Unit 2
CSR and Ethics in Strategic Management
Presented by:
Bal Ram Chapagain, PhD
June 5, 2025 [email protected] 1
What is your understanding of CSR?
Concept of Corporate Social Responsibility (CSR)
There are varieties of definitions and interpretations of
corporate social responsibility (CSR).
But, the concept of CSR is essentially around the
question of what should be the role of business in society.
In a nutshell:
“CSR may be defined as the obligation of business
management to: obey the law, run the business in an
ethical manner, fulfil the prudent interests of different
stakeholders without compromising the sustainability of
business as well as the environment, and give something
back to society simultaneously.”
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Basic Elements of CSR
1. Responsible Earning
Obeying the applicable laws & regulations
Ethical conduct of business (descriptive & normative ethics)
Fulfilment of prudent interests of all stakeholders beyond
minimum requirements of law
Environmental integrity/sustainability
2. Spending for Social Causes
Giving back to society (e.g., contributing to community
education, health, infrastructure, and helping needy people)
However, “responsible earning” is more important than
“spending for social causes”.
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CSR vs. Window Dressing
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Elements of Socially Responsible Organizations
1. Responsible philosophy, strategy, and action plan:
Embedding socially responsible aspirations into the
business vision, mission & values; preparing CSR strategy
and action plan
2. Responsible business practices in day-to-day activities:
Legal compliance
Ethical conduct of business
Good corporate governance
Fulfillment of prudent interests/needs of stakeholders
Environmental integrity
Creating shared value
Giving something back to society
Measurement and reporting of CSR activities etc.
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Major Theoretical Perspectives on CSR
(that provide insights into the social responsibilities
of strategic decision makers)
1. Friedman’s Shareholder Theory
2. Freeman’s Stakeholder Theory
3. Carroll’s CSR Pyramid
4. Porter & Kramer’s CSV Approach
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Friedman’s Shareholder Theory (1970)
Maximize profit
Create employment opportunities, pay taxes
Play within the rules of the game
Managers are neither trained nor responsible
for meeting social goals.
Aligning resources to meet social goals is the
duty of government.
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Freeman’s Stakeholder Theory (1984)
Business has to fulfill the expectations of
different stakeholders, not just shareholders.
Employees
Other stakeholders Shareholders
(e.g., environmentalists,
media, NGOs etc.)
Government Competitors
Business Firm
Suppliers Customers
Communities
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Carroll’s CSR Pyramid (1991)
There are four basic responsibilities of business toward
society. They are: economic, legal, ethical and philanthropic.
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Porter and Kramer’s CSV Approach (2011)
Creating shared value (CSV) is concerned with creating value
for business & society simultaneously.
CSV is not about sharing the fixed resources; rather
expanding the pie by reconceiving the traditional way of doing
business.
Examples:
Nestle in India (working with farmers)
Dow Chemicals in Canada (work-life balance)
Wal Mart in USA (reducing packaging, rerouting trucks,
recycling plastics),
Grameen Bank in Bangladesh (banking for the poor)
SCBNL (use of energy efficient lights and equipment)
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The Link between CSR and Competitive
Advantage
CSR Practices toward: • Enhanced reputation
• Employees • Stakeholder support
• Customers • Talent attraction, • Competitive
• Investors motivation & retention Advantage
• Community • Customer attraction & (Low Cost and/or
Differentiation
• Environment loyalty Advantages)
• Government • Cost & risk reduction
• Ethics etc. • Easy access to capital etc.
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Concept of Business Ethics
The term “ethics” has been coined from the Greek word
“Ethikos” which means character.
Thus, when applied to business, this simply means
“business with character”.
Specifically, business ethics is concerned with doing the
right things by business (or who represent it) even when
no one is looking/noticing/compelling.
“Right” or “wrong” should be based on morality as
opposed to, for example, commercially, strategically or
financially.
“Ethics” has become a buzzword in today’s business world.
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Ethical Decision Making:
Ethical decision making is a process of making a choice
from among available alternatives that considers morally
right thing to do.
Ethical decision making involves the following steps:
Define the problem
Collect relevant information
Identify promising options
Evaluate options (based on moral principles and stakeholder
concerns as opposed to merely personal/business benefits)
Make a choice
Implement your choice and reflect on the outcome
Reasons for Unethical Behavior
1. Desires for personal gain
2. Short-run materialistic attitude
3. Conflict of interest
4. Cross-cultural contradictions
5. Unclear policies and loopholes in the law
6. Poor ethical culture
7. Implicit bias (e.g., due to the belief that women are less
confident) and explicit bias (due to manager’s very nature)
Case Incident: “Who is (Un)ethical?”
Hari and Madan were college friends but now they are closest
competitors in a building construction industry. One day Hari was
preparing a tender form for a building contract. In the meantime, he
invited Madan into his office for reflecting on the college days as
well as to chat about business in general. Hari believed that while he
is out of the room, Madan will look at what is on his desk. Hari
deliberately went out of his office room just for few minutes leaving
a dummy tender at his office table. Madan captured this information
in his cell phone to guide his tender while Hari was outside. Hari
later tendered for a lower sum, and got the contract.
Questions:
1. Who is (un)ethical in this case? Why?
2. Which ethical issue(s) do you think relevant in this case? Discuss.
3. Does Madan have a legitimate ethical complaint? Why or why
not?
4. What do you think will
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Concept of Corporate Governance
In simple words, governance is a system by which
countries, companies or any other entities are governed,
i.e., operated, regulated and controlled.
Thus, corporate governance is a system by which
companies are operated, regulated and controlled.
A system generally includes a set of policies, procedures,
rules, structures, rights, and responsibilities to guide the
behavior of individuals as well as entities.
Simply put: 'good corporate governance' is simply doing
'good business'.
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Corporate Governance Essentials
Clear mission, vision, values, and code of conduct
Clearly defined organization structure
Independence, diligence, and appropriate size of BOD
Independent and efficient auditing
Legal and ethical compliance
Robust risk management framework
Effective monitoring of conflict of interest
Senior management must ‘walk and talk’
Business activities should be system driven
- Objectives, Budgets, and Procedures
- Information flow internally and to the external stakeholders
- Effective evaluation & control systems
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Impact of good corporate governance on
corporate performance
Risk reduction
Enhanced reputation of business
Confidence among shareholders, investors and other
stakeholders
Business growth and development
Competitive advantage
Improved profitability and stock price appreciation
THANK YOU !
