CORP3547 Wk17 Ethics-CSR in pandemic.pptx

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1. Ethics/CSR in pandemic Stakeholders and CSR responses 1 https://uzalendonews.co.ke/india-hits-5-million-coronavirus-cases-after-90000-new-infections/

2. Learning objectives Understand how unforeseen crises and disruptions may impact companies in terms of CSR responses Discuss the role of stakeholders in company CSR responses during a large-scale crisis Compare and contrast utilitarian vs. deontological motivation for CSR 2

3. Covid-19: ‘Unprecedented’ crisis? 3 Not the first pandemic Occurrence was not unexpected and unforeseen, but Impact/severity is indeed ‘unprecedented’ This session: Covid as example of crises Relate to other crises – past, present, and future

4. Is there still a business case for CSR in times of crisis? 4 Source: ONS Two possibilities for companies Firms decrease CSR investment High cost Priority on survival Firms increase CSR investment (or develop new approach) As seen from past crises, e.g. oil crisis in ‘70s, natural disasters Find out more: He and Harris (2020) Deloitte (2020) Fox (2020) Compared to past crises, this pandemic is “more global in scope, more profoundly impactful and far-reaching, and more complex than any other crisis that today’s decision-makers have experienced or contemplated.” (Deloitte, 2020: 2)

5. Stakeholders revisited 5 Find out more: Freeman (1984) Aguinis & Glavas (2012) Laplume et al. (2008) Parmar et al. (2010) F irms are affected by, and affect, many individuals and groups (Freeman, 1984) . These individuals and groups are referred to as the firm’s stakeholders. Top managers can enhance relationships with stakeholders by way of trust, honesty, integrity and mutual cooperation. Firms which are more considerate of their stakeholders  better relationships with stakeholders  longer-term success Positive outcomes not limited to finance Good stakeholder management especially relevant when the environment is dynamic and complex In crisis/recession, firms with CSR strategies performs better financially (Marti et al., 2015) and innovate better ( Asgary and Li, 2016). CSR’s insurance-like effect on firm’s stock prices when encountering negative events ( Shiu and Yang, 2017) Theoretically speaking, in times of crisis, firms must continue to honour and engage in their commitments to their stakeholders

6. Covid-19 CSR Examples 6

7. Philanthropy's response to Covid-19 Follow this link to the database 7

8. CSR motivation 8 Find out more: Aguilera et al. (2007) Logic behind motivation P rimary motivator: company benefits, promoting firm survival (self-interested or instrumental motivation)  Utilitarian Secondary motivator: potential benefits to relationships with stakeholders and industry participants (which may also bring financial performance) Third motivator: Deontological or the moral imperative to do what is right Sources of motivation Internal – Pressures from managers and employees External – Suppliers, customers, market, regulators In reality, these motivations may exist simultaneously, with a single action satisfying multiple motivations. E.g. restaurant using furlough scheme to benefit both workforce and community

9. Three types of CSR response: Degrees of integration 9 Find out more: Rangan et al. (2015) Manuel & Herron (2020) Philanthropy – activities not directly benefit the business through performance or profits Improved operations – activities that reduce waste or increase efficiency and effectiveness, though not always positively impacting profits Transformed business models - activities that create new ways of doing business in response to social or environmental problems New solutions rather than ‘add-on’

10. Furthe r thoughts on stakeholders 10 Find out more: Aguilera et al. (2007) Manuel & Herron (2020) Bansal et al. (2015) Watkins et al. (2015) External stakeholders Most firms reduced CSR investments during the Great Recession (2007-8) , but Reduction less likely for long-term CSR investment integrated into business strategy (donations, etc. are easily cut) Firms with better financial performance during recession  more likely to maintain CSR investments Internal stakeholders Employees view social responsibility as proxy for fairness and justice (Edelman, 2020) Fulfilling relational and moral purposes at work (deontological) Increasing economic security (utilitarian/instrumental) Therefore , promises to maintain jobs, increased health benefits and protections for employees at work are valuable internal CSR investments during the pandemic “Society is composed of much more than just powerful stakeholders” (Barnett, 2019: 173)

11. References Aguilera, R., Rupp, D., Williams, C. and Ganapathi, J. (2007), “Putting the S back in corporate social responsibility: a multilevel theory of social change in organizations ”, Academy of Management Review , Vol. 32 No. 3, pp. 836-863, Aguinis , H. and Glavas , A. (2012), “What we know and don’t know about corporate social responsibility: a review and research agenda”, Journal of Management , Vol. 38 No. 4, pp. 932-968. Asgary , N. and Li, G. (2016), “Corporate social responsibility: Its economic impact and link to the bullwhip effect”, Journal of Business Ethics , Vol. 135, pp. 665-681. Bansal, P., Jiang, G. and Jung, J. (2015), “Managing responsibly in tough economic times: strategic and tactical CSR during the 2008-2009 global recession”, Long Range Planning , Vol. 48 No. 2, pp. 69-79. Deloitte (2020), “COVID-19: Confronting Uncertainty through and beyond Crisis”, Monitor Deloitte, available at: https://www2.deloitte.com/global/ en /pages/about- deloitte /articles/covid-19/covid-19–confronting-uncertainty-through—beyond-the-crisis-.html# (accessed 25 November 2020). Edelman (2020), “Edelman trust barometer special report on COVID-19 demonstrates essential role of the private sector”, Edelman, March, available at: www.edelman.com/research/edelman-trustcovid-19-demonstrates-essential-role-of-private-sector (accessed 12 November 2020). Fox, C., Davis, P. and Baucus, M. (2020), “Corporate social responsibility during unprecedented crises: The role of authentic leadership and business model flexibility”, Management Decision , Vol. 58, No. 10, pp. 2213-2233. Freeman, R. (1984), Strategic Management: A Stakeholder Approach , Pitman Publishing, Boston, Massachusetts. 11

12. References He, H. and Harris, L. (2020), “The impact of Covid-19 pandemic on corporate social responsibility and marketing philosophy”, Journal of Business Research , Vol. 116, pp. 176-182. Laplume , A., Sonpar , K. and Litz , R. (2008), “Stakeholder theory: Reviewing a theory that moves us”, Journal of Management , Vol. 34 No. 6, pp. 1152-1189. Manuel, T. and Herron, T.L. (2020), “An ethical perspective of business CSR and the COVID-19 pandemic”, Society and Business Review , Vol. 15, No. 3, pp. 235-253. Marti, C., Rovira -Val, M. and Drescher, L. (2015), “Are firms that contribute to sustainable development better financially?”, Corporate Social Responsibility and Environmental Management , Vol. 22 No. 5, pp. 305-319. Parmar, B., Freeman, R., Harrison, J., Wicks, A., Purnell, L. and De Colle, S. (2010), “Stakeholder theory: the state of the art”, Academy of Management Annals , Vol. 4 No. 1, pp. 403-445. Shiu , Y. and Yang, S. (2017), “Does engagement in corporate social responsibility provide strategic insurance-like effects?”, Strategic Management Journal , Vol. 38 No. 2, pp. 455-470. Rangan , V., Chase, L. and Karim, S. (2015), “The truth about CSR”, Harvard Business Review , Vol. 93 Nos 1/2, pp. 40-49. Watkins, M., Ren, R., Umphress , E., Boswell, W., Triana , M. and Zardkoohi , A. (2015), “Compassion organizing: employees’ satisfaction with corporate philanthropic disaster response and reduced job strain”, Journal of Occupational and Organizational Psychology , Vol. 88 No. 2, pp. 436-458. 12

13. Ethics/CSR in pandemic Leadership, business models & CSR responses 13 https://tinyurl.com/y2ycvxpt

14. Learning objectives Understand the typology of firms in terms of CSR orientation, based on leadership and business model flexibility Recognise the underlying characteristics of firms based on their CSR in practice Realistically appraise firms based on their CSR responses 14

15. CSR as Usual(?) ‘People, planet, profit’ becomes more challenging Many companies forced to reduce CSR spending What explains the differences in CSR responses of companies? Focus: Role of authentic leadership and business model Key reading: Fox et al. (2020) 15

16. Factor I – Business model flexibility 16 Find out more: Osterwalder and Pigneur (2010) Freudenreich et al. (2020) Business model (BM) indicates what your business is and how it creates value Change in one/more components impacts on others Value should be co-created with stakeholders Some firms have adjusted their BM in response to Covid Depends on resource, capabilities, and market

17. Factor II – Authentic leadership 17 Find out more: Avolio & Gardner (2005) Carter & Greer (2013) Authentic leadership Positive approach to leadership Sense of purpose No one encompassing definition, but it may include these characteristics Ethics, morality, values, relational transparency, self-regulations, consistency, positive behaviour modelling In CSR, research suggested that authentic leaders consider all the firm’s stakeholders when making decisions and strive to help others Authentic leaders are mindful of shared value, beyond financial metrics

18. Typology of firms in crisis 18 Find out more: Fox et al. (2020)

19. Quadrant 1 – Taker firms 19 Find out more: Fox et al. (2020) Low authentic leadership, but with highly flexible business models. They perceive there is no other alternative than to retrench and focus on cost-saving (Lack of vision, creativity, optimism, etc.) Narrow set of stakeholders considered Q1 firms can reconfigure/repurpose resources But this would be directed at the bottom line Leaders may, however, be overwhelmed buy the situation Instinctively learning towards traditional profit-maximization behavior. Possible actions – layoff, furlough while continuing with share repurchase plans and dividend payments (i.e. benefiting shareholders) Dividends paid by US companies totalled to over half a billion dollars Taker firms may also put workforce in harmful situations (e.g. frontline staff) for profit This is despite the recent Business Roundtable statement emphasising stakeholder importance

20. Quadrant 2 – Failing firms 20 Find out more: Fox et al. (2020) Low authentic leadership, Many of these firms may have already been struggling, due to leadership’s inability to address changing environment in general May suffer from rigidity and inertia … low flexibility of business models Resources and capabilities are dedicated to the core product or service No capabilities or resources to reconfigure business model Cannot afford to make new commitments to stakeholders

21. Quadrant 3 – Symbolic giver firms 21 Find out more: Fox et al. (2020) High authentic leadership, Leaders have intention to continue CSR They may resort to symbolic activities (e.g. charitable donations) unrelated to core business to signal commitment to stakeholders … inflexible business models Limitations in some components of business model, e.g. High level of fixed assets, such as hotels and airlines Main activities not viable under lockdown Resources are not easily (re)deployable Symbolic giving is usually considered to be what “takers” do (e.g. for impression management or PR), but In crisis, there are considerable constraints that make substantive action more difficult.

22. Quadrant 4 – Substantive giver firms 22 Find out more: Fox et al. (2020) High authentic leadership, Leaders consider a wide range of stakeholders, with more transparency Optimistic when faced with uncertainty May be more creative … Highly flexible business models Command sufficient level of resources and capabilities Can afford to make more commitments Stakeholder may influence business model Flexibility allows for re-thinking More possibility of making transformational CSR response (Manuel and Herron, 2020)

23. PepsiCo as example of substantive giver firm Creativity in resource configuration Continuous learning Social responsibility (incl. to employees) 23 https://www.marketingweek.com/pepsico-ecommerce-focus/ https://www.beveragedaily.com/Article/2020/05/04/PepsiCo-Tailoring-innovation-around-coronavirus https://www.foodnavigator.com/Article/2020/07/14/PepsiCo-seeks-to-exploit-shift-to-home-cooking-and-immunity-focus-among-comfort-craving-consumers https://www.foodnavigator-usa.com/Article/2020/03/23/PepsiCo-gives-additional-compensation-to-workers-on-frontline-of-COVID-19-pandemic https://www.pepsico.co.uk/news/stories/supporting-communities-and-frontline-workers

24. Takers vs. Substantive givers: What’s the difference? 24 Find out more: Fox et al. (2020) Takers Substantive givers Focus Financial stakeholders/share Wide range of stakeholders Priority Short-term survival Long-term performance Advantage Lower risk of the ‘unknown’ Conducive of learning and innovation (due to adaptation with stakeholders) leading to new value propositions Disadvantage Risk developing rigidity Requires patience from shareholders

25. Which type of company is Amazon? 25 Find out more: Aguinis et al. (2020) https://www.nytimes.com/2020/04/05/technology/coronavirus-amazon-workers.html https://www.aboutamazon.com/news/company-news/how-amazon-is-helping-customers-get-groceries

26. References Avolio, B. and Gardner, W. (2005), “Authentic leadership development: getting to the root of positive forms of leadership”, The Leadership Quarterly , Vol. 16, pp. 315-338. Carter, S. and Greer, C. (2013), “Strategic leadership: values, styles, and organizational performance”, Journal of Leadership and Organizational Studies , Vol. 20 No. 4, pp. 375-393. Fox, C., Davis, P. and Baucus, M. (2020), “Corporate social responsibility during unprecedented crises: The role of authentic leadership and business model flexibility”, Management Decision , Vol. 58, No. 10, pp. 2213-2233. Freudenreich , B., Ludeke -Freund, F. and Schaltegger , S. (2020), “A stakeholder theory perspective on business models: value creation for sustainability”, Journal of Business Ethics , Vol. 166, pp. 3-18. Laplume , A., Sonpar , K. and Litz , R. (2008), “Stakeholder theory: reviewing a theory that moves us”, Journal of Management , Vol. 34 No. 6, pp. 1152-1189. Manuel, T. and Herron, T.L. (2020), “An ethical perspective of business CSR and the COVID-19 pandemic”, Society and Business Review , Vol. 15, No. 3, pp. 235-253. Osterwalder, A. and Pigneur, Y. (2010), Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers , John Wiley, Hoboken, NJ. 26

27. Ethics/CSR in pandemic Future of CSR after Covid-19 27

28. Learning objectives Understand the pandemic’s implications on “business as usual” Discuss how the pandemic has raised unresolved issues in CSR, especially in relation to the wider society (compared to individual firms) 28

29. Stakeholders 29 Find out more: Crane & Matten (2020) Frontline and ‘key’ workers as the most ‘essential’ stakeholders of business Widely applauded, but poorly paid (Lowrey, 2020) and exposed to danger (Lancet, 2020) Inequalities to worsen, even for so-called ‘essential workers’ WFH implications: How much does economic value creation rely on ‘overlooked and unrewarded’ labour at home and schools? Home ‘social reproduction’ (Ferguson, 2020) in economic value creation How to recognise the value that different stakeholders generate Stakeholder salience Essential workers may be classified as ‘dependent stakeholders’ as they lack power How do we consistently take into account their indispensability to society, given that they are under-appreciated?

30. CSR and soc ietal risk 30 Find out more: Crane & Matten (2020) Covid-19 has highlighted the role of business as both i ) source of societal risk, and ii) actor highly exposed to such new risks Management challenges Social obligations to retain employees, provide ‘essential services’, and deal with immediate impacts (e.g. producing vaccines and PPE) The role of business in providing goods and services to address social needs Most discussions in CSR – CSR viewed as a tool to manage risk for individual companies and their profitability Risks connected to pandemic are of broader scope More attention needed to understand ‘risk society’ (Beck, 1992) Modern societies are exposed to risk for which there are no mechanisms to cope Such risks are beyond individual decisions, or government interventions Societal actors (incl. companies) must be involved in negotiating and executing solutions, and become ‘ responsibilized ’ (Reinecke and Ansari, 2016) Key: CSR to shift from individual to societal conception of risk

31. Political economy of CSR 31 Find out more: Crane & Matten (2020) Covid-19 illustrates the more prominent roles of both governments and businesses Governments have key roles in handling pandemic CSR responses by companies going in the same direction, e.g. charitable activities, safeguarding workers, protecting stakeholders Question: What is a firm’s core purpose and its role in society? The ‘instrumental’ view of CSR is perhaps unfit for purpose (Scherer and Palazzo, 2011) Need to explore how different eco-political systems work, to understand what role business responsibility should play CSR needs to transcend the self-interest of the firm, and become part of societal governance

32. References Crane, A. and Matten, D. (2020), ‘Covid-19 and the future of CSR research’, Journal of Management Studies , doi:10.1111/joms.12642. Ferguson, S. (2020), Women and Work: Feminism, Labour, and Social Reproduction . London: Pluto Press. Scherer, A. G. and Palazzo, G. (2011), ‘The new political role of business in a globalized world: A review of a new perspective on CSR and its implications for the firm, governance, and democracy’. Journal of Management Studies , Vol. 48, pp. 899–931. The Lancet (2020). ‘The plight of essential workers during the COVID-19 pandemic’. The Lancet , Vol. 395, p. 1587. 32