What is Corporate Social Responsibility?

Question:

1. Write a report that discusses the arguments for and against the narrow and broad views of CSR. Please use your text book as a guide, and include all the arguments discussed in Chapter 4.
2. Discuss your position in relation to the CSR debate i.e. do you favour the broad or the narrow view? Imagine yourself after graduating. You are the CEO of a large company and have adopted your chosen view. How would your approach affect society?
3. Use ethical theory to defend your position. An effective way to do this is to:

a. Choose an ethical theory to apply to the broad or narrow view.
b. Briefly outline the theory to demonstrate your understanding of it.
c. Apply it to the issue (HINT: It’s easier to apply it to the concept of one view or another, rather than to specific arguments for/against one side). Justify any assumptions that you make.
d. When you have applied the theory, make a clear statement regarding whether or not your application of theory finds your chosen view ethical.

Introduction

The Corporate Social Responsibility is a concept of management according to which the companies incorporate the social as well as the environmental concerns into their operations and interactions with their stakeholders in business [4]. Particularly in the past couple of years, the empirical research conducted had stated that the initiatives of Corporate Social Responsibility had a good payoff for both the companies as well as the stakeholders. Companies require Corporate Social Responsibility for a number of reasons.

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This phrase of Corporate Social Responsibility widely describes the extension of the corporations to have an ethical obligation towards the stakeholders. With the increase of influence and power of the corporations the arguments regarding the responsibility of the companies towards the stakeholders beyond the making of profits have also increased.

The World Business Council for Sustainable Development had defined CSR as a commitment through which the business organizations are required to maintain ethics and morality and contribute to the economic development in order to improve the quality of life for the workforce and families and also the community and the society.

The International Finance Corporation (IFC) stated that CSR is a business commitment for contributing to the economic development. It also resonate the definition of Business Council for Sustainable Development by stating that businesses should work with employees, families, local communities and the society as such attempts would be beneficial for the businesses in the long run.

Sociologists consider CSR in the capitalist form and state that this social responsibility began in the form of a social movement against the uninhibited power of the corporate houses.

The primary policies and functions of Corporate Social Responsibility as a self-regulatory body includes the monitoring of business and ensuring active compliance according to law, ethics and international standards. However, in some cases implementing or the CSR includes a number of other details such as actions of social good, ahead of the interests of the company in accordance with the law [4]. The objectives of Corporate Social Responsibility includes the gripping of business actions and encouraging a constructive impression on the stakeholders which includes the employees, consumers, the communities, the investors and also the environment.

This term of Corporate Social Responsibility popularized during the 1960s and since then it has remained a significant part of company and has over the years comprised within itself a number of other responsibilities such as the legal and moral responsibilities.

The Narrow View of CSR

In this research study the researcher has attempted to explore the two distinct views of Corporate Social Responsibility and also expressed the significance of the broad view of CSR with the help of ethical theory and appropriate instances.

The narrow and broad views of CSR

Corporate Social Responsibility can be considered as one of the most widely disputed issues in the area of business organizations. There exist two extreme views and opinions regarding the social responsibilities in business [4]. On one hand is the classical view according to which the companies are business enterprises or more precisely economic organizations whose sole motive is to make profits and they have only one responsibility towards the society that is to provide the necessary goods and services to them in exchange of providing maximum profits to the shareholders [3]. Economist and Nobel Prize Winner Milton Friedman supported this classical view of CSR. He stated that the sole responsibility of the managers and the company to carry out the business operations for satisfying the interests of the shareholders and this interest also coincides with the maximization of profits.

On the other hand lays the socioeconomic view according to which all business organizations are part of the larger society and hence its responsibilities cannot be restricted to the mere maximization of profits [3]. The proponents of the view further state that even looking at the financial aspect of the company it is in the company’s interest to be responsible towards the society.

Both the views on Corporate Social Responsibility have been under scrutiny and have been argued extensively as gradually this arena is becoming increasingly essential for the society where the business operates. With time the classical theory or the narrow view of CSR is becoming fader and the socio-economic approach is gaining momentum. Internationally most business houses are adopting the CSR along with their economical interests.

As stated above the narrow view suggests that the primary and sole objective of business would be to maximize profits. Scholars supporting different views have generally argued on the narrow and the broad views [2]. For instance Levitt had stated that eventually businesses have two main responsibilities. One is to comply with the basic standards of any business and second is to profit from the business. Friedman argues business should only concentrate on maximizing profits and not on social wellbeing. He further argues since corporations are artificial persons they have ‘artificial responsibilities’. Business being an artificial construction the responsibility lies solely on the proprietors and the corporate executives who are the only ones held liable [9].

The narrow view further states that business organization should make money, the executives are employed to accomplish the goals and hence the managers must act in accordance with the owners [1]. Freidman also stated that the executives do have certain amount of corporate social responsibility ahead of making profits. These social responsibilities include the spending of the shareholders’ money for general interests in the way of taxing owners and spending such tax on community causes [9].

Freidman further argues that the only social responsibility that a business organization has is to indulge in such activities which assist in increasing the profits and that such profit making schemes should be in accordance to the law that is the business should made in an open and freely competitive market without any fraudulences and deceptions. When no force is used the profit making cannot be considered as wrong. Nevertheless, there are such instances of force that gives businesses and markets the wrong impression of profits [2].

The Socio-economic View of CSR

Contrastingly, the broader view of Corporate Social Responsibility states that other than the main objective of gaining profits the businesses and organizations have responsibility towards the communities where they operate and to address the negative consequences of their businesses on the society.

The Acceptance of the Broader View

Both the narrow and the broader view of CSR have a number of supporters. However, I being a CEO of a large company would favor the broader view due to a variety of reasons. There are some arguments which are generally presented to support the narrow view of CSR. The first argument is based on Adam Smith’s invisible hand argument. According to this argument organizations should be independent to promote their own self-interests and during this they would be guided by the invisible hand to do social good [6]. Further if organizations are forced to worry about the CSR then would not be able to meet the material needs.

However, it needs to be noted that this view is extremely old and does not exist in contemporary times [8]. Presently, corporations have more powerful than the governments.

The second argument on behalf of the narrow view is that it is the government of the country that should be responsible for regulating the activities of the corporations and make sure that they act ethically.

It needs to be mentioned that it is not possible for the government alone to regulate all the possible unethical behaviors of all the organizations. Further it also not possible to predict the probable behavior of all the organizations [4].

The third argument is that organizations should not be trusted for promoting the well-being of the society as they lack appropriate expertise and would be more prone to project the material views on the society.

This contention can also be refuted since there are many private organizations that are capable of looking into the well-being of the society and their own interests as well.

The fourth argument is that most corporate executives do not have the moral or the social capabilities to take social welfare decisions hence they would be inefficient in this field.

It should be noted that no person is born perfect or with all capabilities. People learn along with their work and responsibilities. In all other sectors people from given expert backgrounds are taking up this Corporate Social Responsibility. Hence even the companies should not be far behind in this matter.

And the final argument is that when business organizations are given social responsibilities they would use the influence and power and covert the society into a more commercial and materialistic place.

This argument is totally baseless since the business organizations already have enough power to manipulate, materialize or commercialize the society.

Proceeding to the broader view there are a number of contentions that proves that the broader view of Corporate Social Responsibility should be adopted rather than the narrow view. Firstly, the duties of any corporation involve the duties towards the stakeholders, the employees, the customers, the suppliers and the environment [5]. Hence the consequences of the actions of the organizations are even felt by the wider society.

Applying Ethical Theory to CSR Views

Secondly, there exists a saying that with great power comes greater responsibilities. Business organizations are generally large and extremely influential and hence they have certain responsibilities towards the society.

Thirdly, there exists a universal social contract between the society and business. According to this contract it is the society which makes the rules and guidelines and the responsibilities under which the organizations operate [4]. Therefore, when the society concentrates on sustainability, quality of life and the environment then the organizations should also follow suit and abide by the social norms.

And finally under the law every organization is considered as a person. Being a person they are given the right to speech, right to own property and the right to enter into contracts. With rights comes duty and hence the organizations have a duty towards the society.

Ethics and CSR

The differences between the broad and narrow view of CSR can be elaborately explained with the help of an ethical theory and its application in a practical theory. In accordance to the stakeholders theory stakeholders are such individuals who are the most affected by policies, actions and procedures of the organization. Whereas some stakeholders have specified legal rights in the organizations some stakeholders may have more moral rights relating to the organization [7].

For instance in a large organization having multiple stakeholders some of them are primary stakeholders and others are secondary stakeholders. Under such situations an environmental group may not have any legal rights in the organization. However, they do have a moral right to know about the environmental policies of the organization. Towards their customers who are the primary stakeholders the organization has a lot of responsibilities. They are responsible to deliver such goods to the customers which function properly, are safe and of value.

Being a CEO of such a large organization with multiple stakeholders I would consider the broader view of Corporate Social Responsibility. This is because if the narrow approach is considered most of the rights of the stakeholders would be ignored. Corporations generally have been criticized for their adverse effects on the environment as they usually wasted natural resources and contributed largely to environmental problems.

With regard to the broader approach the organization would have the responsibility towards the protection of the environment. With the protection of environment the moral obligations towards the secondary stakeholders such the environmental group may be fulfilled. If the sole motive the organization would have been maximizing profit as according to the narrow approach then such moral rights of the secondary stakeholders would not be fulfilled [7].

Also with regard to the primary stakeholders their legal and moral rights also needs to ascertained by the organizations. These rights may also be fulfilled only with the help of the broader view of CSR. Hence this suffices that in order to fulfill the moral and legal rights of the stakeholders it is essential that the broader view of the CSR be adopted since only then the organization would be able to fulfill the business ethics of the stakeholders.

Recommendations

To have a concrete CSR every organization should abide by certain guidelines so that the large organizations are transformed into productive corporations that affect the society in a positive manner.

According to the policies of Corporate Social Responsibility corporations should give away some of the wealth and success to the society for supporting them. In most of the developing countries that have multinational organizations that employ poor people in the factories. Since the organizations have lot of social and financial influence they can make contacts with the governments and business houses to make a difference to these lives. They can contribute in employment schemes, education of their children, counseling sessions and also assist them in staring businesses.

Secondly, it is a known fact that the natural environment is the primary source of wealth and such wealth is being abused by humans for centuries. Organizations which take the CSR seriously would understand that they do not indulge in such environmental damage and further they contribute their time and money to protect and preserve the environment [9].

In any organization employees are the primary important factor as they are the ones who produce the wealth. There are companies where collective bargaining protects the interests of the employees. However, such an arrangement is not present in all organizations. Corporate Social Responsibility recommends that all organizations should properly remunerate the employees for the work they do make the organization successful. Equitable packages including salaries, benefits, pension plans and paid vacations should be given to the employees. Corporate organizations should also provide the customers reasonable and appropriate products as they had advertised. Hence by abiding by the standards and guidelines of the CSR corporations not only maximize profits but also serve the society.

Conclusion

Hence it can be construed that CSR is a sort of duty that the business organizations should eagerly perform in the society where they operate and in a responsible manner. Under general circumstances organizations should not be forced to perform such duties but nevertheless, there are companies that have signified that they need to be forced to take up at least some form of Corporate Social Responsibility [4]. Further sometimes the government, the social media, the advocacy groups and the civil societies compel the business enterprises to practice CSR.

From the above discussion it is evident that significant and active CSR is useful not only to the society but also to the company, the employees and the government. Hence CSR should be considered among the basic concepts and values of the company and in this way the corporate organizations would shift from the idea of exploiting the community. This concept would further make the organizations responsible without adding pressure to the authorities.

References

1 Sternberg E. CORPORATE SOCIAL RESPONSIBILITY AND CORPORATE GOVERNANCE 1.Economic Affairs 2009;29:5-10. doi:10.1111/j.1468-0270.2009.01940.x

2 Aluchna M. Special issue on Corporate social responsibility in transitional economies. Social Responsibility Journal 2008;4. doi:10.1108/srj.2008.36804aaa.002

3 Demetrious K. Corporate social responsibility, new activism and public relations. Social Responsibility Journal 2008;4:104-119. doi:10.1108/17471110810856875

4 Arvidsson S. Corporate social responsibility and stock market actors: a comprehensive study. Social Responsibility Journal 2014;10:210-225. doi:10.1108/srj-08-2012-0099

5 Scott S. Corporate Social Responsibility and the Fetter of Profitability. Social Responsibility Journal2007;3:31-39. doi:10.1108/17471110710840215

6 Hunnicutt S. Corporate social responsibility. Detroit, MI: : Greenhaven Press 2009.

7 Zu L. Corporate social responsibility, corporate restructuring and firm’s performance. Berlin: : Springer 2009.

8 Schreck P. The business case for corporate social responsibility. Heidelberg: : Physica-Verlag 2009.

9 Crowther D, Capaldi N. The Ashgate research companion to corporate social responsibility. Aldershot, England: : Ashgate 2008

Ans: The present practice has depicted three corporate social responsibility theories, namely:

• The Carroll Theory
• The Stakeholder Theory
• The Triple Bottom Line Theory

Each theory comprises four dimensions: political performance, ethical values, profits, and social demands. And every MNC must practice any of these theories to thrive in the competitive market.

Ans: In the narrow business view of corporate social responsibility (CSR), several multinational companies contribute to society by earning profit and using the profits to support employment, investment, wages, and taxes. The key responsibility of the CSR business view is to increase profits consistently. As Friedman (forerunner of the narrow business view) goes, the only social responsibility of businesses in the world is to use natural resources, multiply them in terms of money and deploy them for the betterment of nature and its bearers.

Ans: The broad view of corporate social responsibility states that businesses have responsibilities towards the communities they thrive in. broader view of CSR addresses the negative consequences of earning profits by a business on society. CSR incorporates and practises this concept, which cares for society and its cohesion. There are four broad aspects of CSR, namely environmental responsibility, philanthropic responsibility, economic responsibility, and ethical responsibility.

Ans: Corporate social responsibility or CSR shows a business at the top for taking care of social interests and giving a broader view of social issues. CSR ensures that a business always takes more interest in looking after and taking care of social problems than just considering factors that impact their profit margins. This way, they can take good care of customers while operating the business sustainably.

Ans: Some of the common examples of corporate social responsibility are:

• Reducing carbon footprints
• Participating in fairtrade
• Charitable global giving
• Corporate policies that benefit the environment
• Improving labour policies
• Diversion, inclusion, and equity
• Virtual and community volunteering
• Socially and environmentally conscious investments

Below given are three brands that have deployed CSR policies:

• Salesforce’s Philanthropic model,
• Ben & Jerry’s Social mission,
• Levi Strauss’s social mission.