Page 237 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Unit 12: Behavioural Implementation

service advertisement campaigns, donations, medical camps, public welfare activities etc. Notes
A commitment to full corporate responsibility requires strategic managers to attack social
problems with the same zeal in which they tackle business problems.
Business managers should keep in mind that economic and legal responsibilities are mandatory,
ethical responsibilities are expected, and discretionary responsibilities are desirable.

The above four responsibilities are listed in order of priority. A business firm must first make a
profit to satisfy its economic responsibilities. A firm must also follow the laws as a good
corporate citizen. Carrol, however, argues that business firms have obligations beyond the
economic and legal responsibilities; that firms must also fulfill its social responsibilities. Social
responsibility includes both ethical and discretionary responsibilities, but not economic and
legal responsibilities.

12.5.2 Need for CSR: The Strategy

After considering the arguments for and against CSR, it becomes evident that it is in the
enlightened self-interest of companies to be good corporate citizens and devote some of their
resources and energies to employees, the communities in which they operate, and society in
general. There are five important reasons why companies should undertake social
responsibilities.

Self-interest of the Organisation
Every organisation obtains critical inputs from the environment and converts them into goods
and services to be used by society at large. In this process they help shareholders to get appropriate
returns on their investment. It is expected that organisations acknowledge and act upon the
interests and demands of other stakeholders such as citizens and society in general that are
beyond its immediate constituencies – owners, customers, suppliers and employees. That is,
they must consider the needs of the broader community at large, and act in a socially responsible
way.
It generates Internal Benefits

CSR generates internal benefits like employee recruitment, workforce retention and training.
Companies with good CSR reputation are better able to attract and retain employees compared
to companies with tarnished reputations. Some employees just feel better about working for a
company committed to improving society. This can contribute to lower turnover and better
worker productivity. This also benefits the firm by way of lower costs for staff recruitment and
training. Provision of good working conditions results in greater employee commitment.

It Reduces Risks

CSR reduces the risk of damage to reputation and increases buyer patronage. Consumer,
environmental and human rights activist groups are quick to criticise businesses that are not
socially responsive. Pressure groups can generate adverse publicity, organise boycotts, and
influence buyers to avoid an offender’s products. Research has shown that adverse publicity is
likely to cause a decline in a company’s stock price.

In the Best Interest of Shareholders

CSR is in the best interest of shareholders. Well-conceived social responsibility strategies work
to the advantage of shareholders in several ways. Socially responsible behaviour can help avoid

LOVELY PROFESSIONAL UNIVERSITY 231