INTRODUCTION TO BUSINESS MANAGEMENT
CHAPTER 5: CORPARATE SOCIAL RESPONSIBILITY:
Companies have a responsibility for their impact on society’s and the natural environment.
This responsibility may extend beyond legal compliance and the liability of individuals.
Companies have a responsibility for the behaviour of other with whom they do business.
Companies need to manage their relationship with wider society, whether for reasons of commercial viability
or to add value to society.
The Kings III Report: Provides a broader definition of corporations: ‘Corporate responsibility is the responsibility of
the company for the impacts of its decisions and activities on society and the environment, through transparent
and ethical behaviour that:
• Contributes to sustainable development, including health and the welfare of society.
• Takes into account the legitimate interest and expectations of stakeholders.
• Is in compliance with applicable law and consistent with international norms of behaviour.
• Is integrated throughout the company and practised in its relationship.
Corporate citizenship and corporate social investment:
‘Corporate Citizenship’ recognises corporation as legal persons with certain rights and responsibilities in the
same way as individual citizens have right and responsibilities as members of a community.
The Triple Bottom Line: A company’s ultimate success or health can, and should, be measured against its
financial bottom line as well as its social/ethical and environmental performance.
• The TBL advocates that a company’s ultimate worth should be measured in financial, social and
environmental terms.
• The TBL metaphor has been adopted as an accounting framework to which many companies subscribe.
• This framework incorporates three dimensions of performance, namely social, environmental and
financial.
• People, Planet, Profit.
CSR in contemporary business management: CSR is expanded to develop more nuanced arguments
concerning issues such as corporate social performance, sustainability, stakeholder’s theory and business
ethics.
Social drivers: Some consumers prefer socially responsible products and services, and employees increasingly
choose to work for companies with a reputation for being socially responsible.
Government drivers: Most governments enforce local and national legal systems with which companies have
to comply in order to operate in that country.
Market drivers: CSR does not only represent cost for companies. It can also result in various advantages such
as deducted costs or increased revenues.
, Companies can reduce cost through CSR by:
• Avoiding fines
• Avoiding legal costs
• Using resources efficiently
• Using alternative raw materials sources, such as recycled materials
• Reducing recruiting costs
• Increasing staff retention
• Reducing the cost of capitals.
Companies can also increase revenue through CSR by:
• Developing new products/services
• Growing market for services through general programmes such as job creation and social development,
or more specific interventions such as bridging the digital divide.
• Improving access to markets
• Avoiding boycotts
• Exploiting the CSE premium – consumers prefer to buy products and services from companies that are
socially responsible.
Ethical drivers: Generally speaking, ethics is about deciding between right and wrong conduct. Business ethics
is a subset of ethics that focuses on deciding between rights and wrong in the workplace and the business
generally.
Corporate Governance:
‘Governance’ = steer
• Good governance is thus essentially about effective leadership. Characterised by the ethical values of
responsibility, accountability, fairness and transparency.
• Leaders to direct company strategies and operations with a view to achieve sustainable economics, social
and environmental performance.
• Corporate governance = the system by which companies are managed and controlled. It is also referring
to the relationship between those who govern and those who are governed.
• Roles and Responsibility of boards within a company in terms of good governance: The board of
directors is a group of people assembled to lead and control the company so that is functions in the
best interest of its shareholders.
• Primary principal of good governance: The King II Report provides seven primary principles:
1. Discipline: Senior management’s commitment to adhering to behaviour that is universally
recognised.
2. Transparency: How good management is at making information available that a company’s
actions, economic fundamentals and non-financial aspects pertinent to the company’s business.
3. Independence: The extent to which mechanisms have been implemented to minimise or avoid
potential conflict of interest.
4. Accountability: Mechanisms must exist and be effective to allow for the allocation of
accountability to decision-makers. Investors should also be provided with the means to query
and assess the actions of the board and its committees.
5. Responsibility: Board members must act responsibility towards all stakeholders and
management should allow for corrective action.
6. Fairness: All systems within the company must be balanced in considering and respecting the
rights of various groups and their competing interest.
7. Social Responsibility: A well-managed company will be aware of, and respond to, social issues
while placing a high priority on ethical standards.
CHAPTER 5: CORPARATE SOCIAL RESPONSIBILITY:
Companies have a responsibility for their impact on society’s and the natural environment.
This responsibility may extend beyond legal compliance and the liability of individuals.
Companies have a responsibility for the behaviour of other with whom they do business.
Companies need to manage their relationship with wider society, whether for reasons of commercial viability
or to add value to society.
The Kings III Report: Provides a broader definition of corporations: ‘Corporate responsibility is the responsibility of
the company for the impacts of its decisions and activities on society and the environment, through transparent
and ethical behaviour that:
• Contributes to sustainable development, including health and the welfare of society.
• Takes into account the legitimate interest and expectations of stakeholders.
• Is in compliance with applicable law and consistent with international norms of behaviour.
• Is integrated throughout the company and practised in its relationship.
Corporate citizenship and corporate social investment:
‘Corporate Citizenship’ recognises corporation as legal persons with certain rights and responsibilities in the
same way as individual citizens have right and responsibilities as members of a community.
The Triple Bottom Line: A company’s ultimate success or health can, and should, be measured against its
financial bottom line as well as its social/ethical and environmental performance.
• The TBL advocates that a company’s ultimate worth should be measured in financial, social and
environmental terms.
• The TBL metaphor has been adopted as an accounting framework to which many companies subscribe.
• This framework incorporates three dimensions of performance, namely social, environmental and
financial.
• People, Planet, Profit.
CSR in contemporary business management: CSR is expanded to develop more nuanced arguments
concerning issues such as corporate social performance, sustainability, stakeholder’s theory and business
ethics.
Social drivers: Some consumers prefer socially responsible products and services, and employees increasingly
choose to work for companies with a reputation for being socially responsible.
Government drivers: Most governments enforce local and national legal systems with which companies have
to comply in order to operate in that country.
Market drivers: CSR does not only represent cost for companies. It can also result in various advantages such
as deducted costs or increased revenues.
, Companies can reduce cost through CSR by:
• Avoiding fines
• Avoiding legal costs
• Using resources efficiently
• Using alternative raw materials sources, such as recycled materials
• Reducing recruiting costs
• Increasing staff retention
• Reducing the cost of capitals.
Companies can also increase revenue through CSR by:
• Developing new products/services
• Growing market for services through general programmes such as job creation and social development,
or more specific interventions such as bridging the digital divide.
• Improving access to markets
• Avoiding boycotts
• Exploiting the CSE premium – consumers prefer to buy products and services from companies that are
socially responsible.
Ethical drivers: Generally speaking, ethics is about deciding between right and wrong conduct. Business ethics
is a subset of ethics that focuses on deciding between rights and wrong in the workplace and the business
generally.
Corporate Governance:
‘Governance’ = steer
• Good governance is thus essentially about effective leadership. Characterised by the ethical values of
responsibility, accountability, fairness and transparency.
• Leaders to direct company strategies and operations with a view to achieve sustainable economics, social
and environmental performance.
• Corporate governance = the system by which companies are managed and controlled. It is also referring
to the relationship between those who govern and those who are governed.
• Roles and Responsibility of boards within a company in terms of good governance: The board of
directors is a group of people assembled to lead and control the company so that is functions in the
best interest of its shareholders.
• Primary principal of good governance: The King II Report provides seven primary principles:
1. Discipline: Senior management’s commitment to adhering to behaviour that is universally
recognised.
2. Transparency: How good management is at making information available that a company’s
actions, economic fundamentals and non-financial aspects pertinent to the company’s business.
3. Independence: The extent to which mechanisms have been implemented to minimise or avoid
potential conflict of interest.
4. Accountability: Mechanisms must exist and be effective to allow for the allocation of
accountability to decision-makers. Investors should also be provided with the means to query
and assess the actions of the board and its committees.
5. Responsibility: Board members must act responsibility towards all stakeholders and
management should allow for corrective action.
6. Fairness: All systems within the company must be balanced in considering and respecting the
rights of various groups and their competing interest.
7. Social Responsibility: A well-managed company will be aware of, and respond to, social issues
while placing a high priority on ethical standards.
