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Running head: CORPORATE SOCIAL RESPONSIBILITY (CSR) Does Corporate Social Responsibility Drive the Firm’s Competitiveness Chapter 4 (Novo Nordisk Case Study) Completed by University of Outline 1. Introduction 2. Empirical approach: measuring CSR at Novo Nordisk 3. Novo Nordisk and the CSR 4. Implementing CSR at Novo Nordisk 5. CSR and modern stakeholders 6. Main issues at Novo Nordisk’s attitude towards CSR 7. Conclusion 8. References Introduction This part of the work performed on the subject of Corporate Social Responsibility (CSR) presents a case study of the Novo Nordisk, a Danish pharmaceutical company, and illustrates how CSR’s successful implementation at this organization drives and greatly strengthens company’s competitiveness. It is difficult to explain the social responsibility of Novo Nordisk because there is no clear-cut definition of this function either in literature or in the company’s manuals. Practically, however, corporate social responsibility (CSR), in the minds of many, has been characterized by the image of a recently ‘downsized’ employee who, after years of loyalty to his or her firm, is left with nothing more than an insufficient severance check and an uncertain future. While many deplore the behavior of these firms, others see these moves as sensible responses to changes in technology that have reduced the advantages of in-house production and reduced the benefits of scale in the product market. Managers of firms defend their layoff practices as being necessary in order to meet global competitiveness, improve efficiency, or become leaner and meaner. Observers and constituents, however, are divided on the issue of social responsibility. Novo Nordisk managemetnt believes that layoffs have devastated the industrial workforce, leaving workers with little hope for job security and improving economic prospects. Underlying this pro-social responsibility view of Novo Nordisk is its belief that legal solutions are not always sufficient. It is suggested that the time-lag problem is at the heart of this argument in that the law is primarily a reactive institution. Novo Nordisk analysts argue that there may exist a significant period of time between when a problem is recognized and when the legislature can pass a law to solve the problem. Until new laws are passed a great deal of damage--some irreversible--can be done. According to Novo Nordisk management, organizations have to take on social responsibility because it significantly increases the competitiveness of the firm. There is no one else in the society of organizations to take care of society itself. Yet organizations must do so responsibly, within the limits of their competence, and without endangering their performance capacity. However, Novo Nordisk specialists also present a debta that there can be various degrees or kinds of CSR. Social responsibility for management of Novo Nordisk represents a commitment to not waste the resources of the society at large in unprofitable plants and lines of businesses. To Novo Nordisk, adopting new management strategies or using new technologies in order to produce more for less would increase their stockholders’ wealth. This improvement of stockholders’ wealth is assumed to have a trickle-over effect on other stakeholders in terms of lower prices, better quality of goods and services, and even an increased rate of job creation in the not-so-distant future. The principal idea behind the corporate social responsibility concern for Novo Nordisk is now deeply imbedded in the desire to increase its overall competitiveness on the market. The main objective of this paper is to empirically test the impact social responsibility performance at Novo Nordisk has on its overall competitiveness, as measured by the company’s performance index. It is important to note that considerable CSR expenditures do not imply that the level of economic activity or overall level of employment will decline. In fact, while the years 1991 and 1992 were notable for a series of layoffs at large firms, overall employment in the EU rose considerably. Within this organization, ethical and social principles are being institutionalized in a variety of ways. The goal of such activities is to ensure that organizational social responsibility concerns are treated in the same routine manner in which legal, financial, and marketing concerns are addressed. In a recent review about company’s activities, Novo Nordisk management discovered that during the past two decades, corporation experienced an increase in social pressure that resulted in a business climate characterized by increased environmental regulations. In this same report (Novo Nordisk report of 2004), it is indicated that corporate social responsibility is a function of the evolutionary nature of corporate social responses to environmental concerns. In addition, a number of recent studies suggest that environmental issues and social responsibility have become increasingly important to a large segment of modern society. Empirical approach: measuring CSR at Novo Nordisk All researchers, management scientists, and practitioners agree on the fundamental question that corporate social responsibility is an extremely difficult concept to measure. Each of the techniques developed by those researchers has limitations. Some use financial performance as a proxy for social performance; others use measures that introduce bias and cause inconsistencies; and still others suffer from lack of generality. Generally, however, there are two accepted methods of measuring corporate social responsibility (CSR) at Novo Nordisk. The first method is the “reputation index”, where knowledgeable observers rate the company on the basis of one or more dimensions of social performance. The advantages of this method lie in the fact that (1) it summarizes the responses of a key constituency of various firms, and (2) it tends to be internally consistent because one evaluator is applying the same criteria to each firm. The most important disadvantage of this method is the degree of subjectivity inherent in the ranking. However, this method is still one of the most popular ones used because of its comprehensiveness and availability. The survey consists of an annual polling of executives, directors, and financial analysts in particular industries on eight key attributes of reputation in order to establish overall reputation scores for the corporations of interest. The second method of measuring CSR at Novo Nordisk is content analysis. Normally in content analysis the extent of the reporting of CSR activities in various firm publications, especially in the annual report, is measured. This can consist of simply noting whether or not a specific item (such as pollution control) is discussed either qualitatively or quantitatively, or it can mean actually counting a number of items. In Novo Nordisk, the reputation index is used as a proxy to measure a firm’s social performance. It is believed that the eight social dimensions represent the multidimensional nature of social responsibility and are commonly used by firms maintaining socially responsible portfolios. Furthermore, an independent assessment of social corporate responsibility on these eight dimensions is available from the database provided by Fortune magazine. The reputation index method of corporate performance is, relatively, a more unbiased measure of social responsibility than content analysis, which relies heavily on information provided by the company itself.
The key attributes constituting the survey at Novo Nordisk are: (1) quality of management; (2) quality of products/services offered; (3) innovativeness; (4) value as a long-term investment; (5) soundness of financial position; (6) ability to attract, develop, and keep talented people; (7) responsibility to the community and environment; and (8) wise use of corporate assets. These attributes reflect a multiple-constituency view of the firm as having many stakeholders. These include not only investors but also customers interested in quality, employees interested in rewarding employment, and the global community. In what concerns the individual importance of each of the eight attributes, historically, 80 percent of the respondents pick quality of management as being the most important. The second most important attribute is the quality of products or services. Over the past years, though, a marked shift in the number of respondents who cite responsibility to the community and environment as being paramount to a corporation’s reputation has taken place. The reputation of Novo Nordisk constitutes an important signal about its managerial and control effectiveness, which is essential to the creation of a better image with all constituents. To create the right reputation, a firm signals its key characteristics to its stakeholders in order to maximize its social status. In addition, a good reputation can be perceived as a competitive advantage within an industry. Novo Nordisk and the CSR Note that it was the discovery of process innovations (mainly CSR) that Dr Schatzmann was interested in. It was neither a new enzyme, nor was it a new source from which a better rennet could be extracted. This is of great interest because we would argue that this fundamental insight into processing that Christian Hansen later developed as a research assistant at the chemical laboratory at the Copenhagen University is one of our main arguments as to the status of Novo Nordisk as the leading manufacturer in the market for industrial enzymes. Today Chr. Hansen’s Laboratories is a world-wide company with a production subsidiary in Ireland and production plants located outside Copenhagen, in Milwaukee, in the Toronto area, in Adelaide, and in Milan. Moreover, the firm has established sales companies world-wide. Chr. Hansen’s Laboratories is still producing rennet, but has made a big expansion into the pharmaceutical business with strong biotechnological competencies focusing on the prevention of allergies. At almost the same time as Christian Hansen developed a new process to produce rennet, another major research institution, Carlsberg’s Laboratory, was founded. It is often said that you can’t manage what you can’t measure. While this is not always true there are a number of advantages to measuring CSR. They include: • Monitoring improvement over time and in comparison with others, • Providing a good knowledge base for setting the stretch targets that eco-efficiency requires, • Helping set priorities for action, • Deciding between alternative courses of action, • Providing information to external stakeholders. However, measuring CSR is not easy. One difficulty reported by Novo Nordisk management is that CSR is often about getting more from less. Measures that only have an environmental parameter such as quantities of substances emitted and resources used are, while valuable for environmental management, not CSR measures because they cover only one side of the equation. Novo Nordisk management believes that true CSR measures have to show how more output is being obtained from a given resource input or environmental effect. While this is relatively straightforward for outputs expressed in physical units—as with miles per gallon or fuel consumption per ton of product as a measure of fuel efficiency—it is more problematic for economic outputs. Some companies and analysts relate resource utilization or emissions to turnover, for example. However, while this can be useful, there is a danger that the measures improve not because of real environmental action but because of other changes such as inflation of revenues through price increases, corporate reorganizations, or acquisitions (Reinemund, 1992). Similar problems can occur with other output indicators, such as production, profitability, or value added. Whichever one is chosen needs to have a significant relationship with the environmental parameters. Novo Nordisk believes that decisions also have to be made about the boundaries of the measurement—is it the whole corporation, a division, a site, or a process within the site? There is also a danger that measuring CSR improvements in one environmental parameter can obscure deterioration in another. While this can be reduced by developing a wide range of individual measures covering all the main parameters, many non-specialists lack the time to absorb such detailed information and therefore seek a single CSR measure that relates an aggregate indicator of environmental impacts to output. However, this means comparing apples (e.g., the impact of a gaseous emission of sulfur dioxide) with pears (e.g., the environmental impact of producing a ton of copper)—a procedure for which there is no broadly accepted scientific methodology. A final difficulty is that, even if an individual organization can demonstrate that its activities and products are becoming more eco-efficient, for instance, this says nothing about its sustainability. When markets are expanding rapidly, for example, any improvements in the eco-efficiency of making products may be outweighed by the effects of increased numbers in use and / or their greater utilization. The effects of some products and processes will also be unsustainable even with radical improvements in their eco-efficiency. CSR is a new concept and such difficulties are inevitable— after all, it took many decades for specialists to work out the standardized measures of financial performance that we now take for granted. But some companies are at least making initial steps that, for all their imperfections, are providing useful information and a solid foundation for further progress. Implementing CSR at Novo Nordisk David Elkington coined the concept of the triple bottom line in 1998 in his book Cannibals with Forks: the Triple Bottom Line of 21st Century Business. The rationale behind this concept was that the single dimension of financial reporting cannot provide an adequate description of an organization. Given that a company is multifaceted, corporate reporting on social and environmental performance is necessary to present a coherent profile of the organization. This concept found favor within commerce and industry and has played a role in driving reporting practices by companies today. Corporate reporting has evolved to include the documentation of non-core business activities that are undertaken by companies and implemented to demonstrate their commitment to sustainability and a more transparent relationship with stakeholders. Novo Nordisk has made progress in developing matrices that allow for quantitative reporting in terms of a triple bottom line. Common approaches to quantitative TBL include: • economic value added (EVA)-a measurement technique developed to assess whether companies are adding or destroying value. The company prof its are adjusted for the cost of capital employed, and a linked concept Market Value Added (MVA) calculates how much value has been created since the company was founded • environmental value added- the adjustment made to allow a charge for the natural capital employed (renewable resources), and for non-renewable resources, for the one-off benefit derived from the resource • social value added -the means of accounting for the knowledge and skills developed and lost.
The focus of this may be on the levels of trust, resilience or mutuality a company enjoys with a local community. The release of the Social Accountability 8000 (SA 8000) guidelines has added substantially to the existing body of knowledge on valuing social capital. There is considerable interest in, and work being undertaken on, TBL approaches and metrics at Novo Nordisk. A means of integrating aspects of mainstream and alternative accounting, which is required to provide a perspective on the total net value added by a company, has not so far been developed. In order to adopt this more holistic perspective-the perspective of an organism/organization in an ecological niche within a wider environment, where the organism and environment are mutually sustaining- Novo Nordisk has developed a model that acknowledges, and is applicable to, the increasingly complex and disaggregated nature of the modern workplace. It is clear that if Novo Nordisk is to make an effective evaluation of the sustainability and effectiveness of new developments in the workplace, it will require an assessment methodology and indicators that take a new approach, one that enables this company to evaluate both the specific sustainability and effectiveness of any particular workplace as well as its sustainability and effectiveness relative to alternative options. At present, in addition to assessing the environmental sustainability of the organization and its workplace, the methodology and indicators of the TBL at Novo Nordisk evaluate the workplace in terms of its contribution to the social sustainability of the individual, the working community and the wider community. Lastly, these indicators are framed in the context of ensuring the economic sustainability of individuals within an organization, the organization itself, and the organization's contribution to the wider community. In this respect, a new set of indicators was derived in concept from the TBL procedures, but reformed to construct a set of workplace-specific indicators-indicators that do not simply focus on the building, but that instead focus on the “performance” of staff in their workspace. It must be remembered that the concept of the workplace now extends well beyond the traditional office environment. Since the workplace, the nature of work and the way Novo Nordisk now functions within society are all constantly evolving, it is important that the indicators of workplace performance and sustainability are not static at this company. To remain useful, they must develop in line with the evolution of the organization they are assessing and contributing to. Thus, the indicators must be flexible, and must be readily open to adaptation to deal with new situations. CSR and modern stakeholders Today’s modern organization in many instances is the institutional centerpiece of a complex society made up of many people with a multitude of interests and with many expectations as to what organizations ought to provide. As highlighted in this paper, the social contract between organizations and various stakeholders (e.g., employers and employees) has continually changed, producing new demands that all parties rethink their relationships (Reinemund, 1992). Those organizations likely to survive in the future will pay particular attention to how to successfully respond to ever-changing expectations. These organizations will need to meet many legal, ethical, and social or philanthropic expectations while still being able to change proactively in response to economic incentives (Schmidheiny, 1996). Ethical and socially responsible employee behavior is important to the viability of all organizations as they attempt to change and respond to stakeholder expectations. To Novo Nordisk and its employees, acting ethically and legally means saving billions of dollars each year in theft, lawsuits, and settlements. Research has shown that corporations also have paid significant financial penalties for acting unethically. Novo Nordisk realizes it must be responsive to an increasingly diverse audience, made up of individuals and groups that they may have been able to ignore in the past. The growing importance of the role of stakeholders in the organizational equation over the past few decades has made it apparent that organizations must address the legitimate needs and expectations of stakeholders if they want to be successful in the long run. Stakeholder inclusion is the key to Novo Nordisk success in the twenty-first century. Novo Nordisk must continuously address stakeholders; it is the ethical course of action to take, and stakeholders clearly have claims, rights, and expectations that should be honored. A stakeholder approach to understanding organizational situations like the Enron debacle can help us to understand better why such ethical organizational demises occur (Backhaus et al., 2002). Organizational management at Novo Nordisk truly cares about business and corporate social responsibility. It is proactive rather than reactive in linking strategic action and ethics. It steers away from ethically and morally questionable business opportunities and business practices. If this organization’s stakeholders conclude that management is not measuring up to ethical standards, they have recourse. For example, concerned investors can protest at the annual shareholders’ meeting, appeal to the board of directors, or sell their stock. Concerned employees of Novo Nordisk can unionize and bargain collectively, or they can seek employment elsewhere. Novo Nordisk customers can switch to competitors. Suppliers can find other buyers. The community and society can do anything from staging protest marches and urging boycotts to stimulating political and governmental action. Novo Nordisk also realizes it must recognize the rights or interests of various stakeholders—not only stockholders and employees but also outsiders affected by the company’s actions. As it was said, such outsiders include customers, suppliers, governments, unions, competitors, local communities, and the general public. Stakeholder groups justifiably expect (and often demand) that the firm satisfies their claims in a responsible manner. In general, stockholders claim appropriate returns on their investment; employees seek broadly defined job satisfactions; customers want what they pay for; suppliers seek dependable buyers; governments want adherence to legislation; unions seek benefit for their members; competitors want fair competition; local communities want the company to be a responsible citizen; and the general public expects the company’s existence to improve the quality of life (Backhaus et al., 2002). To be successful in today’s complex and dynamic environment, Novo Nordisk must incorporate the interests of these groups when defining its strategy or making business decisions. These steps should be taken: 1. Identification of the stakeholders 2. Understanding the stakeholders’ specific claims vis-á-vis the company 3.
Reconciliation of these claims and assignments of priorities to them 4. Coordination of the claims with other elements of the company The left-hand column of Table 1 lists the commonly encountered stakeholder groups, to which the Novo Nordisk’s senior officer group is often added. Obviously, though, every business faces a slightly different set of stakeholder groups, which vary in number, size, influence, and importance. Organizational leaders and managers must take the time to identify all the stakeholder groups and to weigh their relative rights and their relative abilities to affect the company’s success. The concerns of the principal stakeholder groups tend to center on general claims, as listed in the right-hand column of Table 1. However, TABLE 1 Stakeholder View of Corporate Responsibility at Novo Nordisk Stakeholder Nature of the Stakeholder Claim Shareholders Participation in distribution of profits, additional stock offerings, assets on liquidation; vote of stock; inspection of company books; transfer of stock; election of board of directors; and such additional rights as have been established in the contract with the corporation. Employees Economic, social, and psychological satisfaction in the place of employment. Freedom from arbitrary and capricious behavior on the part of company officials. Share in fringe benefits, freedom to join union and participate in collective bargaining, individual freedom in offering up their services through an employment contract. Adequate working conditions. Customers Service provided with the product; technical data to use the product; suitable warranties; spare parts to support the product during use; R&D leading to product improvement; facilitation of credit. Creditors Legal proportion of interest payments due and return of principal from the investment. Security of pledged assets; relative priority in event of liquidation. Management and owner prerogatives if certain conditions exist with the company (such as default of interest payments). Suppliers Continuing source of business; timely consummation of trade credit obligations; professional relationship in contracting for, purchasing, and receiving goods and services. Unions Recognition as the negotiating agent for employees. Opportunity to perpetuate the union as a participant in the business organization. Competitors Observation of the norms of competitive conduct established by society and the industry. Business statesmanship on the part of peers. Governments Taxes (income, property, and so on); adherence to the letter and intent of public policy dealing with the requirements of fair and free competition; discharge of legal obligations of businesspeople (and business organizations); adherence to antitrust laws. Local communities Place of productive and healthful environment in the community. Participation of company officials in community affairs, provision of regular employment, fair play, reasonable portion of purchases made in the local community, interest in and support of local government, support of cultural and charitable projects. The general public Participation in and contribution to society as a whole; creative communications between governmental and business units designed for reciprocal understanding; assumption of fair proportion of the burden of government and society. Fair price for products and advancement of the state-of-the-art technology that the product line involves. the organization’s leaders and managers should understand the specific demands of each group. They then will be better able to initiate actions that satisfy these demands. Unfortunately, the claims of various stakeholder groups often conflict (www.novonordisk.com). For example, the claims of governments and the general public tend to limit profitability, which is the central claim of most creditors and stockholders. Claims must be reconciled in a way that resolves the conflicting, claims of stakeholders. For organizational objectives and strategies to be internally consistent and precisely focused, leaders must display a single-minded, though multidimensional, approach to the company’s aims. Main issues at Novo Nordisk’s attitude towards CSR Claims on Novo Nordisk may include high wages, pure air, job security, product quality, equal employment opportunity regulations, product variety, wide markets, company growth, investment security, high return on investment (ROI), and more. Although most of these claims may be desirable ends, they cannot be pursued with equal emphasis. They must be assigned priorities in accordance with the emphasis that the organization will give them. That emphasis is reflected in the criteria that the company uses in its strategic decision making; in the company’s allocation of its human, financial, and physical resources; and in the company’s long-term objectives and strategies (Drucker, 1982). The demands of Novo Nordisk’s stakeholder groups constitute only one principal set of inputs to decisions on such things as mission and strategic direction. The other principal sets are the managerial operating philosophy and the determinants of the product- or service-market offerings. Those determinants constitute a reality test that the accepted claims must pass. The key question is: How can Novo Nordisk as the companies satisfy its claimants and at the same time optimize its economic success in the marketplace? Novo Nordisk must increasingly learn how to respond to this question if it is going to survive and thrive. Novo Nordisk must be financially successful while responding claims that the organization be more socially responsible. The issues that surround the call for more socially responsible organizations are numerous, complex, and contingent on specific situations. Rigid rules of business conduct cannot deal with them. Therefore Novo Nordisk’s managers must be concerned about the social responsibility of their organizations. Failure to do so may result in their inability to sustain a competitive advantage. Novo Nordisk attempts to place the economic and legal expectations of business in context by relating them to more socially oriented concerns. These social concerns include ethical responsibilities and philanthropic (voluntary/discretionary) responsibilities. This concept, which includes four kinds of responsibilities, elaborates and builds upon the definition proposed at the beginning of this paper. Novo Nordisk management suggests portraying the four parts of CSR in pyramid form, beginning with the building block of economic performance at the base. At the same time, Novo Nordisk is expected to obey the law, because the law is society’s codification of acceptable and unacceptable behavior. Next is business’s responsibility to be ethical, which at its most basic level is the obligation to do what is right, just, and fair and to avoid or minimize harm to stakeholders (employees, consumers, the environment, and others). Finally, business is expected to be a good corporate citizen—to fulfill voluntary/discretionary or philanthropic responsibility to contribute financial and human resources to the community and to improve the quality of life (Drucker, 1982). However, it is important to avoid the facile assumption that endorsing a TBL approach will automatically lead to more sustainable environments. The Club of Rome/Factor 10 Club (2001) warn against the assumption that the new economy will automatically lead to more sustainable business, pointing to the danger of rebound effects.
They feel that voluntary codes of conduct regarding sustainability in the workplace must be supported and supplemented by governmental intervention, to avoid a situation where committed organizations are constantly improving their environmental performance while the majority of organizations merely fall further behind. The importance of measurement to sustainability is starting to be recognized in the wider society. The Green Futures website includes the following: “So maybe we need some new measurements?” That's the conclusion reached by Nic Marks, who helped devise the Index of Sustainable Economic Welfare-an earlier attempt to provide an alternative to the justly-maligned GDP as a useful indicator. He's now working on an ambitious new national index of well-being, which will combine familiar objective data on everything from the economy to the environment and social cohesion, with distinctly subjective views on levels of affection, creativity, security…things rarely if ever measured (and widely seen as beyond the scope of public policy), but deeply relevant to individual happiness and fulfilment. It may sound woolly, but as a brave attempt to link personal wellbeing with policy development- and what's the point of policy if it's not even trying to touch our well-being?-it's groundbreaking. (http://www.greenfutures.org.uk) If sustainability is being incorporated into measures of the economic health of the country and the general well-being of its citizens, it is more than time that such considerations were included in our assessment of where and how we will work in the future. The wider implications for this in terms of commercial development and the landscape of urban areas are unknown. Thinking about work space based on CSR and TBLA is, however, a real opportunity and one that could drive a paradigm shift in the way work takes place. Sustainability considerations can be incorporated at many stages of the development of a workplace strategy and, when used alongside, or better, integrated with, more traditional measures of workplace effectiveness, they can lead to a truly productive and sustainable workplace and organization. Too much focus on short-term effectiveness at the expense of sustainability will mean there is no future for the organization, long term. Too little focus on effectiveness will also, in the end, be unsustainable. The two must be considered in tandem. More energy must be put into testing and extending the work already done on TBL, in order to move this towards becoming a mainstream approach to accounting and company reporting and evaluation. Conclusion Early in the employment process at Novo Nordisk, a social contract is formed between this company and employee (www.novonordisk.com). Social contracts typically cover the inducement of the employer and the contribution of the employee. The degree to which both parties satisfy the expectations established by this contract affects the success of the relationship. It is important for organizations and employees to understand the expectations of the social contract as well. It is important for leaders and managers to understand that if the two do not or cannot agree on this aspect, then the relationship will suffer. Because ethical behavior cannot be reduced to simple do’s and don’ts, both parties have ever-changing expectations, and thus there must be opportunity and structure to address evolving. Training employees to make an ethical analysis as part of their decision making is critical. Training can be formal, focused on the organization’s goals and objectives and on techniques of decision making. Training can also be achieved through the normal socialization during orientation of a new employee. If the employer is operating ethically, then the role models whom the employees emulates will exhibit the proper ethical behavior. The system of rewards and punishment will confirm and reinforce ethical behavior. It may be a tough time to be in business for Novo Nordisk, but an ethical orientation can help companies weather the storm. Novo Nordisk can withstand the lean years, but the only organizations that will do so are those whose organizational culture encourages right action and rewards ethical behavior. This breeds long-term trust from employees and customers and reassures investors. It is not enough to sign a paper that says your company is behaving ethically. It is not enough to give money to worthy causes and be socially responsible, although it is a nice start. Organizations like Novo Nordisk must reorient themselves to the practice of business. Another way to put this is, if the next generation of managers is not trained to recognize that a competitive edge is no longer solely based on market share, then these companies—no matter how committed their leadership is to implementing an ethical approach to business—will fail to reach their desired state. Based on the above discussion, one can conclude that social responsibility is an important function that affects organizational performance and corporate standing in the community. To ensure their commitment to social concerns, Novo Nordisk has created permanent committees to monitor social responsibility and ethical functions. These committees, often called “social responsibility” or “public policy” committees, serve two functions within an organization. First, they lend legitimacy to the consideration of a social and an ethics agenda at the highest level of organizational decision making. Second, they symbolically communicate to employees and external stakeholders of the organization their commitment to high social and ethical principles in conducting business.