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CHAPTER 17 CORPORATE SOCIAL RESPONSIBILITY AND ETHICS
For example, one analysis links corporate reputation – having a good name – directly to 
share values. It estimates that if Coca-Cola had the more responsible reputation of Pepsi, 
the company would be worth $4 billion more. Similarly, it suggests that if Walmart had 
the superior corporate reputation for responsible behaviour enjoyed by Target, then its 
market value would be $9.7 billion higher (Engardio and Arndt, 2007). Relatedly, brand 
leaders across the world are investing heavily to regain the trust among consumers that 
they lost in the economic downturn because of the impact on brand value (Kiley and Helm, 
2009). It appears corporate reputation, and in particular the impact of perceptions of social 
responsibility and ethical standards on reputation, should be part of executive evaluation 
of strategic choices.
While many damaging corporate crises are concerned with issues such as product defects 
(for example, the repeated recall of defective vehicles by Toyota and GM because of safety 
issues) and failure to deliver the product or service promised (such as the mishandling by 
G4S of security arrangements for the 2012 London Olympics), yet more are concerned 
with events that lead to public disapproval of the behaviour of companies related to trust, 
legitimacy and impact on society. There is a perception that businesses generally fall short 
in their ethical standards (Smith, 2015). Examples of such corporate crises that seriously 
damage reputations include:
● 
The ‘horsemeat’ scandal of 2012–13, when mislabelled meat was found in ready meals 
in the UK. This was probably less about the consumption of horsemeat and more about 
the perceptions of deception and unethical behaviour by a company such as Tesco in 
selling cheap meat without revealing the fact it was horsemeat, causing a major glitch in 
Tesco’s competitive recovery strategy.
● 
Allegations of price fixing in 2013 in the petrol business, with raids on the offices of 
Shell, BP and Statoil, and the public’s perception, encouraged by politicians, that they 
had been deceived and cheated. The issue was more about the companies’ behaviour 
than the actual price of petrol.
● 
The same period saw the emergence of a public attack (which continues to this day) on 
the tax avoidance ploys of multinationals such as Amazon, Apple, Facebook and Star-
bucks, leading to them paying little or no tax in the UK. Anger and calls for boycotts 
emerged as the companies were seen to be cheating and behaving unethically (all such 
tax avoidance schemes are completely legal).
● 
The successful CEO of Abercrombie & Fitch, Mike Jeffries, committed what some have 
called brand suicide by his statements that his clothes were only for thin and attractive 
people, reflected in hiring only ‘gorgeous’ shop assistants and no clothes larger than size 
10 to get ‘cool, good-looking people’ to wear the brand ‘because they attract other cool 
kids’. He claimed once to have paid an unattractive customer not to wear his clothes. His 
statements were seen as offensive, discriminatory and arrogant. Celebrities in the USA 
showed their anger by defiantly giving A&F clothes to homeless people. Mr Jeffries left 
the company in 2014 amid falling sales and profits and circling activist investors.
● 
Accusations of bribery and unethical marketing practices have plagued companies such 
as GlaxoSmithKlein in the pharmaceuticals industry. GSK has been accused of bribing 
doctors and officials, paying rivals not to sell cheaper copies of its drugs in order to dis-
advantage customers such as the NHS, and promoting medicines beyond their approved 
uses. It has paid fines in response to some of these charges. The problem is that the 
perceived ethical violation is likely to outlast the impact of any financial penalties.
● 
The tragic clothing factory collapse disaster at Rana Plaza in Bangladesh in 2013 revealed 
the supply chain strategies of many clothing manufacturers and their reliance on low-
wage workers operating in unsafe and foul conditions. Public judgements related both 
to the low-cost, low-price strategies of clothing retailers and also the level of integrity 
shown in their responses to the tragedy. The issue hinged on peoples’ perceptions of right 
and wrong in employment conditions for workers in emerging countries.

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INTRODUCTION
Many of the most serious threats to corporate reputation come from perceptions of low 
ethical standards, poor executive behaviour and social and environmental damage.
The cost of failing to examine issues of ethical behaviour, social responsibility and the 
impact on corporate reputation may be lost sales and profits, but also longer-term loss of 
freedom of strategic flexibility – things you want to do and cannot because of reputational 
issues, and things you do not want to do, but have to.
What follows CSR?
It should be noted that while CSR and ethical mandates contribute a major topical issue 
in strategic decision making, and a very challenging one, executives should also be aware 
that thinking has not remained static, and there are emerging views of what follows CSR 
in changing corporate behaviours. This thinking may have a major impact in the future.
The last decade saw commentators identifying the ‘new age of corporate responsibil-
ity’ (Skapinker, 2005), and discussing what comes after the ‘green corporation’ (Engardio, 
2007). However, an important article in 2011 by Porter and Kramer concerning the creation 
of shared value takes the vision much further. Porter and Kramer argue that the capitalist 
system itself is under siege and that, paradoxically, the more business has begun to embrace 
corporate responsibility the more it has been blamed for society’s failures, suggesting that 
companies must take the lead in bringing business and society back together. They expand 
on the concept of shared values as ‘policies and operating practices that enhance the com-
petitiveness of a company while simultaneously advancing the economic and social condi-
tions in the communities in which it operates’, so that economic and social progress are both 
addressed through value principles (benefits relative to costs). They see a blurring of the 
profit/non-profit boundary. In their view, companies can create economic value by creating 
societal value through reconceiving products and markets, redefining productivity in the 
value chain and building supportive industry clusters at the company’s locations. Shared 
value thus becomes an integral part of strategy.
While radical and visionary, it is likely that the shared value model will influence strate-
gic thinking in many companies in the near future. By comparison, an even broader critique 
of the successes and failing of capitalism is provided by Philip Kotler in his book Confront-
ing Capitalism (2015). Kotler identifies the underlying problems with capitalism, varying 
from poverty, income inequality and unemployment to failing to bring social values and 
happiness into the market equation, and indicates possible solutions to address these inter-
related issues. The similarity with Porter and Kramer and the relevance to strategy decision 
makers is in requiring business and social problems to be addressed in combination, not 
separately, and for them to be addressed by company managers, not others. This represents 
a shift in thinking that goes beyond most current views of CSR, and is likely to be a recur-
ring theme over the coming years.
In fact, the twenty-first century has seen issues of social responsibility and the morality and 
ethics of company practices become a key element of managing customer relationships, and in 
how companies are perceived and understood by their customers – how companies and their 
products are positioned competitively. However, for some time it has been suggested that an 
integrated approach to CSR in marketing is largely missing, both in theory and practice, and 
is overdue (Maignan et al., 2005). Certainly, some attention has been given to the operational 
role of marketing in managing corporate social responsibility initiatives within companies, 
by expanding focus beyond consumers to include other stakeholders and integrating social 
responsibility initiatives (Maignan and Ferrell, 2004). These developments have been particu-
larly associated with the development of social marketing, concerned with the contribution 
of marketing activities to socially desirable behaviours and goals (such as anti-smoking cam-
paigns), and ‘cause-related’ marketing (for instance, the promotion of charitable donations 
to good causes). Some Australian companies are taking a stand against domestic violence, 
pioneering ways to tackle abuse at home and to support victims at work (Batty, 2015).

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