Corporate Responsibility Essay

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Preliminary Draft - Comments Welcome

Abstract We provide a framework for analyzing corporate social responsibility (CSR). Our model of CSR in this paper has two important ingredients – CSR is at least in part a profit motivated decision; and different CSR activities are aimed at different audiences. We examine the implications of our framework using a ‘visible’ CSR index that captures consumeroriented CSR. We find that CSR is more prevalent in advertisingintensive (consumer-oriented) industries, and CSR is more positively related to profitability in these industries. Further, the effect of CSR on profits is stronger in competitive
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In particular, how does CSR affect the bottom line? 2 Is the relationship between CSR and profitability affected by a firm’s circumstances? A better understanding of these questions directly addresses a classic, yet timely, issue. Is there a conflict between maximizing shareholder value and maximizing stakeholder or social value? Does a corporation do well (financially) by doing good (socially)? In this paper, we provide, with a view to anchoring the notion of CSR, a simple framework that views social responsibility as part of business decisions that managers and shareholders of a firm take. The framework we present views social responsibility as actions that improve the welfare of interest groups who can affect firm value. Thus, there

The Economist recently surveyed executives and investors on CSR. Of the136 executives and 65 investors who responded, eighty-five percent said corporate social responsibility (CSR) was now a “central” or “important” consideration in investment decisions. This figure is almost double the 44% who said CSR was “central” or “important” five years ago, demonstrating the growth in CSR’s significance. Similar findings were also reported by the Global CEO Survey conducted by PriceWaterhouseCoopers. 2 Executives, in the survey cited cost implications (42%) and unproven benefits (40%) as the two

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