The social responsibility of a business Essay
The social responsibility of a business
Nowadays, the idea of social responsibilities supposes that the corporation has not only economic and legal obligations, but also certain responsibilities to society which extend beyond these obligations. Moreover, social responsibility is the obligation of decision makers to take actions which protect and improve the welfare of society as a whole along with their own interests. In other words, virtually all definitions of CSR include the notion that corporations have obligations toward society beyond their economic obligations to shareholders.
Yet many authors have argued and still some continue to argue that social responsibility should not cater to the society at large but only to the organisation’s own interests. For instance, some believe that business has only two responsibilities: to obey the elementary canons of everyday face-to-face civility (honesty, good faith and so on ) and to seek material gain. Therefore, the definitions of CSR appear to fall under two general school of thoughts and throughout this study, we made an attempt to demonstrate that CSR is not limited only to economic duty.
The roots of CSR can be traced back to the medieval era. According to May et al. (2007), various questions regarding organizations’ impact on society have been present for centuries. In fact, the corporate form and modern labor union were derived from the early medieval guild (May et al., 2007). In the 1870s large corporations began to have a significant impact on different aspects of society, including the environment, employees, customers, and the public as a whole.
Although there are many definitions of CSR available, we centre our attention on more recent concepts of CSR. According to Richardson, Welker and Hutchinson (1999), CSR behaviours can be defined as discretionary actions undertaken by companies that are intended to advance their social issues. Joyner, Payne & Raiborn (2002) noted that CSR are categories of economic, legal, ethical and discretionary activities of a business entity as adapted to the values and expectations from society. They also added that, CSR are the basic expectations of the company regarding initiatives that take the form of protection to public health, public safety, and the environment. In this concept, they explained that values and ethics influence the extent of a corporation’s perceived social responsibility that is influenced by societal activities, norms or standard.
In today’s world, CSR can be defined as regards to all aspects of business behaviour so that the impacts of these activities are incorporated in every corporate agenda (Orgrizek, 2001; Coldwell, 2001). So, with the literatures definition of CSR, it can be concluded that CSR is the continuing commitment taken by business organizations to strengthen their ethical concepts and social involvement in society, contribute to economic development, sponsor charitable programs, and improve the quality of the workforce and also the increment of services provided. However on the other hand, Freeman & Liedtka (1991) argue that CSR can promote incompetence by leading the managers to get themselves involved in areas beyond their expertise, that is, trying to repair society’s ill.
To sum up, those CSR theories and approaches are focused on four main points:
(1) Long term profit maximization,
(2) Responsible use of power,
(3) Social demand integration, and
(4) Achieving a good society.
The adoption of the approaches in CSR on some level reflects the motivations of a company behind its CSR implementation.
Discussion & Findings:
Is CSR limited to economic duty?
The evolution of international markets, easy and inexpensive communication structures, increased consumer awareness, wider distribution of risk, environmental awareness, and concern for global equality have put more emphasis on the social responsibility of corporations. Many organisations have introduced new policy instruments to promote corporate citizenship and corporate social responsibility. As mentioned above, there exists mainly two school of thoughts, some believe that social responsibility is limited only to economic duty that is the welfare of an organisation’s stockholders while others believe that organizations should adopt a broader view of its responsibilities that includes not only stockholders, but many other constituencies as well, including employees, suppliers, customers, the local community, local, state, and federal governments, environmental groups, and other special interest groups.
Firstly, the neoclassical paradigm of management explains ethics and corporate social responsibility as nothing but a new strategic instrument to ensure long-term shareholder value. As Milton Friedman wrote long ago “The social responsibility of business is to increase its profits.” He argues that “there is one and only one social responsibility of a business- to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud”. Milton Friedman’s claim that the sole social responsibility of business is to increase its profits places businesses into an adversarial relation to society. That is, businesses become the enemies, the exploiters, of the society of which they are a part.
His statement implies that a business is allowed to behave in a socially irresponsible, and even socially destructive, manner, if this increases its profit. There are ways of increasing a business’ profits which are damaging to the society of which it is a part. Indeed, it is a tendency of business to seek to externalize all costs. Thus, to pollute, to ignore worker safety regulations, to engage in misrepresentation if not fraud, etc. If the business is in competition, and these things are permitted, it must do them, since its competitors, similarly situated, will also do these things. Its competitors, if allowed to externalize costs by polluting, will do so, and so it must also. Its competitors, if allowed to externalize costs by skimping on worker safety, will do so, and so it must do so also. Equally, many authors like Porter and Jensen, agree to Milton Friedman statement and they also argue that social responsibility is only an economic duty.
They articulate arguments to demonstrate the irreconcilability of economic aims with broader social concerns. Michael Porter argues that corporate philanthropy is only meaningful as a part of the economic strategy of a firm while Michael Jensen maintains that it is logically impossible for a company to serve more than one objective. Moreover, Drucker (1984) had the opinion that: “business turns a social problem into economic opportunity and economic benefit, into productive capacity, human competence, into well paid jobs, and into wealth”. Therefore, Drucker also argued that social responsibility is limited to economic duty. Although these kinds of arguments can be defined in order to emphasize the economic advantages of corporate social responsibility and economic advantages of corporate social responsibility and the economic duties of corporations, they do not capture the broader role that corporate citizenship plays in society. The world is changing and nowadays corporations are now held accountable not just by the government, but also by the public.
Corporate responsibility must now take into account how dealings with customers, shareholders and employees are seen by the world. Large global corporations know that people are watching them and that any wrongdoing will not go unnoticed. Many companies have a social conscience, treat employees fairly and try to do the best for their shareholders while trying to be socially responsible. There are, however, many other corporations who see nothing wrong with employing third world country workers to make their products. It is only due to groups who monitor such activities that these issues become public. Many corporations have been forced into taking corporate responsibility at a broader level that is now businesses do not limit corporate responsibility only to economic duty. They know that it does not make good business sense to be seen as a company that is damaging the world that we live in. Huge penalties and fines also await corporations that break ethical and environmental laws.
Corporate responsibility has a huge impact not only on the local community, but also on the world. Its affects are social, economic and environmental. Bad and good corporate responsibility has effects that reach from the worker in the third world country to the air that we breathe. Furthermore, a growing number of writers over the last quarter of a century have recognized that the activities of an organization impact upon the external environment and gave suggested that such an organization should therefore be accountable to a wider audience than simply its shareholders. In the 1970’s many writers evincing concern with the social performance of a business, as a member of society at large.
This concern was stated by Aukerman (1975) who argued that big business was recognizing the need to adapt to a new social climate of community accountability, but that the orientation of business to financial results was inhibiting social responsiveness. Similarly, Mc Donald and Puxty (1979) maintain that companies are no longer the instruments of shareholders alone but exist within society and so therefore have responsibilities to that society, and that there is therefore a shift towards the greater accountability of companies to all participants. Moreover, author like Carroll (1979; 2008, 500) stated that “The social responsibility of business encompasses the economic, legal, ethical and discretionary expectations that a society has of organizations at a given point in time”.
Carroll’s definition is often pictured in the above CSR Pyramid, and is where many CSR practitioners and theoreticians start. As can be seen above, he argued that companies should have economic responsibilities. Obviously, without making a profit then a company will cease to exist and CSR dies. However, the key issue is that CSR is not anti-profits, simply is all about how profits are made! The economic responsibilities cited in the definition refer to society’s expectation that organizations will produce good and services that are needed and desired by customers and sell those goods and services at a reasonable price. Organizations are expected to be efficient, profitable, and to keep shareholder interests in mind. Carroll then goes on to mention legal responsibilities but doesn’t consider those countries where the law is ignored (corrupt Governments for instance).
The legal responsibilities relate to the expectation that organizations will comply with the laws set down by society to govern competition in the marketplace. Organizations have thousands of legal responsibilities governing almost every aspect of their operations, including consumer and product laws, environmental laws, and employment laws. Ethical responsibilities come next, but it seems that ethical behavior is not so easy to define. It concerns societal expectations that go beyond the law, such as the expectation that organizations will conduct their affairs in a fair and just way. This means that organizations are expected to do more than just comply with the law, but also make proactive efforts to anticipate and meet the norms of society even if those norms are not formally enacted in law.
At the top of the pyramid is ‘philanthropy’. This may involve such things as philanthropic support of programs benefiting a community or the nation. It may also involve donating employee expertise and time to worthy causes. But in most cases, philanthropy is seen as a first step toward CSR and all the other levels are often ignored by most businesses. Therefore, Caroll argues that business ethics, values-driven management, and corporate social responsibility are standards of governance that make it possible conceive of the corporation as both an economic instrument and a good corporate citizen.
The importance of serving the society where the companies are operating is a legal and moral responsibility for both the public and private companies. Big companies are always exploiting the resources of a place and they should compensate for that. Companies should understand that, it can stay in the market with the help of the customers and the society in which it operates alone. Neither financial abilities nor the smart governance or management will help the companies in achieving their long term goals. In order to achieve long term goals, the companies need to execute their social responsibilities in a fruitful manner.
On a concluding note, corporate social responsibility is not helping the poor and needy people alone. The company should keep morality and ethics in all its operations in order to fully execute their social responsibilities. Companies should never try to exploit the natural resources injudiciously. Moreover they should never engage in activities which are harmful to the environment. In short, corporate social responsibility is a wide topic which includes a company’s commitment to the society, stakeholders and the environment in which it operates.
Archie B. Carroll, Ann K. Buchholtz Business & Society: Ethics and Stakeholder Management David Crowther; Güler Aras Corporate Social responsibility
Davis Keith, L Blomstrom Robert, 2002 Business & Society: Environment & Responsibility” 3rd Edition MC Graw Hill International Edition. Mark S. Schwartz. Corporate Social Responsibility: An Ethical Approach Porter M.E & Kramer M.2006 Strategy & Society, The link between competitive advantage and corporate social responsibility, Harvard Business Review.