Kairos Fabrics (KF) is a small manufacturer of blankets. KF sells directly to large retail chains in Europe. The company is privately owned and has fifteen shareholders.

Table 1: Selected financial data for KF for 2016 and 2017 (figures in $000s)

Beginning in 2017, KF adopted a programme of corporate social responsibility (CSR) by:

• donating money to charities
• encouraging employees to do three paid hours per week of community service during work hours
• using only biodegradable materials in its handbags.

This programme was expensive.

KF’s management thought that a programme of corporate social responsibility (CSR) would strengthen KF’s brand. During the first year of the corporate social responsibility (CSR) programme, employee morale improved and KF received favourable media attention.

However, at the annual general meeting in January 2018, financial results from 2017 revealed that sales growth had not improved. Several influential shareholders complained about the high cost of the corporate social responsibility (CSR) programme. Other shareholders suggested that KF should develop consumer awareness that it is a socially responsible company.