Corporate Social Performance: Definition & Responsibilities

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  • 0:01 Corporate Social…
  • 1:03 Basic Terminology Review
  • 2:33 Corporate Social Performance
  • 4:57 Importance of Social…
  • 5:42 Lesson Summary
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Lesson Transcript
Instructor: Jennifer Lombardo
How can managers judge if their company is providing good corporate citizenship or being socially responsible? In this lesson, you will learn about how a corporate social performance model is used to critique if a company is providing shareholder satisfaction.

Corporate Social Performance Model

Do you think you could judge if Microsoft, Google, and Coca-Cola are socially responsible? How can a manager judge if a company is a good corporate citizen? Recently, a model was developed to help determine if a company was being responsible to their legal and economic stakeholders, while also being socially responsible. This model is called a corporate social performance model and consists of three elements (social responsibility categories, mode of social responsiveness, and social issues of stakeholders), which are drawn into a three dimensional model for easy interpretation by managers.

In order to fully understand the model, you first need to brush up on some basic terminology. In this lesson, we will first review the definition of social performance, corporate social responsibility, and corporate citizenship. In addition, we will explain the responsibilities of corporate social performance.

Basic Terminology Review

Let's first review some basic terminology that could possibly confuse you during this lesson. Companies have had increasing pressure to be profitable but also ensure that their stakeholders are happy in numerous ways through philanthropic work and protecting the environment. The following terms underlie the importance of having satisfied stakeholders.

Corporate Social Responsibility

Corporate social responsibility (CSR) is the use of a business's resources to respond to help solve social problems and achieve social goals. An example of a company practicing good CSR is Prime Five Homes that builds sustainable homes which use less energy. Their stakeholders are satisfied that the homes are better for the environment. In addition, Prime Five Homes also takes a portion of all home sales to use for charitable activities.

Corporate Citizenship

Corporate citizenship is when a company shows commitment to ethical behavior by balancing stakeholders' needs and protecting the environment. The difference between CSR and corporate citizenship is that there is more concern for employee rights, environment, and education with corporate citizenship. For instance, Microsoft recently won Corporate Citizenship Company of the Year for their work with Making Cents International, where they help with education and training a global youth workforce.

Corporate Social Performance

Now that you have an understanding of the terms, let's discuss the idea of corporate social performance, which is the stakeholders' assessment of the CSR and corporate citizenship over time in comparison to competition. How will stakeholders assess a company through the model? They will evaluate and analyze a company through the three variables. We will use Microsoft as an example since they epitomize a socially responsible company.

The first element of the corporate social performance model is the social responsibility categories, which include economic, legal, ethical, and philanthropic areas. Companies must examine whether they have been successful in each specific area starting at the bottom of the pyramid: economic. A company needs to be profitable before they can continue to be legal, ethical, and philanthropic. Microsoft has successfully made a profit (economic), follows all legal constraints, operates ethically, and donates to many charities (philanthropic).

The second element is called the mode of social responsiveness and refers to how responsive a company is to social issues. A company can be proactive, accommodating, defensive, or reactionary. A socially responsive company will be proactive. Using Microsoft as our example, they act in a proactive manner since they aggressively exceed stakeholders' expectations versus wait for something to happen. For example, they have an initiative called Youth Spark, which helps young minorities gain experience in technology such as coding.

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