Session 3:

Stakeholder Perspective on CSR

September 22, 2014

Introduction
Conceptualization of CSR within different views

regarding the role of business in society

Why companies should or should not engage in CSR?

Debate on shareholder vs. stakeholder

What are the key arguments for and against CSR?

Against CSR

Classical View

For CSR

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Stakeholder Perspective

Session 3: Stakeholder Perspective on CSR

Classical View
Two perspectives:
Pure profit-making view:
Constrained profit making view
Pure profit-making view (Carr 1968)
Business has lower standard of ethics than society

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Some degree of dishonesty is acceptable

Deception is part of a strategy to be successful in business.
Company has legal right to shape its strategy
No social responsibility (other than following the law).

Session 3: Stakeholder Perspective on CSR

Classical View
Constrained Profit-making View (Milton Friedman

1970)
Purpose of business is to maximize profits /wealth for
shareholders.
Conduct business in accordance with the interests of the
owner/shareholders, not divert profit for social
responsibility.
Create profits while abiding the rules of the game, acting
honestly and in good faith (obey law and be ethical
implicit).
Solving social problems should be left to the state.
Contemporary debate has paid some attention to
stakeholders

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Session 3: Stakeholder Perspective on CSR

Classical View
Classical view is justified on the basis of neo-

classical economic theory:

Free market, economic efficiency and profit

maximization.
Shareholders own the corporation so, managers cannot
divert resources to further social goals, which cannot be
directly related to profits.
Companys role is to produce wealth. Pursuing social
responsibility may impact on its performance.
Managers are not equipped to deal with social
responsibility. Government and other organizations can.
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Session 3: Stakeholder Perspective on CSR

Classical View
Changing perspective - CSR is useful in generating

long-term value for the business.

Strategic CSR

the sole objective of business is to maximise

shareholder wealth and that a company should engage

in CSR activities only if it allows value to be created.
CSR as strategic investment (a business case).

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Session 3: Stakeholder Perspective on CSR

Stakeholder Perspective on CSR

Background
Basic Ideas of Stakeholder Perspective
What is stakeholder theory?
Who are stakeholders
Ethical Aspects of Stakeholder Theory
Practical Implications of Stakeholder Theory for

Managers

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Session 3: Stakeholder Perspective on CSR

Background
How to translate vague construct of society towards

which the corporations have some responsibility?

Something concrete, something that can translate into

management attention and action

What exactly are a managers responsibility to this
abstract concept of society?
Stakeholder theory helps us to find out pragmatic
answer to what is S in CSR in a given situation

R. Edward Freeman
Father of stakeholder theory
A managerial tool for strategic management
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Session 3: Stakeholder Perspective on CSR

Basic Ideas

What are the Salient Ideas of Stakeholder Theory? (video)

Socially aware view
Beyond shareholders, there are other groups or constituents who

are affected by a companys activities and have to be considered in

managers' decisions.

A company needs to work with the selected individuals or groups in

society in order to fulfill its aims and every one of these

stakeholders that may have an influence on the companys goals has
to be taken into account.

Companies have social responsibility that requires it to consider

the interests of all affected by its actions.

Companys goal is to benefit all stakeholders

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Session 3: Stakeholder Perspective on CSR

Basic Ideas

Who are stakeholders (video)

Stakeholders are:
groups and individuals who benefit from or are harmed
by, and whose rights are violated or respected by,
corporate actions (Freeman, 1998)
For example

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Employees
Creditors,
Suppliers
Customers
Communities

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Basic Ideas

Typologies of Stakeholders
Primary:

without whose continuing participation the company cannot

survive

Secondary

Those who influence/affect or are influenced/affected by the

corporation, but they are not engaged in transaction with the
company or are not essential for its survival

Difficulty in considering some stakeholders:

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Mute Stakeholder Natural Environment

Absent Stakeholder Future generations, potential victims
How to address this?

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Basic Ideas
Ethical aspects of stakeholder theory
Stakeholder theory is a theory of organizational
management and ethics.
Individuals or groups who are affected by the company
to reach its goal have a legitimate interest in the
company.
Nature of stakes and power of influence
Corporations are not only strategically rational but
morally right in considering the interests of the
stakeholders they affect and are affected by.

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Practical Implications
Identifies new role for management
Instead of agents of shareholders only, managers have
new role of assessing and balancing the interests of all
stakeholders of the company.

Mapping stakeholders (rational)

Identifying influential players in the process (process-level)
Managing relationships with diverse groups of stakeholders to
reach the goals (transactional level)

Given rise to new approaches to corporate governance

Business Ethics and CSR (Video)

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Case Analysis

The company XYZ produces health products that are

potentially unsafe products which some time lead to

adverse impact on the heath of customers. The
company is aware about this. After doing quick costbenefit analysis, the company has found that though
customers and their families can suffer, it is profitable
for the company to continue with the existing products
and disguise their adverse health impact through
advertising campaign than improve the quality of its
product.
What are the key arguments for and against CSR from
different perspectives on CSR?
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