Corporate Responsibility and Society
MNGT 5990
Fall 2013 - Shanghai, PRC
Robert Serben, Ph.D.
Week 3 -
This week is about:
1. differing views,
2. stakeholder responsibility, and
3. complexity in CSR situations
This week
Classic perspectives
Stakeholder responsibilities
Walmart
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Milton Friedman – Charles Handy
CLASSIC PERSPECTIVES
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
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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 points
1. Focus on stock price and ownership can distort
the business culture
2. Shareholders are rarely owners
3. 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?
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
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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 maybe both America's most admired and most hated company
“ Text, p.66
WALMART CASE DISCUSSION –
COMPLEXITY IN CSR
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
Walmart - Hangzhou Wahaha
• 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.
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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/newsarchive/2013/04/15/walmart-announces-new-commitments-todramatically-increase-energy-efficiency-renewables
Walmart
Walmart
Walmart performance
$466 billion – net sales
Shareholder
mentions 30 times
Stakeholder
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.”
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