Concepts & Theories Topic 1: Corporate systems & the concepts of ...
Concepts & Theories Topic 1: Corporate systems & the concepts of corporations, corporate social responsibility & stakeholders
Anglo-Saxon VS Continental perspective Stakeholder theory/Friendman’s doctrine VS Shareholder theory Carroll’s Pyramid of CSR: Four part concept Primary Stakeholders& Secondary stakeholders (Clarkson) Social Justice: society gives individuals fair and equal treat w.r.t the benefits of society Accountability Sustainability: meet the needs of the present without comprising the ability of future generations to meet their own needs
Topic 2: Market failure, externalities and the concepts of sustainability and natural capitalism Market failure: “the failure of a more or less idealised system of price-market institutions to sustain ‘desirable’ activities or to stop ‘undesirable’ activities.” (Bator 1958) Causes remedies Asymmetric information • Imperfect knowledge between seller and buyer (seller knows more than buyer) → Buyer faces adverse selection Public goods • Non-exclusive use:non-rivaled – the consumption of the good by one party does not reduce the availability of the good for consumption by others; and • Non-excludable – no one can effectively be excluded from the good. • “free rider problem” – Natural capital Externalities • Negative externalities – An entity’s (individual, firm …) actions produce an adverse effect that makes others (3rd parties) worse off - Lead to overproduction/consumption of man-made goods & services. • Positive externalities – An entity’s (individual, firm ...) actions benefit others. - Lead to underproduction of man-made goods & services. • Market inefficiency – Divergence between private and social costs and benefits. Industrial Capitalism Natural Capitalism stakeholder status? Ecosystems & ecosystem goods and services Topic 3: Forces for change to CSR: liberisation, globalisation, technology & the markets for capital, products and labour Society’s changing expectations: Shell: trust me show me. Demand for transparency Liberisation through privatisation of gov assets (retreat of the state). Leads to increasing power and accountability of TNC’s. align their objective with public. Stakeholder model. Globalisation allows for global influence and integration. Increased media attention and accessibility to information. Technology media attention and accessibility to information Institutional investors SRI screening (+-)/shareholder advocacy/community investing Equator principles banks provide loans only to projects demonstrate CSR Why corp and investors interested in CSR Self-interest: comp advantage affect share price mind map slide 26 Status within industry group: pressure to conform to industry norms Ethics and welfare consideration of the wider community
Topic 4: The business and environmental cases for CSR Business case for CSR 4 prevailing justifications for CSR: moral obligation sustainability license-to-operate reputation All four focus on the tension between business and society business and society are interdependent; need each other; principle of shared value Business case call for prioritising social issues Supporting both communities and business goals competitive advantage points of intersection slide 8-11. looking inside out Corporate philanthropy? Friedman No, P&K if contributions feedback into profits and enhance competitive contexts. Suchman: moral legitimacy doing the right thing based not on judgements as to whether it benefits the evaluator corporate philanthropy used as a legitimisation strategy. Band-aid solution? Free Rider problem: some individuals in a population either consume more than their fair share of a common resource, or pay less than their fair share of the cost of a common resource How to contribute CSP and CFP positive relationship; bidirectional Environmental case for CSR Topic 5: CSR and ‘greenwashing’ and its causes Greenwashing: disinformation disseminated by an organisation so as to present an environmentally responsible public image” Oxford English Dictionary cited in Banerjee Can be about more than environmental issues Concerns ethical aspect of Carroll’s pyramid Normally done in marketing BP & VW Enron: reported profits for 7 years when they were actually making losses Dodge v Ford Motor Co Levels of CSR table slide 13 Solutions to greenwashing: 3rd party assurance: Sarbanes-Oxley Act to increase auditor independence in response to greenwashing from Enron(poor financial reporting) Blanket prescription and isn’t an efficient form of control because it is rigid. Suitable for medium-large enterprises where there is a larger separation of ownership and control. However for small business where ownership and control are usually the same, 3 rd party assurance is not appropriate. GFC In the years prior to GFC managers were earning large compensation stats slide 24 Suddenly went bankrupt Topic 6: The role of government and CSR Sources of regulation: government/private sector/co-regulation Theory of efficient markets markets function best without government intervention Private interest theory of regulation government intervention in a market is taken to promote the public interest, due to market failure to do so. Public interest theory of regulation politicians are self-interested Approaches to gov regulation: command and control, market based, information and education Theory of deterrence: probability of an offender being punished and the severity of the penalty slide 14 Transparent disclosure Regulatory capture slide 15
Anglo-Saxon VS Continental perspective Stakeholder theory/Friendman’s doctrine VS Shareholder theory Carroll’s Pyramid of CSR: Four part concept Primary Stakeholders& Secondary stakeholders (Clarkson) Social Justice: society gives individuals fair and equal treat w.r.t the benefits of society Accountability Sustainability: meet the needs of the present without comprising the ability of future generations to meet their own needs
Topic 2: Market failure, externalities and the concepts of sustainability and natural capitalism Market failure: “the failure of a more or less idealised system of price-market institutions to sustain ‘desirable’ activities or to stop ‘undesirable’ activities.” (Bator 1958) Causes remedies Asymmetric information • Imperfect knowledge between seller and buyer (seller knows more than buyer) → Buyer faces adverse selection Public goods • Non-exclusive use:non-rivaled – the consumption of the good by one party does not reduce the availability of the good for consumption by others; and • Non-excludable – no one can effectively be excluded from the good. • “free rider problem” – Natural capital Externalities • Negative externalities – An entity’s (individual, firm …) actions produce an adverse effect that makes others (3rd parties) worse off - Lead to overproduction/consumption of man-made goods & services. • Positive externalities – An entity’s (individual, firm ...) actions benefit others. - Lead to underproduction of man-made goods & services. • Market inefficiency – Divergence between private and social costs and benefits. Industrial Capitalism Natural Capitalism stakeholder status? Ecosystems & ecosystem goods and services Topic 3: Forces for change to CSR: liberisation, globalisation, technology & the markets for capital, products and labour Society’s changing expectations: Shell: trust me show me. Demand for transparency Liberisation through privatisation of gov assets (retreat of the state). Leads to increasing power and accountability of TNC’s. align their objective with public. Stakeholder model. Globalisation allows for global influence and integration. Increased media attention and accessibility to information. Technology media attention and accessibility to information Institutional investors SRI screening (+-)/shareholder advocacy/community investing Equator principles banks provide loans only to projects demonstrate CSR Why corp and investors interested in CSR Self-interest: comp advantage affect share price mind map slide 26 Status within industry group: pressure to conform to industry norms Ethics and welfare consideration of the wider community
Topic 4: The business and environmental cases for CSR Business case for CSR 4 prevailing justifications for CSR: moral obligation sustainability license-to-operate reputation All four focus on the tension between business and society business and society are interdependent; need each other; principle of shared value Business case call for prioritising social issues Supporting both communities and business goals competitive advantage points of intersection slide 8-11. looking inside out Corporate philanthropy? Friedman No, P&K if contributions feedback into profits and enhance competitive contexts. Suchman: moral legitimacy doing the right thing based not on judgements as to whether it benefits the evaluator corporate philanthropy used as a legitimisation strategy. Band-aid solution? Free Rider problem: some individuals in a population either consume more than their fair share of a common resource, or pay less than their fair share of the cost of a common resource How to contribute CSP and CFP positive relationship; bidirectional Environmental case for CSR Topic 5: CSR and ‘greenwashing’ and its causes Greenwashing: disinformation disseminated by an organisation so as to present an environmentally responsible public image” Oxford English Dictionary cited in Banerjee Can be about more than environmental issues Concerns ethical aspect of Carroll’s pyramid Normally done in marketing BP & VW Enron: reported profits for 7 years when they were actually making losses Dodge v Ford Motor Co Levels of CSR table slide 13 Solutions to greenwashing: 3rd party assurance: Sarbanes-Oxley Act to increase auditor independence in response to greenwashing from Enron(poor financial reporting) Blanket prescription and isn’t an efficient form of control because it is rigid. Suitable for medium-large enterprises where there is a larger separation of ownership and control. However for small business where ownership and control are usually the same, 3 rd party assurance is not appropriate. GFC In the years prior to GFC managers were earning large compensation stats slide 24 Suddenly went bankrupt Topic 6: The role of government and CSR Sources of regulation: government/private sector/co-regulation Theory of efficient markets markets function best without government intervention Private interest theory of regulation government intervention in a market is taken to promote the public interest, due to market failure to do so. Public interest theory of regulation politicians are self-interested Approaches to gov regulation: command and control, market based, information and education Theory of deterrence: probability of an offender being punished and the severity of the penalty slide 14 Transparent disclosure Regulatory capture slide 15
