Chapter 3

 Chapter 3 – Corporate Social Responsibility

(CSR) & Citizenship
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 1. Principles of business ethics are same;

ONLY examples where we could think off, we’ll
try to see their practices and applications to
companies in in current context and
situations.

2. Advisable to read and understand the text

first because it’s explanation is more detail.
The slides summaries the text.
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 In capitalism, increase in wealth through means such as
profiteering, dominance, manipulation, exploitation,
monopolistic, is non-issue. That’s capitalist economy

However, in Islamic ways of doing business, the pursuit

of profits is NOT sole purpose or function of business. That
attitude of business is also oriented to helping others. All
wealth belongs to Allah s.w.t, and that man is only
appointed as trustee to use resources collectively for the
good of mankind, and responsible towards communities
and other stakeholders including the society.
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 In today's highly competitive economy,

organizations are expected to not only focus on
making profits but also to be fair, aware of their
responsibilities and contribute actively to the
public good (the society).

 The concepts of social and distributive justice

will help businesses fulfill their social
responsibilities ethically.
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 Distributive justice refers to fair distribution of
society's benefits and burdens. The key word is
"equal". In distributive justice, equality means
treating anything that is equal, equally, and the
unequal is treated unequally.
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 Corporate power is the capability
of corporations to influence and
make contributions to government,
the economy, and society, based on
their organizational resources.
The corporations with the power
have resources to make substantial
contributions to political campaigns
thus influencing the policies of
government
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 They dominate not only traditional domains of
product manufacture and services; but also
increasingly reach into public sector activities as
education, law enforcement, and provision of
social services.
 Corporate power can also harm society
 Disproportionately influence politics, shapes
tastes, dominate public discourse.
 Move production from one site to another,
weakening communities. Can use economic
power to collude to fix prices, divide markets,
quash competition negatively affect consumer
choices, employment opportunities
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 Business have power to influence many aspects of
society.
The “Iron law of responsibility” – in the long run
those who do not use power in ways that society
considers responsible, will tend to lose it
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 Corporate Social Responsibility- corporation
should act in a way that enhances society,
and its inhabitants, and be accountable for
any of its actions that affect people, their
communities, and their environment.
Responsibility = “to pledge back” creating
a commitment to give back to society and
the organization’s stakeholders.
 “Responsibility” implies that harm to people
and society should be acknowledged and
corrected if at all possible.
 It may require a company to forgo some
profits if its social impacts seriously hurt
some of its stakeholders
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 Corporate Social Responsibility implies…
 These responsibilities (CSR) at times, in tension,
competing with other objectives; at other times,
they blend together to better the firm and make
the organization more profitable.
 Philanthropic organizations believe businesses
have a responsibility to society that go beyond
just profit-making.
 A vision of an integrated => Financial &
voluntarily broad social performance
Principles of good Corporate Citizenship:
Engage in genuine dialogue with stakeholders.
“Proactive” address their concerns
Principles of good Corporate Citizenship:
Respect rights of consumers
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 As these early ideas about roles of business
have expanded, and how they have gained
influences, phases of CSR have evolved.
 1. Early 20th century. Charity = the wealthiest
numbers of society should provide charitable
means toward those less fortunate. For
company’s image
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 2. 60s-70s. Corporate Social Responsiveness.
For mere regulatory compliance.
 When there is likelihood of social impact, unrest
or protest.
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 3. 80s-90s Corporate or Business Ethics.
Companies started to encourage a culture of
ethical responsibility.
Human rights pressures
Companies recognize common ethical principles
built from religious and ethnic beliefs
Companies started to have Mission, Vision and
Value statements
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 4. 90s to present. Corporate / Global
Citizenship.
 Integrating financial, social and environmental
performance.
 Sustainability of company and environment.
 Geopolitical shifts/ competitions. The balance
of power in the global economy is shifting. For
half a century the US has been the world’s
biggest superpower. But China has been
catching up fast and it is now, by some
measurements, the largest economy on earth.
Evolution of CSR
 Stewardship => Strategic responsiveness
=> ethic-based in culture called Corporate
Citizenship.
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 The believe that the business of business is
SOLELY to stockholders’ return on investment
and make profit is no longer widely held.
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 Enlightened self-interest. It isn’t charity but a
new way of doing business.
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 The CSR debate, for and against; 1) For
 Balance corporate power and responsibility
 Voluntary socially responsible actions head-off
increased Govt. regulations of business.
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 Promotes long-term profits for business
 Corrects social problems caused by business
 Improves business value and reputation
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 Against CSR:
 Lowers economic efficiency and profits
 Imposes unequal costs among competitors.
Imposes greater cost on more responsible
companies, thus competitive disadvantage
 Impose hidden costs passed on to stakeholders

 Requires skills business may lack

Principles of good corporate citizenship:
Engage in genuine dialogue with
stakeholders
Principles of good corporate citizenship:
Respect rights of consumer