Analysis of the Various Perspectives of Corporate Social Responsibility - Coursework Example

Corporate Social Responsibility Name: Tutor: Course: Date: Introduction Corporate social responsibility has aroused great public and business debate in its implementation, and application in current corporate environment (Garriga & Mele, 2004). Organizations are now adopting social responsibility initiatives as part of their vision, mission, and business ethical values. However, many organizations have been criticized for unethical practices and business externalities that do not represent the desires of shareholders, employees, customers, communities and the environment (Bowie, 1995). Despite these drawbacks in the application, corporate social responsibility is strongly favored as a bridge to sustainable companies, healthier communities and environment (Schaefer, 2008). This essay will discuss and critically analyze the various perspectives of corporate social responsibility. Corporate Social Responsibility Caroll (1979, p. 500) defines social responsibility as the ethical, legal, discretionary and economic expectations of the society to businesses at any point in time. In later years, this definition was refined by McWilliams and Siegel (2001) to mean corporate engagement in voluntary social efforts that goes beyond the legal regulations to include community service, environmental activism, and charitable giving. Earlier, Friedman (1970) had proposed that the social responsibility of a business is to increase profits while complying with the law, and ethical customs. The author defended actions of corporate executives to engage in free and open competition as long as they do not get involved in fraud or deception. The arguments of Friedman suggest that businesses do not have to meet their ethical or social objectives if they are not in the interest of shareholders or demanded by the rules of the game (Husted & Salazar, 2006, p. 82). For example, controlling pollution such as CO2 emissions beyond the required minimum or giving to charity such as contributing supplies after a hurricane. While concurring with Friedman that a business fulfills its true purpose by making profits, Drucker (2008) goes beyond to assert that businesses have to be aware of social impacts of innovations and products to the society. This view is shared by Kolstad (2007) who argues that corporate executives are not freed of other responsibilities and are not only limited to simply maximizing profits. Businesses may be having the expertise to create a positive impact where the government is unwilling or unable to attend to specific social causes (Brusseau, 2013). The theoretical understanding of business ethics and corporate social responsibility is underscored by the stakeholder and shareholder theories (Garriga & Mele, 2004). Under the stakeholder theory, Jensen (2002) and Schaefer (2008) maintain that companies should make an attempt to solve social problems caused by their actions on employees, general public, suppliers, customers and others. An extreme version of stakeholder theory, legitimacy theory, prevails in large corporations to bear greater responsibility than smaller firms in social ventures (Garriga & Mele, 2004. For example, Johnson and Johnson exhibit the stakeholders’ perspective by listing the responsibility of the company in the order of stockholders, customers, management, employees, and communities. On the contrary, shareholder theory defends the existence of corporations for the purposes of maximizing the long-term wealth of shareholders legally (Jensen, 2002). In maximizing future cash-flows, it is unreasonable for firms to engage in unprofitable social causes (McAleer, 2003). Steve Malloy, a critic of social responsibility, and a mutual fund manager, was quoted admitting that, “…business is the wealth creation machine of society, and shareholders do not hire CEOs to be a charity, government or UN. They are hired to make money for shareholders” (Weiss et al. 2008, para. 5). The argument by Milloy is in agreement with that of Milton Friedman and Adam Smith on serving business interests that will in the end generate wealth to the society’s benefit. However, the perspective of these three experts on social responsibility failed to acknowledge the positive implications of ethical activities in organizational marketing. Theodore Levitt (1960) argues that corporations can add value to consumers and shareholders by avoiding marketing myopia if they offer services and products that match their ethical thresholds. This argument suggests that consumers prefer services and products with product labels that make claims of social responsibility as proposed by the Herzberg’s Motivator-Hygiene Theory (Herzberg et al. 1959). Confirming the Herzberg’s Motivator-Hygiene factor, Meijer and Schuyt (2005) conducted a study in the Netherlands on the influence of social responsibility on Dutch consumers buying behavior. Interestingly, the study found that corporate social performance served as a Hygiene Factor and not a Motivator and had no relationship with household income. Investors increasingly prefer ethical investments that are not profit-seeking by imposing ethical constraints on operations. It implies by understanding the needs, preferences, worries and desires of the people, and businesses can meet ethical thresholds and makes ethical profits. For example, the integrity of American businesses were put into question in 2002 when WorldCom, Enron, and other corporations were involved in accounting scandals that led to massive loss of confidence in the public, and sharp decline in the US stock market (Carson, 2003). These events lack prohibition against fraud and deception given that business executives lack the ground as agents of social improvement and moral arbiters. In the face of critical human needs, public’s moral sensibility requires that people close to the need, and power to intervene should act (Simon, et al. 1972). Under the Kew Gardens principle, a sin of omission engenders a sin of commission (ibid). Porter & Kramer (2006) argue that some situations prompted by people’s reactions require that emergency responses be treated as obligations for those with proximity, and capability to respond else, it becomes a violation of the negative injunction. Just like the slow death of Kitty Genovese after a stabbing in Kew Gardens, organizations are called to fulfill the ‘moral minimum’ criteria by assuming the duty to correct and avoid a self-caused social injury (Simon, et al. 1972, p. 23). For example, in the mid-1990s, the Ogoni people of Nigeria had suffered severe dumping and leakage of unrefined petroleum products to their land and waterways. Shell Petroleum was put on the spot to undertake environmental cleaning and pay the people damages (Vehr, 2010). In essence, Shell was being called upon to fulfill the ‘moral minimum’ of responding to the cries of the Ogoni people, since they were close to the incident and had the capability to correct the social and physical injury beyond their oil business. Porter and Kramer (2006) suggest that corporations have a huge responsibility to the society. They note that the society is closely watching their activities, and any actions seen as improper will lead to boycotts of company products or bad mouth lashing. The authors support the idea of companies developing a balance between business and society and stop perceiving social responsibility as a liability (ibid). The ethical responsibility, even when not demanded by the spirit or letter of the law, is doing what is right (Jensen, 2002). The keystone obligation is for a corporate culture to view the business as a citizen in society, espousing citizenship with its obligations. The corporate world is awash with uncontrolled externalities (Carroll, 2001). Owing to weak laws governing toxic waste disposal, many industrial plants produce poisonous waste in the fabricating process. However, Henderson (2009, p. 15) argues that some companies have gone beyond their legal obligations to protect the environment and people which consumes a lot of company resources. It may not be the right action while pursuing pure profits, but from the dimension of society’s welfare, it is the most valuable and recommendable thing to do. For example, in Woburn, Massachusetts, Beatrice Foods enclose poisons in leak-proof, double-encased barrels to contain any contamination. Ethics is about moral standards that go beyond self-interest (Werhane, 2000). This implies that in terms of potential foregone profits, ethical edicts ought to be adhered to even at the expense of the firm. Chewning et al. (1990) suggests that sometimes actions need to be taken not because they are profitable, but because they are right. Corporate managers and executives lack the obligation to maximize shareholders profits if they disregard the means to those profits. All social responsibility decisions are tradeoffs, but ethical corporate social responsibility underscores moral actions and short-run profitability (Carroll, 2001). For example, finances allocated and spent on pollution control or product safety may diminish shareholder profits, but the substitute is unethically to endanger other people's welfare in the society (Ip, 2009). Moral misbehavior is evident in many firms in the way they treat their distributors, suppliers, employees, customers, and the general public (Henderson, 2009). In such cases, unethical actions have resulted in increased cost of litigation and fines (Ip, 2009). Today, bad publicity is spreading like bushfire in the instantaneous, media and global communications sphere to unravel unethical actions in firms (Vogel, 2008). For instance, some clothing line multinationals came under fire for letting their suppliers manage “sweatshops” in Thailand manufacturing facilities while attempting to cut operational costs. The fact that only society benefits from corporate social responsibility actions is no longer the case (McAleer, 2003). A corporation does well and operates sustainably if they observe the triple bottom line actions; Profit, People and Planet (Idowu, Kasum & Mermod, 2011). According to the Dutch Department of Trade and Industry (2008) corporate social responsibility has contributed to a sustainable society and enhanced the competitive position of the agricultural sector in the Netherlands. Despite great achievements in corporate social responsibility in terms of awareness and familiarity, the discourse is yet to gain widespread acceptance (Schaefer, 2008). In recent years, there appears to be a trend break that has allowed openness in businesses to discuss corporate social responsibility (Vehr, 2010). The image of many businesses has taken a hit in these tough economic times due to increased irresponsibility in firms (ibid). According to Kolstad (2007), irresponsible corporations currently experience economy's financial woes and has lost trust and authenticity within communities. Given that communities are organizations and individuals, a growing expectation demands that corporations should operate as good corporate citizens. Organizations benefits society if there are genuine corporate social responsibility efforts (Carson, 2003). Corporate social responsibility is intended to build healthier economies, offer solutions to social problems, and maintain sustainable environments (Kolstad, 2007). Firms have moral and philanthropic responsibility to contribute to projects in society even when independent of the specific business. For example, an industrial chemical company may serve as a leader in the rehabilitation of disused space in a public park. From the example, it can be seen that the act is an obligation not extending from daily operations of the company. Here, the ethical responsibility of the chemical firm is safe waste disposal but philanthropic responsibility is going beyond the usual business practice to fulfill other needs of the society. It means that the public act of generosity is the obligation to support and meet the needs of the surrounding community including their general welfare. Corporate activities for several decades have increased positive impacts on society and promoted human welfare (Boatright, 1999). Leisinger and Wieland (2010) argue that the integral part of corporate social responsibility as viewed in the academia and enlightened firms is going over and above core business activities. Corporate philanthropy demonstrates the values that the company espouses (Werhane, 2000). Altruism is the primary goal of corporate philanthropy; however, it generates positive ‘moral capital’ among stakeholders and communities (Meijer & Schuyt, 2005). It also extends beyond the direct business relationships in the firm. For example, many firms supported and contributed to fight against Ebola disease which threatened the survival of the human race in 2014 by donating medicines, funds or personnel. In the case where corporate management becomes responsive and socially aware of others’ needs, such actions are often perceived as ‘accidents’ rather than irresponsible motivations arising from the desire to save money at the expense of safety (Brusseau, 2013). To mitigate negative perceptions companies require the ‘moral capital’ to counter such events although actions have to be taken before the mishap eventuates (Leisinger & Wieland, 2010). However, moral capital and employee pride, in contrast to other forms of engendered social values are not primary objectives but desirable side-effects of the altruistic action (Caroll and Schwartz, 2003). Some of the action plans firms can implement include developing and maintaining relationships, benchmarking community expectations, aligning corporate social responsibility into core goals and missions of the company, and measurement of results on social impacts of the projects. Conclusion Corporate social responsibility is an important driver of sustainable economic growth as it prevails in firms to go beyond generating profits and include the larger society (Smith, 2001). Firms have philanthropic, ethical, legal and economic obligations and operate on sustainable environmental, social and economic realms (Maitland, 2002). Corporate ethics evokes the stakeholder theory in order to involve all people affected by the organization to contribute to its decision-making process (Kolstad, 2007). Lindgreen, Swaen and Maon (2009) call upon firms to be good corporate citizens by assuming roles and obligations that will ensure sustainability of the business, people, planet, and philanthropy. From the arguments above, firms are primarily responsible for profit making, but they have a social responsibility and obligation to the communities in which their business operations are involved. The essay has found that firms while maximizing profits should not harm or cause social injury, but instead engage in ethical and philanthropic activities to communities. Reference list Black, L.D. 2006. Corporate Social Responsibility as Capability, Journal of Corporate Citizenship, 23:25-38. Boatright, J. R. 1999. Ethics and the Conduct of Business, Third Edition, Prentice Hall, Upper Saddle River, N.J. Bowie, N. 1995. New directions in corporate social responsibility, in Hoffman, W. M., and Frederick, R.E. (Eds), Business Ethics: Readings and Cases in Corporate Morality, Third Edition, McGraw-Hill, New York. Brusseau, J. 2013. The Business Ethics workshop, V. 1.0. Retrieved from http://catalog.flatworldknowledge.com/bookhub/reader/1695?e=brusseau-ch13_s02 Carroll, A. B. 1979. A three-dimensional conceptual model of corporate performance. Academy of Management Review, 4(4), 497-505. Retrieved from http://www.aom.pace.edu/amr/ Carroll, A. B. 2001. Ethical Challenges for business in the new millennium: corporate social responsibility and models of management morality, in Business Ethics 01/02, Carson, T.L. 2003. Self-interest and business ethics: Some lessons of the recent corporate scandals. Journal of Business Ethics. 43(4): 389–394. Department of Trade and Industry. 2008. Corporate Social Responsibility ‘Balancing people, planet and profit’. Marloes Rotmeijer. Netherlands. Drucker, P. 2008. The Essential Drucker: The Best Sixty Years of Peter Drucker’s Essential Writings on Management. Harper. Friedman, M. 1970. The Social Responsibility of Business is to Increase Profits. The New York Times Magazine. September 13, 1970. New York. Garriga, E. & Mele, D. 2004. Corporate Social Responsibility Theories: Mapping the Territory. Journal of Business Ethics, 53:51-71. Henderson, D. 2009. Misguided corporate virtue: The case against CSR, and the true role of business today. Economic Affairs, 29(4), 11-15. doi:10.1111/j.1468-0270.2009.01941.x. Herzberg, F., Mausner, B. & Snyderman, B.B. 1959. The motivation to work. New York: John Wiley.  Husted, B., & Salazar, J. D. J. 2006. Taking Friedman seriously: Maximizing profits and social performance. Journal of Management Studies, 43(1), 75-91. doi:10.1111/j.1467- 6486.2006.00583.x Idowu, S.O., Kasum, A.S. & Mermod, A.Y. 2011. People, Planet and Profit: Socio-Economic Perspectives of CSR. Retrieved from http://www.ashgate.com/isbn/9781409466499. Ip, P.K. 2009. The Challenge of Developing a Business Ethics in China. Journal of Business Ethics, 88: 211-224. Jensen, M. C. 2002. Value maximization, stakeholder theory, and the corporate objective function. Business Ethics Quarterly, 12(2), 235-256. Retrieved from https://secure.pdcnet.org/pdc/bvdb.nsf/journal?openform&journal=pdc%5Fbeq. Kolstad, I. 2007. Why Firms Should Not Always Maximize Profits. Journal of Business Ethics. Vol 3(1): 34-45. Leisinger K.M. & Schmitt, K. 2012. Corporate Responsibility and Corporate Philanthropy. Retrieved from http://www.un.org/en/ecosoc/newfunct/pdf/leisinger- schmitt_corporate_responsibility_and_corporate_philanthropy.pdf Leisinger K.M. & Wieland J. 2010. Manifesto Global Economic Ethic. Consequences and Challenges for Global Businesses. dtv, München 2010; see also: www.weltethos.org. Levitt, T. 1960. Marketing myopia. Harvard Business Review 38(4):45–56.  Lindgreen, A., Swaen, V., & Maon, F. 2009. Introduction: Corporate social responsibility implementation. Journal of Business Ethics, 85, 251-256. doi:10.1007/s10551-008- 9732-1. Maitland, I. 2002. The Human Face of Self Interest, Journal of Business Ethics, 38:3-17. McAleer, S. 2003. Friedman’s Stockholder Theory of Corporate Moral Responsibility. Teaching Business Ethics, 7:437-451. McWilliams, A., & Siegel, D. (2001, January). Corporate social responsibility: A theory of the firm perspective. Academy of Management Review, 26(1), 117-127. Retrieved from http://www.aomonline.org/ Meijer, M.M. and Schuyt, T. 2005. Corporate social performance as a bottom line for consumers. Business & Society 44(4): 442–461. Porter, M.E. & Kramer, M.R. 2006. Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility, Harvard Business Review, December 2006. Schaefer, B. 2008. Shareholders and social responsibility. Journal of Business Ethics, 81(2), 297-312. doi:10.1007/s10551-007-9495-0. Smith, N.C. 2001. The role of consumer boycotts and socially responsible consumption in promoting corporate social responsibility, in Bloom, P.N., and Gundlaxch, G.T. (Eds), Handbook of Marketing and Society, Sage Publications, Inc., Thousand Oaks, CA, pp. 140-161. Vehr, A. 2010. People, Planet, and Profit: Corporate Social Responsibility's Triple Bottom Line. March Forth. September 1, 2010. Retrieved from http://www.vehrcommunications.com/corporate-social-responsibility/ Vogel, D. 2008, CSR doesn’t pay. Forbes. October 16, 2008. Retrieved from http://www.forbes.com/2008/10/16/csr-doesnt-pay-lead-corprespons08- cx_dv_1016vogel.html Weiss, T., Kirdahy, M., & Kneale, K. 2008. CEOs on CSR. Forbes. October 16, 2008. Retrieved from:http://www.forbes.com/2008/10/16/ceos-csr-critics-leadcorprespons08- cx_tw_mk_kk_1016ceos.html Werhane, P.H. 2000. Business ethics and the origins of contemporary capitalism: Economics and ethics in the work of Adam Smith and Herbert Spencer, Journal of Business Ethics, 24, 3:185-198. Read More