Lecture 5 Flashcards
(10 cards)
What is Corporate Social Responsibility (CSR)?
CSR refers to a company’s voluntary integration of social, environmental, and ethical concerns into its business operations and stakeholder interactions.
What are two widely accepted definitions of CSR?
Thomsen & Conyon: Aligning business interests with society’s long-term best interests.
European Commission: Integrating social and environmental concerns in business operations.
What are the four corporate responses to CSR?
Reactive – Avoid responsibility (e.g., ExxonMobil funding climate change denial).
Defensive – Compliance-focused, minimal engagement (e.g., tobacco industry’s fight against regulation).
Accommodative – Accepting responsibility but only when necessary (e.g., automakers adopting ISO 14001).
Proactive – Actively integrating CSR into business strategy (e.g., Patagonia’s environmental commitments).
Name two benefits and two criticisms of CSR.
✔Pros:
Builds trust and reputation with stakeholders.
Helps with risk management and long-term sustainability.
❌ Cons:
Increases costs, reducing short-term profitability.
Some firms use CSR for greenwashing (misleading ethical branding).
What was Milton Friedman’s argument against CSR?
Businesses have one responsibility: maximize shareholder profit.
Spending money on CSR reduces shareholder returns.
Managers (agents) should not make charitable decisions on behalf of shareholders (principals).
What is Socially Responsible Investment (SRI)?
SRI integrates environmental, social, and governance (ESG) criteria into investment decisions to support ethical businesses.
What are two examples of SRI funds influencing corporate governance?
BlackRock & Vanguard – Influence firms to adopt sustainable practices.
EU Sustainable Finance Disclosure Regulation (SFDR) – Requires ESG integration in investment decisions.
What are the three ESG dimensions?
Environmental – Pollution, carbon footprint, waste management.
Social – Human rights, employee treatment, community impact.
Governance – Executive compensation, board accountability, transparency.
What does research say about CSR’s impact on financial performance?
Positive Impact: Studies show CSR improves brand loyalty, reduces risk, and increases employee motivation.
Negative Impact: Some studies (e.g., Manchiraju & Rajgopal, 2017) found mandatory CSR spending lowered stock prices.
Mixed Results: CSR’s impact varies by industry, country, and CSR approach.
Name three common ethical issues in corporate governance.
Bribery – (e.g., Siemens bribery scandal).
Insider Trading – (e.g., Martha Stewart case).
Greenwashing – (e.g., Volkswagen “Dieselgate” scandal).
