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Friday, September 2, 2011

Strategic CSR - News Corp

There are two aspects of the Rupert Murdoch/News Corp scandal that unfolded in the UK over the summer that I think are important, but have not been widely discussed:

1.       While I am certainly no defender of Murdoch, at the time the News of the World was closed it was the largest selling English-language newspaper in the world. Clearly, not only did its readership have no problem with the content of the stories published by the paper (or seem to care how the paper uncovered the information), but they actively sought it out and were willing to pay for it. As such, who is more at fault—Murdoch for providing the content people wanted to read, or the public for continuing to buy it? This speaks to a broader theme we introduced in the second edition of Strategic CSR—the idea of Corporate Stakeholder Responsibility. Until a firm’ stakeholders begin demanding better behavior (and the evidence of unethical behavior has long surrounded Murdoch’s newspapers), we should not be surprised if firms continue to be less than socially responsible.

2.       Of course, the key to the story, as with all good scandals, is to follow the money. This is especially true now that the FBI and U.S. Justice Department have become interested in the case. In addition to investigating whether Murdoch’s journalists hacked into the voicemails of 9/11 victims, the FBI and Justice want to know whether money was paid to the UK police. If true, News Corp (as a U.S.-listed firm) is likely in breach of the Foreign Corrupt Practices Act for paying money (bribes) to a foreign government official to gain some form of competitive advantage. Although the British newspapers are important to Murdoch, the U.S. is where the largest News Corp assets are located and so how the U.S. authorities react to the case will determine its eventual impact on the firm.

Have a good weekend.

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