Stakeholder theory, ethics and the return on customer

Corporate Social Responsibility
Stakeholder Theory, Ethics, Trust and the Return on
Customer

By: Eva Kanovich
World Mediterranean MBA Student
Date: September 12th, 2007
Submitted to: Mr. Andrew Roberts

Table of Contents

Abstract…………………………………………………………………………………… p.2

Introduction ……………………………………………………………………………… p.3

Defining Corporate Social Responsibility……………………………………………….p.3, 4

Andrew Carnegie………………………………………………………………………….p.4

Key Developments………………………………………………………………………..p.5, 6

Micro vs. Macro Approaches…………………………………………………………….p.7

Anything for Profit –An Economic View of the Firm……………………………………p.7

Milton Friedman, Albert Carr and Robert Reich………………………………………..p. 8

Stakeholder View; Edward Freeman…………………………………………………….p.9

Instrumental Stakeholder Theory…………………………………………………………p.9

Evolution of the Consumer: People, Planet, Profit……………………………………..p.9, 10

Acknowledging Stakeholder Power: Cooperation and Collaboration………………..p. 11, 12

FORTUNE Accountability: Beyond the Bottom Line…………………………………...p.13, 14, 15

Corporate Social Responsibility,
Business Profitability and Increased Customer Satisfaction…………………………..p.15, 16

Increased Customer Interest and CSR…………………………………………………..p.17, 18

Return on Customer and Total Shareholder Return……………………………………p.18, 19, 20

Conclusion…………………………………………………………………………………..p.21

Bibliography…………………………………………………………………………………p.22, 23

1

Abstract

There are countless writings on Corporate Social Responsibility (“CSR”), but little
correlative examination of the Return on Customer, CSR and overall value maximization.
This paper offers a qualitative look at the key developments of CSR, the evolution of
needs of the modern day consumer and the tenable value consumers bring in generating
future cash flow for a company. Pivoting on the writings of both micro and macro schools
of thought, I set out to show the limitations of shareholder theory and contend that
businesses, much like consumers, espouse similar value systems; mirrored respectively
in Maslow’s hierarchy of needs. Highlighting a consumer centric approach to business, I
show that companies can be both ethical and profitable if they incorporate key
stakeholder interests and CSR into their ongoing business strategies.

2

Introduction

Much like the businesses they operate, business managers live under continuous pressure and
scrutiny to excel or to achieve; to be profitable or to be virtuous. But is there a way that they can
be both? Companies and individuals alike are being held increasingly accountable for their
actions as demand grows for higher standards of Corporate Social Responsibility. Stakeholders:
including shareholders, analysts, regulators, activist, labour unions, employees, community
organizations and the news media are asking companies to be accountable not only for their own
performance but for the performance of their entire supply chain and for an ever changing set of
Corporate Social Responsibility issues. These societal demands and consumer pressures have
ultimately led to an economic paradigm shift; wherein corporate social responsibility needs to
drive corporations beyond the bottom line. Companies must now go over and above the once
prescribed altruistic do-gooderist- philanthropic contributions they made; rather align both ethical
and business strategies so as to quell all stakeholder expectations. ‘The invisible hand,’ as once
described by Adam Smith, has failed to ensure business morality and has contributed to the
shaping of modern day CSR implementations.

This paper will address the humanitarian side of capitalism whilst entertaining a myriad of
Corporate Social Responsibility theories. It will explore the long standing competing shareholder
vs. stakeholder debate and the link between profit, consumer and Corporate Social
Responsibility. The objectives will be threefold: Firstly, to show that modern consumers exact
Corporate Social Responsibility strategies from the companies they endorse. Secondly, to show
that Corporate Social Responsibility is competitively advantageous. Lastly, to demonstrate how
Corporate Social Responsibility is a means of redefining profit maximization and increasing a
return on customer.

Defining Corporate Social Responsibility

There have been breathless writings on CSR yet no single definition to date. Generally, CSR is
regarded as the economic, legal, ethical and philanthropic expectations placed on corporations by
society.1 In this regard companies are required to meet their economic and legal requirements
and at the same time are expected to operate in ethical ways and avoid social injuries even if the
corporation may not benefit in the short term. The concept in and of itself has become
synonymous with organizations, especially but not limited to commercial business, having the
duty to take care of all their stakeholders’ interests and is often used to describe businesses’
integration of social and environmental issues into decisions, goals, and operations. A widely
quoted definition by the World Business Council for Sustainable Development states that
“Corporate Social Responsibility is the continuing commitment by business to behave ethically
and contribute to economic development while improving the quality of life of the workforce and
their families as well as of the local community and society at large.”2 This holistic and symbiotic
approach to business holds organizations as being fully integrated partners in their communities,
rather than seeing them more narrowly as being primarily in business to make profits and serve
the needs of their shareholders. This duty of care is seen to go beyond the statutory obligation to
comply with legislation.

As corporations operate in many communities and across various social segments, and they
frequently have to respond to the different needs of these groups, let us further the
aforementioned definitions as follows: corporate social actions whose purpose is to satisfy social
needs. Here the fundamental idea is harnessed on the notion that a business should have
obligations to work for social betterment and should act as the consistent function of the
company’s operations.

1
Mattten, Crane, Chapple. ‘Behind the Mask: Revealing the True Face of Corporate Citizenship
2
www.wbcsd.org

3

The vantage point of the consumer is equally important in identifying the most crucial tenets of
Corporate Social Responsibility. In a 2007 Fleishman-Hillard survey, consumers responded to the
“what is Social Responsibility” question with more than a dozen unprompted response categories,
including the most frequently offered responses: “Corporations need to be committed to the public
and communities and overall to society” (23%) - No.1, “Corporations need to be committed to
employees” (17%) - No.2. 3 Such feedback suggests consumers’ proclivity to identify corporate
function as being just with various stakeholders.

Andrew Carnegie

The idea of Corporate Social Responsibility finds its roots in the writings of Andrew Carnegie,
founder of U.S. Steel, who articulated two principles he believed were necessary for capitalism to
function. First, the charity principle which requires more fortunate members of society to assist its
less fortunate members, including the unemployed, the disabled, the sick, and the elderly. He
maintains that these "have nots" could be assisted either directly or indirectly, through such
institutions as churches, settlement houses, and other community groups.4 Second, he puts
forward the stewardship principle, which requires businesses and wealthy individuals to see
themselves as the stewards, or caretakers, of their property.5 This idea assumes that wealth
maximization benefits all stakeholders. Carnegie views the rich as holding their money "in trust"
for the rest of society as a whole. In turn, they could use it for any purpose society deemed
legitimate. However, he maintains that it is also a function of business to multiply society's wealth
by increasing its own through prudent investments of the resources that it was caretaking.6

3
Rethinking Corporate Social Responsibility: A Fleish-Hillard Study
4
Freeman, E.,Liedtka, J. ‘Corporate social responsibility: a critical approach - corporate social responsibility’
5
Ibid 4
6

4

Key Developments

When compared to developments in previous centuries, the two most striking features of
twentieth century economic growth are its staggering size and acceleration. It has witnessed the
awakening and expansion of globalization, the transformation of the capitalist system, the
ascension of capital markets and the deepening competition in business. Now, in an era of
permeable boundaries, cross flow of information and greater mobility of human capital,
corporations have been confronted with the evolving eco-friendly, ethically conscious, socially
minded post-modern consumer. Such commitment and awareness has provoked an irreversible
trend in business: to progressively, innovatively and steadfastly integrate CSR into corporate
vision and strategic planning.

But how did we get to this point? Although the past is never a perfect template for the present we
must look at CSR having its seminal roots in three correlative movements: 1) Community
relations and contributions response to local pressures/needs and CEO/Senior Management-
1960’s and 1970’s, 2) Corporate Citizenship model based on ethical issues including the new
corporate or strategic philanthropy-1980’s-1990’s, and 3) Strategic Alliances closely aligned with
corporate objectives-1999 and beyond.7

Traditionally businesses operated exclusively on the classical economic model of maximizing
profits. As long as the firm could sell its good(s) or service(s) at prices high enough to make a
profit and survive, then its social obligation was fulfilled.8 However, shortly after large companies
first emerged in the 1870s, debate quickly arose as to the appropriateness of their conduct.9 This
debate would later arise with many multinationals in the 1990’s as their unethical behaviour would
be publicly rebuked.

Upon the heels of the Great Depression, the 1930’s signaled a transition from a primarily laissez-
faire economy with industrial power and might in control to a more mixed economy with a more
activist role by organized labor and the government.10 Eventually, the government's creation of
various socially oriented programs to ease the country's economic woes resulted in more socially
minded Americans.11 Thus, more socially minded persons demanded more socially minded
businesses. Under the auspices of change, and in a flurry of enlightened self-interest,
businessman and politicians alike wanted to rebuild the post World War II economy. Protracted
debates over the appropriate role of business in society continued and business leaders seemed
to (more than ever) come to espouse a belief of the equitable distribution of wealth. Little by little,
the pillars of corporate philanthropy were being established with the creation of public interest
watchdogs and regulatory agencies such as the American Civil Liberties Union. The Federal
Trade Commission stimulated new interest in business ethics, the standards by which to judge
corporate and individual behavior within the moral framework of business and society.12

7
Jafar, Alamgir. ‘Global Scenario and Context’
8
Ibid 7
9
10
Ibid 9
11
12
Ibid 11

5

The 1950’s ushered in an era of Social Responsibility. It was Howard Bowen's Social
Responsibilities of the Businessman (1953) that expanded social responsibility into the corporate
realm. According to Bowen, the social responsibilities of a businessman consisted of obligations
to pursue those policies, make those decisions or to follow those lines of action which would be
desirable in terms of objectives and values to society.13 Soon afterwards, all three levels of
government started enacting increasingly detailed legislation conducive to socially responsible
behavior by businesses. Further, the four key regulatory agencies – the Equal Employment
Opportunity Commission, the Occupational Safety and Health Administration, the Environmental
Protection Agency and the Consumer Product Safety Commission – were established from 1969
to 1972.14 These developments created an entirely new framework for managers: hit all of a
sudden with four enormous regulatory agencies making many demands for information and
corrective action.15

A combination of factors propelled the subject of socially responsible business to the frontlines
during the 1980s.The ‘ME’ decade of popular culture was symbolic in many ways. It bore the
largest population growth the world had ever seen, witnessed the introduction of compact discs,
the first Macintosh, the first available hand held phones and presented a time wherein social
issues were becoming more visible and registering on the corporate radar. After the decline and
then eventual collapse of socialist economies, the world saw the rise of the technological
revolution and the globalization of economics – the creation of a worldwide market that
championed capitalism and democracy as twinned values. More transparency was demanded of
companies and coupled with the consumer rights movement heightened scrutiny of corporate
practices. In 1937, Adam Smith wrote that “consumption is the able end and purpose of all
production, whereby the basic measure of an economy's worth should be the health, safety and
economic well-being of its consumers.”16 Here, consumer sovereignty governs supply and
demand. Moving from a work-based to consumer-based society, the Reagan-Bush era, in which
government restrictions on businesses were loosened, caused some business leaders to contrast
what appeared to be an alarming array of crumbling institutions – including weakened federal and
local government agencies once charged with protecting those institutions – with the wealth they
and their shareholders had amassed over roughly the same period, and to recognize an inherent
imbalance.17

The 1990’s present a time of environmentalism and entrepreneurship. With the Royal Dutch/Shell
crisis thrust upon the world in 1995, the general public had put morality to centre stage. It called
attention to the dubious corporate policies and practices that lay behind consumer goods offered
for sale in the Western World.18 Transnational corporations were now seen as having to be moral
actors with moral and ethical obligations. In lieu of the crisis, consumers increasingly began
demanding that corporations pursue socially responsible goals rather than ones purely motivated
by bottom line profit maximization. Companies could no longer employ the antiquated charitable
giving method to offset the damage they were doing both to communities and the environment.
Being both reactionary and visionary to this moral consumer activism, corporations such as
Starbucks responded through ethically branded strategies; for example, ensuring that farmers
would receive an equitable price for their coffee and receive help in strengthening their farms in
the future.

Within an evolutionary landscape, CSR needs to be looked at as more than a cost constraint or
charitable deed. Strategic CSR needs to directly align key stakeholder interests, business
strategy and financial long term profitability. In modern light, when identifying both the social and

13
Ibid 12
14
15
Ibid 14
16
Smith, Adam. The Wealth of Nations, 1937, p 625
17
18
Holzer. Boris, ‘Framing the Corporation: Royal Dutch/Shell and Human Rights Woes in Nigeria,’ Journal of Consumer
Policy

6

business aspects of CSR it is highly important to distinguish strategic CSR from charitable
donations and good works. Corporations have often spent money on community projects,
scholarship endowments, and the establishment of various foundations such as Habitat for
Humanity and Ronald McDonald House. In addition, they have also often encouraged employees
to volunteer in community work thereby creating goodwill in the community which in turn directly
enhances the reputation of the company and strengthens its brand.

Listening and incorporating consumer demands has now become a type of brand insurance for
corporations. According to a survey conducted by Cone Communications and the Roper Group,
76% of consumers would switch brands to further worthy causes (holding price and quality
constant with other goods). Results of another extensive study conducted by the same groups
reveal that 40% of (25,000) respondents would consider punishing a business deemed not to be
socially responsible; 20% of respondents avoided products of offending businesses or expressed
their dissatisfaction to others, and one in five consumers were likely to use their purchasing
power "to reward a company perceived as socially responsible.”19

Micro vs. Macro Approaches

There are two basic approaches to the concept of Corporate Social Responsibility. One school of
thought focuses on micro level analysis which deals specifically with how individual companies
could be made more responsible towards society.20 Robert Ackerman, a micro-level theorist
espouses that responsiveness should be the goal of corporate social endeavour. Archie
B.Carroll’s well known four-part CSR pyramid model plays on the latter and suggests that the
total Corporate Social Responsibility of business entails the fulfillment of the firm’s legal,
economic, ethical, and discretionary responsibilities.21 It must produce the goods and/or services
that society wants and in a lawful manner and must sell them at a profit.22 Nevertheless, business
here should also be a good corporate citizen, whereby it should contribute financial and human
resource to the community and improve overall quality of life. Conversely, researchers belonging
to the macro level school of thought favour government, not individual companies, as the entity
that establishes and achieves a country's social goals.

Anything for Profit –An Economic View of the Firm

Within the economic view shareholder value consists of maximizing share value and wielding
short term profit .Those against CSR have anchored their arguments in the economic view of the
firm which suggest that the primary task of the corporation is to fulfil its economic purpose. For
this approach social problems and social services are relegated to the role of the government
since businesses are set up as economic institutions, not welfare agencies. The economic view
supports the same values as the Pareto Optimality theory which maintains that free-market forces
ensure that maximum social benefits will be achieved at minimum social costs.23 The alleged
problem within CSR in a capitalistic scenario is primarily a Pareto Optimization problem whereby
there exist too many conflicting objectives, namely, minimizing costs, maximizing profits and
satisfying all stakeholders.

19
Cone press release 2005
20
Pater. Alberic, ‘Corporate Social Responsibility Theories: Mapping the Territory’ Journal of Business Ethics, Volume 53,
Numbers 1-2 / August, 2004
21
‘Caroll. A.’ Thee Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational
Stakeholders.’ Business Horizons, July-August 1991
22
23
Lantos, G. ‘The boundaries of strategic corporate social responsibility,” 2001 Volume: 18 Issue: 7 Page: 595 – 632,
MCB UP Ltd

7

Milton Friedman, Albert Carr and Robert Reich

According to Milton Friedman, a company’s mandate is to make money. A fervent proponent of
the economic view, Friedman fundamentally bases his arguments on two principal contentions:
one economic and the other, legal. From the economic perspective, he asserts that if managers
spend corporate funds on projects not intended to maximize profits, the efficiency of the market
mechanism will be undermined and resources will be misallocated within the economy.24 On the
legal side, Friedman contends that because managers are legal agents of stockholders, their sole
duty is to maximize their financial return. Hence, if they spend corporate funds for social
purposes, they are essentially stealing from the stockholders.25 What Friedman fails to address is
a scenario wherein there could be a profitable return on social projects and said return on such
action could actually maximize shareholder return not only in the short but in the long term.

Rather, Friedman champions the idea that society determines and meets its needs and wants
through the marketplace He determines the needs of society to be singular rather than pluralistic;
neglecting to take into account spiritual and self actualization needs. Through his agency
perspective, Friedman maintains that ‘the business of business is business,’26 and that
corporations’ main players should be those that invest their wealth: the shareholders. Investment
here does not take into account the investments made by other parties, namely, consumers.
Friedman’s perspective is rooted in the idea that the corporation’s priority should be to satisfy the
shareholder and to make profits. For him, the relationship between the corporations and groups
such as employees, suppliers and customers is maintained as primarily economic.

In ‘Is Business Bluffing Ethical?’ Albert Carr posits that “we can learn a good deal about the
nature of business by comparing it with poker. While both have a large element of chance, in the
long run the winner is the man who plays with steady skill. In both games ultimate victory requires
intimate knowledge of the rules, insight into the psychology of the other players, a bold front, a
considerable amount of self-discipline, and the ability to respond swiftly and effectively to
opportunities provided by chance. Focused solely on profits and legality he continues, “Poker's
own brand of ethics is different from the ethical ideals of civilized human relationships. The game
calls for distrust of the other fellow. It ignores the claim of friendship. Cunning deception and
concealment of one's strength and intentions, not kindness and openheartedness, are vital in
poker. No one thinks any the worse of poker on that account. And no one should think any the
worse of the game of business because its standards of right and wrong differ from the prevailing
traditions of morality in our society.”27

Much like his follower, Friedman undersells the humanitarian dimension of capitalism. Although
never overtly dismissing philanthropy, he pointedly questions its merits in terms of engendering
profitability. Rather, he suggests that a business’ social responsibility should be to increase its
profits in a free enterprise system where there is no coercion and deception. He denies the
importance of networks linked to the corporations such as communities, media and the natural
environment which now, in the 21st century are inextricably linked to the crucial long term viability,
profitability and sustainability of a firm.

Notable liberal economist Robert Reich agrees with Friedman, contending that “if a certain action
improves the corporation's bottom line, there's no point in labeling it socially responsible. It's just
good business.” What Reich neglects here is to realize that CSR is not about generous deeds,
volunteerism or virtue, but about social impact and competitive advantage. In his controversial
new book, Supercapitalism: The Transformation of Business, Democracy, and Everyday Life,
Reich goes as far as suggesting that “if consumers were willing to sacrifice good deals for the
sake of some social goal they believed in – for example, paying more for a garment with a label

24
Friedman, M. ‘The Social Responsibility of Business is to increase its profits’ New York Times Magazine, pp. 87-91
25
Ibid 23
26
Friedman, M (1970) ‘The Social Responsibility of Business is to increase its profits’ New York Times Magazine
27
Carr, A. ‘Is Business Bluffing Ethical?’ Harvard Business Review 46, January-February, 1968, pp. 143-53

8

guaranteeing it's not made by children in a poor country or for a book that's made with recycled
paper – then you're right: Supercapitalism, as I've called it, would serve the interests of us both as
consumers and as citizens. But the overwhelming evidence shows that consumers are not willing
to make such sacrifices. If items are priced the same, consumers will choose the one that better
matches their personal ethics, but they won't pay more for one that does.’28 The Natural and
Ethical Report of 2005 challenges this assertion and presents findings that suggest that (for
example) 67% of Dutch and 60% French consumers are wiling to pay a premium for ethical
products.

Stakeholder View

Edward Freeman

Business should not be separate from ethics and society. From an investor’s perspective, the
purpose of business should be to maximize profits, but what is the purpose for other
stakeholders? An enlightened corporation should try to create value for all of its constituencies.
The stakeholder theory challenges the conventional market capitalist views of the firm. Rather it
views the corporation as an entity through which a variety of participants who may be
interdependently related accomplish multiple and at times divergent goals. Stakeholder theory
describes the firm as a nexus of co-operative and competitive interests possessing intrinsic
value.29 Stakeholder theory, often thought not to take account of the interests of shareholders, in
fact does so by seeking to ensure the long-term sustainability of the company. It is imperative to
note that businesses rely on the contribution of a much wider set of constituents, not just
shareholders, for its success and they have a duty to take into account the interests of these
stakeholders as well as the shareholders.

Rather than looking solely at wealth maximization through classic business models, stakeholder
view, offers an enlightened self–interest approach; taking into account other issues that could
impact the sustainability and long term profits of the firm-namely consumers. “It’s tempting to
consider value simply as a matter of maximizing the short term financial performance of the
organization,” 30 says Michael Jensen. Contending with that value maximization approach is
stakeholder theory which says that managers should make decisions so as to take into account
all of the interests of all stakeholders in the firm. He further writes that “a firm cannot maximize
value if it ignores the interests of its stakeholders. But a melding of new interpretations of both
value maximization and stakeholder theory is necessary so as to make possible the long run
maximization of the value of the firm.”31 CSR should be viewed as more than an add-on solution.
Rather, it should be strategically integrated as a direct response to stakeholder demands for
ethical business and be fully integrated into core business practices.

Instrumental Stakeholder Theory

How do we get beyond the theoretical problem of reconciling corporate social responsibility and
shareholder value? Instrumental stakeholder theory suggests a positive relationship between
corporate social profitability and corporate financial profitability. According to this theory, the
satisfaction of key stakeholder groups is instrumental for organizational financial performance. By
addressing and balancing the claims of multiple stakeholders’ managers can increase the
efficiency of their organization’s adaptation to external demands. The assumption here is that
instrumental strategic ethics generally equates or engenders wealth maximization. Additionally,
according to Freeman, high corporate performance results not only from the separate satisfaction

28
Wooseley, M. Forbes Q&A ‘Supercapitalism: Transforming Business, Democracy and Everyday Life’ Sept 6, 2007
29
Freeman, E (1984) Strategic management: A Stakeholder Approach
30
Jensen, Michael.HBS working paper "Value Maximization, Stakeholder Theory, and the Corporate Objective Function,"
31
Ibid 30

9

of bilateral relationships 32 but also from the simultaneous coordination and prioritization of
multilateral stakeholder interests. These strategic and tactical steps may be necessary to reduce
the likelihood of the organizations becoming stuck in a high-density network which can reduce
corporate financial profitability in a number of ways.33 For example, in a high-density network,
firms may become stuck in the role of compromiser or subordinate, depending on the degree of
the firm’s network centrality.34 Either of these roles may lead to further consumption of valuable
firm resources such as time, labour, and capital.

Evolution of the Consumer: People, Planet, Profit

Over the course of this century, the affordability and availability of consumer goods have greatly
increased and given rise to new behaviors and new consumer attitudes. But are price, quality and
end benefit the only purchase determinants or are there other drivers? In their book, Brand Spirit,
How Cause Related Marketing Builds Brands, Hamish Pringle and Marjorie Thompson contend
that consumers are going beyond the practical issues of functional product performance or
rational product benefit and further than the emotional and psychological aspect of brand
personality and image.35 Consumers are moving towards the top of the Maslow Hierarchy of
Needs and seeking self-actualization. Instead of just looking for product benefit, they are now
asking for and are compelled by demonstrations of good and ethical behaviour. They are
questing to identify, relate and be challenged by the brands they endorse. They want to share the
same values and work towards self-perfection.36 We can look towards NIKE who pioneered the
focus on self-actualization with their famous "Just Do It" tag line. Home Depot followed suit with
"You can do it. We can help." 37 Starbucks also engaged it’s consumer with its mantra ‘Rewarding
Everyday Moments.’ These companies have transcended the product only relationship with
customers. The aforementioned brand names have unequivocally demonstrated a belief in their
customers' abilities to reach higher, accomplish more and become the best person they can be.

32
Orlitzky, Frank L. Schmidt, Sara L. Rynes. ‘Corporate social and financial performance: A meta-analysis Organization
Studies’
33
Rowley, T.J. 1997. ‘Moving beyond dyadic ties: A network theory of stakeholder influences’. Academy of Management
Review
34
Freeman, E (1984) Strategic management: A Stakeholder Approach
35
Pringle, Hamish & Thomspon, Marjorie, Brand Spirit, How Cause Related Marketing Builds Brands, 2001
36
Ibid 35
37
Hamish, Pringle, Thomspon. Brand Spirit, How Cause Related Marketing Builds Brands, 2001

10

So if consumers are moving towards the top of Maslow’s hierarchy, are corporations doing the
same? Frank Tuzzolino and Barry R. Armandi, provide a motivational theory of organizational
social response based on Maslow's hierarchy of needs in their work A Need-Hierarchy
Framework for Assessing Corporate Social Responsibility.38 They suggest that a parallel exists
between individual and organizational needs. This organizational-need hierarchy consists of: (a)
physiological needs which are fulfilled by corporate profits; (b) safety needs which focus on
criteria such as dividend policy, payout ratio, integration, conglomeration, and competitive
position; (c) affiliative needs which are manifested by the willingness to participate in trade
association, lobby groups, industry publications; and (d) internal and external self-actualization
needs. The former pertains to employee relations and addresses such areas as job enrichment,
compensation policy, and pension plans. External self-actualizations refers to community and
government relations as demonstrated by corporate philanthropy, affirmative action, pollution
abatement, and product reliability.39

Acknowledging Stakeholder Power: Cooperation and Collaboration

Should corporations be concerned with their social performance as much as their economic
results? And if so, why? According to an ASQ poll, 96% of business leaders think their company's
CSR behavior will greatly impact the nation’s economic future, but more than 40% still do not
have any policy in place to guide their company's actions. These ASQ findings hyphenated with
the McKinsey Quarterly Global Survey of Business Executives, which polled more than 4,000
executives from 116 countries in December 2005,40 shed new light on the importance of social
strategic interest. While the January 2006 edition of the McKinsey Quarterly published the results
of the global survey, the latest edition of the publication includes an in-depth analysis of the
survey findings, entitled "When social issues become strategic".

The McKinsey analysis maps out the social contract businesses must honor, extending it well
beyond the traditional understanding of abiding by formal laws to encompass less formal
stakeholder expectations and, increasingly, "frontier" expectations that are still developing.41
The authors cite obesity as an example, where responsibility has shifted from individuals who
choose what to eat to companies that make or sell unhealthy foods, just as the debate around
tobacco shifted from individual smokers to companies' marketing of addictive products.
Companies such as McDonald’s are now adding healthier menu options so as to combat the
societal and ethical pressure bestowed on fast food companies. Should McDonalds want to
maintain its number one perennial ‘global brand’ standing, it will have to rigorously provide a
conscientious product offering. 42

“Business leaders must become involved in socio-political debate not only because their
companies have so much to add but also because they have a strategic interest in doing so,"
stated McKinsey analysts Sheila Bonini, Lenny Mendonca, and Jeremy Oppenheim.
Subsequently they assert that “Social and political forces, after all, can alter an industry's
strategic landscape fundamentally; they can torpedo the reputations of businesses that have
been caught unaware and are seen as being culpable; and they can create valuable market
opportunities by highlighting unmet social needs and new consumer preferences." 43

38
Tuzzolino, Frank & Armandi, Barry R., A Need-Hierarchy Framework for Assessing Corporate Social Responsibility’
39
Ibid 38
40 th
Baue. B, ‘Social Funds, April 4 2006, Analysis Advocates Strategic Approach to Corporate Social Responsibility’
41
Ibid 40
42 th
43
Ibid 42

11

The McKinsey analysis takes a practical approach of acknowledging the reality of stakeholder
power instead of fighting it. Rather than denying it, Mckinsey analysts recommend acknowledging
it and working with it. They believe that it is beneficial to all parties to endeavour towards creating
shared value. The analysts assert”…we believe that the case for adopting a wholeheartedly
strategic approach to the socio-political agenda is threefold.” They continue to say, “First, these
forces can alter an industry's landscape in fundamental ways. Second, the immediate financial
and longer-term reputational impact of social issues that backfire can be enormous,” citing the
Monsanto genetically modified organism debacle and the Exxon Valdez oil spill. They finally
remark that “new product or market strategies can emerge from changing social and political
forces." Think Toyota Prius.44 Toyata’s success speaks for itself; hybrid sales in 2006 doubling to
capture 3% of all the company's sales in Canada-which is nearly 6,000 vehicles.45 Furthermore,
Toyota towers as a key example of a company which responded early to public concern about
auto emissions. In turn they created the hybrid-engine Prius that significantly reduced pollutants
and gave Toyota and enviable lead over its rivals in hybrid technology.

The McKinsey analysis also recommends something that may seem antithetical to competitive
capitalism: namely, collaboration and cooperation. It notes that Coca-Cola and PepsiCo have
experienced success through a common approach of implementing policy prohibiting the
marketing of their core carbonated soft drinks to children under 12.46 The analysts state that "as a
rule, companies should consider responding on their own if they think they can capture the first-
mover advantage (as British Petroleum did in acknowledging the dangers of global warming), if
they are a target, or if a collective approach is too difficult or costly. Collaboration can be
attractive if the stakeholders regard all companies as equally culpable, if regulation is imposed on
an entire industry, or if isolated, individual action would clearly destroy value." 47

44 th
45
CSR automotive, February 22, 2007, Report on Business
46 th
47
Ibid 46

12

FORTUNE Accountability: Beyond the Bottom Line

Ranking of the world's largest companies by how well they conform to socially
responsible business practices
2006 2005 Accountability Global 500
Rank Rank Company score* Industry Rank
Computers and
1 3 Vodafone 72 66
electronics
2 1 BP 71 Petroleum refining 4

3 2 Royal Dutch Shell 69 Petroleum refining 3

4 8 Électricité de France 61 Energy and utilities 68

5 15 Suez 58 Energy and utilities 96
Trading and
10 5 Carrefour 50 25
merchandise
11 9 Peugeot 50 Automotive 60
Computers and
14 28 General Electric 48 11
Electronics
17 18 Total 46 Petroleum refining 12
International Business Computers and
18 24 46 29
Machines electronics
19 56 Volkswagen 46 Automotive 17

From the July 23, 2007 issue(Accountability ratings for 2007 will be published in November
2007)

Fortune Global 500

Revenues Profits
Rank 2007 Company ($ millions) ($ millions)
1 Wal-Mart Stores 351,139.0 11,284.0

3 Royal Dutch Shell 318,845.0 25,442.0

4 BP 274,316.0 22,000.0

10 Total 168,356.7 14,764.7

11 General Electric 168,307.0 20,829.0

13

Business survival and profitability depends on changing socio-economic norms and the new
moral marketplace. Within this framework, different CSR activities are aimed at different
audiences, but about one in every ten dollars of assets under management in the U.S-an
estimated $2.3 trillion out of $24 trillion48 is being invested in companies that rate highly on some
measure of social responsibility. This is a $2.3 trillion wager that socially responsible companies
will outperform companies that don't engage a wide array of stakeholders, from shareholders and
customers to employees and activists, in an ongoing conversation about what can be done
better.49

Taken from the 2007 issue of Fortune: Accountability :Beyond the Bottom Line, the world's
largest companies were ranked according to how well they conform to socially responsible
business practices. The survey conducted by AccountAbility (a London think tank on corporate
accountability) and CSR network (a British for-profit consultancy), measured 6 criteria, ranging
from stakeholder engagement to performance management, at the top 50 companies on
Fortune's Global 500 list. Fourteen other large companies were included so that there were at
least ten in each of five industry sectors. 50

Many of the highest-ranking companies were not conventionally considered do-gooders or
philanthropic corporations, but ultimately showed progressive CSR tactics to reinvent their
business strategies. Oil giants BP and Shell assumed the No. 2 and No. 3 ranks respectively,
however, the rankings did not measure performance outcomes such as CO2 emissions. It is
important to note that four of the top ten on the list were utilities.51 The rankings’ barometer
focused on management practices: Does a company have procedures for listening to critics? Are
its executives and board members accountable? Has it hired an external verifier? This is where
the triple bottom line comes into play-where CSR measures align both corporate and public
expectation and ultimately correlate both socially responsible practice and year end profitability
margins.52

Much to the chagrin of those that espouse shareholder theory, the key motivation here is for
businesses to look beyond economic performance for indicators of success. Corporate Social
Responsibility proponents define a company as socially responsible if it maximizes its “triple
bottom line.” It encourages companies to maximize their economic, social and environmental
impacts-something which shareholder fundamentalists would maintain deviates from the essential
role of business.

CEO’s are coming to the realization that CSR counts. This year the top-ranked company was
Britain's Vodafone, the world's largest mobile-phone operator, edging out last year's leader, BP.
"What we've tried to do is embed CSR," 53 said Charlotte Grezo, the company's director for
corporate responsibility.54 There were four newcomers in the top ten this year - French water
companies Suez (No. 5) and Veolia (No. 8), Italian utility Enel (No. 6), and British banking and
insurance company HBOS (No. 9). Both newcomers and those that fared well in the 2005
rankings were those that progressively embraced strategic management systems and/or engaged
with a broader array of stakeholders.55

The 2006 ratings penalized companies that failed to address non-financial issues at the core of
their business. Conversely, Volkswagen climbed the rankings from No. 56 to No. 19 after
releasing its first comprehensive CSR report. This clearly demonstrates that Corporate Social
Responsibility may be used as a means of differentiation in otherwise competitive environments.

48
Demos, Telis, Beyond the Bottom Line. www.money.cnn.com, October 23,2006
49
Fortune Accountability Beyond the Bottom Line. www.money.cnn.com, July 23, 2007
50
51
Ibid 50
52
53
Ibid 52
54
Ibid 53
55

14

At No. 52, Home Depot also made strong gains; doubling its score, in part due to the company’s
publication of a Web report on the non-financial impacts of its business, such as how the wood it
sells affects forests in North America and the Amazon.56

General Electric (GE) is a prime example of a company that has effectively managed key
stakeholder relationships and boasted significant financial gains as evidenced in the company’s
No. 11 ranking in Fortune 500 (2007), No. 14 in Socially Responsible Ranking and No. 4 among
Most Valuable Global Brands of 2006.57 GE’s success can be attributed to the socially and
environmentally conscious business stratagems the company has embarked on. Most notably, its
‘Ecomagination’ technology has offered a new approach to solving customers’ toughest
environmental challenges. Put into practice, GE’s belief that financial and environmental
performance can work together to drive company growth.

Criticized by CSR campaigners in the past for unethical business practices, McDonald’s now
seems to tower as example of a corporation that has integrated social demand into its business
objectives and been rewarded with a healthy return on shareholder equity. ”The most important
thing is to listen to our customers,” stated spokesperson Walt Riker. 58 The turnaround plan,
which from 2003, focused on customers demand in-turn lead to the company’s stock soaring to
an all time high above $55 since it announced its largest-ever dividend increase. McDonald’s
promised to return $15 billion to $17 billion to shareholders through dividends and share buyback
by the end of 2009.

Corporate Social Responsibility, Business Profitability and Increased Customer
Satisfaction

Corporate Social Responsibility is contingent on various factors, namely: cost of social response
relative to the firm's resources, firm's culture, values of management, and rewards a firm expects
to receive from the social segment it serves. Business and investment communities have long
debated whether there is a real connection between socially responsible business practices and
positive financial rewards. There is a growing body of data, both quantitative and qualitative, that
demonstrate the bottom line benefits of socially responsible corporate performance. In the last
decade an increasing number of studies have been conducted to examine this link. These studies
generally fall into two camps: those analyses that argue companies should pursue CSR initiatives
because they are the moral thing to do and those that argue companies should pursue CSR
initiatives because they will enhance profits. The former, upheld by stakeholder theorists, are
founded on the premise that without proper pressure companies will not act in a socially
responsible manner. The claim here is that managers overemphasize the pursuit of profits while
overlooking the benefits of Corporate Social Responsibility.

Onside with those that maintain that CSR will enhance profitability is Janet Blake, Head of Global
CSR at British Telecom (BT). Recently interviewed in Green Business News, Blake explains “that
there is a strong financial return on CSR (BT estimates that about £2.2bn revenue per year is tied
to CSR), not to mention an improvement in customer satisfaction - BT estimates that for every
10% rise in customer awareness of CSR, there is a related 1% increase in customer
satisfaction.59 Deductively, there in turn must be a correlation between customer satisfaction,
return on customer and profitability.

A study by the Centre for Social Markets found that “there was a CSR premium (i.e. an addition
benefit because of Corporate Social Responsibility earned by firms or appreciated by consumers
and other stakeholders) that could be earned by firms on such items as product quality, employee

56
57
Business Week 2006 ‘Innovation Metrics The top 100 Brands’
58 st
Carpenter, David. ‘How McDonald’s Got Cooking’, Associated Press September 21 , 2007
59
www.green.itweek.co.uk/2006

15

productivity, consumer satisfaction.”60 Therein the additional CSR costs could well be cancelled
out by consumers accepting to pay for this additional premium or through prices being positively
affected by the additional efficiency that CSR was likely to bring about. The Centre maintained
that “evidence for this positive CSR premium is growing. How big this premium is likely to be is a
matter for further research although visionary CSR companies can have a premium of at least 5%
over non visionary companies”61

Furthermore, over 100 empirical studies published between 1972 and 2000 have examined the
relationship between companies’ socially responsible conduct and financial performance. In these
studies, the majority of results (68%) point to a positive relationship between corporate social
performance and financial performance. The London Business School confirms these findings
and has identified 80 studies on CSR, of which 42 demonstrated a positive impact, 19 found no
link, and 15 produced mixed results and only 4 showed a negative impact.62

To give some examples of the studies:

• Companies with a public commitment to ethics performed better on 3 out 4 financial
measures than those without. These companies also had 18% higher profits on average.
(Source: Institute of Business Ethics, 2003)
• A study of “stakeholder superstars” (including Coca Cola, Procter and Gamble, Johnson
& Johnson) showed that companies who consistently tried to take into account its
stakeholders opinions outperformed the S&P 500 by more than twice the average over
the past 15 years. Total shareholder return was 43% over the past 15 years, while the
total shareholder return from the S&P 500 was 19%
• This result was confirmed by Harvard University, who that found stakeholder-balanced
companies’ showed four times the growth rate and eight times the employment growth
when compared to companies that are shareholder-only focused (Harvard University,
2000).
• Other research show that corporations with a public commitment to relying on their ethics
code outperformed firms that did not by two to three times (Business and Society Review,
1999)63

Overall wealth maximization is achieved through strategic stakeholder relationships. Many
experts even argue that a company’s commitment to social responsibility improves its financial
performance by attracting more investment. For examples, 9 of the 15 largest social funds are in
the top quartile of investment categories based on a three-year performance.64 In addition, a
study by the University of Southwestern Louisiana titled, "The Effect of Published Reports of
Unethical Conduct on Stock Prices,” showed that publicity about unethical corporate behavior
lowered stock prices for a minimum of six months.65 The latter findings highlight the relationship
between stock, share market performance and corporate reputation rankings. Said results
confirmed that based on total equity return, firms of higher reputation outperform lowly ranked
firms.
.

60 th
Laffer, A. ‘Does CSR enhance business profitability?’ November 19 , 2004
61
Ibid 58
62
www.crseurope.org
63
Ibid 60
64
www.csreurope.org
65
Journal of Business Ethics Volume 15, Number 12 / December, 1996

16

Increased Customer Interest and CSR

In 1960, Theodore Levitt, wrote "Marketing Myopia," one of the most widely-quoted and reprinted
Harvard Business Review articles. The article warned of the dangers from firms shortsightedly
focusing on their products and, in doing so, overlooking the needs of their customers.66 Levitt
insisted that the organization must learn to think of itself not as producing goods or services, but
as buying customers; as doing the things that will make people want to do business with it.
Although a functional fundamentalist that viewed CSR as immaterial, Levitt’s article seems to call
into play customer needs which now, forty years later, are entrenched in ethically minded
purchasing. While businesses must first satisfy customer’s key buying criteria-such as price,
quality, availability, safety and convenience, studies have shown a growing desire to buy or not
buy because of other values-based criteria such as ‘sweatshop-free‘ and ‘child-labour free’
clothing, lower environmental impact and absence of genetically modified materials or
ingredients. (i.e. Body Shop).

I draw attention to a body of evidence that suggests that the ethical conduct of companies exerts
a growing influence on the purchasing decisions of customers. On December 5, 2006 GolinHarris
revealed results of its fourth national survey, ‘Corporate Citizenship Gets Down to Business:
Doing Well by Doing Good 2006.’ The survey found that Americans were sending a clear
message to Corporate America: ‘Do more, be authentic and the business rewards will follow.’67
An overwhelming two-thirds of Americans interviewed said:

• “Doing well by doing good” is a savvy business strategy. Good corporate citizenship
should be approached as an investment, asset and competitive advantage for business
that contributes to the company's success.” (67%)
• “Business should invest significantly more money, time, attention and resources in
corporate citizenship than it does today.” (68%)
• “Corporate citizenship should be considered an essential, high priority compared to other
priorities companies face and manage in running a profitable, competitive and successful
business.”68 (68%)

A loyal customer is the equivalent of repeat business and the possibility of increased profit
margins. The strength of the business-consumer relationship is only as good as the level of
satisfaction it generates. In a recent study by Cone Inc. and AMP Insights, (2007) more than one
in five consumers reported having either rewarded or punished companies based on their
perceived social performance.69 The following, outlines the repercussions of both responses
towards companies. While support of social issues improved trust in a company, Cone’s research
also showed that Americans stood ready to act against companies that behaved illegally or
unethically. Although the effects of such actions may have not hurt the company in the short term,
the consequences for business could be devastating in the long-term.70Those surveyed
responded that they would react in a variety of ways if they were to find out about a company’s
negative practices:71

• Consider switching to another company’s products or services (90%)
• Speak out against that company among my family and friends (81%)
• Consider selling my investment in that company’s stock (80%)
• Refuse to invest in that company’s stock (80%)
• Refuse to work at that company (75%)

66
Levitt,T. ‘Marketing Myopia.’Harvard Business Review, 2006
67 ,
GolinHarris News Release December 5, 2006
68
Ibid 46
69
Cone press Release 2004
70
Ibid 69
71
Cone Press Release 2004

17

• Boycott that company’s products or services (73%)
• Be less loyal to my job at that company (67%)72

So, responsible business can make for loyal customers, improved morale and higher productivity
among employees. In turn, companies should have an interest in strengthening their social
responsibility with associations and consumers. Companies need to be cognizant that any actions
that violate societal expectations could very well damage, even destroy, brand image among
networked stakeholders. Precariously balancing the interests of various groups is paramount to
safeguarding a company’s image.

A recent study by the Reputation Institute found that companies which demonstrated: innovation,
vision, social responsibility and appealed to emotions while simultaneously posting strong
financial results, had the best corporate reputations. For its eighth annual rankings, Reputation
Institute surveyed more than 60,000 people online in 29 countries – participants could only vote
on companies based in the country where they live – and used the result to determine a
company's reputation. Consumers were polled on seven factors that contribute to a firm's
reputation: products and services, innovation, workplace, governance, citizenship, leadership and
performance.73 The results ultimately proved that good deeds, lead to good reputations. Charles
Fombrun, Executive Director of the Reputation Institute said that “companies that gave to social
causes did well in the survey.” 74 According to Fombrun, Ikea and Lego were “two companies
that (had) taken responsibility for the development of their region and country and (were) seen as
national icons. They have earned their trust, respect and admiration from behaving in ways that
are relevant to their key stakeholders and that’s why they’re rated tops by the public.”75
Integrating CSR in business strategy has not only had a social impact, but, as reported in 2007,
led Lego to report a 3% rise in pretax profit.76

72
Ibid 71
73
www.forbes.com/leadership/2007/05/22/reputation-institute-rankings
74
Ibid 73
75
http://reputationinstitute.com (Press Release May 2007)
76
Reuters August 29th, 2007

18

Return on Customer and Total Shareholder Return

Ultimately, both short term and long term company profit are generated from the one business
asset that matters most: customers. So it’s imperative that companies’ align their business
objectives with the increasing social consciousness demands that consumers place on them.
Peppers and Rogers, who defined and launched the global CRM movement, have devised
Return on Customer (ROC) formula for measuring the rate at which overall enterprise value is
created by customers. This formula is consumer centric-defining the customer as the primary
profit and value driver of the business.

According to Don Peppers and Martha Rogers, a customer can create value for a business in two
very important ways: by increasing the company’s current-period cash flows and by increasing its
future cash flows. 77 For instance, as stated previously in the section on reputation, if a customer
has a bad experience with a company and becomes less inclined to do business with it in the
future, the firm loses value at that very instant with the customer’s change of mind. This company
would lose real value-in the same way as share price would lose current value when future profits
are threatened.

In their work, Return on Customer: Creating Maximum Value From your Scarcest Resource,
Rogers and Peppers explode the notion that “maximizing the value created from a given
customer over time, most likely occurs when the company’s value to that customer is maximized
and the customers who get the most value are those who have come to trust the firm. So to
maximize Return on Customer (ROC) a firm must earn trust.”78 The two authors maintain that
most customer relationship management ROI-oriented business cases focus too much on the
near term, counting only direct "hard" benefits and ignoring the more important "soft" benefits that
relate to customer satisfaction, retention and lifetime value optimization. Their ROC model
focuses on the softer benefits especially maximizing customer lifetime value.79 Peppers and
Rogers believe that "Customers are the only reason you build factories, hire employees, schedule
meetings, lay fiber-optic lines, or engage in any business activity. Without customers, you don't
have a business."80 Therefore attracting and retaining customers should both be regarded as
critical processes.

To model a very simple example of unintended value destruction Rogers and Peppers consider a
company that has a million customers, each with a 1% likelihood of responding to a direct mail
sales offer.81 Let us assume that each solicitation costs $1 to send out and each positive

77
Peppers, Don & Rogers, Martha, Return on Customer: Creating Maximum Value From your Scarcest Resource
78
Ibid 77
79
Peppers &Rogers, Martha, Return on Customer: Creating Maximum Value From your Scarcest Resource
80
Ibid 79
81
Peppers, Don &,Rogers, Martha(2005), Return on Customer: Creating Maximum Value From your Scarcest Resource,

19

response generates $125 in cash flow.82 Thus, with the first campaign the company spends $1
million on solicitations and generates $1.25 million in cash flow for a $250,000 profit.83 The firm
can effect up to six solicitations a year and each campaign pulls a 1% response from the
customer base. As Table 1 illustrates below, these customers represent $6 million for the firm.
The firm’s Return on Customer remains constant in subsequent years because it continues to
generate a steady 1% productivity rate on its customers year to year.84

This begs the question, what if after six unsuccessful solicitations each year; the customers were
to become less likely to take the company’s offer during the next year?85 The company builds into
the model a .05% annual decline in response rate, accounted for by increased speculation about
the brand and its corporate affiliation. If the decline were actually .05% annually then the firm
would be destroying about a quarter of its customer equity-more customer equity than it was
reaping profit.86 The result: a negative ROC in the first year as shown in Table 2 which then
accelerated downwards as the company continues to decrease the value of its customer base.

82
Ibid 81
83
Peppers & Rogers.Return on Customer: Creating Maximum Value From your Scarcest Resource
84
Ibid 83
85
Peppers & Rogers, Return on Customer: Creating Maximum Value From your Scarcest Resource
86
Ibid 85

20

An examination of Table 2 reveals a direct relationship between the decreasing rates of
profitability and the declining customer response rates. While the company may assume it is
creating value, in actuality customer equity is declining each year by an amount exceeding the
year’s profit; with an end result of total value created each year being negative. As a result, the
company’s return on customer is negative and while it might think it has a profit to report, it is
actually eating its own customer base. Year 4 is the very last year that the company will generate
any current-period profit as it will have completely destroyed the productivity of its customer base.

To compliment the Rogers and Peppers theory, research conducted by Bain Consulting Group
and Harvard Business School in August of 2005, showed that the longer a customer is a with a
company, the greater the annual profit generated from that customer. These increased profits
came from a combination of increased purchases, cost savings, referrals and a price premium.87

This research implies that companies should not be near-sighted and simply look at market share
or short term profitability as would people such as Friedman. Rather they should base their
marketing programs on the following basic tenets: Firstly, to quickly assess which new customers
have the greatest potential to become high-value, long-term customers. Secondly, to reward
existing high-value, loyal customers with preferential treatment in order to retain a higher
percentage of said customers.88

Conclusion

In the end, what benefit does return on customer bring to overall shareholder return? When we
talk about Total Shareholder return, we define it as an investment term that refers to the overall
return a shareholder earns from owning a company’s stock over some period of time. It is the
economic value of a business broken down into customer specific units.89 This definition is based
on what a shareholder’s actual cash flow would be if he were to buy the stocks at the beginning of
the period and sell it at the end. All value is created by any company’s business operation must
come from its customers at some point. 90 Therefore, if the discounted cash flow value of an
operating business is created entirely by customers, the result is that its discounted cash flow is
composed of a whole of individual lifetime values. All the firm’s current and future customer
lifetime values added together (its customer equity) will equal its total discounted cash flow.

Beyond the bottom line, businesses need to balance economic, legal, and social responsibilities
in order to achieve long term success. Firms that are seen as acting illegitimately are likely to

87
Cutler, Andy.(2005) ‘The need for Customer Centric Marketing’
88
Ibid 87
89
Peppers & Rogers,Return on Customer: Creating Maximum Value From your Scarcest Resource
90
Ibid 89

21

face difficult relations with employees, governments, communities, and consumers – which all
have direct impacts on the top and bottom lines. When examining whether or not business could
prosper from strategic Corporate Social Responsibility it is pivotal to see it’s overall business
benefits – lowering and limiting litigation, sizably reducing taxes, protecting and enhancing brand
image, improving customer satisfaction and retention, reducing employee turnover, reducing
operating cost, increasing both reputation and sales and increasing customer loyalty. By
integrating a stakeholder perspective which accounts for various consumer needs (i.e. ones of
self actualization), management is best placed to optimize shareholder returns over the longer
term and create overall value maximization-both for the consumer and the corporation.

22

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24

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