THEROIES RELATED TO

“CORPORATE SOCIAL
RESPONSBILITY”

Presented to : Dr Ahsan Riaz

Presented by : Arslan raza
Corporate social responsibility
• Corporate Social Responsibility is the continuing
commitment by business to behave ethically and contribute
to economic development while improving the quality of
life of the workforce and their families as well as of the
local community and society at large (Lord Holme and
Richard Watts )

• How companies manage the business processes to

produce an overall positive impact on society” (Baker,
2004)

• The idea that business has a duty to serve society in

general as well as the financial interests of stockholders.
(Pearce & Robinson)
Four components of CSR :
CSR encompasses the
• Economic
• Legal
• Ethical
• Discretionary (philanthropic)
According to Carroll’s CSR Pyramid
Theories related to CSR
1. STAKE HOLDER THEORY :
 In 1984, R. Edward Freeman
proposed this theory which argues that a firm should create value
for all stakeholders, not just shareholders.

Applications of STAKE HOLDER THEORY :

 protect the basic rights of internal and external stakeholders
 once become able to recognize and honors the individual rights.
 Focused on social wealth of organization as a whole

Criticism of STAKE HOLDER THEORY :

 Stakeholder theory did not deliver the main objective of the
corporation.
 Sometimes exploit the right of another.
 2. Shareholder Value Theory :
 The only one responsibility of business towards the
society is the maximization of profits to the shareholders,
within the legal framework and the ethical custom of the
country. ( New York Times Magazine in 1970, Friedman )
Applications of Shareholder Theory:
 It creates good reputation of a organization in a market.
 Attract the investors towards its company.
 Shareholders considered the prime role in corporate governance
because they are the source of capital and finance.

Criticism on Shareholder Theory:

 Short term profits and ignores the long term profits.
 Only supports the shareholders wealth.
 Ignore economic performance of whole system.
2. Corporate Citizenship Theory :
 The term ‘corporate citizenship’ was introduced in the 1980s.
 Many companies are involved in philanthropic activities. Philanthropic
means to give charity. Corporate citizenship’’ is used in a sense of
corporate philanthropy
Carroll said :
 ‘be a good corporate citizen’ includes ‘actively engaging in acts or
programs to promote Human welfare or goodwill.
Applications of Corporate Citizenship Theory:
 it is give emphasis to that citizenship activities avoid risks
 increase corporate status
 Increases the financial performance of effective firms
Criticism on Corporate Citizenship Theory:
 Here is the lack of clarity about who is responsible for creating the
standards for global citizenship (Munshi, 2004)
 Critics said argue that companies should not worry themselves with
issues other than maximizing shareholders wealth.
Arguments of corporate social
Responsibility :
 Business has to respond to the needs and expectations of
society
 Improvement of the social environment benefits both society
and business
 Social responsibility discourages additional governmental
regulation and intervention
 Business has a great deal of power, which should be
accompanied by an equal amount of responsibility
 Internal activities of the enterprise have an impact on the
external environment
 The concept of social responsibility protects interests of
stockholders
 Social responsibility creates a favourable public image.
 Arguments Against corporate Social
Responsibility :
 Social responsibilities could reduce economic efficiency

 Social responsibility would create excessive costs for

business

 Weaken international balance of payments

 Business has enough power, and social involvement

would further increase its power and influence

 Business people lack the social skills necessary to deal

with the problems of society

 Business is not really accountable to society