Corporate Social Responsibility Theories - Research Paper Example

inserts his/her full Corporate Social Responsibility By virtue of free trade and open economies, economic progress has been seen as a tool of poverty elimination and ensuring security for generations to come. However, there remains the challenge of ensuring that this progress remains equal across all sectors and nations and that the well-being of the environment is not being harmed. Most companies have, therefore, made it a practice to incorporate responsibility towards the society and the environment as part of their routine business. This notion of corporate social responsibility has been heavily debated on in recent years so much so that researchers have called into question the existence of the “social” aspect in “corporate social responsibility”. Advocates of CSR have increasingly defined it in terms of human rights, ethics, closures of plants, relations with employees and the environment. A more comprehensive definition of CSR and sustainability encompasses all three foundations of sustainability, including the people, economy and the environment. If only the social and environmental development is taking place that is referred to as “bearable” (Chick and Micklethwaite 83). If only the social and economic development is taking place, that is referred to as “equitable”, whereas, if only the environmental and economic development takes places, that is referred to as “viable” (Chick and Micklethwaite 83). CSR is achieved only when all three dimensions develop simultaneously; that is, it is bearable, equitable and viable (Chick and Micklethwaite 83). The very mention of CSR calls into question the reason for business’ existence. Whether or not businesses should be responsible for the society and environment remains questionable since the primary purpose of a business is to satisfy its shareholders and generate profits. This is the line of argument used by classical theorists who are against the practice of CSR. According to Milton Friedman, the only social responsibility of a corporate entity is that of doing business in an open competitive marketplace that is free of deception and any fraud by utilizing its resources in order to increase profits (Friedman 6). The classical advocates further maintain that managers are mainly responsible for catering to shareholders’ interests by enhancing financial returns to the business. Practicing CSR may lead to the dilution of economic productivity since the investments made in CSR may be irrecoverable (due to the non-profit nature of CSR activities) (Friedman 6). However, advocates of CSR base their arguments in favor of the same for various reasons. Usually, companies engage in such disclosure for two main reasons: achieving a competitive edge by enhancing employee morale and goodwill and pressure by external stakeholders such as governments, environmental agencies etc. Not adhering to the latter’s demands would mean a loss in company’s goodwill and, hence, profits. This leads us to the argument related to stakeholder view used by proponents of CSR. This view was conceptualized as early as in the 1970’s by Freeman who described organizations in terms of the managers’ relationships with stakeholders (Garriga and Mele 59). A stakeholder is typically any individual entity or group that has an impact on, or is affected by the corporation’s goals and objectives (Garriga and Mele 59). Companies can reconcile the conflicting objectives amongst stakeholders by engaging in a successful CSR dialogue with them in which the company gives something of value (such as a public service) to a significant community in lieu of popular support from groups and individuals within the environment. Advocates of CSR further state that firms are required to exercise duty of care when dealing with both primary and silent stakeholders (such as the community) (O’Riordan and Fairbrass 748). By recognizing the fact that shareholders’ interests cannot be satisfied without satisfying (to some degree) the interests of stakeholders, these advocates have highlighted the firms’ responsibilities beyond that of profit generation and maximization (as suggested by the classical including Friedman). By doing so, corporations are likely to see an increase in shareholders’ wealth as well as the total business value. The social contract basis of CSR is another reason why CSR is considered desirable. This argument states that the society’s actors are defined as being involved in a contractual obligation with each other (Garriga and Mele 56). With respect to CSR, this implies that corporations do not exercise social responsibility because of commercial reasons but in response to the society’s implicit expectations from the business (Garriga and Mele 56). This is further split into the microsocial and macrosocial contract. The former implies that corporations would be expected (by the communities) to extend their support to the local communities; whereas, microsocial contract would become effective when corporations would specifically deal with individuals within that community (Garriga and Mele 56). However, it has been observed since a long time that organizations have used CSR mainly as a tool for seeking legitimacy and masking their unethical practices. Legitimacy is defined as the widespread perception or assumption that corporate conduct is suitable within the social network of values, norms and beliefs (Suchman 574). Throughout history, corporations have encountered various threats to their legitimacy, threatening their continued survival in the marketplace. For instance, the Bhopal disaster, the Gulf Oil Spill as well as the famous Ford Pinto case have all led to the questioning of organizational conduct leading them into practicing CSR to overcome the bad publicity. Another case is that of Pfizer. The company was renowned for its philanthropic practices in Africa where it donated a medicine to curb blindness. On the contrary, the company was charged with conducting medicinal trials on children that were unethical. Taking advantage of an epidemic in Nigeria, the company treated the infected children with a new and dangerous antibiotic (Chima 849). In other cases, the effectiveness of CSR efforts is questionable. For instance, the recharge shafts used in Coca Cola’s rainwater harvesting program in India were found in decaying conditions upon inspection. Although the company has received huge fanfare for publicizing this initiative on paper, the reality is surprising. It was discovered that the company did this to mask its water mismanagement that had been heavily criticized. Hence, companies may make half-hearted attempts at CSR which is why advocates against CSR have labelled it as a PR activity. Such socially responsible behaviour creates the impression that the corporation is honest and trustworthy. This automatically leads to the popular belief amongst consumers that the offerings of such an honest and reliable corporation will also be of high standards, thereby ensuring customer loyalty. For instance, adding ingredients to products that are chemical-free or that have not been tested on animals help make the product preferable compared to that of competitors’ (Garriga and Mele 55). It is safe to conclude, that the basis of CSR rests with aspects such as the attainment of objectives that enable corporations to achieve long-term financial benefits, making responsible use of organizational power, consolidating and incorporating the demands and expectations of the society and finally, contributing to societal welfare by doing what is deemed correct by moral and ethical principles. However, the view of classical theorists cannot be negated. Considering that organizations are profit making entities, it would be unjustified to expect them to possess purely charitable or philanthropic intentions for incorporating CSR. Therefore, the profit incentive behind practising CSR would remain a powerful force. Without such an incentive, the need to practise CSR would not be convincing enough for firms to take it up. Therefore, ideally a blend of profit and non-profit motives must exist to make CSR achieve its full potential. Works Cited Chick, A. and P. Micklethwaite. Design for Sustainable Change: How Design and Designers Can Drive the sustainability agenda. London: AVA Publishing, 2011. Print. Chima, S.C. "Global medicine: Regulation of biomedical research in Africa." British Medical Journal (2006): 848. Print. Freeman, R. E. Strategic management: A stakeholder approach. Boston: Pitman Publishing, 1984. Print. Friedman, Milton. Capitalism and freedom. Chicago: University of Chicago Press, 1962. Print. Garriga, Elisabet and Domenec Mele. "Corporate Social Responsibility Theories: Mapping the Territory." Journal of Business Ethics (2004): 51–71. Print. O’Riordan, Linda and Jenny Fairbrass. "Corporate Social Responsibility (CSR): Models and Theories in Stakeholder Dialogue." Journal of Business Ethics (2008): 745-758. Print. Suchman, M. C. "Managing legitimacy: Strategic and institutional approaches." Academy of Management Review (1995): 571-610. Print. Read More