CHAPTER 2

CHAPTER 2

Dr. JURIS CANLAS-PONIO

DR. JURIS PONIO

 INTRODUCTION

• Business community is confronted with a

great deal of challenges and opportunities.

• Businesses are prodded, asked or

encouraged to improve their business
practices in ways that respect ethical
values, people, communities, and the
environment.
• Businesses recognize that aside from making
profit, they are morally obliged to become
innovative, competitive, productive, and
responsible members of the society.

• Business has a moral obligation, even if not

legally required, to protect and uphold the
interests of their stakeholders and meet the
tests of good corporate citizenship.
T H E C O N C E P T O F CO R P O R AT E
SOCIAL RESPONSIBILITY
• The fundamental reason for examining the activities of
business from the moral perspective is for the promotion
of the common good, protection of the individual’s
interests, and the preservation of the human society in
general.

• Social responsibility is a moral obligation of each and

every individual, institution, business, and organization
since they all compose the society.
• Businesses, especially big corporations, not only do
business by maximizing profit but also incorporate
social responsibility as an integral part of their business
operations and strategies.
 CORPORATE SOCIAL RESPONSIBILITY

• According to BAUER:
– “Corporate social responsibility means
seriously considering the impact of the
company’s actions on the society.”
• According to Davis and Blomstrom:
– “The obligation of decision makers to take actions
which protect and improve the welfare of the society
as a whole along with their own interests.”
 CORPORATE SOCIAL RESPONSIBILITY
According to Professor Keith Davis
– “The response of the corporation to issues beyond its narrow
economic, technical, and legal requirements. It is the obligation of
the corporation to evaluate the effects of its decisions on the
external social system.”
According to Peter Drucker:
– “The first responsibility to society is to operate at a profit…
business is the wealth-creating organ of society. But what is
important is that management realizes that it must consider the
impact of every business policy and business action on society. It
has to consider whether the action is likely to promote to its
stability, strength and harmony…the ultimate responsibility to
itself, to our heritage, to our society and to our way of life.”
 CORPORATE SOCIAL RESPONSIBILITY
• CSR is a concept that has developed an emerging
prevalence around the globe.
• It is said that business is as old as the civilization.
• CSR means extending beyond the business’
compliance with laws and other legal
requirements.
• It means fulfilling the moral obligations of the
business by involving itself with commitments and
activities that contribute to and help improve the
condition of the society, the community, and the
environment.
The Origins of CSR
• While widespread adoption of CSR has been relatively recent, the
concept itself has been around for over a century. It has its roots in
the late 1800s, when the rise of philanthropy combined with
deteriorating working conditions made some businesses reconsider
their current production models. Business tycoons began donating to
community causes, and some business owners (although somewhat
reluctantly) reduced working hours and improved factory conditions,
laying the foundation of responsible corporations.
The Origins of CSR
• The term “Corporate Social Responsibility,” however, was not coined
until 1953, when American economist Howard Bowen
published Social Responsibilities of the Businessman. In this book,
Bowen identified the great power of corporations and recognized that
their actions had a tangible impact on society. Therefore, he argued,
businessmen have an obligation to pursue policies that are beneficial
for the common good.
THREE PHASES OF CORPORATE
SOCIAL
RESPONSIBILITY
Phase One: Profit Maximizing Management
(1800s to early 1900s)

Phase Two: Trusteeship Management

(Early 1900s)

Phase Three: Quality of Life Management

(1930s)
 CHARACTERISTICS:
Phase One: Profit Maximizing Management
(1800s to early 1900s)

• Management must maximize profit.

• Individual drive for profit maximization would
ultimately create wealth for the nation.
• Business systems as a profit maximizer are
used as a tool for the elimination of economic
scarcity.
• Businesses ignored unsafe working conditions, paid
starvation wages, and used child labor in order to
maximize profit.
• Problems of cultural minorities, unsafe products,
unfair advertising and urban poor problems were
given little if no attention at all.
• Abuses of capitalism are extremely rampant and the
government tolerates these deplorable business
practices.
 Phase Two: Trusteeship Management
(Early 1900s)

• Management was considered both as an instrument

of stockholders and as a trustee for all groups who
contribute to the business enterprise.
• Aside from profit maximization, management’s
concern is also to maintain a fair balance in the
interests of employees, customers, creditors,
stockholders, and the community.
 Phase Three: Quality of Life Management
(1930s)

• Security of basic goods and services was no

longer a principal problem.

• Social and economic problems brought about by

economic growth expanded the concept of social
responsibility of management.
• Society demanded management’s active
participation in helping solve social and
environmental problems in view of vast resources
(funds, manpower, materials, management skills,
and technology) of business.
• Business is expected to contribute to the
improvement of the quality of life, which involves
cultural, social, educational, political factors and
economic security.
Arguments in Support of Corporate Social
Responsibility

1. Long-run self-interest.
• In the long run, business enterprises will benefit from
their own investment by using their resources in reducing or
eliminating social problems. A good social and economic
condition will offer an encouraging environment for
businesses.
2. Business resources

– Business could use their huge resources in the

improvement of societal and environmental
conditions. Some of these business resources are
manpower, funds, materials, management skills
and technology.
3. Viability of business

• As embodied in the deed of a corporation, businesses

are granted powers and privileges by the government
due to their contributions to the economy and
valuable services to society. The government can also
revoke the charter of a business once it fails to meet
social expectations. For this reason, businesses have
to perform their social responsibilities.,
4. Public image

– Charitable, civic and socio-economic projects

are some of the activities where businesses take part.
As they become active with such projects, their public
image is also enhanced. They leave to the society a
very good impression of their corporate image that
attracts more competent recruits and a greater number
of customers.

5. Profit from social problems

– Businesses can turn problems into profits by
being creative and resourceful. An example is recycling
of waste materials into other valuable goods.
The Four Corporate Social
Responsibilities
• Taking it from the Pyramid of Social Responsibility, a four-part
model developed by Archie B. Carroll and published in the
July-August 1991 issue of the Business, Horizons, the
corporate social responsibilities of a business can be
classified into four as can be seen from the next figure.

– 1. Philanthropic Responsibilities - DESIRED of business by

society.
– 2. Ethical Responsibilities – EXPECTED of business by
society.
– 3. Legal Responsibilities – REQUIRED of business by
society.
– 4. Economic Responsibilities – REQUIRED of business by
society.
CSR TODAY
• Today, businesses are missing out if they aren’t participating in CSR. It has
become an integral part of doing business and is increasingly driving
consumer choice. For instance, nearly 90% of consumers would purchase a
product because a company supported an issue they care about, while 75%
would refuse to buy a product if the company had a different stance on an
issue
• CSR is also a big factor in attracting talented employees, as people want to
work for a company that upholds strong values. Further, a comprehensive
CSR program can have the benefits of "increased brand reputation and
credibility, improved risk and supply chain management, cost savings from
efficiency improvements, and increased revenue." Companies are thus
discovering that CSR is not only better for society, but in many cases better
for business as well.
CSR TODAY
• The scope of CSR has also never been wider. Now, companies craft
their CSR programs around the UN’s 17 Sustainable Development
Goals, ranging from gender equality to the protection of ocean life.
CSR is also increasingly related to growing Diversity, Equity, and
Inclusion initiatives, as socially responsible corporations must foster a
welcoming work environment and combat discrimination. While not
every corporation follows CSR principles and those that do are far
from perfect, it is encouraging that businesses are beginning to
recognize the myriad of ways that they affect society and can change
it for the better.
UN’s 17 SDGs