditing

PT
standards in order to provide an external and objective assurance to
N
the board and shareholders that the financial statements fairly
represent the financial position and performance of the company in
all material respects.
D. External auditors should be accountable to the shareholders and
owe a duty to the company to exercise due professional care in the
conduct of the audit.
E. Channels for disseminating information should provide for equal,
timely and cost-efficient access to relevant information by users.
 Principle 6: The
responsibilities of the
EL
PT
N
Board
(oecd-ilibrary.org)
 Principle 6: Description (oecd-ilibrary.org)

“The corporate governance framework should

ensure the strategic guidance of the company,

EL
the effective monitoring of management by the

PT
board, and the board’s accountability to the
N
company and the shareholders.”
 Principle 6 (Contd.) (oecd-ilibrary.org)

 “Board members should act on a fully informed

basis, in good faith, with due diligence and care,
and in the best interest of the company and the

EL
shareholders.
PT

N
Where board decisions may affect different
shareholder groups differently, the board should
treat all shareholders fairly.
 The board should apply high ethical standards. It
should take into account the interests of
stakeholders.”
 Principle 6 (Contd.) (oecd-ilibrary.org)

D. “The board should fulfil certain key functions, including:

1. Reviewing and guiding corporate strategy, major plans of
action, risk management policies and procedures, annual

EL
budgets and business plans; setting performance
objectives; monitoring implementation and corporate

PT
performance; and overseeing major capital expenditures,
N
acquisitions and divestitures.
2. Monitoring the effectiveness of the company’s governance
practices and making changes as needed.
3. Selecting, compensating, monitoring and, when necessary,
replacing key executives and overseeing succession
planning. In most two tier board systems the supervisory
board.”
 Principle 6: D: “The board should
fulfil certain key functions” (Contd)
(oecd-ilibrary.org)

4. Aligning key executive and board remuneration with the longer

term interests of the company and its shareholders.
5. Ensuring a formal and transparent board nomination and
election process.

EL
Monitoring and managing potential conflicts of interest of

PT
6.
management, board members and shareholders, including
N
misuse of corporate assets and abuse in related party
transactions.
7. Ensuring the integrity of the corporation’s accounting and
financial reporting systems, including the independent audit,
and that appropriate systems of control are in place, in
particular, systems for risk management, financial and
operational control, and compliance with the law and relevant
standards.
8. Overseeing the process of disclosure and communications.
 Principle 6 (Contd.) (oecd-ilibrary.org)

E. The board should be able to exercise objective independent

judgement on corporate affairs.
1. Boards should consider assigning a sufficient number of non-

EL
executive board members capable of exercising independent
judgement to tasks where there is a potential for conflict of

PT
interest. Examples of such key responsibilities are ensuring the
N
integrity of financial and non-financial reporting, the review of
related party transactions, nomination of board members and
key executives, and board remuneration.
2. Boards should consider setting up specialised committees to
support the full board in performing its functions, particularly in
respect to audit, and, depending upon the company’s size and
risk profile, also in respect to risk management and
remuneration. When committees of the board are established,
their mandate, composition and working procedures should be
well defined and disclosed by the board.
 Principle 6: E: The board should be
able to exercise objective independent
judgement (Contd.) (oecd-ilibrary.org)
 “Board members should be able to commit
themselves effectively to their responsibilities.

EL
Boards should regularly carry out evaluations to
PT


appraise their performance and assess whether

N
they possess the right mix of background and
competences.”
 Principle 6 (Contd.) (oecd-ilibrary.org)

F. “In order to fulfil their responsibilities, board

members should have access to accurate,
relevant and timely information.

EL
PT
G. When employee representation on the board
N
is mandated, mechanisms should be
developed to facilitate access to information
and training for employee representatives, so
that this representation is exercised effectively
and best contributes to the enhancement of
board skills, information and independence.”
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
CG & CSR
EL
PT
N
 Relationship between CG & CSR
 “a society whose members pursue self interest
without a sense of justice will eventually collapse
A society whose members pursue self interest

EL

checked by their sense of justice alone will survive
PT
 N
A society whose members pursue self interest,
justice, & the interests of others will flourish.”
(Adam Smith – Wealth of Nations – in Stovall, Neill & Perkins, 2004)

implying that:
 “Rule making is bound by both the law & the social
force of moral & ethical persuasion.” (Mason & Mahony, 2008)
 Workplace democracy (Matten & Crane, 2005)

 “Workplace democracy - ‘the search for

effective means by which employees might

EL
exert equitable influence over matters affecting

PT
their working lives’.” (Ramsay, 1997, in Matten & Crane, 2005).”
N
 “The main issues in workplace democracy are
employee participation in decision making,
inclusion of employees in corporate governance
processes, & co-determination of organizational
strategy.”
 How does organizational climate
affect CSR? (Aguilera, Rupp, Williams & Ganapathy, 2007)

 “… if an organization has a general concern for

fairness (e.g. respect & care for the

EL
environment, for working conditions),

PT
employees may deduce that chances are
N
conditions will be fair for them, thus satisfying
their need for control.”
 Reminder: Definition of CSR
(EU Commission, 2001, in Sacconi, 2004)

 “By stating their social responsibility & voluntarily

taking on commitments which go beyond common
regulatory & conventional requirements, which

EL
PT
they would have to respect in any case, companies
N
endeavor to raise the standards of social
development, environmental protection & respect
of fundamental rights & embrace an open
governance, reconciling interests of various
stakeholders in an overall approach of quality &
sustainability’.”
 CG & CSR (Sacconi, 2004)

 CSR refers to “a model of extended corporate

governance whereby who runs a firm

EL
(entrepreneurs, directors, managers) have

PT
responsibilities that range from fulfilment of
N
their fiduciary duties towards the owners to
fulfilment of analogous fiduciary duties towards
all the firm’s stakeholders.”
 The economic bases of the idea that
the firm has ‘further’ responsibilities
towards its stakeholders (Sacconi, 2004)
 Theory of the firm:
 “According to the neo-institutional theory (Williamson, 1975,
1986; Grossman & Hart, 1986; Hart & Moore, 1990; Hart, 1995; Hansmann, 1996, Sacconi,
the firm emerges as an institutional form of ‘unified

EL
2004),
transactions governance’ intended to remedy

PT
imperfections in the contracts that regulate exchange
N
relations among subjects endowed with diverse assets
(capital, labor, instrumental goods, consumption
decisions, & so on).
 These assets, if used jointly, are able to generate a
surplus over the cost of their use that is higher than in
the case of their separate use by each asset holder.”
 Optimal use of these assets requires a structure and
boundaries (governance)
 Economic bases (Contd.)
(Sacconi, 2004)

 The risk of abuse of authority & control: “Those

wielding authority may use it to expropriate the
specific investments of others by exploiting ‘gaps’

EL
in contracts – which persist even under unified

PT
governance. […] Those in a position of authority,
are able to threaten the other stakeholders with
N
exclusion from access to physical assets of the
firm, or from the benefits of the contract, to the
point that those other stakeholders become
indifferent between accepting the expropriation &
foregoing the value of their investment by
withdrawing from the relation.”
 How can CG help with abuse
of authority? (Sacconi, 2004)

 “Extended governance should comprise:

 The residual control right (ownership) allocated to the stakeholder
with the largest investments at risk & with relatively low

EL
governance costs, as well as the right to delegate authority to
professional directors & management.

PT
 N
The fiduciary duties of the those who effectively run the firm
(administrators & managers( towards the owners, given that
these have delegated control to them.
 The fiduciary duties of those in a position of authority in the firm
(the owner or the managers) towards the non-controlling
stakeholders: the obligation, that is, to run the firm in a manner
such that these stakeholders are not derived of their fair shares of
the surplus produced from their specific investments, & that they
are not subject to negative externalities.”
 How can we identify CSR duties?
(Sacconi, 2004)

 The social contract as a criterion for strategic

management

EL
 Social contract & the emergence of the firm

PT
 The societary interest of the company &
N
extended fiduciary duties
 The social contract as a criterion
for strategic management (Sacconi, 2004)

 “Identifying the joint strategy that the stakeholders

may utilize to coordinate themselves, in that they
accept it […] as a voluntary agreement to

EL
cooperate – so that strategic management can

PT
reduce bargaining costs (time, conflict, etc.) & the
N
costs of gathering information on the alternatives
available & on the intentions of each player about
cooperation.”
 Ensuring […] that each member of the team
complies with the agreement on the joint strategy
selected & does not act as a free rider with regard
to the others.”
 The social contract as a criterion for
strategic management (Contd.)
(Sacconi, 2004)

 How will the above be taken care of?

 “Force, fraud & manipulation must be set aside.”
The only agenda in negotiation is to negotiate based on facts and logic and no

EL

threats of any other sort are to be used.

PT
 “Each stakeholder must obtain from the social contract at least reimbursement of
N
the specific investment with which it has contributed to the surplus (otherwise
the bargaining process would permit opportunistic exploitation of the
counterparty’s lock-in situation).
 Each party in turn puts itself in the position of all others, & in the position of
each of them he can accept or reject the contractual alternatives proposed.
 If solutions are found which are acceptable to some stakeholders but not to
others, these solutions must be discarded & the procedure repeated (which
reflects the assumption that cooperation by all stakeholders is recognized as
necessary)”
 Agreements arrived at must be acceptable to all stakeholders
 Social contract & the emergence
of the firm (Sacconi, 2004)

 Social contract of the firm:

 “Rejection of shared plans of action which generate negative
externalities for those not participating in the cooperative venture

EL
or, if these negative externalities are essential for the production
of the cooperative surplus, a compensation of third parties so that

PT
they are rendered neutral;
N
 Production of the maximum surplus possible (difference between
the value of the product for its consumers, who belong to the
association, & the costs sustained by each stakeholder to produce
it)
 A distribution of the surplus which is fair, or rationally acceptable
to each stakeholder in a bargaining process free from force or
fraud & based on an equitable status quo, i.e., considering the
surplus net of the specific investments.”
 Social contract & the emergence
of the firm (Contd.) (Sacconi, 2004)

 How can all this be taken care of? – The firm must
take care of the non-owners in the following ways:
“The firm must abstain from activities which impose

EL

negative external effects on stakeholders not party to

PT
transactions, or compensate them so that they remain
N
neutral.
 The firm must remunerate the stakeholders
participating in the firm’s transactions with payoffs
which, taken for granted a fair status quo, must contain
a part tied to the firm’s economic performance such to
approximate fair/ efficient shares of the surplus as
envisaged by the first social contract.”
 The societary interest of the
company & extended fiduciary duties
(Sacconi, 2004)

 Construction of the corporate interest by means of a

hierarchical decision-making procedure which moves
from the most general conditions to the most specific
ones:

EL
First step: Minimize the negative externalities affecting

PT

stakeholders in the broad sense (perhaps by paying suitable
N
compensation)
 Second step: Identify the agreements compatible with the
maximization of the joint surplus & its simultaneous fair
distribution, as established by the impartial cooperative
agreement among the stakeholders in the strict sense.
 Third step: If more than one option is available in the above
is defined feasible, choose the one that maximizes the
residual allocated to the owner.”
 The logic of a CSR strategic
management standard (Sacconi, 2004)

 “The firm’s strategic behavior must conform to

in a context of incomplete information in order

EL
that reputation effects are reactivated:

PT
 Generality & the abstractness of principles
N
 Precautionary protocols of behavior
 Communication & dialogue with the stakeholders
 CG, dialogue with stakeholders &
CSR (Sacconi, 2004)

 “Enunciation of the social contract stating the firm’s

fiduciary duties towards its stakeholders: If this
statement is formulated on consultation with the
stakeholders, its acceptability is ensured & the

EL
parameters with which behavior is assessed are known

PT
to both parties. N
 Internal management & implementation: The presence
of external members on internal board or committee –
both corporate board of directors or those committees
set up ad hoc to manage CSR, like an ethics committee
– enables representation of the stakeholders’ points of
view & prevents divergence between the ex post
assessment by the two parties
 CG, dialogue with stakeholders
& CSR (Contd.) (Sacconi, 2004)
 Social accountability: Dialogue with stakeholders
identifies the areas of their effective interest for
which account should be made, & therefore

EL
ensures the relevance of social communications.

PT
 Verification by an independent third party: Multi –
N
stakeholder bodies – based on multi-stakeholder
dialog – may control third-party verification &
certification of CSR management standard
compliance, preventing auditors conflicts of
interest & granting credibility to the entire
system.”
 How have different countries
embedded CSR in CG? (Young & Thyil, 2014)

Australia UK India
Strategic vs Move from strategic to Reactive focus maybe Strategic focus link with
reactive reactive focus due to due to GFC community

EL
global financial crisis

PT
Environmental Governance & envt.al Structural focus; Broad review of ESG;
Social focus; Industry Governance focus; Moral case; Sustainable
Governance differences; Business N Socially responsible communities;
(ESG) case investing; Business case
External Linked to reputation & Fund managers & Community focus
stakeholders access to resources pension schemes to use
power
Remuneration Key risk response to Key risk public anger Increases linked to
increase reporting influx of MNCs
 How have different countries
embedded CSR in CG? (Contd.)
(Young & Thyil, 2014)

Australia UK India
Communication Calls for increased Use flexibility to improve Legislative requirement;
with transparency, more transparency Maintains reputation &
stakeholders quality & less trust
quantity; GFC impact

EL
Integrate - - Companies integrated

PT
communities with communities
Increased ASA (American N Calls for institutional -
activism Studies Association) investors to use power
driver – Academic &
community activism
Regulation No need for Focused on regulation & Lack of enforcement
strengthening codes
Ethical behavior Intersection of Look to EU to bring about Tolerance & ‘hearts of
ethics, culture & change in behaviors people’
leadership
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
Models connecting
EL
CG to CSR
N
PT
 Satisfaction with firm performance as
a moderator in the relationship
between CG & CSR (Arora & Dharwadkar, 2011)

Corporate Governance Corporate Social Responsibility

EL
Managerial ownership

PT
Independent directors Positive CSR
Institutional ownership
Shareholder rights
N Negative CSR

Satisfaction with Firm Performance

Slack (“the existence of a ‘cushion of actual or potential resources’.”)

Attainment Discrepancy (“the difference between actual & aspired performance”)
 Specific relationships between CG,
satisfaction with firm performance, &
positive & negative CSR (Arora & Dharwadkar, 2011)

Satisfaction with firm Low High

performance (Low slack, negative (High slack, positive

EL
attainment discrepancy) attainment discrepancy)
Corporate governance

PT
N
Low positive CSR Targeted positive CSR
Strong
Low negative CSR Low negative CSR

Low positive CSR High positive CSR

Weak
High negative CSR Low negative CSR
 How does CG affect CSR?
(Gul, Muhammad & Rashid, 2017)

 “Board leadership & independence, analyst

following, institutional ownership, & antitakeover
provisions appear to have a direct positive

EL
influence on CSR engagement.” (Jo & Harijoto, 2011, in Gul,

PT
Muhammad & Rashid, 2017)

 N
“Foreign & public ownership, presence of audit
committee, & board independence have significant
positive effect on CSR disclosures.” (Khan et al., 2012, in Gul,
Muhammad & Rashid, 2017)

 “Dominance of family ownership on CSR disclosure

is alleviated to some extent by sound CSR
mechanisms.” (Khan et al., 2012, in Gul, Muhammad & Rashid, 2017)
 How does CG affect CSR? (Contd.)
(Gul, Muhammad & Rashid, 2017)

 “Boards with independent directors are less

involved in CSR activities [possibly implying that]
for independent directors, CSR engagement is not

EL
a primary concern.” (Ghazali, 2012, in Gul, Muhammad & Rashid, 2017)
PT

N
“CSR disclosure is significantly higher in firms that
are larger in size & have higher government
ownership [with reference to Malaysia].” (Ghazali, 2012, in
Gul, Muhammad & Rashid, 2017)

 “High proportion of management ownership & CSR

disclosure is negatively correlated.” (Ghazali, 2012, in Gul,
Muhammad & Rashid, 2017)
 How does CG affect CSR? (Contd.)
(Gul, Muhammad & Rashid, 2017)

 “Only the presence of audit committee, ownership

concentration, & government ownership
significantly positively impact the extent of CSR

EL
PT
disclosures.” (Said, et al., 2009, in Gul, Muhammad & Rashid, 2017)
N
 “Profitability, board commitment to CSR, & firm
size positively affect the extent of CSR disclosure.”
(Giannarakis, 2014, in Gul, Muhammad & Rashid, 2017)

 “ESG performance is negatively affected by closely

held equity & family ownership.” (Rees & Rodionova, 2015, in Gul,
Muhammad & Rashid, 2017)
 How does CG affect CSR? (Contd.)
(Gul, Muhammad & Rashid, 2017)

 “Corporate social performance is positively related

to the proportions of independent, community
influential & female directors.” (Mallin & Michelon, 2011, in Gul,

EL
Muhammad & Rashid, 2017)

PT
 “State ownership positively affects CSR
N
performance [in China].” (Lau et al., 2016, in Gul, Muhammad & Rashid,
2017)

 “Audit committee characteristics, size & risk, &

board meeting frequency, both size &
independence of the board positively affect
disclosure of CSR.” (Jizi et. Al., 2014, in Gul, Muhammad, & Rashid, 2017)
 How does CG affect CSR? (Contd.)
(Gul, Muhammad & Rashid, 2017)

 “Supervisory board meetings, state ownership,

number of directors, & managerial shareholding
positively affect CSR.” (Liu & Zhang, 2017, in Gul, Muhammad & Rashid, 2017)

EL
“CSR information is not beneficial for the short-
PT

term profit of an information, but can increase its
N
long-term value.” (Liu & Zhang, 2017, in Gul, Muhammad & Rashid, 2017)
 “Hiring ‘individually’ socially responsible CEO acts
as a commitment device for the firm’s owners &
signal to consumers that the missioned CSR
activities will be undertaken.” (Manasakis et al., 2014, in Gul,
Muhammad & Rashid, 2017)
 How does CG affect CSR?:
Summary of the above
(Gul, Muhammad & Rashid, 2017)

Board composition

EL
PT
Agency theory
Legitimacy theory
Transparency & auditing
N CG Index CSR
Stakeholder theory

Disclosure
 CG & CSR: Application of the
stakeholder systems model of CSR
(Mason & Simmons, 2014)

 Stakeholder claims & agendas include:

 Shareholders & institutional investors
 Customers
Employees

EL


 Suppliers

PT
 Government regulations & auditors
 Local & national communities N
 Social & environmental activists

 And are influenced by:

 CSR outcomes & reporting
 Stakeholder perceptions of distributive justice
 CSR – cumulative company evaluation

 And influence: Board decisions on stakeholder saliency

 CG & CSR: Application of the stakeholder
systems model of CSR (Contd)
(Mason & Simmons, 2014)

 Board decisions on stakeholder saliency influence:

 Investor & company expectations: Revenue increases, cost reduction, increased
brand value, greater customer & employee attraction & retention, enhanced
corporate image

EL
 Customer & supplier expectations: Functional, emotion & social benefits of CSR

PT
infused products, services & supply chains

N
Employee expectations: Fulfilling work, job security, & involvement in decision-
making, commensurate & competitive reward, equitable treatment, &
development opportunities
 Community & environment expectations: Commitment to industry, national &
international standards, comprehensive & timely disclosure, sustainable resource
utilization, voice, consideration of the social & natural environment
Which in turn influence
 CSR: Company philosophy & strategy
 Stakeholder perceptions of procedural justice
 CG & CSR: Application of the stakeholder
systems model of CSR (Contd.)
(Mason & Simmons, 2014)

 CSR: Company philosophy & strategy

 Stakeholder perceptions of procedural justice

EL
PT
Influence:
N
 Hard wiring (systems): Investor relations
 CSR: Processes & operations: Customer relations &
employee relations
 Soft wiring (culture): Community relations

Which in turn influence

 Stakeholder perceptions of interactional justice
 CG & CSR: Application of the stakeholder
systems model of CSR (Contd.)
(Mason & Simmons, 2014)

 Stakeholder perceptions of interactional justice

Influence
 CSR outcomes & reporting, which includes:
 Investor evaluation: Cost benefit assessment, appropriate RoI, greater
innovation, increased customer revenue, loyalty & advocacy, reputational

EL
benefits, vicarious evaluation of the organization’s wider CSR practice

PT
 Customer & supplier evaluation: Functional, emotional & social benefits of CSR
manifested; fair trade principles observed; sustainable production, service
N
provision & supply chains, vicarious evaluation of the organization’s wider CSR
practice
 Employee evaluation: Ethical people management, employees recognized as key
source of competitive advantage in employee resourcing, development & reward
strategies, involvement in decision making; vicarious evaluation of the
organization’s wider CSR practice
 Community & environmental evaluation: Demonstrable alignment with industry,
national & international standards; timely auditing & comprehensive disclosure;
verifiable sustainability; viewed as a ‘good neighbor’
 And influence
 Stakeholder perceptions of distributive justice
 CG & CSR: Application of the stakeholder
systems model of CSR (Contd.)
(Mason & Simmons, 2014)

 Stakeholder perceptions of distributive justice

influence:

EL
 Stakeholder claims & agendas

PT
 Board decisions on stakeholder saliency
N
 Investor & company expectations, customer &
supplier expectations, employee expectations, &
community & environment expectations
 CSR: Company evaluation
 CG & CSR: Application of the stakeholder
systems model of CSR (Contd.)
(Mason & Simmons, 2014)

 CSR: Cumulative company evaluation

influences:

EL
 Stakeholder claims & agendas

PT
 Board decisions on stakeholder saliency
N
 Investor & company expectations, customer &
supplier expectations, employee expectations, &
community & environment expectations
 CG & CSR: Application of the stakeholder
systems model of CSR (Contd.)
(Mason & Simmons, 2014)

 CSR: Cumulative company evaluation includes:

 Efficiency: incorporation of CSR principles & standards in
Management Control Systems & performance management

EL
systems

PT
Effectiveness: Overall (quantitative & qualitative) cost

N
benefit analysis of CSR within an appropriate time frame
 Equity: CSR stakeholder perceptions of appropriate power,
scope & justice
 Environmental impact: Demonstrate sustainability in
resource acquisition & utilization
 External reputation: Alignment with relevant standards &
enhancement of ethical capital across stakeholder groups.
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSOM, IIT Kharagpur
CG in India
EL
PT
N
 Structures of corporate governance
in independent India (Reed, 2002)
The business house model The Anglo-American model
Formal Single tiered board of directors Single tiered board of directors
structure of Role for nominee directors Reduced role for nominee directors
governance

EL
with a move toward abolishing
nominee directors altogether

PT
N
 Structures of corporate governance
in independent India (Contd.) (Reed, 2002)
The business house model The Anglo-American model
Macro- Direct government intervention in Anglo-Americanization of capital markets
economic capital markets through pricing of with deregulated pricing or corporate
context corporate securities securities
Development banking – heavy use of A more ‘marketised’ model of

EL
financing from public financial development banking; banking system
institutions more continuation oriented toward profit

PT
generation – but of the dependence on
financing from public financial institutions

markets
N
Protected, non-competitive product Limited reduction in protection

Stringent controls on foreign Relaxed controls on foreign ownership as

ownership as well as portfolio well as portfolio investment
investment
Regulation of foreign exchange Reduced regulation of foreign exchange
expenditure by firms expenditure by firm
License permit quota regime Abolition of license permit quota regime
No buybacks of its own shares by a Firms allowed to buyback their own
firm shares through open market operations
takeover code the corporate governance
codes
 Structures of corporate governance
in independent India (Contd.) (Reed, 2002)
The business house model The Anglo-American model
Control: Minority ownership (of group Minority ownership (of groups
Proximate companies by the apex companies by apex company)
company)

EL
Control: Majority ownership (of apex Majority ownership (of apex company

PT
Ultimate company by controlling family) by controlling family)
Other Interlocking boards N Interlocking boards
mechanisms Intercorporate investments Intercorporate investments
of control
Debt financing through PFI Private (or regulated) placement of
stocks
Discouraging shareholder Mergers (of group firms)
participation
control of share offerings Discouraging shareholder participation
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
 CSR &
EL
Sustainability
N
PT
CSR & Corporate
EL
Citizenship
N
PT
 What is citizenship? (Matten & Crane, 2005)

 Belongingness
 Affiliation

EL
Rights
PT


 Responsibilities N

 “legal entities with rights & duties, in effect,

‘citizens’ of states within which they operate”
(Marsden, 2000, in Crane & Matten 2005)
 The rights of citizens (Crane & Matten, 2005)

 Social
 Civil

EL
Political
PT

N
 Social rights (Matten & Crane, 2005)

 “Social rights consist of those rights that

provide the individual with the freedom to

EL
participate in society, such as the right to

PT
education.” N
 Civil rights (Matten & Crane, 2005)

 “Civil rights consist of those rights that provide

freedom from abuses & interference by third

EL
parties (most notably governments), among

PT
the most important of which are the rights to
N
own property, exercise freedom of speech, &
engage in ‘free’ markets.”
 Political rights (Matten & Crane, 2005)

 “Political rights […] include the right to vote or

the right to hold office, & generally speaking,

EL
entitles the individual to take part in the

PT
process of collective will formation in the public
N
sphere.”
 Opportunities for corporations
to step in as citizens (Matten & Crane, 2005)

 “Where government ceases to administer

citizenship rights

EL
 Where government has not as yet administered

PT
citizenship rights,
N
 Where the administration of citizenship rights
may be beyond the reach of the nation-state
government.” (primarily social rights)
 Where government ceases to
administer citizenship (Matten & Crane, 2005)

 “Either corporations have the opportunity (or

are encouraged) to step in where once only

EL
governments acted, or

PT
 Corporations are already active in the territory
N
concerned and, therefore, their role becomes
more pronounced as governments retreat.”
 What is corporate citizenship?
(Matten & Crane, 2005)

 “Corporate Citizenship describes the role of the

corporation in administering citizenship rights

EL
for individuals.”

PT
N
 How can the corporation help?
(Matten & Crane, 2005)

 “Corporate citizenship: Social role of the

corporation in administering citizenship rights

EL
 Social rights: Corporation as provider

PT
 Civil rights: Corporation as enabler
N
 Political rights: Corporation as channel”
 Global corporate citizenship
(Hemphill, 2004)

 Different organizations from the same industry

from different parts of the world coming
together to help with social rights of people

EL
connected to that industry.
PT

N
e.g. Fair Labor Association:
http://www.fairlabor.org/
 Equator Principles: http://www.equator-
principles.com/
 Rugmark:
http://www.rugmarkindia.org/rugmark/index.htm
 Dimensions of corporate
citizenship (Marvis & Googins, 2006)

1. “Citizenship concept: How is citizenship

defined? How comprehensive is it?”

EL
 “… how comprehensive & inclusive a company

PT
regards its role in society?”
N
 “… [how well] the total actions of a company […]
minimize harm, maximize benefit, are accountable
& responsible to stakeholders, & support financial
results.”
 Dimensions of corporate citizenship
(Contd.) (Marvis & Googins, 2006)

2. “Strategic intent: What is the purpose of

citizenship?”

EL
PT
 “… [is citizenship] embedded in a company’s
N
strategies, products & services, culture, & ways of
doing business?”
 Dimensions of corporate citizenship
(Contd.) (Marvis & Googins, 2006)

3. “Leadership: Do top leaders support

citizenship? Do they lead the effort?

EL
 “… do they walk the talk?”

PT
N
 Dimensions of corporate citizenship
(Contd.) (Marvis & Googins, 2006)

4. “Structure: How are responsibilities for

citizenship managed?”

EL
 “… movement of citizenship from a marginal

PT
position to its management as mainstream
N
business activity.”
 “ movement from ‘functional islands’ to cross-
functional committees [to] […] integration through
a combination of structures, processes, &
systems.”
 Dimensions of corporate citizenship
(Contd.) (Marvis & Googins, 2006)

5. “Issues management: How does a company

deal with issues that arise?”

EL
 “… how proactive a company is on myriad

PT
citizenship issues & how responsive it is in terms of
N
policies, programs, & performance?”
 Dimensions of corporate citizenship
(Contd.) (Marvis & Googins, 2006)

6. “Stakeholder relationships: How does a

company engage its stakeholders?

EL
 “… increasing openness & depth of such

PT
relationships”
N
 “… [could range from] increased social activism by
shareholders to […] increase in non governmental
organizations”
 Dimensions of corporate citizenship
(Contd.) (Marvis & Googins, 2006)

7. “Transparency: How open is a corporation

about its financial, social, & environmental

EL
performance?”

PT
 “… when and how companies adopt transparent
N
practices & how much they disclose”
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
Stages of corporate
EL
citizenship
N
PT
(Mirvis & Googins, 2006)
 Stage 1: Elementary (Marvis & Googins, 2006)

 “Citizenship concept: Jobs, profits, taxes”

 Activity: “episodic”; underdeveloped programs
“Strategic intent: Compliance” – obeying the law

EL

Leadership: Lip-service, out of touch
PT


 “Structure: Marginal; staff driven[…] - functional

N
heads of departments”
 “Issues management: Defensiveness
 Stakeholder relationships: Unilateral
 Transparency”: With the sole intent of ‘protection’
 Challenge: To gain credibility
 Stage 2: Engaged (Marvis & Googins, 2006)

 “Citizenship concept: Philanthropy, environmental

protection”
 Activity: “policy based approach to mitigate the

EL
likelihood of litigation & risks to reputation”

PT
 “Strategic intent: License to operate
 N
Leadership: Supporter, in the loop
 Structure: Functional ownership [by staff units]
 Issues management: Reactive, policies
 Stakeholder relationships: Interactive
 Transparency: Public relations”
 Challenge: To build capacity
 Stage 3: Innovative (Marvis & Googins, 2006)

 “Citizenship concept: Stakeholder management”

 Activity: “Planning, funding & launching […] myriad
corporate citizenship related programs, […] monitoring social
& environmental performance & publishing results in public

EL
reports”

PT
 “Strategic intent: “Business case”
N
 “Leadership: Steward, on top of it”
 “Structure: Cross-functional coordination
 Issues management: Responsive, programs
 Stakeholder relationships: Mutual influence
 Transparency: Public reporting”
 Challenge: To create coherence between programs programs
 Reasons for lack of coherence
at stage 3 (Marvis & Googins, 2006)

 “Corporate staff units don’t see the necessity &

value of working together, especially when they
feel stretched by their own agendas & a sense of

EL
PT
competition for scarce resources
N
 Many line managers don’t see the relevance as
they often face compelling, short-term priorities”
 “… a comprehensive view of citizenship is not
linked with corporate strategy or embedded in the
company culture.”
 Stage 4: Integrated (Marvis & Googins, 2006)

 “Citizenship concept: Sustainability or triple bottom line

(People, planet, profit)”
 Activity: “… setting targets & KPIs, & monitoring

EL
performance through balanced scorecards.”

PT
 “Strategic intent: Value proposition
 N
Leadership: Champion, in front of it
 “Structure: Organizational alignment
 “Issues management: Proactive, systems
 Stakeholder relationships: Partnership, alliances
 Transparency: Assurance
 Challenge: To deepen commitment to sustainability
through citizenship
 Stage 5: Transforming (Marvis & Googins, 2006)

 “Citizenship concept: Change the game”

 Activity: “… partnering extensively with other businesses, community
groups, & NGOs to address problems, reach new markets, & develop
local economies [...] – cross-industry and multisector cooperation in

EL
addressing societal ills.”

PT
 “Strategic intent: Mainstream, business driven
 N
Leadership: Visionary, ahead of the pack
 Structure: Mainstream, business driven
 Issues management: Defining
 Stakeholder relationships: Multi-organizational
 Transparency: Full disclosure”
 Challenge: “Development of inter-organizational alliances, innovation
in different socio-economic spheres, & differentiation”
 Factors that shape citizenship
(Marvis & Googins, 2006)

 Founding purpose & time

 External forces

EL
 Strategy & competition

PT
 Traditions & culture
N
 Leadership matters
 Pull vs. push:
 Pull: Legislation, external demand for transparency &
responsible behavior
 Push: Self-monitoring, realization from the inside,
bottom-up responsible behavior
 Elements & issues in corporate
citizenship (Altman, 1998)

 “Moral & ethical obligations of the firm

 Provision of economic benefits
Integration, common goals between corporation & its

EL

communities

PT
 Responsibility to stakeholders
N
 Inclusion of proactive action
 Partnership across sector lines
 Global interconnectedness
 Preservation/ protection of natural environment
 Active leadership’
 Strategic advantages of corporate
citizenship (Altman, 1998)

 “Enhance the long-term sustainability of an

investment & manage change

EL
 Build the brand

PT
 Develop human resources in the company & in
N
the community
 Help create a growing economy & stable
society”
 Indicators of good corporate
citizenship (Davenport, 2000)

 “Ethical business behavior: The company is guided by

rigorous ethical standards in all of its business dealings.

EL
 Stakeholder commitment: The company is managed for
the benefit of all stakeholders: community, consumers,
PT
employees, investors, & suppliers.
N
 Environmental commitment: The company moderates its
overall environmental impact through programs such as
recycling, waste & emission abatement, & impact
assessment via environmental audits.”
 Antecedents & consequences of
corporate citizenship (Maignan & Ferrell, 2001)

ORGANIZATIONAL CORPORATE BUSINESS

CULTURE CITIZENSHIP OUTCOMES

EL
PT
Economic citizenship Employee commitment
Market orientation
N
Legal citizenship
Humanistic orientation Customer loyalty
Ethical citizenship

Competitive orientation Business performance

Discretionary citizenship
Corporate citizenship

EL
& CSR
N
PT
 How do CC & CSR come together?
(Moon, Crane & Matten, 2005)

 “Corporate dialogues, mediation processes, &

other for a, to both involve citizens in corporate

EL
decisions as well as making corporations active

PT
& accountable members of their respective
N
communities.” (Steimann & Löhr, 1994, in Moon, Crane & Matten, 2005)
 Historical, developmental &
intersectoral (IS) organizing lessons
for corporate citizenship (Waddell, 2000)
Issue Action
Recognizing the role of both rights & - Provide opportunities to broaden
responsibilities discussion about organizations’ historical
activities

EL
- Allow discussions around specific

PT
controversial actions by a collaboration
N member, even if it has no direct bearing
on the relationship
Understanding & valuing sectoral - Undertake further research on the IS
differences model
- analyze specific IS opportunities in
terms of organizations’ sectoral position,
core competencies, assets, etc.
- Build strategies & activities that
recognize & support the sectoral
differences
 Historical, developmental &
intersectoral (IS) organizing lessons for
corporate citizenship (Contd) (Waddell, 2000)
Issue Action
Appreciating history, culture & technology - Analyze the specific locational
circumstances
- Rather than ‘roll-out’ IS strategies,

EL
develop them grounded in reality of

PT
specific circumstances
Creating & spreading new IS models N - Create an experimental & learning
approach
- Create joint comparative learning
processes with other organizations
involved in IS model-building
- Identify needed institutions both within
& between sectors & join with others to
found them
 Historical, developmental &
intersectoral (IS) organizing lessons for
corporate citizenship (Contd) (Waddell, 2000)
Issue Action
Developing new IS leaders - Hire people from other sectors
- Develop volunteer & employee
exchange programs with the goal of

EL
creating IS leaders

PT
Recognizing power issues & inequality - talk about power differences &
N inequality
- Research exchange mechanisms already
developed
- Categorically experiment with new
power sharing mechanisms
 Corporate citizens & CSR
(Aguilera, Rupp, Williams & Ganapathy, 2007)

Multiple motives Mechanisms

Actor & relationships Pressure to increase CSR level;
employee participation &
Employee leadership
Employees perceptions of
distributive, Organizational commitment; job

EL
procedural, satisfaction, employee
interactional
justice citizenship, performance

PT
Insiders
Stakeholders
N Direct strategic decision Change in CSR
Exercising voice thru’
Outsiders collective action
MOTIVES Social Change
Law enactment, law
enforcement, ‘bully pulpit’,
Domestic education on best practices
Governments
IGOs ‘Bully pulpit’ policy papers

NGOs Campaigns, boycotts, &

multiparty dialogues
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
 What is sustainability?
What is sustainable development?

EL
PT
N
The following slides are from the MOOC course
titled, ‘Strategic communication for sustainable

EL
development’ offered by Dr. A. Malik in Sep-Oct,

PT
2016 N
 What is sustainability?
Perspectives:
 “Sustainability implies that society must use no more of
a resource than can be generated.” (Aras & Crowther, 2009)

EL
 Preservation of capital (Economic, social and
environmental):
PT
 Economic sustainability – “Maximizing the flow of income
N
from a given stock of assets (or capital) while at least
maintaining them.” (Maler, 1990, in Bonevac, 2010)
 Environmental - “Requiring that conditions necessary for
equal access to the Earth’s resource base be met for each
generation.” (Pearce, Markandya & Barbier, 1989, in Bonevac, 2010)
 Each generation “leave a lesser burden than they inherited,
increasing the quantity and quality of ecological, human and
man made resources.” (Keiner, 2006,740in Bonevac, 2010)
 What is development?
 Betterment of human life
 People centric
 “[Development may be understood as] a process that must lead to
the expansion of people’s freedoms.” (Amartya Sen, 1998, in Saez, 2013)

EL
Development is about choices: Video:

PT

http://www.undp.org/content/undp/en/home/blog/2016/8/1/Development-in-2-
minutes-It-s-about-expanding-choices/
N
 Human Development is “…the process that allows the expansion and
amplification of people’s capabilities and life choices.” (Saez, 2013)
Characteristics of human development (Hamelink, 2000, in Saez, 2013):
 “Equitable access to resources.
 Sustainable resources and institutions.
 The procurement and dissemination of knowledge aimed at rendering
human beings responsible.
 Participation.”
741
 What is sustainable development?
 Continuing environmental and economic development
towards the betterment of human life. – Discussion started
with environment, moved on to economic prosperity & then
its contribution to the betterment of human life.

EL
“Development that meets the needs of the present without

PT

compromising the ability of future generations to meet their
N
own needs.” (Our Common Future – 1997 Report of World Commission on Environment & Development)
 “Societal process of exploration, learning and
transformation.” (Godemann & Michelsen, 2011, in Fischer et al, 2016)
 “In order for development to continue indefinitely, it should
balance the interests of different groups of people, within
the same generation and among generations, and do so
simultaneously in three major interrelated areas–economic, 7
social, and environmental.” (Soubbotina & Sheram, 2000) 4
2
 What is sustainable development
(Contd.) (Bansal, 2005)
 The three principles of sustainable development:
 “Environmental integrity principle ensures that human

EL
activities do not erode the earth’s land, air & water

PT
resources.”
 N
“Social equity principle ensures that all members of
society have equal access to resources & opportunities.”
 “Economic prosperity principle promotes a reasonable
quality of life through the productive capacity of
organizations and individuals in society.” (Holliday, Schmidheiny, &
Watts, 2002, in Bansal, 2005)

743
 Four ‘C’s of Sustainable Development
(Heliopolis University for Sustainable Development, 2013)

 Engaging in context
 Raising consciousness

EL
Assimilating content
PT


 Making a contribution N

744
 Building blocks of sustainable
development (du Plessis, 1999)

 Environment: “Balance between conserving and

protecting the environment and using renewable
resources”

EL
Economy: “Creat[ing] equitable but viable
PT

economic systems with an ethical basis.”
N
 Society: “Encourag[ing] equitability and
responsibility within social and cultural systems
and values.”
(Barbier, 1987, in duPlessis, 1999)

 Adaptability: “Continual adjustment according to

feedback loops.” (du Plessis, 1999) 745
 The Goal:
UN Sustainable Development Goals
 United Nations:
http://www.un.org/sustainabledevelopment/sustainable-
development-goals/
https://www.youtube.com/watch?v=3VbLIz9SaaY

EL


International Institute for Environment & Development:

PT

http://www.iied.org/sustainable-development-goals-new-
N
negotiation-under-way?gclid=CjwKEAjwl4q-BRDtzJmSk-
uGunkSJACmCOY-
eW9GBnt4Ej83PMF0xHiMZqp3OtV3TXltLAYBGK5JHBoCtn3w_
wcB
 Sustainable Development Goals: Indian Experiences (Prof. R.
B. Singh, Delhi School of Economics, University of Delhi):
https://www.youtube.com/watch?v=TWnDJqeuowE
746
 Channels

 International Programme for the Development

of Communication:

EL
http://www.unesco.org/new/en/communication

PT
-and-information/intergovernmental-
N
programmes/ipdc/
 Communication Initiative Network:
comminit.com

747
 Texts

 https://www.eda.admin.ch/content/dam/de
za/en/documents/themen/staats-

EL
wirtschaftsreformen/228184-ict4d-
PT
connectiong-partners_EN.pdf
N
 http://www.cs.cmu.edu/~rtongia/ICT4SD_F
ull_Book.pdf
 http://www.ecologyandsociety.org

748
 Examples of commitment to
environmental sustainability
 Pavegen: pavegen.com
 http://www.pavegen.com/what-we-do

EL
 https://www.youtube.com/watch?v=-Sp2QiKATwY

PT
 Energy Floors: http://www.energy-
N
floors.com/sustainable-dance-floor/
 Think Parallax: http://www.thinkparallax.com/
 Sustainable Brands:
http://www.sustainablebrands.com/
749
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
Corporate Sustainability

EL
&
PT
N

Corporate Social
Responsibility
 Spectrum of social strategies
(Lindgreen, Córdoba, Maon & Mendoza, 2010)

 Social strategies adopted by companies range

from:

EL
PT
 No CSR to “Internationally recognized CSR
N
(Integrated business strategies, attention to
social issues, compliance with codes of
conduct, governance, & sustainability)”
 Corporate sustainability
(Hahn et al., 2015, in Vildásen, Meitsch & Fet, 2017)

 Corporate sustainability refers to preservation/

conservation of economic, social, and

EL
environmental resources within a dynamic,

PT
systemic, organizational, and individual context,
N
which is constantly evolving in time and space.
 Corporate sustainability & Corporate
social responsibility (Marrewijk, 2003)

 “CSR relates to phenomena such as

transparency, stakeholder dialogue &

EL
sustainability reporting, while CS focuses on

PT
value creation, environmental management,
N
environment friendly production systems,
human capital management, & so forth.”
 Stages of the CS/ CSR nexus
(Marrewijk, 2003)

1. Compliance driven CS/ CSR

2. Profit driven CS/ CSR

EL
Caring CS/ CSR
PT
3.

4. Synergistic CS/ CSR N

5. Holistic CS/ CSR
 Stage 1: Compliance driven CS/ CSR
(Marrewijk, 2003)

 Motivation: “Duty/ obligation, correct

behavior”

EL
 Activities:

PT
 “Providing welfare to society within the limits of
N
regulations from the rightful authorities”
 “Responding to charity & stewardship
considerations”
 Stage 2: Profit-driven CS/ CSR
(Marrewijk, 2003)

 Motivation: “Business case” - Anything that

benefits the business

EL
 Activities:

PT
 “Integration of social, ethical, & ecological aspects
N
into business operations & decision making,
provided it contributes to the financial bottom line.”
 Stage 3: Caring CS/ CSR (Marrewijk, 2003)

 Motivation: “Human potential, social

responsibility & care for the planet are as such

EL
important”

PT
 Activities: N
 “Balancing economic, social & ecological concerns”
 “CS/ CSR initiatives go beyond legal compliance &
beyond profit considerations.”
 Stage 4: Synergistic CS/ CSR
(Marrewijk, 2003)

 Motivation: “Sustainability is important in

itself, especially because it is recognized as

EL
being the inevitable direction the business

PT
takes.” N
 Activities:
 “Search for well-balanced, functional solutions
creating value in the economic, social & ecological
realms of corporate performance, in a synergistic,
win-together approach with all relevant
stakeholders.”
 Stage 5: Holistic CS/ CSR (Marrewijk, 2003)

 Motivation: “Sustainability is the only

alternative since all beings & phenomena are

EL
mutually interdependent. Each person or

PT
organization therefore has a universal
N
responsibility towards all other beings.”
 Activities:
 “CS is fully integrated & embedded in every aspect
of the organization, aimed at contributing to the
quality & continuation of life of every being &
entity, now & in the future.”
 Strategic communication
management, CS & CSR (Bɩrɩm, 2016)

 CSR Projects are dependent upon:

 Environmental responsibility
 Employee talent development

EL
 Socially responsible supply chain management

PT
 Social media usage is dependent on:
 Social support
N
 Brand image
 Tracking of large scale data
 CSR projects & social media usage contribute to strategic
communication management, which, in turn results in:
 Long term customer engagement
 Increased income
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
 Integration of
EL
sustainability with
PT
N

CSR
 Conceptual framework (Wijethilake, 2017)

Proactive sustainability Sustainability Corporate sustainability

EL
strategy control systems performance

PT
Mediating effect
N
Control variables:
Firm size, Industry type,
Nature of firms
 Example of sustainability integration
strategy (Essah & Andrews, 2016)

 Ref: Mining operations in Ghana

 Stages:

EL
1. “Sustainability as land reclamation

PT
2. Sustainability as disjointed CSR/ social license
N
activities
3. Sustainability as long-term community
development”
 Summary of CSR codes
pertaining to
EL
PT
N
environmental health
(Dimmler, 2017)
 OECD Guidelines (1970s/ 2000)
(Dimmler, 2017)


“Theme/ Applies to: Recommendations from
governments to corporations

EL

Components included: Law; Investment;
PT
Industrial relations; Employment regulation
N

Comments: France & Holland require
companies to take note of guidelines”
 UN Global Compact (2000)
(Dimmler, 2017)


“Themes/ Applies to: Governments & businesses

Components included: Environment; Human rights; Worker
rights

EL
Comments: Focuses on development; lacks specificity

PT


because it is designed to address a very global & diverse

N
constituency; Principles 7-8 address envt. MDGs begin to
address Social Determinants of Health but are not specific

Notes: Not designed to supplant regulatory initiatives;
focuses on developing strong partnerships; very ambitious
objectives, lacks reporting systems; 7700 participants; very
limited resources; complement to specialized codes &
standards”
 ISO 26000
(Dimmler, 2017)


“Themes/ Applies to: All organizations in all sectors

Components included: Social responsibility; governance,
environment, human rights, labor practices, fair

EL
operating practices, consumer issues, community

PT
involvement, societal development
N

Comments: Voluntary; focuses on mgmt systems, laws
& regulations where business activity takes place, it
must be followed

Notes: Combines well with existing systems such as
Global Compact; corporations can choose how to orient
with their own policies”
 Universal Declaration of Human Rights
(1948 adopted by 48 UN member states) (Dimmler, 2017)


“Themes/ Applies to: ‘Every organ of society’; Defines ‘What are
rights?’; Outlines 1400 indicators for business

Components included: Broadly includes human rights, political, social,

EL
& economic rights, highlighted by 2 UN International covenants – one
on political & civil rights, the other on social, economic, & cultural

PT
rights; covenants are binding to states that join these treaties;
N
universally accepted, serves as the foundations for many CSR codes

Comments: 1993 – 171 nations adopted the Vienna Declaration to
reaffirm support; not legally binding, but accepted as customary law;
challenge is how to translate into business principles, particularly the
civil & political rights

Notes: Formed on the basis of many constitutions around the world;
subsequent UN documents have compensated for a lack of focus on
the rights of minorities & indigenous peoples, resulting in 80
conventions, declarations, & resolutions on human rights”
 ILO Tripartite Declaration of
Principles (Social Policy) (1977)
(Dimmler, 2017)


“Themes/ Applies to: Companies, governments, trade unions, &
employer organizations; ILO Declaration defines the obligation of
governments as well as companies in promoting social & economic
development; precursor to the Global Compact

EL

Components included: Important precursor to CSR codes &

PT
standards; refers to 28 ILO conventions negotiated within a multi-
N
national framework; includes dispute resolution procedures; can be
used to determine whether a company is in accordance with the
declaration; procedures exist to challenge company behavior, but are
rarely used

Comments: Business encouraged to observe standards comparable to
the host country in which they operate; in developing countries,
observance of local norms could still involve poor working conditions”
 SA 8000; SA 8000/ 2008
(Dimmler, 2017)


“Themes/ Applies to: Companies around the world & across industries; truly a
global & verifiable standard designed to make workplaces more humane; best
management tool available to ensure social accountability; current benchmark in
Corporate Social Accountability; auditing; primarily used by companies where
labor conditions are problematic

EL

Components included: A certification standard developed, overseen, & updated

PT
via multi-stakeholder dialogue with companies, trade unions, stakeholders,
NGOs, & academics; requires training & CQI in the workplace, & ensures that
N
social policies remain in effect long after auditors leave the facility

Comments: A process & a performance standard – unique in this respect; the
standard is embedded into daily practice; extensive training programs to ensure
worker rights; also evaluates up to supply chain; promotes corrective action,
Social Accountability International (SAI) identifies perceived costs & benefits
through survey

Notes: Difficult for smaller companies to implement with bias towards
companies with existing mgmt systems in place – expensive barriers; key
challenge is to create a critical mass of certified suppliers; also convergence
with other similar initiatives; to conform to ILO convention 138 – a child is
anyone less than 15 years”
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
 Integration of
EL
sustainability with
PT
N

CSR (Contd.)
Summary of CSR codes
pertaining to
EL
PT
N
environmental health
(Contd.)
(Dimmler, 2017)
 Rio Declaration (Earth Sumit) by the
UN Conference on Environment &
Development (UNCED) (1992) (Dimmler, 2017)

“Themes/ Applies to: Addresses nations & states, but also
addresses many of the issues outlined in the Global
Compact; a weakness is that it does not address companies

EL

Components included: Historical point in time when UNCED

PT
& environmental issues entered the mainstream
 N
Comments: Precautionary Principle & Pollutes-Pay Principle
were defined by Rio Declaration & are key elements of many
environmental standards; these apply to companies

Notes: Provides an important basis for environmental
principles in international law, enshrining many key concepts
& definitions; identifies the question: What is the role of
states in promoting environment & development”
 CERES Principles (Coalition for
Environmentally Responsible Economies) –
Valdez Principles (Result of the Exxon-Valdez
disaster); UN-based organization (Dimmler, 2017)

“Themes/ Applies to: Network of more than 80
environmental, investor, & advocacy groups promoting
sustainability; 10 principles covering major environmental
concerns facing companies; encourages ongoing dialogue

EL
with corporations; weakness is that they are aspirational in

PT
nature & do require a two-way dialogue – companies must
N
meet standards for acceptance; investors can pressure
corporations to comply; uses a trust approach to conflict
resolution

Components included: Helped launch the Global Reporting
Initiative

Comments: Question: What measures can companies take to
promote sustainability of their products & operations?”
 The Natural Step (1992) (Dimmler, 2017)


“Themes/ Applies to: Applies to companies,
communities, & individuals worldwide

EL

Components included: Addresses the systematic

PT
causes of environmental problems; general
enough in nature so that different sector
N
organizations can adopt & make them their own

Comments: Difficult to build capacity & scale up
activities, especially in developing countries;
complements many sustainability tools & resources
including ISO 14001”
 Extractive Industries Transparency
Initiative (EITI) (2003) (Dimmler, 2017)


“Themes/ Applies to: Applies to companies that
operate mining, oil & gas fields; & also can apply
to supply-chain companies – upstream &

EL
downstream
PT
 N
Components included: Promotes the use of
systems & procedures that enable the transparent
use of resources; mineral-rich countries report on
revenue; countries must define their own process

Comments: Does not address social issues,
political issues, or health issues”
 Equator Principles Financial
Institutions (EPFIs) (2003) (Dimmler, 2017)


“Themes/ Applies to: Guidelines for financial institutions to provide a
benchmark on social & environmental issues for project financing;
banks & insurance companies; export creditors & development
agencies; NGO involvement & reputation at risk has created critical

EL
mass of participation; one of the few voluntary sector initiatives to be
successful; the challenge is how to expand it into emerging markets

PT
(China, Russia, India)
 N
Components included: Address project financing with capital costs
over $10 million

Comments: Achieved critical mass when 70 financial institutions in 16
countries signed the Principles; social & environmental assessment
required of borrowers, & establishment of social & environmental
management systems

Notes: Some believe the EPFIs have financed projects which violate
the Principles; a lack of transparency; PR only concern”
 AA 1000 Series (Foundation
Standard) (1999/ 2008) (Dimmler, 2017)


“Themes/ Applies to: Assurance standards for assurance providers
to evaluate public disclosure about performance; established
criteria for evaluation including systems, data, & processes;
Quality Assurance standards; organizational guidelines;

EL
qualification for assurance providers

PT

Components included: Can be used with the Global Reporting
N
Initiative, as well as with other standards or codes such as factory
audits & labor standards

Comments: Established CSR as a discipline; establishing
professional qualifications, training, & development methodologies

Notes: Accessible online at no cost; as more companies sign up,
then CSR will increase; challenge is to build capacity among
assurance providers”
 Global Reporting Initiative
(GRI) (1997) (Dimmler, 2017)


“Themes/ Applies to: Sets a framework for all businesses (GRI reporters);
GRI mission is to evaluate the quality of reporting to a higher level of
comparability, consistence, & utility; companies must meet certain criteria if
they want their reports in accordance with the GRI guidelines

EL

Components included: CERES & the Tellus Institute convened the GRI;
UNEP also has played a significant role; In 2000, the GRI launched the

PT
Sustainability Reporting Guidelines in 2002 as the G3 Guidelines
 N
Comments: Challenges include the need for more research to confirm the
link between reporting & improved social & environmental performance;
reporting can be costly; large no. of GRI indicators can be daunting; lacks
external verification; most visionary of the CSR tools, but will take decades
to become mainstream; sector supplements available in finance, electric
utilities, & mining

Notes: Thousands of companies in 60 countries issue GRI reports; defines
reporting content, defines report quality; report boundary setting; options
for reporting; Questions – How can a company communicate with
stakeholders? What are the issues a company should report? What are the
boundaries of a company?”
 ISO 14001 (1996-2008) (Dimmler, 2017)


“Themes/ Applies to: A family of standards to create environmental
management system; a useful framework to address environmental
mgmt systems; does not focus on sustainability

EL

Components included: Used internally without external auditors;
certificates issued; compatible with a range of standards (ISO 9000

PT
series); once a company has developed the management systems for
N
the ISO 14001 certificate, it is easier to implement SA 8000 as well

Comments: Attained a critical mass of global companies; challenge is
to find mechanisms for enhancing stakeholder participation in
decision making; companies must conduct environmental reviews;
establish effective mgmt systems; conduct environmental audits;
prepare statements on environmental performance

Notes: More than 13,000 standards in 145 countries; Critical Quality
Indicator approach; Question: How can a company develop
management systems to address environmental issues?”
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
 SDG Compass for
business action on the
EL
PT
N
SDGs
(Developed by GRI, United Nations Global Compact & WBCSD in 2015)
 Why do the SDGs matter for
business? (SDG Compass, 2015)

 “The SDGs define global sustainable

development priorities & aspirations for 2030 &
seek to mobilize global efforts around a

EL
common set of goals & targets.”
PT
N
 “Business is a vital partner in achieving the
SDGs. Companies can contribute through their
core activities, & we ask companies everywhere
to assess their impact, set ambitious goals &
communicate transparently about the results.”
(Mr. Ban Ki Moon, UN Secretary-General)
 Objective of the SDG Compass
(SDG Compass, 2015)

 “… to guide companies on how they can align

their strategies as well as measure & manage

EL
their contribution to the SDGs”

PT
N
Steps in the SDG
EL
Compass
N
PT
(SDG Compass, 2015)
 Step 01: Understanding the SDGs
(SDG Compass, 2015)

 “What are the SDGs?”

 The 17 SDGs: Details available at

EL
https://sdgcompass.org/sdgs/

PT
 “Understanding the business case
N
 The baseline responsibilities for business” –
Discussed in the previous lecture
 Understanding the business case
(SDG Compass, 2015)

 “Identifying future business opportunities

 Enhancing the value of corporate sustainability

EL
Strengthening stakeholder relations & keeping
PT

pace with policy developments
N
 Stabilizing societies & markets
 Using a common language & shared priorities”
 Identifying future business
opportunities (SDG Compass, 2015)

 “Innovative technologies to increase energy

efficiency, renewable energy, energy storage,
‘green buildings’ & sustainable transportation

EL
Substitution of traditionally manufactured &
PT

processed products by ICT & other technology
N
solutions that reduce emissions & waste
 Meeting the needs of the large & mostly untapped
market for products & services – including in
healthcare, education, energy, finance & ICT –
that can improve the lives of the four billion people
who currently live in poverty.”
 Enhancing the value of corporate
sustainability (SDG Compass, 2015)

 “The introduction of taxes, fines, & other pricing

mechanisms to make current externalities become
internalized to the business. This will further strengthen

EL
economic incentives for companies to use resources

PT
more efficiently or to switch to more sustainable
alternatives.” N
 Encouraging the young generation and enhancing value
for employees through employee engagement leading to
an increase in employee morale & productivity
 Tapping into the ‘feel-good’ factor for customers through
sustainable business practices
 Strengthening stakeholder relations
& keeping pace with policy
developments (SDG Compass, 2015)

 Benefits:
 “Improvement of trust among stakeholders

EL
 Strengthening license to operate

PT
 Reduction of legal, reputational & other business
N
risks
 Building of resilience to costs or requirements
imposed by future legislation”
 Stabilizing societies & markets
(SDG Compass, 2015)

 Alleviating quality of life and enhancing

purchasing power

EL
 “… sustaining natural resources that companies

PT
depend on for production” N
 “Fostering accountable & well-governed
institutions as well as open & rule-based
trading & financial systems, thereby reducing
the costs & risks of doing business”
 Using a common language &
shared purpose (SDG Compass, 2015)

 Standardization of accountability measures

helps with transparency, credibility and

EL
partnerships

PT
N
 Step 02: Defining properties
(SDG Compass, 2015)

 Map the value chain to identify impact areas

 Select indicators & define data

EL
Define priorities
PT

N
 Mapping the value chain to identify
impact areas (SDG, 2015)

 “Examining each segment of the value chain

falling within the scope of the assessment to

EL
identify areas where:

PT
 The company’s core competencies, technologies &
N
product portfolio currently or potentially contribute
positively to the implementation of one or more of
the SDGs
 The company’s activities directly or indirectly across
the entire value chain may have current or potential
negative impacts on one or more of the SDGs”
 Mapping the value chain to identify
impact areas (Contd) (SDG Compass, 2015)

 “Selecting tools for mapping high impact areas

across the value chain: e.g.

EL
 GHG Protocol Scope 3 Evaluator

PT
 Social Hotspots Database
N
 Human Rights & Business Country Guide
 WBCSD Global Water Tool
 Poverty Footprint Tool
 https://sdgcompass.org/business-tools/”
 Engaging stakeholders
 Selecting indicators & collecting
data (SDG Compass, 2015)

 The logic model:

 Inputs: What resources go on in that could positively or negatively affect
the SDG?
Activities: What activities are undertaken?

EL


 Outputs: What is generated through those activities?

PT
 Outcomes: What changes in the target population occurred?
 Impacts: What are the changes as a result of those outputs?
N
 Examples:
 WBCSD’s Global Water Tool
 WRI’s Aqueduct ; http://www.wri.org/resources/maps/aqueduct-water-
risk-atlas; http://www.wri.org/publication/india-water-tool;
http://www.wri.org/publication/aqueduct-global-maps-21-indicators
 WWF-DEG Water Risk Filter
 https://sdgcompass.org/business-indicators/
 Define Priorities (SDG Compass, 2015)

 “Consider the magnitude, severity, & likelihood of current &

potential negative impacts, the importance of such impacts
to key stakeholders & the opportunity to strengthen
competitiveness through resource efficiency. Additional

EL
considerations include the likelihood that new regulation,

PT
standardization, market shortages (of material or labor),
N
supply chain disruptions, stakeholder pressure or changing
market dynamics over time may translate these negative
impacts into costs or risks for the company.
 Assess the opportunity for your company to grow or gain
advantage from its current or potential positive impacts
across the SDGs. This may include opportunities to innovate,
develop new products & solutions or target new market
segments.”
 Define priorities (Contd.) (SDG
Compass, 2015)

 Natural Capital Protocols: Natural Capital

Coalition

EL
 Social Capital Protocols

PT
N
 EL
Thank You
N
PT
Corporate Social Responsibility

EL
PT
N
Aradhna Malik (PhD)
Assistant Professor
VGSoM, IIT Kharagpur
 SDG Compass for
business action on the
EL
PT
N
SDGs (Contd.)
(Developed by GRI, United Nations Global Compact & WBCSD in 2015)
Steps in the SDG
EL
Compass (Contd.)
N
PT
(SDG Compass, 2015)
 Step 03: Setting goals
 Define scope of goals & select KPIs
 Define baseline & select goal type

EL
Set level of ambition
PT


 N
Announce commitment to SDGs
 Define scope of goals & select KPIs
(SDG Compass, 2015)

 “Identify KPIs
 Define baseline & select goal type

EL
 Set level of ambition

PT
 Goal setting initiatives: N
 The Science Based Targets Initiative
 The Future-Fit Benchmarks
 WBCSD’s Action 2020
 Goal setting approach:
 Inside-out approach
 Outside-in approach”
 Goal setting approach (SDG Compass, 2015)

 Inside-out approach (Current trend):

 “Business goals set internally
 Based on historical data, current trends & future projections

EL
on the company’s performance

PT
 Benchmarked against performance & goals of industry
peers” N
 “Outside-in approach: SDGs help determine:
 Global & Societal Needs:
 Business goals:
 Set based on external societal or global need
 Based on science & external data
 Benchmarked against the needs of society that the business can
address”
 Step 04: Integrating
 “Anchoring sustainability goals within the
business

EL
 Embed sustainability across all functions

PT
 Engage in partnerships”
N
 Anchoring sustainability goals
within the business (SDG Compass, 2015)

 “Create a shared understanding of how progress

towards sustainability goals creates value for the
company, in particular by clearly communicating the
business case & how it can complement progress

EL
towards other business goals.

PT
 N
Integrate sustainability goals into performance reviews
& remuneration schemes across the organization with
additional incentives reflecting the specific role that a
function or individual has in achieving relevant goals”
 Industry specific examples: SDG Industry Matrix
(https://www.unglobalcompact.org/library/3111;
http://sdghub.com/project/sdg-industry-matrix/)
 Embed sustainability across all
functions (SDG Compass, 2015)

 “Although dedicated sustainability teams &

professionals can play an important role in

EL
achieving the company’s sustainability goals,

PT
the support & ownership of corporate functions
N
such as R&D, Business Development, Supply
Management, Operations & Human Resources
are the key to embedding sustainability in
business strategy, culture & operations.”
 Engage in partnerships
(SDG Compass, 2015)

 “Value chain partnerships, within which companies in

the value chain combine complementary skills,
technologies, & resources & bring new solutions to

EL
market

PT
 Sector initiatives that bring several industry leaders
N
together in efforts to raise standards & practices across
the entire industry & overcome shared challenges
 Multi-stakeholder partnerships, where governments,
private sector & civil society organizations join forces to
tackle complex challenges.”
 Step 05: Reporting & Communicating
(SDG Compass, 2015)

 “Effective reporting & communication

 Communicating on SDG performance”

EL
PT
N
 Why report? (SDG Compass, 2015)

 Reporting matters project by WBCSD & Radley

Yeldar:

EL
http://www.wbcsd.org/Projects/Reporting/Reso

PT
urces/Reporting-Matters-2016
N
 Undatarevolution.org
 Effective reporting & communication
depends on: (SDG Compass, 2015)

 “The influence on stakeholder assessments &

decisions

EL
 The significance of economic, environmental, &

PT
social impacts” N
 Communicating on SDG performance
(SDG Compass, 2015)

 “For each SDG identified as relevant,

companies can disclose:
Why the SDG has been identified as relevant, &

EL

how
PT
 N
The significant impacts, whether positive or
negative related to the relevant SDG
 The goals for the relevant SDG & progress made in
achieving them
 Their strategies & practices to manage impacts
related to the SDGs & achieve goals through
integration across the business”
 EL
Thank You
N
PT