CU_SEM_III_MCOM-CSR-Second draft-converted

fair business and principles, norms and regulations which are mainly results of increasing competition. On one hand globalization has provides companies to succeed in to larger consumer base and provided opportunities for collaboration with other companies but it's also true that it's led imperfect competition of massive companies (in terms of turnover, market capitalisation and assets) with small and medium size companies. Well regulated and controlled markets aren't an enormous problem and treat, but lack of regulation and norms is what creates main problem especially in developing countries as globalization has huge influence in these economies. The relationship between business and society remains a sophisticated process and CSR implementation becomes one among important issues in globalized economies and markets. CSR provides the specified rules for determination of relationship between corporation and society. Thus, CSR isn't merely a process but an extended term strategic approach by companies that require adopting socially responsible behaviour with the choice makers enforcing the principal guidelines of CSR within the company. The future perspective to CSR helps company earn benefits concerning profits also as stakeholder interests in company. Studies and researches have shown relationship between CSR and company financial performance also existence of slack resources resulting from better financial performance made when companies invest in areas that are associated with social actions. It’s also been found that good management practices resulting from engagement in social actions enhance relationship with stakeholders adding to financial performance. The buying behaviour of consumers in globalized world is additionally influenced by social behaviour of companies and hence CSR provides some opportunities to company to realize visibility within the eyes of consumers. Consumers want the corporate, they are related to, to behave properly with its suppliers and their suppliers to treat the labourers fairly, albeit consumers are in far distant countries. Any unethical behaviour company comes into notice of consumers which adversely affects the sales of the respective company. Therefore, from this aspect globalization features a multi dimensional effect concerning socially responsible behaviour. Good or bad behaviour is definitely visible round the world with the advancement in technology and every one stakeholders of a corporation are going to be aware. a corporation are going to be affect with this fact both

ways, good behaviour will affect positively but unethical behaviour will undoubtedly have negative effect. Thus, proper socially accepted behaviour is that the only way companies can survive. To summarize, a firm has investment in reputation also and hence increase in perceived social responsibility improves the image and permits it to exchange costly explicit claims for fewer costly implicit charges. Contrary to the present, decline during this image leads to increase in costly explicit claims. 6.5 GLOBALIZATION AND SETBACK OF SOCIAL RESPONSIBILITY OF CORPORATE Globalization is a ‘complex, accelerating, integrating process of global connectivity’ and therefore MNCs would always have to be alert to the demands of the values and norms of their home and host country. Thus, the prerequisite for any organization, small or big, that is operating in the global arena is to capture the new and upcoming global CSR practices, so it is responsive to diverse cultures, norms, values and communication practices. This challenge of integrating global and local practices id further highlighted by Chaudhari (2006, p. 41), who explains that both global and local concerns are likely to determine sectors within the multinational ‘business model, global citizenship mission / vision, scope of operation and availability of monetary and non-monetary resources. This trend of combining the local and global components of business is termed as globalization and related to global or international business practices having the ability to target the local consumers or markets. MNCs have to use multiple formats to influence and push the local people to identify with their cultural or national backgrounds through global products or services a company offers. The challenge is to earn goodwill in the local community because very often MNCs are looked upon the suspicion because of their overwhelming capacity to influence the political, social, and economic fabric of a country. To address these factors, MNCs are using various means to promote social interaction and work towards a sustainable future. With the spread and penetration of Information Technology (IT), organizations are increasingly using the internet to publicize their CSR activities. According to Chapple and Moon (2005), companies functioning internationally are more likely to report their CSR practices than those only functionally domestically. Today’s businesses face multiple challenges in terms of corporate responsibility. Businesses need to continue with the new initiatives on a good range of

fronts like voluntary, regulatory, stakeholders, partnerships, etc. Convincing and significant indicators of how companies are contributing to the standard of life and the way they're implementing corporate responsibility are often challenging, said Kennedy. These challenges are happening at an equivalent time the concept of corporate responsibility is developing in several different directions. One single definition or understanding will not be sufficient to meet the numerous needs given the number of circumstances the business operates in. Having multiple approaches is thus healthy and advisable. Businesses should come forward and talk about the way forward and its deliverables and also need to be watchful of various codes of conduct and guidelines of the MDGs and the World Summit for Sustainable Development for the enabling frameworks for corporate responsibility at the international level. In developing countries like India, the major hindrance is that majority of the companies be deficient in fulfilling the CSR. There are certain challenges that have been enumerated as reasons for the same: Community participation Community participation is lacking in the CSR activities as it is observed that the communities that are going to get advantaged have less interest as and when the initiative is being taken by any company or organization Own benefit: Generally corporate sector in India works for CSR only to save the taxes which are being levied by government on them because it has been noticed that the funds that corporates will raise for the CSR activity will be categorized as tax free, so many corporates work on this premise. Capacity building: Many companies do not have skilled manpower and technical knowhow to develop effective CSR technique. This is required in terms to develop effective CSR policies and methods. The expenditure that has been made on CSR is directly linked to the CSR policies which are being formulated. Corporate social responsibility not only a concept: Corporate sector should understand that CSR is not just a concept that they have to follow and contribute monetarily or in similar other ways, rather it should include social,

environmental and economic factors and corporates need to check out it from the philanthropic point of view. CSR review: The policies which are being formulated and implemented must be evaluated in order to attain the desired result. The organization that has invested on CSR activity must analyze the impact of a specific CSR activity on the society or the targeted section. But in India the scenario is opaque. Companies spend money on CSR activities just for personal gains and publicity. The long-term benefits of CSR are not taken into account. Issue of transparency: There is no governing body to check as to how much amount has been spent on CSR activities. Hence, no regulation, of any sort is available or lined. Suggestions Companies can take up various issues happening within the society and work thereon under CSR. Ideally, the businesses shouldn't and can't work on CSR activities alone, if cooperation and contribution from employees is absent. Stakeholders should be encouraged to contribute within the promotion of CSR activities. Conferences, seminars, workshops and training sessions should be conducted by various companies so as to spread knowledge and awareness during this sector. It is also important to review the prevailing policies which are being laid by various companies and implementation must even be put therein way in order that the specified result could be achieved. Development of latest civil society organizations with a social purpose is named for. Such organizations are going to be dependent totally on corporate instead of donor money, and be focused on particular issues, like sanitation, clean water, child and maternal health then on. Law makers have a responsibility to create the enabling conditions for such organizations to form and thrive, which draws us to our last point. The CSR clause within the Indian Companies Bill is exclusive, and therefore the first for an enormous economy. Critics might see it as a 2 percent tax, but which will be the case as long as we miss this golden opportunity to line a replacement model for a way business can make a true contribution to society's critical problems Conclusions

Corporate Social Responsibility is an emerging activity which is at the initial stage and can grow more within the coming times. Companies Bill which may be a good initiative by the govt of India for various companies to allocate certain allow this activity but it's unclear that what proportion amount has to be spent on this activity. On the international front, CSR has been accepted as a crucial concept for image building and for the successful conduction of the business. But in India, it has to be taken up on a more serious note than a mere tax benefiting activity. The amount projected to be spent on CSR activities should be fixed by government. Social and environmental development programmes must be haunted by various companies as a neighbourhood of this activity. 6.6 SUMMARY • If we analyze the three words in CSR, i.e., corporate, social and responsibility, it would be easier for us to evaluate whether a common CSR formula can be created. • Globalization is one among the foremost cited catchwords of our time and is employed to explain a process of social change on the macro level of societies. • Many companies consider moral and ethical activities articulating the problems of customers and stakeholders, interests and increase the investment within the projects of CSR. • Globalization has brought the whole world under single roof. The countries are expanding. The companies are transforming, the technologies are being developed from host countries, the information is being shared among various countries, economies and continents. Globalization has enabled human resource mobility and foreign direct investment is attracted from developed countries to less developed countries. • Under the influence of globalization, economic liberalization, international cooperation between different countries and the previous aspects, such as the transformation of technologies and others, considerable countries have experienced the benefits from globalization. • For corporates that are multinational, globalization brings more than just opportunities and benefits by making these multinationals adapt to the changing environment and accept the unprecedented challenges in the global level, industrial level and other levels.

• The worldwide competition and consumers’ and shareholders’ perception make the firms recognize and rethink corporate social responsibility and deciding process concerning environmental, social and ethical issues. • The relationship between business and society remains a sophisticated process and CSR implementation becomes one among important issues in globalized economies and markets. CSR provides the specified rules for determination of relationship between corporation and society. • MNCs have to use multiple formats to influence and push the local people to identify with their cultural or national backgrounds through global products or services a company offers. • The challenge is to earn goodwill in the local community because very often MNCs are looked upon the suspicion because of their overwhelming capacity to influence the political, social, and economic fabric of a country. • Corporate Social Responsibility is an emerging activity which is at the initial stage and can grow more within the coming times. 6.7 KEYWORDS / ABBREVATIONS • Economies of scale: Cost advantages that a business obtains by expanding the size of facilities and usage increase of other inputs. • Economies of scope: The total cost of production decreases as a result of increasing the number of differentiated goods produced. • Horizontal combination: Merging with competitors in the same market. • Infrastructure: Basic physical and organizational structures needed for operation of a society or enterprise. • Multinationals: Companies that have operations in the countries outside their home country. 6.8 LEARNING ACTIVITY 1. Why was UK one of the first countries to introduce codes promoting CSR? ________________________________________________________________ ________________________________________________________________

2. Choose any oil-exploring or mining company and trace the CSR record of the company. ________________________________________________________________ ________________________________________________________________ 6.9 UNIT END QUESTIONS Descriptive Questions (Long Answers) 1. Why is it necessary to understand global perspective of CSR? 2. How globalization can be an opportunity and a threat also to business? 3. Briefly trace the history of CSR in a developed and a developing country and compare them 4. Do you think in practising CSR, multinational corporations face a bigger challenge than domestic corporations? 5. Create a multi-dimensional approach that would create the appropriate environment for CSR practices. Descriptive Questions (Short answers) 1. Why is it necessary to understand global perspective of CSR? 2. Explain the concept of globalization? 3. Is globalization a threat to CSR? 4. How does economic development impact CSR activities in a country? 5. What are the challenges in implementing CSR in India? B. Multiple Choice Questions 1. Characteristics of organizational culture include all but which one of the following? a. a. Common language, terminology and norms of behavior b. Policies of Sustainability c. Preference for formal or informal communication d. List of do’s and don’ts for employees 2. The corporate governance structure of a company reflects the individual companies a. Cultural & economic system b. Legal & business system

c. Social& regulatory system d. All of these 3. ------ may be defined as the enhancement of long-term shareholders while at the same time protecting the interests of other stakeholders. a. Business ethics b. CSR c. Cultural relativism d. Corporate governance 4. Which of the following is/are feature of corporate governance? a. Non- universality b. Accountability c. Ambiguity d. None of these 5. Corporate governance is a …………… approach. a. Top-down b. Bottom-up c. Hybrid d. Scientific Answers: 1-a, 2-d, 3-d, 4-b, 5-a 6.10 REFERENCES Reference books • Agle, B. R., Mitchell, R. K., and Sonnenfeld, J. A. (1999). Who Matters to CEOs? An Investigation of Stakeholder Attributes and Salience, Corporate Performance, and CEO Values. Academy of Management Journal, 42: 507-525.

• Aupperle, K. E., Carroll, A. B., and Hartfield, J. D. (1985). An Empirical Examination of the Relationship Between Corporate Social Responsibility and Profitability. Academy of Management Journal, 28: 446-463. • Avi-Yonah, R. S. (2003). National Regulation of Multinational Enterprises: An Essay on Comity, Extraterritoriality, and Harmonization. Columbia Journal of Transnational Law, 42: 5-34. • Barber, B. (2000). Can Democracy Survive Globalization? Government and Opposition, 3: 275-301. • Baumhart, R. C. (1961). How Ethical are Businessmen? Harvard Business Review, 39 (4): 6- 12, 16, 19, 156-176. • Baumol, W. J. with S. A. B. Blackman (1991). Perfect Markets and Easy Virtue: Business Ethics and the Invisible Hand. Cambridge, Mass.: Blackwell. • Beaver, W. (2005). Battling Wal Mart: How Communities Can Respond. Business and Society Review, 110 (2): 159-169 • Beck, U. (1992). Risk Society. Towards a New Modernity. London: Sage. • Beck, U. (1999). World Risk Society. Cambridge, UK: Polity Press. • Beck, U. (2000). What is Globalization? Cambridge, UK: Polity Press. • Beck, U., Giddens, A., and Lash, S. (1995). Reflexive Modernization. Stanford: Stanford University Press TEXT BOOKS 1. Business Ethics and Corporate Social Responsibility by Michael Vas and Aurora Vaz. 2. Corporate Social Responsibility by Madhumita Chatterjee.

UNIT – 7 : SOCIAL RESPONSIBILITY AND LEADERSHIP Structure 7.0 Learning Objectives 7.1 Introduction 7.2 Concept of leadership 7.2.1 CSR and role of leadership 7.3 Styles of leadership 7.4 Summary 7.5 Keywords/Abbreviations 7.6 Learning Activity 7.7 Unit End Questions 7.8 References 7.0 LEARNING OBJECTIVES After this unit you will be able to • Examine Corporate Social Responsibility from a multi-pronged view, considering the interests of the various stakeholders involved, and particularly how a solid base of leadership is core to the successful implementation of Corporate Social Responsibility in contemporary organizations • Understand different styles of leadership and the impact on CSR activities of the company 7.1 INTRODUCTION Effective societal interface management requires effective leadership. Leadership refers to the trade-off between more or less managerial control and therefore the ability of people

to influence a gaggle to understand a given objective. Leadership distinguishes itself from ‘normal management’ on several essential points. Whereas managers attempt to make sure that people do things, leaders make sure that people want to try to to things. Most leaders are good managers, but good managers aren't always good leaders. The styles of leadership have progressed from autocratic to democratic, consultative, motivating, participative leaders or a more permissive style characterized as laissez-fair. At the instant more moral and visionary leadership styles seem to prevail, which is a sign of the growing attention of leaders towards the difficulty of (corporate) social responsibilities. Ethical leaders look to the danger management aspects of corporate social responsibility together of their main priorities. Managing risk is all about keeping the company's reputation and monetary health in restraint. The old saying that it takes years to create a reputation and mere hours to destroy it's more-or-less an accurate way of brooding about risk management and CSR. Ethical practices like responsible accounting, staving off negative media attention, keeping the corporate and its leaders out of legal trouble and honouring contracts help build a real culture of risk aversion and moreover promote a socially responsible organization. 7.2 CONCEPT OF LEADERSHIP Nowadays, organizations face economic, social and environmental challenges: globalization, economic recession, increase (overpopulation), exploitation of natural resources, extreme poverty (rich-poor gap), unprecedented inequality, global migration, religious extremism and terrorism, geopolitical and ecological crises, global warming and its effect on climate change, environmental issues, competitive pressure, health issues, new information and communication technologies, sustainable lifestyle and so on. In this context, taking under consideration of these complex challenges, sustainable development and social responsibility are very “hot” topics. In the age of sustainable development, there's a requirement for “a holistic framework, during which society aims for economic, social, and environmental goals”. The challenge for the companies is to incorporate ethical, social and environmental values in their business practice. “A firm takes on a clear role within the society which matches beyond the core business and beyond what the law requires and which results

in added value for the company and the society”. Business ethics has been on the top list of growing interests among the corporates. Leadership plays a very important role in implementation of CSR in these companies, Today, leaders have many challenges to face like economic, social and environmental. The changes in technology are so rapid that it has forced the leaders to seek creative and innovative solutions to deal with multiple stakeholders. The stakeholders may have varying interests, needs and requirements. The achievement of these may lead to conflict situation. Unfortunately, today’s belief in business is low. On account of growing complexities, uncertainty and environment of ambiguity, the global environment has become complex, leaders should foresee the changes and act as catalysts for shifting their organizations towards a sustainable society. Taking into account not only the economic, but also the environmental and social challenges of the 21st century, a new type of leadership that promotes the CSR’s ideals is needed. 7.2.1 CSR and the role of leadership Effective governance and leadership are vital if companies are to integrate sustainability into their operations. Right leadership, which believes in sustainability is the principal contributor to business growth in the future. 1. The strength of commitment and leadership qualities of the CEO determines the directional growth of an organization. It is imperative for the CEO to be an individual who believes that the proper thing to try to

to is sweet for his business. The rest of the team are likely to pursue a sustainable path if the right guidance is provided to them by a pacesetter with a sound moral conviction. Being part of a team, which is taking a sustainable path will be a source of great satisfaction to many. The CEO has a significant role to play in ensuring that the management structures and governance processes are in place and the leadership styles of the executive team are conducive to integrating sustainability in all their business activities. 2. The impact of understanding by the Board of the relevance of sustainability concerning strategy and risk. The Board sets the strategic direction of a company. If the Board doesn’t recognize the importance of staff, customers, communities or dangers related to the restrictions of natural resources and therefore the impact of polluting the environment, change is going to be limited. The understanding of the impact of the business model, its strategy and risk associated with its operations on the environment and society at large is crucial to the sustainable growth of the business in the long-term. Success Board diversity (not only gender diversity) becomes vital in ensuring that the Board is fit to drive change towards a sustainable business. Research has shown that ladies on boards increase the social and environmental sustainability focus alongside profits. Similarly, a boardroom filled with accountants mentioned to believe financial returns in particular else, with little or no sustainability expertise, is hardly likely to grasp the relevance of sustainability performance to overall business performance. 3. A strong leadership team with diverse skills is the key to attaining sustainable development: Many challenges need to be overcome by a committed leader. Some of them are as follows: • Solving sustainability problems requires working across functions. Sustainability can only happen if the senior team have collaborative leadership styles. Organisations with clear functional boundaries and hierarchical structures may not have the desired degree of cross- functional and informal communication channels needed to make sustainability change work. • To develop engagement process of stakeholders to recognize material concerns and risk • To get KPIs (key performance indicators) approved and targets and integrate sustainability into plans. • Need to persuade the decision makers to incorporate sustainability in the day-to-day operations of the business. Help will be required from the finance team to develop a business

case for sustainability initiatives. • The encountering of lethargy and conflict stemming from lack of know-how and already full workloads. In such circumstances, people concentrate on their job description where they are being assessed. Support and leadership from the Human Resources team are going to be needed to urge sustainability incorporated into job descriptions and performance review practices. CSR must be infused into everything and not be a stand-alone discipline. We need corporate leaders to show the kind of leadership that CSR embodies. Not only because it confers practical benefits, but because it’s the proper thing to try. A thorough implementation of CSR bring several competitive benefits increased reach to capital and markets, augmented sales and profits, functional expenditure savings, enhanced efficiency and quality, competent human resource base, enhanced brand image and reputation, improved customer loyalty, better deciding, and risk management processes. Businesses need to evolve such that sustainability becomes an integral part of their growth strategy. If not, economies will crumble thanks to over utilization of resources. 7.3 STYLES OF LEADERSHIP Figure 7.1: Role of an effective leader to incorporate CSR Executive payment scandals with both business and civil society leaders, kleptocratic behaviour with state leaders, they all have put the question of ‘appropriate leadership’ on top of the political and research agenda. Do leaders offer ‘value for money’? The definition of

‘appropriate’, however, is far from undisputed, but it is increasingly clear that this question has to be related to the issue of corporate responsibilities. ‘Transactional’ and ‘team’ leaders Transactional and ‘team’ leaders are predominantly superior at specifying in-active and re- active CSR goals, describing roles and responsibilities and appealing their followers or subordinates to achieve group or organisational goals. These leaders exhibit a strong resemblance to ‘ordinary’ managers, focusing largely on the internal operations of the firm. Transactional leadership is by character are primarily competence oriented and these leaders will be mainly be interested in Corporate Self-Interest. Charismatic ‘Charismatic’ leaders still spotlight primarily on internal operations of the organization; they also exhibit a capability to present a vision of the future of the organization in grouping with a strong personal commitment and a strong character. Charismatic leaders plead strongly to the idea of ‘trust me’ in their relationship towards employees. But because charismatic leaders mainly lead because of a number of personal traits, it is difficult to follow their example. Charismatic leaders show immense responsiveness to the needs of staff in case of employees and to the society in the case of CSR Visionary and Moral Leadership “Visionary” and “Moral” leadership is considered by a more active stand on CSR. Both need an idea/vision of where the organization should be in the future. Moral leaders obtain their authenticity in particular from ethical principles on which their vision is based. Both types of leadership focus on communicating their vision to stakeholders inside as well as outside the firm. Visionary and Moral leaders are powerfully ambition oriented. They lack the practical orientation to link goals and vision to implementation. Corporate Social Responsibility could boil down to unclear mission statements without much value to the own employees Transformational Leadership Transformational leadership is the most external oriented type of leadership and concentrating at formulating and executing a new organizational vision that is entrenched in a broader

vision of society and the active involvement of external stakeholders. The effectiveness of the actions of the transformational leaders is their main key. Leadership and CSR performance The relationship between leadership and Corporate Social Performance (CSP) has become an significant topic of research in the area of leadership studies. Corporate social responsibility requires Corporate Social Leadership (Hilton, Gibbons, 2002). The said research is yet in its formative years. In the attempt to link top management (characteristics) with some form of CSP, three streams of analysis has developed: values, personal characteristics and compensation levels. Studies that focused on values disclose a strong link between social responsiveness and conservative values. Recent research examined the relationship between levels of CEO compensation and CSP, but could not find any positive correlation. Other studies found evidence of a upturned correlation: high CEO salaries related to relatively poor social performance. Studies have been conducted that examine the professional background of leaders and it relation to CSP. In cases where executives with experience in environmental management had been recruited, CSP improved. Most of these studies concentrated primarily on the Anglo-Saxon context (US firms, US CSP indices). This makes it difficult to land at general conclusions. The link between leadership characteristics, CSP and CFP still needs to be thoroughly researched before any general claims can be made. 7.4 SUMMARY • Effective societal interface management requires effective leadership. Leadership refers to the trade-off between more or less managerial control and the ability of individuals to influence a group to realize a given objective. • The styles of leadership have progressed from autocratic to democratic, consultative, motivating, participative leaders or a more permissive style characterized as laissez-fair. • Ethical leaders look to the danger management aspects of corporate social responsibility together of their main priorities • Leadership and Corporate Social Responsibility (CSR) are some of the most widely studied topics, generating an extensive literature.

• In the growing complexities in modern businesses, where there is a lot of ambiguity and uncertainty involved, the leaders are supposed to foresee the changes and act as a medium for changing their organizations towards a sustainable society. • Effective governance and leadership are vital if companies are to integrate sustainability into their operations. Right leadership, which believes in sustainability, is the principal contributor to business growth in the future. • Transactional and ‘team’ leaders are particularly good at specifying in-active and re- active CSR goals, clarifying roles and responsibilities and motivating their followers or subordinates to achieve group or organizational goals • ‘Charismatic’ leaders still focus primarily on internal operations of the organization; they also display an ability to present a vision of the future of the organization in combination with a strong personal commitment and a strong character. • “Visionary” and “Moral” leadership is considered by a more active stand on CSR • Moral leaders obtain their authenticity in particular from ethical principles on which their vision is based. Both types of leadership focus on communicating their vision to stakeholders inside as well as outside the firm. Visionary and Moral leaders are powerfully ambition oriented. • Transformational leadership is the most external oriented type of leadership and concentrating at formulating and executing a new organizational vision that is entrenched in a broader vision of society and the active involvement of external stakeholders. The effectiveness of the actions of the transformational leaders is their main key • The relationship between leadership and Corporate Social Performance (CSP) has become an important topic of research in the area of leadership studies. 7.5 KEYWORDS / ABBREVIATIONS • Charity: The organized care of the elder people, deserted, disabled, unwell, wounded and those expatriated from their homeland and others are defined under the word ‘charitable’. It is the condition of basic social concern for people who find themselves

in need. Sometimes the word “Charity” is used, especially by Catholic and other religious institutions, as a name to describe organizations that are involved in the aforementioned services. • Donation: Donation is a set of tangible and intangible assets, which a donor gives to a receiver. It may not necessarily be a financial gift, but also an idea, skill, time or product. • Business Ethics: Business Ethics is the influence of moral values and principles on the development of business activities. It is the tendency to apply ethical principles in business, in order to improve practices in all business activities. • Social Reporting: Non-financial data covering staff issues, community economic developments, stakeholder involvement and can include voluntarism and environmental performance. • Ethics: The science of morals in human conduct. 7.6 LEARNING ACTIVITY Examine the explicit and implicit corporate social responsibility (CSR) framework and its implications for leadership style, in a major banking institution. - ________________________________________________________ _______________________________________________________ 7.7 UNIT END QUESTIONS A. Descriptive Questions (Long answers) 1. How does leadership relate to Corporate Social Responsibility? 2. What is the relationship of Ethical Leadership and Corporate Social Responsibility? 3. What are top five qualities of an effective CSR leader? 4. State important leadership factors that influence the degree to which an organization integrates sustainability? 5. How do different leadership styles affect the CSR of the company?

Descriptive Questions (Short answers) 1. What is CSR leadership? 2. What are the 5 qualities of a good leader? 3. Write short note on: ‘Transactional’ and ‘team’ leaders 4. What are Charismatic leaders? How are they different from visionary leaders? 5. Distinguish between Transformational Leadership and Transactional Leadership. B. Multiple Choice Questions 1. All definitions of Corporate Social Responsibility recognize that: a. Every company has a responsibility for their impact on society and environment. b. The main focus of CSR activities should be the natural environment c. business ethics is a multifaceted issue. d. companies must pay equivalent consideration to business ethics and sustainability. 2. The \"only one social responsibility of business is to increase profits\". These are the words of? a. Edward Freeman b. Milton Friedman c. Michael Porter d. Michael Freeman 3. What is the main characteristic of the stakeholder approach? a. The idea that many different groups have a legitimate interest in the corporation b. It is a critical perspective on corporations and business. c. A focus on social and environmental responsibilities of a corporation. d. The supposition that shareholders are not the main stakeholders in the corporation 4. Following are the four generic strategies of social responsiveness? a. Proaction, Defensive, Reinvestment, Reaction b. Reaction, Defence, Reinvestment, Proaction

c. Reaction, Defence, Investment, Withdrawal d. Reaction, Defence, Accommodation, Proaction 5. Which of the following is NOT an example of a genuine business innovation? a. Development of less polluting fuel b. Investment in alternative energy sources c. New product targeted at low-income customers d. Charitable donation to an ecological organization Answers: 1-a, 2-b, 3-a, 4-d, 5-d 7.8 REFERENCES Reference books • Agle, B. R., Mitchell, R. K., and Sonnenfeld, J. A. (1999). Who Matters to CEOs? An Investigation of Stakeholder Attributes and Salience, Corporate Performance, and CEO Values. Academy of Management Journal, 42: 507-525. • Aupperle, K. E., Carroll, A. B., and Hartfield, J. D. (1985). An Empirical Examination of the Relationship Between Corporate Social Responsibility and Profitability. Academy of Management Journal, 28: 446-463. Textbooks 1. Business Ethics and Corporate Social Responsibility by Michael Vas and Aurora Vaz. 2. Corporate Social Responsibility by Madhumita Chatterjee.

UNIT – 8 : ORGANIZATION CLIMATE Structure 8.0 Learning Objectives 8.1 Introduction 8.2 Strategic and Corporate Planning 8.3 Feedback Strategy 8.3.1 Relationship between CSR and customer feedback 8.4 Agency Theory 8.4.1 Strength and weakness of Agency Theory 8.5 Summary 8.6 Keywords/Abbreviations 8.7 Learning Activity 8.8 Unit End Questions 8.9 References 8.0 LEARNING OBJECTIVES After studying this unit, you will be able to: • Academic arrangement that designate association between awareness of ethical climate in the work place and levels of principles to be empowered on employee commitment, and its effects on CSR beliefs and intentions. • Focus on the improvement of a practical structure for the functioning of the CSR actions throughout the entire course of the strategic planning, essential for the success of CSR programs 8.1 INTRODUCTION The organizations in recent world still have not implemented CSR programs to its full capacity. The companies still only tackle with CSR in various ways and concentrate on scattered resources and different objectives. A lot of multinational companies and various

organizations have progressed in implementing CSR programs. Activities built-in CSR programs aren't integrated within nucleus activities, but are parallel to them. CSR features a huge strategic proposition for any company. Using CSR strategic instruments, a company can create its niche image in the market with enhanced they can support in building and enhancing an organization’s status also achieve a competitive advantage, because coping CSR programs are not easy. CSR enables integration of the capital holders’ interests with stakeholders’ interests on the way of achieving the utmost organizational profits. Certain activities or functions of an organization can be cluttered if CSR is implements in core activities. Hence the implementation begins with a method of strategic planning. The planning process is intended toward identifying the objectives and strategies that are intended toward accomplishing these objectives and organising the resources like finance, material and human resource. In order to implement CSR within the business strategy one needs to rethink the mission, vision, achievement of the organization’s strategies within the spirit of CSR. A coherent and easy-to-apply methodological framework will facilitate the mixing of CSR which could cause achievement of any fundamental organizational strategy’s objective, which is that the harmonization of the two fundamental aims of a up to date organization— maximizing profits and meeting the requirements and requirements of all stakeholders 8.2 STRATEGIC AND CORPORATE PLANNING Although the most objective for a corporation is to form money, focusing solely on profitability isn't enough today. Consumers want to embrace and support companies and makes that take stances on social issues happening within the world. By exercising corporate responsibility, companies are often mindful of the impact they're having on their communities beyond sales transactions. Strategic planning of any company is a sort of management during which companies take the ethical aspects of their business operations into consideration. By implementing social concerns into their business strategies, the companies are more conscious of their roles in society and their communities outside of business. Corporate Social responsibility is not just obeying the law but also involves a company taking proactive steps to improve the standard of life for its employees and community.

Different companies will select a special social responsibility strategy from one another, but all of them specialise in four ethical aspects of business: economic, ethical, legal and philanthropic. Figure 8.1: Ethical aspects of business Economic Social Responsibility An economic social responsibility strategy commences with ensuring a corporation is sustainable, which successively means it's profitable. The companies are not only required to make a profit to please its shareholders but the company should also make sufficient money to pay its employees a good salary. There should not be any gender wage discrimination, is to be ensured by the company. Paying appropriate taxes and meeting other financial commitments is a part of economic social responsibility of any company. Finding inefficiencies in their operations that waste capital, and implementing processes that improve efficiencies and reduce this waste should also be included in economic social responsibility. Ethical Social Responsibility Values and ethics in strategic management are important. Being ethical means companies must remember of society's values and standards and operate during a manner that’s conducive to those. Inside the workplace, this might include paying a wage, ensuring safe

working conditions, abiding by all labour laws and being willing only to try to to business with companies with similar ethical principles – not purchasing products from a factory that uses child labour, for instance. Being an ethical business also means taking into consideration a company's environmental impact and doing its job to limit sorts of waste. As environmental issues grow on a global scale, it is increasingly essential that companies are aware of how they contribute to these issues. Companies should analyze the processes they use and proactively do what they will to scale back their environmental impact. This is especially important for companies that dispose of waste, leaving a carbon footprint. Legal Social Responsibility The legal segment of corporate social responsibility revolves around ensuring that companies are conscious of and abide by all local, state and federal laws. Companies must suit safety and labour laws put in situ by regulators. It is the duty of the corporate to form sure they continue to be knowledgeable of any changes to the laws. Being mindful of legal obligations can protect a company's reputation and limit the quantity of your time and money it's to spend in potential legal fees. Part of these legal responsibilities is usually ensuring the corporate meets its tax obligations. Philanthropic Social Responsibility Corporate philanthropic responsibility involves employing a company's time and resources to form investments within the communities where they operate. These investments might be within the sort of scholarships and other educational assistance, or other notable local causes. Many businesses prefer to solely donate money to particular causes that are getting to cause social change, while others will attach their name and brand to causes they strongly believe in as a company. It is common for giant corporations to possess in-house departments that manage and coordinate the company's philanthropic efforts. Strategic Management and Social Responsibility Following a global tendency, corporations are currently more concerned with social

responsibility. There is a trend toward promoting corporate changes with deep strategic implications that has got to be related to business strategies within the company so as to be efficient. Every company has a decision-making standard that determines vision, mission, objectives, policies and plans to achieve targets. Such standards are strategic management standards. These strategies lay down what businesses the businesses run, the economic and non-economic nature of their actions and contributions, and therefore the relationship between shareholders, employees, and clients and therefore the community a corporation may affect variety of various businesses. There is a difference between corporate strategy, which is from the corporation, and business strategy, which is from a business unit or company that creates up the corporation. Corporate strategy is far more complex than simply economic choices, as executive decisions find yourself influencing and impacting an outsized number of stakeholders who are either directly or indirectly associated with the company. Social responsibility has become crucial. The strategic decisions of large companies involve social and economic consequences that are connected intimately. The company has direct impact on society or community that it works with. Thus, there is an interdependence of society and company on each other. This interdependence can have positive or negative consequences. Strategists and executives should take under consideration societal expectations and decisions, as there are often some attractive alternatives when goodwill or services to society are considered. Corporate social responsibility may be a sort of management that's defined by the moral relationship and transparency of the corporate with all the stakeholders with whom it's a relationship as well as with the establishment of corporate goals that are well- matched with the sustainable development of society, where environment and cultural resources are preserved for future generations, diversity is respected and social problems are reduced. The Harvard Business School strategy model has always included social responsibility as a main element of strategy formulation. Social responsibility has become a global conception recently. Top management incorporates it as an integral part or executive jobs. It is motivated by personal values and altruism as strategic advantages that can be developed.

Figure 8.2: Essential Components of Corporate Social Strategy The modelling of the essential components of social strategy may be a necessary element for characterising such strategies. Andrews points to the four components of the strategy formulation and decision, which are: (a) market opportunities; (b) corporate resources and skills; (c) values and aspirations; and (d) knowledge of obligations to society and shareholders. Thus, the author includes a variable that communicates the concerns with society among the essential elements of the social strategies. Social corporate strategy therefore must be linked to the subsequent four elements: (a) structure of industry (b) internal resources of the firm (c) corporation ideologies and values; and (d) the relationship with stakeholders. At the maximum there's business strategy itself, how far does your company’s business strategy embrace corporate responsibility at its heart. In the middle, we've learning: engaged learning, engaging with society. Society means many various possible players:

civil activists, labour, government, other businesses domestically, locally, internationally — whoever you engage within your business. At the bottom left, we have leadership. What we mean by that's companies who are ready to operate within the discomfort zone, driving innovation along the axis of responsibility and therefore the company’s core strategy. On the right is operational excellence. Excellence is another quite leadership, but not discomfort. Excellence is once you know what to try to to and you only roll in the hay incredibly well if you wish, an operational excellence. Proposal for a Theoretical Framework An elaborate and systematic plan of action pursued consciously to achieve a particular goal or objective. Strategy is concerned with analysing, projecting and directing the different engagements. It is about understanding how engagement is linked with the other. It operates in an uncontrolled environment. Therefore, it is not about how an engagement is conducted or done. Strategy is an in-depth visualization of terms and conditions that need to be assessed to evaluate the future of any undertaking. Strategy is not a guessing game based on intuition; rather it is a rational and conscious reaction to situations. Some of the important assessments that an organization needs to make on pursuing CSR are given below: Risk Analysis Building on the information gathered from history and culture, the organization would have to create its strategy to succeed in the market. The foremost policy that the corporate needs to articulate is what it is planning to do in the market place, i.e., its goals and objectives, both long term and short term? While defining its objectives and goals, the firm has to analyse its impact, both long term and short term on the community and society. This is required because the resources and markets required to fulfil the aims and objectives have to be drawn from society. This is where the stakeholder theory finds its legitimacy. However, to implement this, organizations have to be committed towards governance and transparency in their activities. Accountability and integrity are strong 'brand ambassadors’ (help to build brand) of a corporate and often cannot be quantified. These intangible assets have a significant impact on the quantifiable financial profit, which is the central aim of the business entity. Since the real world would demand a trade-off between the stakeholders, the firm would have to find sync

(matching, harmony) between its value foundation (its vision) and the designed trade-off, otherwise it would look farcical. Therefore, risk management would have to be undertaken with immense sincerity, not only within the corporate as a whole, but also in its departments. This would help the organization to evaluate the trade-off and the consequences on a long-term basis, and that would certainly be a more fair and just decision than a short-term profit-oriented trade-off. The firm has to periodically take stock of its assets, relationships, processes, technology, and capabilities to achieve its mission. The mission has to be crafted ingeniously, so that it is neither too broad nor too narrow. An unfocused broad concept, like increasing profit or creating customer satisfaction or catering to the investor, etc., can lead to the firm venturing into every kind of activity, as there is no clarity about the journey that the firm wants to pursue. Extremely focused statements like producing only one product or part of it, for example offering only electronic entertainment or offering one service such as hotels catering only to tourists, can constrict the innovativeness and flexibility of the firm. The mission should aim at creating competitive advantage that would lead to long-term viability. The World Economic Forum 2007 has listed the following risks that need to be assessed by a company if it wants to mitigate the fears of investors, business environment, competitive issues, compliance matters problems, operational factors, reputational loss, security and frau d failure, technological change and trade credit, and customer insolvency. Building Trust An investor-friendly environment can be created only when the increases the quotient of trust in the minds of the customers. Since a unilateral process, the firm has to build a reciprocal relationship with all its stakeholders. CSR is the prime intervention required here to create that congenial co-existence of all stakeholders. This would help the company to go beyond financial reporting and report on the 'soft' or intangible aspects, sometimes termed as extra- financial issues. Today, every code is demanding a reporting of the non-financial factors impacting profits. The corporate has to streamline its value chain to bring about the process. This would allow stakeholders to judge the corporate strategy action related to quality and sustainability, and thus create trust. The products lifecycle, i.e., the stages that a new product is believed to go through fro beginning to end (introduction, growth, maturity, and decline) can also be us by corporations to identify sustainability issues.

Subliminal Impact of History History and heritage provide individuals with a number of basic tools methods with which to pilot everyday lives. In order to understand the though feelings, and actions of a community, it is crucial for the corporate world to comprehend history. The history of a country underpins (supports) its cult which actually reflects the way of life. According to Jones (2008), 'the (this) loss of history has resulted in the spread of influential theories based on ill-informed understandings of the past.' For example, the current accepted advice is that wealth and growth will come to countries that open their borders to foreign direct investment. 'The historical evidence shows clearly that this is an article of faith rather than proven by the historical evidence of the past' (Jones 2008). This reflects that very often policy formulations are based on mono-causality (single cause) and a uni-dimensional (one aspect or characteristic) view of the world, thus emphasizing lack of historical understanding. Social cohesion is one of those values that need an in-depth appreciation of the history of a nation. The form of government and political system plays a large role in deciding the terms of social reforms, as can be seen in the following modern examples. Though Greece has a socialist government, it is unable to balance its economic needs in this era of global recession. This is because being a socialist country it cannot immediately cut public sector pay though that is required to ease the economic pressure on the country. Similarly, Spain's socialist government continues to retain the labour market laws which make though that is required to ease the economic pressure on the country. Similarly, Spain's socialist government continues to retain the labour market laws which make retrenching permanent employees extremely expensive. Italy’s right-wing government is reluctant to remove the burdensome regulations on small business because it fears large-scale strikes. Similarly, Sweden's centre-right leadership does not want to revisit the generous social model, which needs trimming of benefits, pay, and pensions. Even a developed nation like France fears trouble if it pushes for reform in the labour market, pension, and welfare schemes. Now the question is: Is CSR being trampled in the name of social cohesion? The above examples show the strategy to trade-off between permanent and temporary workers behind the façade of social cohesion. But this strategy can have long-term negative impacts because the temporary or the unemployed are bearing the cost of protecting those who are in permanent jobs and/or are members of trade unions, and thus have the benefit of collective bargaining or hold privileged jobs. These temporary workers are usually the young workforce of the country, and also the immigrants. Thus, on the one hand, the young are

being denied training and the immigrants are not being assimilated into the mainstream. This is increasing the divide in the society and production in industry is lagging behind as trained employees are in short supply. In the name of cohesion, public sector employees continue to retain their perks and privileges, while the private sector employees feel the brunt of their pay and privileges being reduced or frozen. This again highlights the disparity in CSR within the same country as a fall-out of their past historical traditions. Corporate Ideology and History The history and culture of countries play a crucial role with respect to accountability, integrity, and transparency. Fritzsche and 13 presented a correlation between the level of economic growth behaviour. According to their study, the level of the legal system and/or social expectations and the need of the involved parties attributed to this difference. This is corroborated when the corruption index of the country is viewed. The international watchdog, Transparency has released a list of 180 countries in terms of public-sector corruption A glaring example is India, which considered one of the fastest-growing economies and a world economic arena, is ranked 84th in the index. Thus, though usually relates to better law and order and less corruption have moved hand-in-hand in India. This has happened, because corruption in India is broad-based and corrupt money is spread number of people, who return it to the economy through their spending is when CSR gives the warning that such practices would corrode the overtime and sustainable growth would be a mere mirage or illusion. Corporations need to realize that corruption is a cost that they are to the unit price of their products. This obviously means that such businesses never be competitive in the world market. The nexus between the government and the corporate world in this game of corruption is actually harming competitiveness. This activity is further fuelled by availability of 'tax heavens’ in countries practising secrecy in banking laws. Transparency International for the first time recommends that tax havens like Switzerland and should do away with the secrecy in banking laws 'Corrupt money must not find safe havens. It is time to put an end to secrecy in banking laws' (Huguette 2009). The advantages of a free economy can never be reaped in such an environment. Therefore, of the CSR concept is being challenged here due to the unique practices of different countries.

Thus, it is clear that CSR requires an in-depth understanding of history and culture and also committed integration into strategy of an organization to succeed. Keeping these in mind a CSR framework needs to be framed that would help to implement CSR in each organization. 8.3 FEEDBACK STRATEGY Figure 8.3: Feedback Strategy In recent decades there has been increasing attention to the social and environmental impacts of business, particularly as regards multinational companies. Recently, the customers purchasing decisions are often associated with the perceptions about the company with respect to their CSR. Hence, stakeholders are more conscious about environmental and social issues. In order to determine a long-lasting relationship with their stakeholders generally and customers especially, companies got to consider and manage their increasing awareness and concerns, aligning business activities accordingly. For these reasons, companies are called on to enhance their CSR through appropriate actions regarding social, environmental and economic sustainability and thru avoidance of “corporate social irresponsibility” At an equivalent time, so as to realize returns from their CSR (such as company reputation, customer loyalty and customer-company identification), companies must then continuously communicate their commitment and true efforts. For this reason, growing numbers of companies now report back to stakeholders on their CSR commitment by means of sustainability reports, websites and other CSR communication activities

However, companies should disclose their CSR effectively; otherwise, customers and other stakeholders won't perceive that the corporate is honest and transparent about its CSR efforts. Thus, to extend stakeholders’ CSR perception, companies must improve the effectiveness of their communication, and at an equivalent time they need to also make efforts to satisfy the stakeholders’ CSR expectations Let us specialise in customers, considering the distinct aspects of customer perceptions and expectations of CSR as two sorts of feedback that companies can use to develop effective CSR. In fact, customer CSR perceptions and expectations provide direct feedback due to their influence on purchase intentions, customer loyalty, company image and reputation and customer-company identification. the particular customer feedback depends on the space between the beliefs, values and lifestyles of the purchasers and their perception of the corporate CSR. Consequently, an equivalent company can receive different and even contrasting CSR feedback supported the multiplicity of its customers’ perceptions and expectations From this, so as to elaborate appropriate CSR initiatives, companies got to organise and classify customer feedback. The classification of CSR feedback requires consideration of three aspects of CSR commitment: i) The CSR commitment disclosed by the corporate in its sustainability report and website; ii) The CSR commitment perceived by the corporate customers; iii) the CSR commitment that customers expect or demand from the corporate. 8.3.1 Relationships between CSR and customer feedback Today CSR is not any longer limited to strictly philanthropic motivations and actions, but instead involves increasingly important managerial decisions in areas of economic, social and environmental aims. Stakeholders are increasingly interested and involved in environmental and social issues and like to affect companies that conform to their personal values and beliefs. Moreover, CSR research shows that stakeholder perceptions of a company’s CSR commitment are positively associated with company image and reputation and to capacities to draw in , retain and motivate employees. For these reasons, several studies suggest that it's going to be productive for companies to integrate social and environmental concerns in their core strategy and business operations

Nevertheless, shareholders push top management to realize CSR profitability targets, inducing organizations to develop only those CSR policies according to cost-effective corporate behaviour. Managers can actually behave during a socially irresponsible manner, considering only their own interests and therefore the prime aim of maximisation of shareholder value, without considering other stakeholder interests. during this regard, Armstrong (1977) suggests that a shareholder orientation encourages CSI, while a stakeholder orientation reduces it. For a corporation, it becomes imperative to know customer feedback to CSR, which depends on the alignment that customers perceive between their expectations and therefore the company’s CSR conduct. 8.4 AGENCY THEORY The agency theory describes the economic relationship that arises between two individuals, one being the principal and the other being the agent. ii a Corporate scenario, the principal stockholders/ shareholders are the principal and the directors/managers are the agents. This relationship mainly requires three conditions to operate: 1. The agent has the freedom to choose between several courses of action, e.g., in an organization, the managers can choose various ways of utilizing the assets as they have effective control over the assets. 2. The actions of agents influence their own growth (through more stability and better remuneration) and also the growth of principals (through rise in share prices, dividends, etc.). 3. As a result of the geographical spread or complexity of activities, it becomes extremely difficult for the principals to observe the actions of the agents as information is not enough or equal. The crux of the agency theory is the agency problem or the relationship between the principal Figure 8.4: Basic organization relationships

Shareholders Board Management Employee The suppliers of finance (principals signify shareholders in joint stock companies) to corporations need to assure themselves of getting a return on their investment. Therefore, they need to ensure that the directors (agent), appointed by the principal, return some of the profits to them, and do not steal the capital they supply or invest it in bad projects. Therefore, the suppliers of finance need to control the directors. The major issue with the numerically growing and geographically dispersed shareholders is the lack of transparency, and therefore the control is also dispersed and less effective. This has led to over-dependence on the directors to act honestly, keeping the shareholders’ interest in mind. With the growing complexity of business, tracing the agency chain becomes difficult, especially when investment is routed through various financial instruments/funds like bonds, equities, commodities, hedge funds, etc. Agency loss can occur in any form of a corporation like not-for-profit organizations, trade unions, and other professional bodies, private companies, cooperatives, etc. This loss was discovered by Jensen and Mackling (1976) when they wrote ‘agency theory involves a contract under which one or more persons (the shareholders) engage another person (director) to perform some service on their behalf, which includes delegating some decision-making authority to the agent. If both parties to the relationship are utility maximizers, there is a good reason to believe the agent will not always act in the best interest of the principal?’ The agency loss is compounded by factors such as unequal information between the two parties. The directors would always have more insider information of the organization and the shareholder has to trust and rely on the information that they receive from the directors. Prospective future investors can only judge the capabilities of the directors from the prospectus, the past performance reports. Therefore, the element of risk would always lurk in this relationship.

8.4.1 Strengths and Weakness of the Agency Theory: The main concern of this theory is to ensure that the agency loss is reduced. In modern corporations, because of the geographically dispersed and numerically large number of owners (shareholders), agency loss is a reality and therefore, the theory offers ways to reduce this loss. It provides for incentive scheme for mangers, if they ensure shareholder profits. Senior members are offered shares to get long term commitment from them. However, critics feel that the theory is extremely narrow in its perspective because it only assesses the quantitative aspect and leaves behind important qualitative aspects. However, criticism is also labelled against the theory because there is too much emphasis on intangible like altruism, interpersonal relations, and intrigues in defining the principal-agent relationship. To allay these fears, governance procedures should include transparent and fair accounting practices and disclosures. The board of directors should include non-executive independent directors who would provide unbiased objective decisions that would lead to better productivity and thus increase shareholder value. 8.5 SUMMARY • Many organizations, especially multinationals, have developed and implemented CSR programs, they have not managed to fully integrate them within the organization’s strategy. Activities included in CSR programs are not integrated within core activities, but parallel to them. • CSR programs involve a multitude of current activities; one can note that their implementation begins with the process of strategic planning. • For the CSR to be integrated in the business strategy it is required to rethink the mission, vision, completion of the organizations strategies in the spirit of CSR • Consumers want to embrace and support companies and brands that take stances on social issues going on in the world. By exercising corporate responsibility, companies can be mindful of the impact they are having on their communities beyond sales transactions

• Different companies will select a different social responsibility strategy from each other, but they all focus on four ethical aspects of business: economic, ethical, legal and philanthropic • There is a trend toward promoting corporate changes with deep strategic implications that must be associated with business strategies in the company in order to be efficient. • Corporate strategy is not just making economic choices but a lot more than that. The senior executives who make such corporate strategies end up • Corporate strategy is much more complex than just economic choices, as executive decisions end up persuading and impacting the stakeholders who are large in number and are directly or indirectly associated with the companies. • Social responsibility has always been a main element of strategy formulation. This is as per Harvard Business School strategy model • The four components of the strategy formulation and decision, which are: (a) Market opportunities; (b) Corporate resources and skills; (c) Values and aspirations; and (d) Knowledge of obligations to society and shareholders. • A company can use social initiatives to improve its competitive context, enhancing the quality of the business environment in the places it operates • The fact is that social responsibility and corporate strategy have been seen separately, with social responsibility contributing to social objectives and corporate strategy contributing to economic objectives. However, they should be seen together in order to maximize both economic and social results • Companies should disclose their CSR effectively, otherwise customers and other stakeholders might not perceive that the company is honest and transparent about its CSR efforts. Thus to increase stakeholders’ CSR perception, companies must improve the effectiveness of their communication, and at the same time they must also make efforts to satisfy the stakeholders’ • The agency theory describes the economic relationship that arises between two individuals, one being the principal and the other being the agent.

8.6 KEYWORDS / ABBREVATIONS • GRI (Global Reporting Initiative): one of the broadest sustainability reporting frameworks that is widely used around the world. • Responsible Business: often referred to as Corporate Social Responsibility (CSR), this focuses on community involvement and charitable giving as well as community engagement. It also touches on employee engagement, development, training and social data such as employee health/HR/life balance • Risk and Compliance: focuses on business continuity planning, risk and compliance management and regulatory change management • Organizational climate: the general character of the total organizational environment as perceived by those who work within it. It is an expression of the organizational culture • Accommodation: Occurs when the parties' goals are compatible and the interaction between groups is relatively unimportant to the goals' attainment • Authority: Power that has been legitimized within a particular social context 8.7 LEARNING ACTIVITY Select a company of your choice and read their annual reports and analyze the relationship between corporate governance and corporate social responsibility. ________________________________________________________________ ________________________________________________________________ 8.8 UNIT END QUESTIONS A. Descriptive Questions (Long Answers) 1. Explain in detail the Agency theory. 2. What is corporate social responsibility in strategic management? 3. What are the strategies of corporate social responsibility? 4. What are the six main characteristics of CSR? 5. What is a feedback mechanism? How does it work for CSR?

6. Explore the association between social responsibility, corporate strategy and competitive advantage; 7. Describe the context of social responsibility in corporate strategy; 8. Explain the potential of social responsibility for creating competitive advantage; 9. Elaborate a theoretical framework related to the strategic management of social responsibility Descriptive Questions (Short Answers) 1. Explain the concept of strategic planning 2. What is corporate planning 3. What are limitations of Agency theory 4. Give the steps for sustainable CSR Program 5. Is CSR an Agency Problem? Justify. B. Multiple Choice Questions 1. Which is not a characteristic of corporate social responsibility? a. Product safety b. Consumer rights c. Environmental Policies d. Price - fixing 2. Which of these factors is not one of the competing responsibilities that influence corporate social responsibility? a. Ethical b. Economical c. Discretionary d. Technical 3. What is the term for a process that enables an organization to assess and demonstrate its social, economic, and environmental benefits and limitation? a. Social Plan b. Social Strategy c. Social audit d. Social account 4. What is not a characteristic of a corporate social responsibility framework? a. Retaining the status quo

b. Understanding society c. Harnessing diversity d. Building capacity 5. What is the overriding philosophy underpinning the strategic direction of an organization? a. Vision Statement b. Mission Statement c. Strategy Statement d. Business Statement Answers: 1-d, 2-d, 3-c, 4-a, 5- b 8.9 REFERENCES Reference books / articles 1. Abreu, M. C. S. (2001). Modelo de avaliação da estratégia ambiental: uma ferramenta para tomada de decisão. Doctoral Thesis, Federal University of Santa Catarina, Brazil. 2. Aguilera, R. V., Rupp, D. E., Williams, C. A., & Ganapathi, J. (2007). Putting the S back in corporate social responsibility: a multilevel theory of social change in organizations. Academy of Management Review, 32(3), 836-863. 3. Alessio, R. (2003). Responsabilidade social das empresas no Brasil: reprodução de posturas ou novos rumos. Revista Virtual Textos & Contextos, (2), Ano 2, 1-10. 4. Almeida, S. L., Lins, S. A. G., & Oliveira, R. R. (2005, September). Benefícios do capital social: an experiência da escola de voluntários da Celpe. Anais do Encontro Nacional da Associação Nacional de Pós-Graduação e Pesquisa em Administração, Brasília, DF, Brazil, 29. 5. Amato, L. H., & Amato, C. H. (2007). The effects of firm size and industry on corporate giving. Journal of Business Ethics, 72(3), 229-241 6. Andrews, K. (1987). The concept of corporate strategy. Homewood: McGraw-Hill. 7. Ashley, P. A. (2002). Ética e responsabilidade social nos negócios. São Paulo: Saraiva. 8. Bardin, L. (2004). Análise de conteúdo (3a ed.). Lisboa: Edições 70.

9. Barney, J. (1986). Organizational culture: can it be a source of sustained competitive advantage? Academy of Management Review, 11(3), 656-665. Textbooks 1. Business Ethics and Corporate Social Responsibility by Michael Vas and Aurora Vaz. 2. Corporate Social Responsibility by Madhumita Chatterjee.

UNIT – 9 : THE STRATEGIC LENS Structure 9.0 Learning Objectives 9.1 Introduction 9.2 Vision and Mission as basis for CSR 9.3 Strategy and Tactics of CSR 9.3.1 Creating a Framework for CSR 9.3.2 Three-level Implementation Programs 9.3.3 Key benefits of Good CSR Practices 9.3.4 Tips to build your own CSR Strategy 9.4 Summary 9.5 Keywords/Abbreviations 9.6 Learning Activity 9.7 Unit End Questions 9.8 References 9.0 LEARNING OBJECTIVES After studying this unit, you will be able to: • How vision and mission of an organization form as a guideline for CSR • Strategy and Tactics for CSR • Tips to build CSR Strategy for a company 9.1 INTRODUCTION Managers of business organizations have four social responsibilities: economic, legal, ethical, and discretionary. While formulating and executing strategies, organizations are responsible

to their stakeholders who affect, or get affected by, their business activities. Shareholders, employees, local community, and society are some of the important corporate stakeholders. Companies have believed for years that their only responsibility was a financial one--- maximizing value for shareholders. Corporate social responsibility (CSR) is a new idea, one in which the corporate sector incorporates social and environmental concerns in its strategies and plays a more responsible role in the world. Corporate social responsibility can be integrated seamlessly into the goals of almost all organizations. Furthermore, it is not necessarily the chief executives who must always initiate and implement CSR. Project managers have the ability to introduce CSR in their work and promote social good within the firm. If properly understood and executed, CSR is a win-win strategy that benefits the company, as well as society. Corporate Vision and Mission as a Basis for CSR In order to consider corporate social responsibility as a fundamental part of business decision making, it should be blended with company’s core vision and mission and values. This is according to Business for Social Responsibility. In order for the philosophical basis of the organization’s raison d’etre to be effective, companies should have a mission statement that is well-explained, widely understood and shared by the relevant stakeholders (primarily the owners and employees, but also external ones). Most businesses proclaim a mission. Often set forth in an explicit statement, a mission serves as a unifying vision of the benefits that a corporation creates for society. Mission statements, which are prominently displayed in company documents and on websites, are an effective means of communicating and building relationships with employees, consumers, investors, and the general public. Although the objective of a corporation is commonly described as making profits for shareholders, no profit can be earned without providing some economic good—which is to say, some product or service. This good must fulfill a need, expressed as market demand, and be preferred by consumers over the offerings of competitors. Fortunately, most economic goods can be provided in sufficient quantity and quality and at affordable prices to meet market demand and thus satisfy people's needs through the marketplace. In a market economy, we rely on for-profit business for the fulfillment of most economic needs, and companies benefit society by each pursuing a mission to fulfill some specific need. Thus, in one sense, all businesses are, of necessity, mission-driven.

It is commonly recognized that standard for-profit businesses are not able to fulfil all economic needs. An obvious failure occurs when companies are unable to offer goods at prices that everyone can afford and still make a profit. The market can respond to low purchasing power by reducing quantity or quality. For example, automobiles are manufactured in different price ranges with corresponding differences in quality. However, some essential goods such as housing, education, and health care cannot be produced by business in sufficient quantity and quality and at prices that can be afforded by everyone. The result is that some goods are simply unaffordable for some people who are consequently forced to do without, unless they can be provided by some means outside the marketplace. In addition to unaffordable goods, public goods, such as roads and parks and police and fire protection, are necessities that cannot be fully provided by business and are left mainly for government to provide. Both unaffordable goods and public goods are examples of what economists call market failures. Some goods are so critical for individual wellbeing that, in cases of market failure, a humane society provides them to people in need outside the market mainly through non profit, donor- supported organizations and/or through tax-supported government welfare services. Corporations also help meet some pressing social needs through their various social responsibility programs. However, in recent years, a new type of organization, the social enterprise, has developed to meet critical unmet social needs. Operating alongside traditional non-profit organizations, government welfare agencies, and corporate social responsibility programs, social enterprises have the mission of a traditional non-profit organization but differ from them by the adoption of business concepts and methods. Social enterprises operate like a business but with the non-business-like mission of meeting essential social needs that standard businesses, operating in a market, do not and perhaps cannot provide. Vision for Future If we are looking for a better community life in the world that is shared by both human and non-humans, then we have to broaden our vision and limit our greed. This, in fact, will provide a strong foundation for environmental protection. The thinking process with respect to how to achieve this goal and drive the philosophical support to lay the foundation has to change in order to incorporate nature into moral framework. The sense of sharing will be strengthened only if we accept that we are part of integral whole. The beginning of the twenty-first century witnesses a new form of capitalism. Stakeholders’ worry and issue

relating to the nature has become the major guiding force for business behaviour. This move is occurring more rapidly in the developed countries than in developing countries. The main features of capitalism look after and reshape the environment policy. Focusing on profit alone can have adverse impact on firms and they may fail to achieve objectives. Thus, the contention is that when a business cares about the well being of stakeholders, it builds trust and cooperation that ultimately increases productivity. 9.2 VISION AND MISSION FOR CSR An organization's vision and mission act as guiding principle for strategy formulation. A well- conceived vision has two main mechanisms: core ideology and envisioned future. A well-drafted vision should be pragmatic, convincing, attractive, and future-oriented. A mission statement describes the product, the market, and the technological areas of importance for the business, and forms its overriding raison d'être, that is, ‘reason for existence'. The vision and mission statements together provide the expansion directions for the organization and organize the allotment of resources. The mission statement of a firm centers on its fundamental product, primary market, and principal technology. It also reflects the firm's attitude/creed, public image, and self-concept. According to Hussey (1998, p. 278), vision is an” expression of the longer-term objectives and principles of the organization, in a way that shows what the firm is trying to realize.” He refers to Karlöf, who sees vision in the sense of a dream. It can associate business with corporate culture, creating standards of values for individual performance of employees. It often includes the values of the organization, which are arrived at through stakeholder theory. The main purpose of a written vision, however, is to assist a company be able to converse it across the organization and to stakeholders. Hussey (1998) believes that mission is a type of objective, one that answers the question “What business are we in?” This may include defining the nature and scope of the business, its geographical area, and other key factors that the chief executive finds important. It also may include a statement about how the company plans to handle its relations with a number of stakeholders, including employees, customers and society. Whether one calls it called mission or vision, most strategy authors agree that all formal organizational objectives and goals obtain from them. Vision provides the higher formulation of the organization activities and is normally very broad. Further, it is the most long-term of the activities and should rarely, if ever, be

changed. The basic business idea of the organization, the comparatively specific description of the business area, thus follows the mission, which in fact provides the basis for it. Finally, come more detailed goals, followed by a set of objectives that specify specifically how the goals are to be met. Vision Mission Business Idea Goals Figure 9.1: Vision, Mission, Business Idea and Goals From this standpoint the association between the specific company objectives and the organization’s higher-level aspirations is apparent. Arguably, some of the criticisms and disbelief surrounding CRM efforts can be traced to the fact that they have been initiated without considering their overall relationship to the company’s vision and mission. Well intending but ad hoc efforts recurrently result in objectionable long-term effects. Because much of the scepticism surrounding CRM is due to the comparatively low assignment in the hierarchy of Figure 1, Duncan (1995) asserts that firms can avoid criticism and be professed as feeling, ethical, and having beliefs and a wisdom of mission by implementing what he calls “mission marketing.” He sees cause related marketing as a short-term activity that is not essentially anchored in the values or mission of the organization; there is no real assurance. Mission marketing, on the other hand, has more believability Vision Mission Business Idea Goals 13 than cause related marketing because it is a long-term and strategic organizational objective. It is bound to the mission of the organization and, according to Duncan, the first thing a company needs to do is to establish a

pragmatic, applicable mission that reflects a corporate social responsibility and then be willing to ‘walk the talk’. As consumers become more sceptical of the motives of business in their association with non-profit organizations and causes (Webb and Mohr, 1998), ‘walking the talk’ is becoming increasingly imperative. Here a mission statement that reflects the organization’s corporate site on social responsibility drives the overall strategy of the organization. From this mission statement, the organization then creates a strategy for carrying out its responsibilities in the CSR area, i.e., selecting causes/non-profit and/or charity alliances. These activities are then communicated to various stakeholders through marketing or other communications initiatives. This includes organizational communication, i.e., across and up and down the organization; corporate communications, normally associated with all other stakeholders than customers; and finally marketing communications, all activities directed at customers with the objective of increasing sales (in the long-term). Strategic processes related to corporate social responsibility determined by the organization’s mission statement. Corporate social responsibility is a concept that is tightly connected to the underlying values of the organization. As such, it should be reflected in both the vision statement as well as the more detailed mission statements of the organization. In this manner, one can assure that, at the least, the aspirations and guiding values that are tied to the CSR concept are maintained. This, however, poses two problems. One problem is concerned with the expansion of the firm’s vision. The second problem relates to functioning of actions that support the vision, and does so in a manner that is perceived by a potentially sceptical stakeholder as honourable and philanthropic. These challenges are not inconsequential and go to the root of many complex and difficult organizational processes. According to Senge (1997), the task of building a mutual vision is part of developing the governing principles for the enterprise. A sense of mission and explicitly stated core values are important components of the process. The vision must be reliable with the underlying core values. Three questions are critical in this activity. First, “what?” What is the vision of the future that the company seeks to create? Second, “why?” Why does the company exist at all, why should it exist? Finally, “how?” How can the core values be simultaneous to the decisions and actions taken by the organization in a dependable manner in order to achieve the vision? Hussey claims that there is a connection between these initiatives and the chief executive's ethical viewpoint. Furthermore, in Hussey’s opinion, moral and ethical theoretical decisions in a company are personal to the chief executive. Logsdon and Yuktha’s (1997) concur that strategies and actions within organizations are dependent on the organization’s top managers, who are the individuals

with the most influence within the organization. They have the necessary power and resources, along with responsibility, to ‘develop and implement organizational processes through which their expectations can be carried out’ (p. 1219). Logsdon and Yuthas agree with Hussey that these managers set the moral tone for the organization and are responsible for its moral climate. Managerial principled behaviour, however, is linked to two types of individual characteristics: individual moral development and personality characteristics. It would come into sight that an organization’s view of their social responsibility reduces to managers’ stage of moral development and the factors influencing the translation of this moral development into decision- making. Hussey maintains that the liberty of executives to decide these issues for themselves is an important point of principle. He quotes Drucker (1955): “No one but the management of each particular business can decide what the objectives in the area of public responsibility should be”. Therefore, it represents their views on why the organization exists and what they want to attain in the future. This way of thinking is typical of traditional hierarchical organizations where no-one questions the source of the vision (Senge, 1997). It is frequently the case that a firm’s vision is not even shared; people are given enough information to do their jobs, which then support the larger unstated and implied vision. It is possible to conclude then, that 1) all companies should have written mission statements, 2) they are best when inspired by a vision for the company that is inspirational, and 3) while often the result of strong leaders, missions and visions are best accepted when shared by everyone inside the company and often outside. Further, the mission of the organization should provide the foundation for expressing the organization’s social responsibility, 9.3 STRATEGY OR TACTICS FOR CSR Corporations create social and societal impacts, both positive and negative through the daily operations of their value chain. There is a lot of interdependence among organizations and the society in which they operate. The community or the society depends on the companies to provide their people with employment and infrastructure facilities for their better standard of living. On the other hand, the companies depend on the society to provide capable workforce. Many a time the society depend on corporations for the provision of employment and

infrastructure as against the government but it’s also a healthy society that can create the kind of productive workers that every corporation seeks to hire. Companies survive to generate prosperity. Society in turn decides what limits to impose on how companies behave, and thus we have laws to protect the common good. Recently, most parts of the world are at the stage where the governments or legal authorities have all the good laws are in place but enforcement of such laws is poor. Poor enforcement has its roots in corruption and weak institutions, and poor governance perpetuates poverty. The programs of CSR try to bridge the gap between what laws are in place and enforced, and basic fundamentals of good business practice, such as obedience to local laws, avoidance of exploitative practices, and complete transparency. For example, Nestle has stated that the true test of a business is whether it creates value for society in the long term. Because much of Nestle's business takes place in developing countries, they need to improve business conditions, improve the capabilities of farmers, create a skilled workforce, and develop improved standards in order to operate effectively (Nestle, 2006). This example demonstrates that the welfare of society and environment is not the responsibility solely of governments and nongovernmental organizations; indeed, corporations can be often more effective in promoting lasting social change. Good CSR is not so much about prioritizing the environment over shareholder interests as much as it is about solving environmental problems in a way that serves shareholder interests (Arena, 2006, p. 12). Moreover, as Porter and Kramer (2006) point out, “the more closely tied a social issue is to a company's business, the greater the opportunity to leverage the firm's resources—and benefit society.” 9.3.1 CREATING A FRAMEWORK FOR CSR It is clear that CSR requires an in-depth understanding of the history and culture of the country and also a committed integration into the strategy of an organization for it to succeed. Therefore, keeping these in view, certain suggestions are given below to help in designing the framework that would help to implement CSR in each organization. Creation of a Corporate Culture The relationship between an organization and its environment has been extensively discussed by sociologists in the form of institutional theory (Scott and Meyer 1995). For example,

Scott's (1992) book, now seminal, stresses the importance of organizations as open systems in which the boundary between an organization and its environment is permeable (porous). The institutional environment of an organization refers to the written and unwritten rules which organizations must conform in order to maintain legitimacy to survive, and to prosper. In essence, they reflect the beliefs. Values and none of the members of the institution. Thus, industry culture can be thought of as the organizational manifestation of institutional beliefs and values. While implementing CSR in an organization, one has to keep in mind the concept of, invented traditions as explained by Hobsbawm: '\"Invented tradition\" is taken to mean a set of practices, normally governed by overtly or tacitly accepted rules. These rules have ritualistic or symbolic nature; therefore, they seek to inculcate certain values and norms of behaviour by repetition, which automatically implies continuity with the past. In fact, where possible, they normally attempt to establish continuity with a suitable historic past . . . insofar as there is such reference to a historic past. The peculiarity of \"invented\" traditions is that the continuity with it is largely factitious' (Hobsbawm 1983, pp1—2). Factors such as the founder's beliefs (Schein 1985; Pettigrew 1979), national cultures (Hofstede 1984), and industry pressures are likely origins of widespread and consistent practices. An example of an 'invented tradition' in most Indian organizations is the practice of doing 'puja' (asking for the blessings of the Almighty) before launching any new venture. Since specific cultural practices have a crucial impact on corporate performances, CSR practices in an organization have to be woven into the fabric of operations of the organization. CSR cannot remain as a separate voluntary entity anymore. Corporate scams and disasters like the Bhopal gas tragedy, Exxon Mobil oil spill, Enron, and Satyam, to name a few, have clearly exposed that parking a part of profits in trusts and foundations, run by the mother organization doing social work, however brilliant they may be, does not protect society against fraud and disillusionment. The big questions are how is the profit being earned and distributed among the stakeholders? If the means of earning is dishonest and selfish, and the distribution is not just, the repercussions would be Mephistophelean, i.e., extreme devastation as a result of wickedness. Therefore, CSR is the basic source of success for all stakeholders. 9.3.2 Three level Implementation Framework The framework for implementation has to be integrated through three stages: the inner corporate level, the intermediate national level, and the outer universal level.

Inner Corporate Ideology The core value foundation based on integrity, accountability, and transparency of the organization needs to be built. This would provide the direction to strategic decision-makers to choose between alternatives that may be either right or wrong or between two rights. Choosing between right and wrong is easy but when it comes to a choice between different decisions that seem both valid and just, e.g., the right to information and the right to privacy, both of which are fundamental rights, the choice becomes rather difficult. Therefore the decision-makers have to be extremely cautious in such situations. This is where the concept of CSR can become very handy because if CSR is already woven into the business plan and mission, it would be easier to see which 'right' needs priority at that particular time and location. The business fraternity needs to realize that the law-and-order situation is also dependent on the economics of the country. Its roots are often embedded in an unfair distribution of benefits to the local community of both government schemes and organizational benefits. The anger is usually directed towards the big businesses, which become symbols of disrupting local subsistence in collusion with the government. The promises of larger growth are not trusted because very often development does not put anything back into the local society. The unprecedented demands for community-based settlements like the Gorkhaland movement in West Bengal, the ULFA movement in Assam and the North East, as well as the recent Maoist movements in India are examples of such emotions. Unless the business community contributes to the crucial needs, its very survival would be threatened and it is in its own interest to participate in ‘nation building effort’. A few suggestions of the approach to the implementation of CSR are given below: A practical approach for judging value-based management would be to understand micro- level integration by the government. Micro-level Integration by the Firm This relates to individual activities that firms undertake, both as suppliers of products and as consumers of labour and capital. The concept of integration firms to examine how values can become an integral part of the various activities that they undertake to allocate the resources drawn from society to earn profit. The individual activities that need to be viewed in their pursuit of CSR can be summarized as given below: 1. Position in the stock market