Two Views of Corporate Social Responsibility - Coursework Example

Comparison and contrast the two views of corporate social responsibility Name Professor Institution Course Date Comparison and contrast the two views of corporate social responsibility Introduction In the recent times, Corporate Social Responsibility (CSR) has drawn a lot of public attention due to the obvious significance for economic and social health of companies and general society (Bartkowiak p.135). The headline in the recent years has depicted sad news of business ethics and even lack of it. In the debate, the differences between opinions on CSR whether it should be adopted have emerged. Margolis, Elfenbein & Walsh (2007) argue that corporate social responsibility is a driver of sustainability and long term relationship with customers. In spite of divergence of views concerning the effectiveness of CSR, there has been a common agreement amongst policy makers, practitioners and academicians that companies serve with a social authority which needs that they work within the culture and norms of the societies where they operate (Devinney 2009, p.44). Based on the contentious topic, this essay will compare and contrast the two views of corporate social responsibility. The views to be discussed include the classical view and the socioeconomic view. Definition of CSR According to Bartkowiak (2006), corporate social responsibility is defined as the form of business self-regulation incorporated into a firm’s business model in which a business control and make sure there is an active compliance with ethical principles and global norms and with law. Proponents of CSR claim that the course supports a positive effect on the environment and the stakeholders such as employees, consumers, investors and communities, among others (Fisman, Heal & Nair 2007). It is a major aspect of proponents of the theme of CSR that firm gets a sanction from the society which needs that they in response, make a contribution to the development and growth of the society (Devinney 2009, p.44). Devinney (2009, p.45) says that the term sanction may not be true, but society expects the management of the organizations to use common sense to realize the communities expect employment from them, to improve society by developing and deliver consumer needs, creating markets for suppliers, making good returns to the shareholders and also paying government taxes (Devinney 2009, p.45). However, as much as some companies are praised for taking part in CSR they have equally been condemned. For instance, BHP-Billiton Company which is Anglo-Australian giant usually puts much emphasis on CSR surveys majorly owing to because it is regarded by Global Reporting Standards to be responsible in terms of environment and to be implementing safety and environmental policies and practices (Devinney 2009, p.45). Nevertheless, the same company has been vilified criticized and boycotted by environmental activist groups for its effect on the environment. Classical View The classical observation holds that the sole social responsibility of the management is to maximize business profits (Lenkowsky 2006, p.48). One of the famous economist who believes the sole purpose of business is to make profit is Milton Friedman. He thinks that the managers have the right to increase the profit at the confines of the law (Friedma, 1970, p.2). In his piece titled, 'The social responsibility of business is to increase its profits', he says that “There is only one social responsibility of business, which is to employ its resources and take part in activities created to enhance its profits provided that it remains within the rules of the game, that is, to engage in clear and free competition with no fraud or deception." Lenkowsky (2006) claims that the view of Milton Friedman is inclined towards supporting the action of directors and managers who believe that their role in an organization is to serve in the shareholders’ best interest who are actually the business owners. In this article, Friedman referred businessmen who supported the concept of corporate social responsibility as 'unwitting puppets of the rational forces that have been destabilizing the foundation of a free society' and blamed them of 'preaching pure and unadulterated socialism' (Friedman 1970, p.3). His claim is, basically, that managers of the organization are the workers of the shareholders and, per se, have a 'fiduciary duty to increase the profits. He argues that offering money to social causes or charity (apart from as public relations intended to increase business) and being engaged in community projects that do not maximize the corporation's profit is similar to robbing from the shareholders (Friedman 1970, p.3). Recently in an article published by Margolis, Elfenbein & Walsh (2007), Milton Freidman was quoted saying that “the corporate spending on social actions is a contravention of the responsibility of management to the shareholders”. Freeman (1984) posits the statement was made completely based on capitalist perspective, where such a universal society will certainly results to the damaging of the natural environment within which the company operates. Due to such argument, many companies can be accused of practices to accumulate profits. Some of the companies include BHP-Billiton, General Electric, Wiliams Energy, Dow Chemical, Northrop Grumman, U.S. Steel and ConAgra Foods among others. U.S. Steel Company is currently fighting endeavors to control pollution in many states in the US comprising of Indiana, Illinois and Ohio in which the environment agencies have recommended for closure of companies which does not conserve the environment (Fisman, Heal & Nair 2007). They contend that permitting U.S. Steel Company to carry on with releasing toxic substances such as mercury in Great Lakes results to great harm on the environment. Opponents of corporate responsibility argue that managers and executives might not know what is affecting the community and they are actually going too far of their capability over and above violating their responsibilities when they engage in community events (Friedman 1970). However, it is the businesses that have violated people’s rights when moral principles are neglected. For example, today, Wal-Mart remains one of the most recognized corporations across the globe but the image is also tainted due to relentless breach of employees’ rights especially in the US (Paul, Qingyuan & Hayagreeva 2010, p.93). The company is profit-oriented and has done everything to frustrate formation union among its employees (Alana 2013). Wal-Mart is criticized for low payment, no payment for overtime and dismal of employees who are protesting. Wal-Mart own up and promised to look into the solution but later continue with exercise while covering up with its public relation endeavor. Captivatingly enough, Robbins et al. (2006) has recognized that study has established a positive relationship between corporate social responsibility endeavors and profits, so whereas the causal aspect is yet to be attested, it is absolutely a concern to pure classicist view. Socioeconomic View The socioeconomic view holds that social responsibility ought to go further than just increasing profits to encompass improving and protecting welfare of the society. The proponent of these view like Edward Freeman contend that the company hold the duty to the society to promote eliminate social issues which affect the large society. In journal article by Margolis, Elfenbein & Walsh (2007) they explain that companies can be segmented further on the basis of motivation behind embracing the socioeconomic view of CSR. In this explanation, she meant ‘Relational Responsibility’ which concerns implementing socioeconomic perspective in regards to improving of wellbeing of societal groups liken employees, customers and community which are directly impacted by the operations of the corporations (Margolis, Elfenbein & Walsh 2007). Another segment can be ‘Social Activism’ in which a company implements a socioeconomic strategy to benefits the community or just a certain interest group within the society which is outside the usual commercial operations of the firm (Bartkowiak 2006). This approach involves every company even if such companies think that their businesses hold no negative effects on the wide society. Company that use this approach have realized, that social responsibly is one of the right strategies which creates attractive public image, increase share price and secure long term revenue increase. Additionally, Robbins et al. (2006) posit that when companies hold high sense of CSR, they take great account on of what their operations may results such as social and environmental concerns such as pollution and general degradation. Furthermore, it for the best interest of the society and corporation, it would be viable for them to create strong relationship with the society through CSR because the court of public opinion supports the issue (Devinney 2009, p.51). Companies which have effective CSR are very popular with the public and they include Nike Inc, Coca Cola, Google Inc among others. On other hand, companies which have not taken hid on CSR have suffered public condemnation and boycott. According to Walker (2014) a new environmental Non-governmental organization called Clean Air-Cool Planet based in the UK ranked Nike amongst the top three corporations (out of 56) which promote environment conservation in a study. Nike Inc. has time and again been admired for its program Nike Grind by groups such as Climate Counts (Walker 2014). The company has also been likened for commercial which it launched on Earth Day of 2008 which featured Steve Nash, a basketball star wearing Trash Talk Shoe from made by Nike (Ogden 2014). The shoe was made from leather piece and waste from the factory floors. The same shoe also characterized a sole produced from its shoe recycling initiative. Nike Inc (2014) claims that Trash Talk Shoe was the first basketball shoe which was manufacture from waste which produced up to 5,000 pairs. The program demonstrates Nike commitment to recycling and general environmental conservation. Another project that has been in existence for quite some time is Nike's Reuse-A-Shoe initiative (Nike Inc 2014). The program began in 1993 and has been the longest-running initiative which benefits both environment and community by gathering old shoes so as to recycle them (Ogden 2014). The product that results from such process is used to make sports surfaces like the running tracks, playgrounds and basketball courts. The case of Nike is an example of a positive correlation between financial performances and CSR actions. Conclusion The essay has offered an effective insight into the shifting function of the corporate social responsibility, and the way corporation ought to advance this reasonably new concept. Marketing and management experts argue that companies are becoming open in their business, while consumers have become more educated and now look at the image and corporate responsibility when making purchase decisions. What is clear that majority of shareholders do not subscribe to socioeconomic view of CSR unless but classic view because it only allow maximization. However, as the century unfolds people are becoming informed of their rights and engagement that should be created by companies, hence companies is challenged to adopt socioeconomic view. References Alana, S 2013, Fully staffed NLRB investigates complaints against Wal-Mart, latimes.com Bartkowiak, G 2006, Practical Aspects of a Social Responsibility in Business, Dialogue & Universalism, vol.16, pp.133-140 Devinney, T.M 2009, Is the Socially Responsible Corporation a Myth? The Good, the Bad, and the Ugly of Corporate Social Responsibility, Academy of Management Perspectives, pp.44- 56 Fisman, R, Heal, G & Nair, V. B 2007, Social responsibility: Doing well by doing good? (Working paper) New York, Columbia University Friedman, M 1970, The social responsibility of business is to increase its profits. New York Times Magazine, September 13: 32-33, 122-124 Freeman, R.E 1984, Strategic Management: A Stakeholder Approach, Boston, Pitman Lenkowsky, L, 2006, Milton Friedman Was Right About Philanthropy After All, Chronicle of Philanthropy, pp. 48-57 Margolis, J. D, Elfenbein, H. A & Walsh, J. P 2007, Does it pay to be good? A meta-analysis and redirection of research on corporate social and financial performance (Working Paper), Boston, Harvard Business School Nike Inc 2014, Nike Inc. Official Website, viewed on 1st December 2014 from http://nikeinc.com/pages/responsibility Ogden, M 2014, Nike favourites to beat Adidas and Puma and remain Manchester United kit supplier in 'billion dollar deal, The Telegraph (London) Paul, I, Qingyuan, Y, L & Hayagreeva, R 2010, Trouble in Store: Probes, Protests, and Store Openings by Wal‐Mart, 1998–2007, American Journal of Sociology, Vol.116, No.1, pp.53–92 Robbins, S, Bergman, R, Stagg, I & Coulter M, 2006, Management, 4th edn, Pearson Prentice Hall, Australia Walker, M 2014, Nike's latest CSR report examines drop in emissions, labor challenges, south Florida Business journal, viewed on 1st December 2014 from http://www.bizjournals.com/portland/blog/sbo/2014/05/report-nike-breaks-pattern-lowering.html Read More