Corporate Responsibility and SocietyMNGT 5990

Fall 2013 - Shanghai, PRCRobert Serben, Ph.D.

Week 3 -

This week is about:

1. differing views,

2. stakeholder responsibility, and

3. complexity in CSR situations

Corporate Social Responsibililty 3

This week

Classic perspectives

Stakeholder responsibilities

Walmart

CLASSIC PERSPECTIVES

Milton Friedman – Charles Handy

Corporate Social Responsibililty 5

Three arguments for CSR

1. Moral argument:– Successful operations reflects the values of the

larger society 2. Rational argument:– Maximize performance by minimizing restrictions

3. Economic argument:– Reflects concerns of stakeholders over medium

to longer term

CSR debate: Friedman/Handy

Milton Friedman Charles Handy

Friedman/Handy

Both are concerned about the survival of a competitive market

Both are concerned with doing the right thing

Both are concerned with duties - …. “beyond the maximization of profit”

Milton Friedman

• Published in 1970 – rational argument• “Business has a social purpose” talk is illogical• Logically, business is only responsible to its

owners to:– Make as much money as possible– Conform to the basic rules of society (law, custom,

and ethics)

Milton Friedman

• People have social responsibilities – businesses do not

• Business leaders are not ethicists– What is the greater social purpose?

• Spending someone else's money without consent– a form of taxation

• If business is responsible for social outcomes, what is the role of the individual, the government?

Charles Handy

• Published in 2002. Moral argument: – “The purpose of a business …is not to make a

profit. It is to make a profit…to do something more of better.”

• Three points1. Focus on stock price and ownership can distort

the business culture 2. Shareholders are rarely owners3. Intellectual capital

Charles Handy

• Sees business as a community of interested groups

• To start the search he poses the question ,”If the business were not in existence , would we invent it?

Corporate Social Responsibility 12

Shareholders

• “…the average holding period for stocks has dropped from five years in the mid-1970s to six months today. People aren’t investing in your company; they’re investing in your stock.” – Class text, p.44

STAKEHOLDER RESPONSIBILITIES?

Questions

• Can business ignore calls for greater social responsibility as long as they’re profitable ?

• Doesn't profitability positively affect all stakeholders? If “yes,” why change?

• Do stakeholders have responsibilities? – What are those responsibilities ?

SCSR

• DOES: Business does a better job in reacting to CSR concerns rather than initiating them. Why?

• T/F: Stakeholders need to care and to act for socially responsible action. Why?

• True responsibility for initiating social responsible action is …………….

Point and question

• Point in text: The CSR community may expect too much from firms – they react to change better than they initiate it.

• What is the driving force that “pushes” CSR actions within firms and their strategic planning?

WALMART CASE DISCUSSION – COMPLEXITY IN CSR

“Walmart maybe both America's most admired and most hated company “ Text, p.66

Case discussion

• Is it in the best interests of competitive, market-based environment, and the various stakeholders, for a company to be as big and powerful as Walmart?

Walmart

• World’s largest retailer • 2009 – sales: $401 billion• Facilities – 4,200 – U.S.– 3,600 – 16 other markets worldwide

• Two million (2,000,000) employees

Walmart

• It’s big and smart!– “…the world’s largest grocer….”

• Web location: http://news.walmart.com/walmart-facts/health-wellness-fact-sheet

– Sophisticated technology – especially supply chain and customer insights. Web location: http://news.walmart.com/walmart-facts/walmart-economic-customer-insights-report-q3-2012

• Very competitive. Low prices. Dominates and sector it enters. Uses its size as a competitive tool.

Walmart – continuing reality

“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”

• Sam Walton

Corporate Social Responsibility 22

• Chinese beverage maker Hangzhou Wahaha, for example, has built a $5.2 billion business against global competitors such as Coca-Cola and PepsiCo by targeting rural areas, filling product gaps that meet local needs, keeping costs low, and appealing to patriotism.

Walmart - Hangzhou Wahaha

Walmart

• Key competency: identifying inefficiencies in the value chain and eliminating them to minimize costs

• How does this competency affect:– Suppliers?– Employees?– Competitors?– You? What do you do look for at Walmat?

Walmart corporate mission

• “Regardless of the market where we operate, the retail format or the website, Walmart serves customers with one core mission: to help people save money so they can live better.”

– Source: Walmart 2013 Annual Report. Web location: http://stock.walmart.com/annual-reports

Walmart

• How could a strategy of minimizing cost affect various stakeholders? – Employees – Suppliers – Communities – Competitors

Walmart

• From the 1990s – 2000s,coalitions of unions, environmentalists, community organizations, state lawmakers, and academics attacked Walmart

Walmart– on one hand

• Lower prices for consumers• Good jobs and economically deprived regions• Wide range of products• Redefinition of supply chain management and

general pursuit of technologically driven efficiencies

• Increased productivity

Walmart– on the other hand

• Loss of jobs to overseas suppliers• Strong opposition against collective

representation of workforce• Relatively low employee wages and benefits• Competitors go out of business, reducing

competition and, ultimately, consumer choice• Litigation against Company on issues of

alleged discrimination, etc.

A closer look – p.62

• Prices – strategy/tactics• Suppliers – very big sales - vulnerable• Jobs – jobs – 44% turnover• Competitors – Become better – out of

business• Quality and variety – Top 10 in every category

A question

• If CSR is central to a firm’s competitiveness in a global business environment, how is a firm like Walmart can apparently ignore calls for greater social responsibility from key stakeholders?

Walmart

• President and CEO – Mike Duke:– New Commitments to dramatically increase energy

efficiency and renewables – “… look at the future, energy costs may grow as much as

twice as fast as our anticipated store and club growth – Walmart has also been cited by the U.S. Environmental

Protection Agency (EPA) as America’s leading user of onsite renewables, using more onsite renewable power than any other company in the U.S”

– Web locaton: http://news.walmart.com/news-archive/2013/04/15/walmart-announces-new-commitments-to-dramatically-increase-energy-efficiency-renewables

Walmart

Walmart

Walmart performance

$466 billion – net sales

Shareholder mentions 30 timesStakeholder mention 2 times

Walmart and sustainability

• Walmart’s envronmental goals– “To be supplied 100% renewable energy – To create zero waste– To sell products that sustain our resources and

environment”

Which do you like? Why?

Walmart’s mission statement and its advertising slogan are the same

It’s not over

It’s not over

Albert Einstein: “Without changing our pattern of thought, we will not be able to solve the problems we created with our current patterns of thought.”

Corporate Social Responsibililty 40