Week 1

Introduction to CSR: defining

CSR contested terrain

General Motors - Malibu

Fire risk from fuel tank explosion

Risk known since engineers 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.

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?

Social context
Political context
Economic context

The case of Enron

Collapsed 2002
Audit failure Andersons collapsed
Accounting irregularities
Fraud
Employees and shareholders loss

Bhopal, India

1984
Worst pollution episode in history
Union Carbide chemical plant
100s dead, 1000s injured
Pollution of water etc still present
No compensation paid to date

The case of BCCI

Bank of Credit & Commerce International

closed down in July 1991
1.4 million depositors
Losses > $10billion
Fraud
Audit failure

Oil pollution

Torrey Canyon, 1969

Amoco Cadiz, 1993
The Prestige, 2003
Alaska
Siberia
Nigeria

Why did it go wrong?

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