Week 1
Introduction to CSR: defining
CSR – contested terrain
General Motors - Malibu
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Fire risk from fuel tank explosion
Risk known since engineer’s report in
1973
500 fatalities per annum
Cost of legal claim = $2.40 per car
Cost of rectifying problem = $8.59 per
car
1993 claim awarded $1.2billion punative
damages
“People of the same trade seldom
meet together even for merriment
and diversion, but the conversation
ends in a conspiracy against the
public or some contrivance to raise
prices.”
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Adam Smith – The Wealth of Nations
“whether or not business should undertake
CSR, and the forms that responsibility should
take, depends upon the economic perspective of
the firm that is adopted”.
Moir (2001)
CSR “analyses economic, legal, moral, social
and physical aspects of environment”.
Barnard (1938)
“there is one and only one social responsibility of
business – to use its resources and engage in
activities designed to increase its profits so long
as it stays within the rules of the game, which is
to say, engages in open and free competition
without deception or fraud”.
Friedman (1970)
“business encompasses the economic, legal,
ethical and discretionary expectations that
society has of organization at a given point in
time”.
Carroll (1979)
“business turns a social problem into economic
opportunity and economic benefit, into
productive capacity, into human competence,
into well-paid jobs, and into wealth”.
Drucker (1984)
“in the modern commercial area, companies
and their managers are subjected to well
publicised pressure to play an increasingly
active role in [the welfare of] society.”
Balabanis, Phillips and Lyall (1998)
“there is a positive relationship between
disclosure level and CSR. That is, firms that
engage in socially responsive activities provide
more informative and extensive disclosures than
do firms that are less focused on advancing
social goals.”
Gelb and Strawser (2001)
CSR “is a concept whereby companies integrate
social and environmental concerns in their
business operations and in their interaction with
their stakeholders on a voluntary basis”
European Commission (2002)
There is a sound business case for social
responsibility
Department of Trade & Industry (DTI)
"....every large corporation should be thought of
as a social enterprise; that is an entity whose
existence and decisions can be justified insofar
as they serve public or social purposes"
Dahl (1972)
Socially responsible behaviour
leads to increased economic
performance
Crowther (2002)
“a certain amount of rhetoric may be inevitable
in the area of social responsibility. Managers
may even believe that making statements about
social responsibility insulates the firm from the
necessity of taking socially responsible action.”
Robertson and Nicholson (1996)
What has caused the interest in CSR?
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Social context
Political context
Economic context
The case of Enron
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Collapsed 2002
Audit failure – Andersons collapsed
Accounting irregularities
Fraud
Employees and shareholders loss
Bhopal, India
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1984
Worst pollution episode in history
Union Carbide chemical plant
100’s dead, 1000’s injured
Pollution of water etc still present
No compensation paid to date
The case of BCCI
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Bank of Credit & Commerce International
closed down in July 1991
1.4 million depositors
Losses > $10billion
Fraud
Audit failure
Oil pollution
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Torrey Canyon, 1969
Amoco Cadiz, 1993
The Prestige, 2003
Alaska
Siberia
Nigeria
Why did it go wrong?
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Rights & responsibilities
Risk & rewards
Corporate power
Accounting
‘If the confidence of the public in the integrity of
accountants’ reports is shaken, their value is
gone. To preserve the integrity of his reports,
the accountant must insist upon absolute
independence of judgment and action. The
necessity of preserving this position of
independence indicates certain standards of
conduct.’
Arthur Andersen, 1932