Does Csr Represent a Genuine Desire by Corporations to Do Well Towards Society?
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Corporate Social Responsibility (CSR) is a view of the corporation and its role in society that assumes a responsibility among firms to pursue goals in addition to profit maximization and a responsibility among a firms stakeholders to hold the firm accountable for its actions (Werther &Chandler 2011). Genuine is defined as real and exactly what it appears to be (Cambridge University Press 2011). Desire is defined as a strong feeling of wanting to have something or wishing for something to happen (Oxford University Press 2010). What I understand from genuine desire is, corporations wanting to contribute to society purely because they want to give back and do not expect returns. CSR has become the new trend. Many profit organizations are making efforts to take account of the society and environment by strengthening desirable outcomes and reducing undesirable outcomes. The reason may be due to demands from different groups in society like customers, authorities, civil society and Non-Governmental Organization (NGO).
Why Corporate Social Responsibility
According to Trevino and Nelson (2010), there are three reasons: pragmatic, ethical and strategic. Pragmatic reason means business must use its power in a responsible way in society or will risk of losing it. Corporations gain certain advantages like limited liability by existing as legal entities. Since societies allow firms to do so, their rights and advantages can be taken away if they are perceived to be irresponsible. Therefore, it is imperative for corporations to anticipate stakeholder concerns and act defensively to protect their reputation and viability. Ethical reason argues that since business is part of society so it is expected to behave ethically. Social responsibility should be seen as a whole with business that will indicate economic performance. Organizations often avoid legal costs and undesirable outcomes. Lastly, Trevino and Nelson (2010) mention Michael Porter and Mark Kramer strategic approach on CSR. It begins with acknowledgment of the inter-connected relationship of business and society. The assumption is business needs a healthy society as healthy society can produce a productive workforce and set the rules for business transactions. Healthy society depends on business to innovate, create jobs, products, and services and pay taxes to support societal activities. Value chain activities can be incorporated in CSR initiatives as they benefit society by reducing harm or doing social good which can reduce costs or improve its reputation. Corporations must identify the core values that aid tough ethical decisions of what they should and should not do and concentrate on social responsibility resources. This approach challenges businesses to be innovative, to think of how they can act in socially responsible ways that in turn benefit society and themselves, and encourages business to measure the social impacts of their efforts.
Milton Friedman and CSR
Friedman states that corporations exists for delivering goods and services to society which in turn create economic value and ultimately generate profits for shareholders. The managers are obligated to maximize revenues for the shareholders (Keinert 2008). A companys responsibility is to improve the economic bottom-line and increase shareholders wealth. It is expected for the corporation to comply the laws and generate wealth which then can be directed towards social ends through fiscal policy and charitable choices. The emphasis is, corporate responsibilities limited to private owners. He argues that profit is a result of the actions of the firm and is an end itself.
Firstly, business executives do not have the right to spend shareholders, customers or employees money on societal activities (Friedman 2007). It will distort allocative efficiency as donating resources to charitable organizations does not yield high returns (Bacher 2005). Business is business so society and welfare should not be part of the corporation. It is simply money down the drain so why should business executives practice CSR?
Secondly, Friedman (2007) argues that only people can have responsibilities; a corporation is an artificial person so he denies that it can possess responsibilities. To him, the corporation is a mechanism through which people act, a framework within human agency is actualized. Therefore, CSR is nothing but just another activity performed by individuals that have been allocated certain roles within corporation (Dunne 2008). Corporations are brought into existence by societies passing laws that give legal protection to certain forms of business associations and structures. Simply to say, corporations would not exist if there are no legal and social devices (Bacher 2005).
Thirdly, business executives have the responsibility to conduct the business according to the owners desires which is to maximize profits but in lawful and ethical way (Friedman 2007). A manager should not spend shareholders money on causes of his own choice. This is not tolerated as it will harm the shareholders legitimate interests and breach the trust between the shareholders.
Friedman does not treat ethics as a set of side constraints on making profits as he believes that the business of making profits is itself ethical (Stieb 2008). It is a difficult decision to make between CSR and profit maximization. By using the cost benefit analysis, net benefits of CSR must outweigh the costs then managers will agree to practice CSR. I agree to some of Friedmans ideas but I disagree that corporate philanthropy is a waste of money. If everyone cares only himself then nobody is willing to contribute to the needy. We are living in a globalised world whereby everyone is inter-connected so it is impossible to care only our interests. However, I agree that the social responsibility of business is to maximize profits. The primary objective of business is to make profits. Without making profits, the company is unable to survive needless to say about philanthropy activities. Unless is a non-profit organization then the primary motive is, to reach out to as many people as possible. If corporation is unable to make profits, it will lead to undesirable results that will impact society. For instance, Enron lied about its profits and stands accused of a range of shady dealings including concealing debts so they did not show up in the companys accounts. However, after the deception was unfolded, investors and creditors retreated. Many employees lost their jobs and shareholders lost their life savings. Furthermore, many have committed suicide because they were unable to pay up the debts and also could not accept the reality they have become penniless. Since management has a duty to