{"id":44,"date":"2015-04-21T18:43:20","date_gmt":"2015-04-21T18:43:20","guid":{"rendered":"https:\/\/courses.candelalearning.com\/masterybusiness1xngcxmaster\/?post_type=chapter&p=44"},"modified":"2015-07-11T21:38:54","modified_gmt":"2015-07-11T21:38:54","slug":"reading-stages-of-corporate-responsibility","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/clinton-introbusinesswmopen\/chapter\/reading-stages-of-corporate-responsibility\/","title":{"raw":"Reading: Demands for Corporate Social Responsibility","rendered":"Reading: Demands for Corporate Social Responsibility"},"content":{"raw":"

Stakeholder Pressure<\/h2>\r\nMost of the pressure on businesses\/corporations\u00a0in the last twenty-five\u00a0years has come from shareholders. More recently, however, a different source of pressure\u2014the demand for\u00a0corporate social responsibility (CSR)\u2014has emerged, which is forcing directors into new governance territory occupied by stakeholders other than shareholders. While pressure on corporate executives to pay greater attention to stakeholder concerns and make CSR an integral part of corporate strategy has been mounting since the early 1990s, such pressure is only now beginning to filter through to the board of directors who are responsible for making decisions for the corporation.\r\n\r\nThe emergence of CSR as a more prominent item on a board\u2019s agenda reflects a shift in popular opinion about the role of business in society and the convergence of environmental forces, such as the following:\r\n

Globalization<\/h3>\r\nThere are now more than 60,000 multinational corporations estimated to be in the world (World Investment Report, 2004).\u00a0Perceptions about the growing reach and influence of global companies have\u00a0drawn attention to the impact of business on society. This has led to heightened demands for corporations to take responsibility for the social, environmental, and economic effects of their actions. It has also spawned more aggressive demands for corporations to set their sights on limiting harm and actively seeking to improve social, economic, and environmental circumstances.\r\n

Loss of Trust<\/h3>\r\nHigh-profile cases of corporate financial misdeeds (Enron, WorldCom, and others) and of social and environmental irresponsibility (e.g., Shell\u2019s alleged complicity in political repression in Nigeria; Exxon\u2019s oil spill in Prince William Sound in Alaska; Nike\u2019s and other apparel makers\u2019 links with \u201csweatshop\u201d labor in developing countries; questions about Nestl\u00e9\u2019s practices in marketing baby formula in the developing world) have contributed to a broad-based decline in trust in corporations and corporate leaders. The public\u2019s growing reluctance to give corporations the benefit of the doubt has led to intensified scrutiny of corporate impact on society, the economy, and the environment, and a greater readiness to assume\u2014rightly or wrongly\u2014immoral corporate intent.\r\n

Civil Society Activism<\/h3>\r\nThe growing activity and sophistication of \u201ccivil society\u201d organizations, many of which are oriented to social and environmental causes, have generated pressure on corporations to take CSR seriously. The International Chamber of Commerce, a global advocacy group for the private sector, observed in 2000 that \u201cnon-governmental organizations have gained an enormous influence\u201d over corporate decision making, as quoted in Barrington.[footnote]2000, January\u2013June.[\/footnote] Well-known international nongovernmental organizations (NGOs), such as Oxfam, Amnesty International, Greenpeace, the Rainforest Action Network, and the Fair Labor Association, have influenced corporate decision making in areas such as access to essential medicines, labor standards, environmental protection, and human rights. The advent of the Internet has increased the capacity of these organizations\u2014as well as a plethora of national and local civic associations\u2014to monitor corporate behavior and mobilize public opinion.\u201cCivil society\u201d is sometimes described as the part of society that exists between the state and the market. A more formal definition is \u201cthe voluntary association of citizens, promoting their values and interests in the public domain,\u201d according to Saxby and Schacter.[footnote]2003, p. 4.[\/footnote] Kaldor, Anheier, and Glasius[footnote]2003, p. 2.[\/footnote] estimate that there are approximately 48,000 international nongovernmental organizations (NGOs) and that total membership in international NGOs grew by about 70% between 1990 and 2000.\r\n

Institutional Investor Interest in CSR<\/h3>\r\nThe growth in \u201csocially responsible investing\u201d has created institutional demand for equity in corporations that demonstrate a commitment to CSR. Recent growth in assets involved in socially responsible investing has outpaced growth in all professionally managed investment assets in the United States, even though the mainstream financial community has been slow to incorporate nonfinancial factors into its analyses of corporate value.\u201cBig investors want SRI research: European institutions to allocate part of brokers\u2019 fees to \u2018nontraditional\u2019 information.\u201d[footnote]Financial Times,\u00a0<\/em>UK, October 18, 2004.[\/footnote]\r\n\r\nThese trends indicate that there is both a growing perception that corporations must be more accountable to society for their actions and a growing willingness and capacity within society to make corporations accountable. These developments have\u00a0profound implications for the future of corporate governance, suggesting that boards will have to deal with many of the following:\r\n