McGraw-Hill/Irwin

Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 6

Implementing Social
Responsibility
This chapter:
Discusses the key elements of managing for social
responsibility, including leadership, review, strategy,
reporting, and verification.
Discusses corporate and strategic philanthropy.
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The Bill & Melinda Gates

Foundation Opening Case
Bill Gates was a slender, intense boy with a messy
room and a dazzling mind who often challenged his
teachers in class.
He attended Harvard University, but left to pursue
his fascination with computers.
At age 19, Gates founded Microsoft Corporation
and twelve years later he was a billionaire.
He was energetic, independent, and
confrontational and developed the reputation of a
fanatical competitor willing to appropriate any
technology and crush market rivals.
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The Bill & Melinda Gates

Foundation Opening Case
(continued)
Gates established the Bill & Melinda Gates
Foundation, which has an endowment of $33
billion.
The foundations work is based on a two values:
All livesno matter where they are being ledhave
equal value;
To whom much is given, much is expected.

The foundation has given out more than $13.4

billion.
Gates follows a long tradition of wealthy entrepreneurs who
have made fortunes, sometimes by compromising ethics,
then later in life used their wealth for works of extraordinary
benevolence..
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Sources of Pressure for

Social Responsibility

6-5

Leadership and Business Models

Top management sets the tone for a companys
social response.
A traditional business model is one in which the
central strategy is based on meeting market
demands.
A progressive business model is one is which the
central strategy is to meet market needs by
mitigating social problems.
Although based on traditional business models, some
companies have cultures emphasizing voluntary
social responsibility in one or more dimensions
because of the influence of founders.
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A Spectrum of Responses to
Social Demands

6-7

CSR Implementation:
CSR Review
CSR implementation includes an assessment of
the firms current situation and activities, discovery
of the firms core values ,and engagement of
stakeholders.
A key source of values is the mission statement, a
brief statement of the basic purpose of an
organization.
Engagement has advantages:
Mapping helps identify sphere of influence.
Dialogue can review gaps between company performance
and stakeholder expectations, provide important
information, build trust, and lead to cooperative efforts.
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6-9

CSR Implementation:
CSR Strategy
A company defining its CSR strategy must first find
an objective, or a vision of what it will achieve,
then create a method for reaching it.
For large firms the task of setting priorities is
complex because multiple, sometimes
conflicting, stakeholder demands exist.
Border and Kramer suggests an essential test for
the worthiness of any additional social initiative is
to determine whether it produces a meaningful
benefit for society that is also vital to the business.

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CSR Implementation
Steps for CSR implementation:
Create a CSR decision-making structure within
the overall organization
Develop an action plan that sets forth a multitude
of tasks that will bring the strategy to fruition
Establish performance targets and timelines for
their accomplishment
Setup incentives to encourage achievement of
goals and targets
Align corporate culture with strategic intent

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CSR Implementation:
Reporting and Verification
Assessment and reporting create transparency
and allows managers to evaluate corporate social
performance and measure overall progress toward
strategic goals.
In the last decade a new wave of social reporting
has risen.
The leading effort to create a new reporting format
is the Global Reporting Initiative (GRI)
GRI guidelines show performance on a triple
bottom line of economic, social, and environmental
results.
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Corporate Philanthropy
Large philanthropic contributions by American
companies are a relatively recent phenomenon.
Until about 50 years ago courts held that
corporate funds belonged to shareholders;
therefore, managers had no right to give away
money, even for noble motives.
The first major break from narrow legal restrictions
on corporate giving was the Revenue Act of 1935,
which allowed charitable contributions to be
deducted from taxable earnings up to 5 percent of
net profits before taxes (raised to 10 percent in
1981.)
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Patterns and Magnitudes of

Corporate Giving
Charitable giving is now a traditional
dimension of corporate social responsibility.
Corporate philanthropy is only a small part
of overall private philanthropy in the U.S.
The basic motives for corporate giving are:

Response to pressure
Belief that it will bring monetary profit
Desire for reputational gain
Altruism

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Strategic Philanthropy
As corporations gained experience with
philanthropy, many concluded that the traditional
approach of diffuse giving to myriad worthy causes
was noble but flawed.
Many firms decided to change their philosophy of
giving from one of pure generosity to one that
aligned charity with commercial objectives.
Strategic philanthropy is a form of corporate and
three in which charitable activities reinforce
strategic business goals
Not everyone approves of strategic philanthropy.
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Cause-Related Marketing
Cause-related marketing is a marketing
method linking a corporation or brand to a
social cause so that both benefit.
Corporations realize that if their brand is
connected to a social cause or charity, this
appeals to the conscience of a consumer.
Cause-related marketing raises big sums of
money for worthy causes but its mixture of
altruism and self-interest attracts criticism.

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New Forms of Philanthropy

Philanthropy can be inefficient compared
with market-driven business activity.
An emerging approach seeks to increase
productivity from charitable giving by
bringing businesslike methods to the task.
These new approaches to philanthropy
seek to solve global problems by correcting
market failures and applying the tools of
capitalism.

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Concluding Observations
If a corporation announces aspirations to be socially
responsible, it must follow up with the hard work of
building those aspirations into its operations.
Corporate philanthropy, while not a management
method, is a long-standing way of implementing social
responsibility.
Recently, corporations have shifted from a tradition of
altruistic giving to a new style of philanthropy that aligns
with business strategy.
Some critics attack this approach as too self-interested.
Strategic philanthropy may be a promising development
because it injects thinking about corporate social
responsibility into the strategic mainstream.
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