Why CSR?
Corporate Social Responsibility: An Introduction
Overview of Corporate Social Responsibility (CSR)
- Aradhna Malik introduces the MOOC course on corporate social responsibility, emphasizing its significance and relevance in today's corporate landscape.
- The lecture will cover various theories related to CSR, including corporate social initiatives, performance, and citizenship.
Theories of Corporate Social Responsibility
Legitimacy Theory
- Legitimacy theory posits that organizations must meet societal expectations as they derive resources from their environment.
- Organizations impact multiple environments—physical, social, ecological, and political—and are expected to give back to these environments.
Societal Expectations
- For an organization to thrive, it must align its value system with that of the society it operates within.
- Corporations need to understand societal expectations and ensure their operations resonate with community values.
Methods of Organizational Legitimization
Reporting Practices
- Organizations can legitimize their actions by transparently reporting their activities and performance to stakeholders.
Public Impression Management
- Companies may alter stakeholder perceptions without changing actual behaviors; for example, justifying environmental impacts by highlighting benefits.
Distraction Techniques
- Organizations might divert attention from negative issues by promoting unrelated positive initiatives (e.g., building schools while acquiring farmland).
Balancing Perceptions
Understanding Organizational Legitimacy and Stakeholder Theory
Strategies for Organizational Legitimization
- Organizations often engage in CSR activities, such as distributing free blankets and meals, to divert attention from negative impacts like farmland loss.
- A key strategy involves changing community expectations regarding organizational performance, encouraging communities to adapt their views on development-related losses.
- Organizations may assert that the destruction of farmland is an inevitable consequence of development, urging communities to adjust their expectations accordingly.
Limitations of Legitimacy Theory
- The legitimacy gap arises from the dynamic nature of societal expectations versus organizational objectives, making it challenging for organizations to align with evolving community needs.
- Unexpected events (e.g., accidents or scandals) can threaten an organization's legitimacy by damaging its reputation and undermining efforts to meet community expectations.
- Vagueness around disclosure practices presents another limitation; organizations struggle with what information to share and why certain disclosures are made or withheld.
Introduction to Stakeholder Theory
- Stakeholder theory builds upon legitimacy theory, emphasizing that organizations must act in ways deemed important by stakeholders and report relevant information back to them.
- Stakeholders include individuals or groups affected by or capable of influencing an organization’s decisions; they can be formal or informal entities.
Types of Stakeholders
Based on Involvement
- Internal stakeholders: Individuals within the organization who have vested interests in various aspects of its operations.
- External stakeholders: Groups outside the organization that can influence or are influenced by its actions but do not belong internally.
Based on Influence
- Primary stakeholders: Directly affected individuals/groups (e.g., employees impacted by changes in company policy).
Stakeholder Theory and Institutional Theory Overview
Understanding Key Stakeholders
- Key stakeholders are influential individuals or groups, such as policymakers and community leaders, who can significantly impact an organization through their power, influence, or financial resources.
- There are four types of stakeholders based on their interest and power:
- Promoters: Highly interested with the power to drive decisions positively or negatively.
- Defenders: Have a vested interest but limited actual influence over decisions.
Types of Stakeholders
- Latents: Lack immediate interest but possess potential influence if they choose to engage. They observe from the sidelines but can affect outcomes when motivated.
- Apathetics: Show minimal interest and have little power; often unaware of decisions affecting them. Their indifference means they do not actively participate in discussions.
Perspectives on Stakeholder Theory
- The ethical perspective posits that all stakeholders deserve fair treatment regardless of their power level. Managers should prioritize the welfare of all affected parties, even if it impacts financial performance.
- A limitation of this perspective is managing conflicting interests among diverse stakeholders, which may challenge profitability.
Managerial Perspective on Stakeholders
- The managerial perspective emphasizes accountability primarily to economically powerful stakeholders. It raises questions about prioritizing stakeholder voices and determining whose interests take precedence.
Introduction to Institutional Theory
- The institutional theory examines how organizations operate within social frameworks defined by norms and values regarding acceptable economic behavior.
Dimensions of Institutional Theory
- One key dimension is isomorphism, which compels organizations facing similar environmental conditions to behave similarly in terms of corporate social responsibility (CSR).
Types of Isomorphism
- Three types exist:
- Coercive Isomorphism: Results from external pressures from institutions or communities that compel compliance; failure to conform can lead to serious consequences.
Real-world Implications
Understanding Isomorphism in Organizational Behavior
Types of Isomorphism
- Mimetic Isomorphism: This occurs when organizations imitate the practices of others, particularly when they struggle to innovate independently. For instance, if one sugar factory adopts a community initiative, others may follow suit without developing their unique approach.
- Examples of Mimetic Practices: Organizations might engage in similar community support activities such as using waste materials for packaging or providing affordable products to local communities. Pharmaceutical companies may establish clinics for disadvantaged groups after observing similar actions by peers.
- Normative Isomorphism: This type reflects a shared belief among organizations about the importance of social responsibility. Companies participate in community initiatives not due to external pressure but because they feel it is inherently valuable and aligned with societal expectations.
Decoupling in Institutional Theory
- Definition of Decoupling: This concept refers to the disconnect between an organization’s formal structure or stated practices and its actual operations. Organizations may present a socially responsible image while their internal practices do not align with this portrayal.
- Impact on Public Perception: Through selective disclosure, organizations can create a favorable public impression that may not accurately reflect their true impact or behavior regarding social responsibility.
Theoretical Framework Integration
- Linking Theories: The integration of legitimacy theory and institutional theory leads to stakeholder theory, which emphasizes organizational accountability and the need for legitimacy within business practices.
- Organizational Motivations: According to these theories, organizations aim for stability and legitimacy while conforming to established norms within their industry. These motivations drive corporate social responsibility (CSR) behaviors.
Homogeneity Among Organizations
- Conformity Across Industries: Similarities in CSR practices emerge as organizations within the same field adopt comparable strategies based on normative pressures. For example, pharmaceutical companies might provide free health services while utility companies offer subsidized electricity.
- Isomorphic Motives in Action: The tendency for organizations to replicate successful CSR initiatives leads to homogeneity where different entities contribute similarly towards societal good, reflecting shared values across industries.
Conclusion