A blog touching on governance issues important for the open exchange of ideas between the business community and academia.

Corporate Social Responsibility: Why Directors Should Care

Mon, 2013-03-11 10:58

Corporate Social Responsibility: Why Directors Should Care

Corporate Social Responsibility (CSR) is increasingly viewed as a topic of strategic importance. The vast majority of Fortune 1000 companies now engage in social and environmental responsibility activities, and CSR spending has reached unprecedented levels. For example, in 2010, Walmart gave more than $340 million in cash to charity, and Alcoa gave away 6.2 percent of its pre-tax profit. Keep in mind that these numbers represent only a portion of total CSR spending; others include environmental initiatives, volunteering programs, and workplace safety.

With the stakes so high, one might expect CSR to be a priority among corporate directors. Yet many directors remain wary, skeptical the CSR makes business sense, and unsure whether CSR even belongs under their purview. The truth is, CSR can have lasting effects on the competitive standing of a company, and this makes it critical for directors to add their voice to the conversation.

CSR presents both upside potential and downside risk. The upside potential of CSR is considerable. For example, my research shows that if managed correctly, CSR has the potential to enhance customer loyalty, intent to invest in company stock, employee engagement, and customer service delivered by employees. A colleague’s research even shows that companies that are more engaged in CSR tend to be more innovative, introducing more products than their peers.

Perhaps less understood are the downside risks of engaging in CSR. CSR can backfire for a number of reasons. One surprisingly common scenario is an executive who addresses a “pet project” without the support of other stakeholders; despite the executive’s best intentions, these initiatives are often wasteful and subsequently jettisoned when the executive quits. A second recipe for failure is engaging in CSR without any clear business objectives. Without social and business targets, it is difficult to measure and adjust CSR strategy so that gains are maximized.

Given the upside potential and downside risks of CSR, companies need to manage CSR carefully. Directors are among the best qualified to provide thoughtful guidance on how to seize the opportunities and avoid the pitfalls. As stewards of the long-term interests of the company, directors have a – dare I say it – responsibility to make CSR part of the conversation.

About the Author

Headshot of Daniel Korschun
Daniel Korschun
Stephen Cozen Research Scholar in Marketing
Marketing

Daniel Korschun is a Fulbright Scholar, Stephen Cozen Research Scholar in Marketing and an Associate Professor of Marketing. He is a fellow of both the Institute for Strategic Leadership and the Center for Corporate Governance at LeBow.

Dr. Korschun’s latest research examines employee and consumer reactions to companies that take controversial political stands. His research on stakeholder responses to corporate social responsibility is published in premier journals such as the Journal of Marketing, Academy of Management Review, MIT-Sloan Management Review, Journal of the Academy of Marketing Science, Journal of Public Policy & Marketing, Journal of Business Research, and the Journal of Business Ethics.

His book, We Are Market Basket (co-authored with Grant Welker, AMACOM), tells the true story of a grassroots movement to reinstate a beloved CEO and save a $4.5 billion supermarket chain. The book was named a top 15 business book of 2015 in Forbes and was also recognized as the Best General Business Book of 2015 by influential distributor CEO-READ.

In the popular press his work appears in the Harvard Business Review, Washington Post, McKinsey Quarterly, Knowledge@Wharton, Salon, and other publications. He has offered expert commentary to the New York Times, The Boston Globe, NPR-Marketplace, LA Times, USA Today, Bloomberg, CBC Canada, and many others. He appears periodically as a guest on Wharton Business Radio (Sirius 111).

On the teaching front, Dr. Korschun teaches PhD, executive MBA’s, Master’s, and undergraduates. He is a recipient of the prestigious Rothwarf Award for Teaching Excellence, the highest teaching award given to tenure-track faculty at Drexel University.

Dr. Korschun delivers keynote speeches and is frequently invited as a speaker at company, industry, and academic conferences.

The Center’s research and programmatic efforts advocate for leading governance practices in the public and private sectors.

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Any opinions expressed here, except as specifically noted, are those of the individual authors or commenters and do not necessarily represent the views or policies of Drexel University.