Frame of reference
The theoretical framework will cover our three main subjects; CSR, the particularities of a service company and stakeholder theory. First CSR will be defined and CSR in practice will be discussed. The following section will describe Service organization and CSR in different industries. Lastly an elaboration of the Stakeholder theory will be executed.
What is CSR?
As early as 60 years ago the concept of CSR started to appear in the literature and many de-finitions have since then been developed (Schwartz & Carroll, 2003). The discussion of CSR usually falls within two general schools, those who mean that companies are only compelled to maximize their profit within the boundaries of law and minimal ethical con-straints (e.g. Friedman, 1970) and those who suggest a more broad obligation to the society (e.g. Carroll, 1979; Epstein, 1987; Schwartz & Carroll, 2003). In this section a discussion of CSR in theory will be carried through. As a base Carroll’s model will be used but other thoughts will also be presented. The section ends with a summary and the definition that will be used for this thesis
The limitation of CSR
Carroll develops in 1979 the model “Four Domains of Corporate Social Responsibility” and after that “The Pyramid of CSR” in the early 90s. In 1979 Carroll defines CSR as “…the economic, legal, ethical and discretional expectations that society has of organiza-tions at a given point in time” (Schwartz & Carroll, 2003). The pyramid leads to a few mi-sunderstandings, especially of the priorities of the four CSR domains. Instead Carroll de-velops another definition in 2003, “The three-domain model of CSR”. The three responsi-bilities of this model are; economic, ethical and legal. In this model the responsibilities overlap and in the center the three domains is simultaneously fulfilled (Schwartz & Carroll, 2003).
With the economic domain Carroll refers to the responsibility that has a direct or indirect positive economic effect on the company. The activities that fulfill this responsibility should maximize profit and/or maximize share value. Examples of this are action intended to increase sales, increase employee morale and improving the company’s public image. Ac-tions fall outside the domain if they are not intended to maximize profit when a more prof-itable alternative exist or if the company engages in them without any consideration of the consequences (Schwartz & Carroll, 2003). Friedman (1970) adopted a fairly different view of CSR and believes instead that companies should only be obligated to maximize their profit within the boundaries of law and minimal ethical constraints. He argues that doing more would be irresponsible. Furthermore, Friedman implies that managers that involves in CSR do this at the expense of shareholders, only to promote their own social, political, or career agendas. The resources should instead be used on improving the organization’s efficiency (Friedman, 1970).
The legal domain refers to a company’s responsiveness to legal expectations, demanded by society through federal, state and local jurisdiction. Legality is divided into three different categories; compliance, avoidance of civil proceedings and anticipation of the law. In com-pliance the company takes certain actions because the law allows them to do so. Avoidance of civil proceedings indicates that an organization undertake certain actions or behaviors since if they do not, they might get sued. The last category, anticipating the law, means that the organization engage in activities that slow down the process of new legislation (Schwartz & Carroll, 2003). McWilliams and Siegel (2001) believe that the legal aspect should not be included in the definition of CSR. Instead, they define CSR as “…action that appear to further some social good, beyond the interest of the firm and that which is re-quired by law” (McWilliams & Siegel, 2001, p.117). CSR according to them indicates that going beyond the law is CSR; an example of this would be to adopting progressive human resource. McWilliams and Siegel furthermore, exemplify some actions that they identify as CSR actions; developing non-animal testing procedures, recycling and supporting local businesses.
The ethical domain, that Carroll present refers to the ethical responsibility a company has, that is expected by the general public and stakeholders. Three ethical standards are in-cluded; conventional, consequential and deontological. The standards and norms that have been accepted by the organization, the industry, the society and the profession are defined as conventional standards. The consequential standard is an action that is considered ethi-cal when it endorses the good of an individual as well as the society and when it is intended to produce the greatest net benefit to the society. Lastly, the deontological domain focuses on those activities that reflect the company’s consideration of their duty or obligation; this includes for example citizenship, trustworthiness and caring (Schwartz & Carroll, 2003). Handy (2002) adopts a similar but more detailed perspective on corporate social responsi-bility. He believes that companies have responsibility to their customers, employees and to the community. This responsibility should not be subordinate to making profit for their shareholders but given at least the same priority. Both Carroll and Handy argue that it is significant for companies to take responsibility for society and other stakeholders than shareholders. They also stress the importance to have a sustainable balance between the different domains.
In Carroll’s model all three components should be considered but not of the expense of each other. A company should find a place where all components are taken into account and their CSR work is as sufficient as possible.
From the discussion above the complexity of CSR is acknowledged and it can be a broad and occasionally a confusing issue. Moreover, many different views exist on the subject of the matter. This thesis take the standpoint that CSR is the responsibility a company has beyond the law towards the society including employees, the environment and the society as a whole. CSR is about using the resources to gain society but not to an extent that jeo-pardizes the economy of the entity. Furthermore, CSR is to be aware that organizations are a significant part of the society that they operate in and to understand that doing business comes with a responsibility. In the long run, this responsibility may also be beneficial for the organization.
CSR in practice
To further gain knowledge within the subject of the matter, CSR in practice needs to be considered. This in order to understand the activities that a company may undertake that can be classified as socially responsible. Moreover, it is significant to remember that CSR activities and practice used are not intended to be exactly the same in different companies. Companies have diverse resources and all cannot take responsibility to the same extent. The industry in which the organization operates also affects how the company will engage in CSR.
According to Lantos (2001), organizations may practice three different forms of CSR; ethi-cal CSR, strategic CSR and altruistic CSR. The three approaches are mutually exclusive and based on the activities’ nature (required vs. optional) and the purpose (stakeholders’ good, firm’s good), or both. Practicing ethical CSR means going beyond the firm’s economic and legal obligations and take actions that is morally mandatory. A corporation is morally re-sponsible towards any individual or group that might be harmed or injured by a particular course of action. The tradeoffs in ethical CSR are usually between short-run profit and moral actions. An example of this is when an organization spends money on pollution con-trol and reduction, this may reduce shareholder´s profit. However, the alternative is con-sidered to be unethical. Ethical CSR may in the long-run generate goodwill by building the public’s trust in the company. This will probably minimize the cost of fines and also bad publication that otherwise may prevail from unethical behaviour (Lantos, 2001).
Strategic CSR is an activity where there is a win-win situation. Hence, both the company and some of the stakeholder will benefit. This type of CSR actions implies short-run sacri-fices, yet the actions usually result in long-run gains. An example of strategic CSR was when Ford campaigned that children should be seated in booster-seats and gave away mil-lions such seats. This generated goodwill among customers and government regulators and in the end was the resources spent justified. This is in fact the motives for firms to engage and invest in strategic CSR; they believe that the investment will be profitable in the end (Lantos, 2001).
Altruistic CSR is when organizations are contributing to the common good and making the society a better place on some sort of expense of the firm, linking corporate competences of the company to societal and community needs. Altruistic CSR goes beyond ethics and are actions that are not necessary for the company to take; it usually lies outside the firm’s activities. The actions gives back to society and furthermore also some social good. This regardless if the company financially gain from it, since return on the investment should not be the motive for the firm. Examples of altruistic CSR are activities that aid the society to fight drug and alcohol problems, poverty, crimes and chronic unemployment (Lantos, 2001).
1.2 Problem discussion
2 Frame of reference
2.1 What is CSR?
2.2 Service organizations
2.3 Stakeholder theory
3.1 Research design
3.2 Data collection
3.3 Data analysis
4 Empirical findings
4.1 Presentation of Elmia
4.2 Interview participants
4.3 Summary of Empirical Findings
5 Analysis & Results
5.1 Diverse knowledge about the CSR definition
5.2 The practice and purpose of CSR
5.3 Stakeholders influence on CSR
6.2 Recommendations for further studies
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