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Law81305ch03 - Law81305_ch03pg43_61 0:29 Page 43 PART TWO...

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Business and the Social Environment P A R T T W O Law81305_ch03pg43_61 2/19/04 0:29 Page 43
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Corporate Social Responsibility Corporate social responsibility challenges businesses to attend to and interact with the firm’s stakeholders while they pursue traditional economic goals. The firm’s stakeholders expect businesses to be socially responsible, and many companies have responded by making social goals a part of their overall business operations. What it means to act in socially responsible ways is not always clear, thus producing controversy about what constitutes such behavior, how extensive it should be, and what it costs to be socially responsible. This chapter focuses on these key questions and objectives: What is the basic meaning of corporate social responsibility? Where and when did the idea of social responsibility originate? What are the critical arguments for and against corporate social responsibility? How does business meet its economic and legal obligations while being socially responsible? How does business balance its responsibilities to multiple stakeholders, including its stockholders? 44 C H A P T E R T H R E E Law81305_ch03pg43_61 2/19/04 0:29 Page 44
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Do managers have a responsibility to their stockholders? Certainly, for the owners of the business have invested their capital in the firm. Do managers also have a responsibility, a social responsibility, to the people who live where the firm operates? Since commu- nity development often is closely related to productivity, being socially supportive of the local community seems to make good economic sense. What happens when these mul- tiple responsibilities seem to clash? WMC Resources, an Australian-based minerals company, found itself in such a clash of stakeholder responsibilities. When WMC and the Philippine government entered into a Financial or Technical Assistance Agreement (FTAA) in 1995 to explore and develop mineral deposits on the island of Mindanao in the Philippines, WMC saw significant economic opportunities. The small island was home to 2,300 people who belong to five indigenous Bla’an communities. The Bla’an ancestral lands were located within the Tampakaen Copper prospect, an area where WMC planned to mine for low-grade copper. In the past, other companies had mined for minerals and logged for timber in the Tam- pakaen region without showing any concern for the Bla’an people or their sacred lands. These actions had led to conflicts between the Bla’an people and the Philippine military. The Philippine military often was called upon to secure land on behalf of the companies or to put down local community protests. WMC wanted to act responsibly toward the indigenous people, as well as avoid military intervention. The potential for military con- flict could have restricted or delayed WMC’s ability to freely extract minerals from the Tampakaen prospect or could have imposed additional costs on the company.
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