The Super Citizen

Transforming business students into CSR-savvy leaders

s the sole purpose of a corporation to make money for its shareholders? Or is part of its role to be a socially responsible world citizen?

The two objectives don’t have to be at odds with one another. Some argue that being socially responsible boosts business. Increasingly, corporations and business schools are embracing this idea of corporate social responsibility (CSR), which, loosely defined, can include any activity that serves communities and the environment beyond what the law requires.

Ellen Peirce, a professor of entrepreneurship at UNC Kenan-Flagler, teaches students that part of being an entrepreneur and thinking creatively is not just about how you will make profits, but about how you will fulfill your responsibilities to the globe.

“Business is always in competition to try to increase value for shareholders,” Peirce said. “But the public increasingly expects companies to be socially responsible.”

Peirce and UNC Kenan-Flagler colleague Lisa Jones Christensen, assistant professor of entrepreneurship, surveyed the top 50 business schools (as identified in the Financial Times 2006 rating of global MBA programs) and found that 84 percent of responding schools require students to take courses that address CSR, ethics or sustainability. And, companies are increasingly ranked according to more than their balance sheets. Dow Jones, for one, publishes an index rating companies on their level of social responsibility.

Corporations can both maximize profits and benefit the communities in which they operate. Globalization extends the impact around the world. “The whole point of moving operations to other countries is to save money to benefit shareholders. There’s nothing wrong with that,” Peirce said. “But a company also has other stakeholders, including the employees they’re hiring and the communities in which their businesses are located.”

Organizations’ stakeholders include not only their customers, shareholders and employees. Suppliers, community organizations, subsidiaries and affiliates, and local neighborhoods also are important. Peirce says, “Socially responsible companies go beyond employee benefits. They understand the power of a gesture such as a school or paved road that will help that community.”

Good Defense

But, in a competitive global economy, just any good works won’t do, said Robert Bushman the Forensic Accounting Distinguished Professor. “There are some cases in which CSR money is spent very wisely and maximizes shareholder value,” he said.

As an extreme example, Bushman cites Philip Morris’ and other tobacco companies’ sponsorship of anti-smoking campaigns for teens. These programs seem at their very heart to be about destroying the tobacco companies’ market. “But is Philip Morris just being altruistic? Absolutely not; this is actually an implicit compact between Philip Morris shareholders and politicians to ward off social activism,” Bushman said.

Funding such campaigns is a survival mechanism for Philip Morris. “The government takes amazing amounts of money out of the tobacco business. And shareholders still are doing really well. Those two groups have no incentive to destroy themselves,” Bushman said.

Christensen observed firsthand the CSR efforts of one of the nation’s largest companies, Procter & Gamble, on an October 2006 trip to the Dominican Republic. The company has partnered with nonprofits to provide PUR water purification sachets, which can purify 10 liters of water on the spot, to families in eight countries as part of their Children’s Safe Drinking Water program. “The company has stuck with the product even when it wasn’t commercially viable, because they knew the technology had value to people,” Christensen said.

Bushman adds a pragmatic note. “I’m all for good works,” he said. “I’m just saying, let’s do it smart and respect whose money it is we’re spending.”

Some social initiatives can provide shareholder value or increase the strength of the brand, but Bushman cautions against turning a business into a charitable organization. “Over the next 30 years in this country, as defined-benefit pension plans go away and as the younger generation becomes the first 401-K, defined-contribution generation, it is going to depend on the wealth-creating activity of corporations for its retirement income,” Bushman said. “It’s important that we maintain the wealth-generating energy of our businesses and not divert them into something that they’re not well-suited to be.”

Walk the Talk

Jan-Benedict Steenkamp, C. Knox Massey Distinguished Professor of Marketing and marketing area chair, said that in some cases practicing CSR can make a company stand out from the competition. But if a company brands itself as a good corporate citizen, any scandals that arise may hurt it all the more. “When a company is playing the CSR card, then it better make sure there is a story behind it and that the story is correct,” Steenkamp said.

In more typical circumstances, does CSR really benefit the financial bottom line? “The answer is, ‘it depends’,” Bushman said. He points to a study from researchers at Columbia University that found that CSR is more likely to be associated with increased profits in industries that are very competitive and advertising-intensive.

Companies such as Starbucks, The Body Shop and Burt’s Bees that take a strong stand on social justice and environmental practices draw like-minded customers who want to support the companies’ mission statements.

Beth Richardson (MBA ’08) built Zebra Crossings, an online retail business, around fair-trade gifts made by artisans in South Africa. The business does its part to relieve the country’s rampant unemployment and attracts customers who want to use their buying power for a good cause (See Sidebar Story Entrepreneurs with a Conscience).

Raising Them Right

UNC Kenan-Flagler students get community involvement experience that can help them later when they’re making decisions about CSR. All incoming MBA students, for example, participate in Community Leadership Day, in which they work at a local nonprofit agency such as the Chapel Hill Senior Center or the Durham Food Bank. The event introduces the students to the needs of the community, with the hope that they’ll volunteer again for much longer than just one day.

In 2006, UNC Kenan-Flagler students, faculty and staff have taken on the job of sponsoring and building an entire Habitat for Humanity house (right). In the past, the school had contributed to the universitywide partnership with local churches, but in 2005, Jean Elia, associate dean for strategy and administration at UNC Kenan-Flagler, suggested that the school sponsor a house of its own. It is the first school at UNC to do so.

Elia got the project off the ground last year, but beginning this year, an MBA student leads the effort. “It’s a wonderful leadership opportunity for a student,” Elia said. Betsy Vos Reeves (MBA ’07) has taken on this year’s job, which involves recruiting 1000 faculty, staff and students needed to fill volunteer slots every weekend from September through March, as well as coordinating efforts to raise $30,000. BSBA student Jonathan Baucom, one of many students and staff project coordinators, has helped with marketing the project and recruiting BSBA volunteers.

The opportunity has given Vos Reeves a broader sense of the quality and caliber of people attracted to UNC Kenan-Flagler, she said, and has made her aware of the need for affordable housing. “The people that we’re building houses for are working very hard but can’t afford to live in our community,” she said.

This year, a local Coldwell Banker realty franchise is building a Habitat house next door to the UNC Kenan-Flagler-sponsored house. Volunteers can contribute to the community as they meet local business people.

Fundraising also connects students to people outside UNC Kenan-Flagler. Local and national businesses provide support for the annual golf tournament fundraiser, for instance. The Volunteer Income Tax Assistance project uses master’s of accounting students to provide tax-return assistance to modestly paid UNC employees. This year, UNC Kenan-Flagler MBAs raised more than $9,000 and collected more than 200 pounds of food for the Food Bank of Central and Eastern North Carolina. The effort was part of the MBA Food Fight, in which business schools nationwide compete to collect food and money for local food banks.

Such efforts aren’t just resume fillers. “We’re training our students to be leaders, and that means business leaders; but it also means community leaders,” Elia said. “UNC Kenan-Flagler is part of a state institution. We have a responsibility to our citizens, and we can demonstrate that and live that out in a variety of ways. I think it’s a part of who we are.”