The Voices of Corporate Social Responsbility - What is that?

What is that?

According to Marianne Jennings (2011), "The theory of corporate social responsibility (CSR) holds that the primary responsibility of a corporation is to benefit society, i.e., companies should always act in the best interests of stakeholders and not just be accountable to their shareholders."

This definition sounds good as do many marketing schemes that advocate for a greener tomorrow, more jobs, and no animal-testing. Of course, often times, there is more to these statements than meets the eye, and brings up the question-- What does it mean to be "socially responsible" and to what extent should businesses partake in this task?



Let's start by analyzing the views of the late Dr. Milton Friedman. Frankly put, Friedman (1970) believes the social responsibility of business is to increase its profits. Here's why:

• Profitable business activity benefits society in numerous ways such as job creation, new goods & services for customers, profits for shareholders, and economic growth.
• Corporate executives can only act as agents to their shareholders.
• If this sense of responsibility is left too broad, he brings in the "tax argument" and it is “intolerable as a matter of political principle” and is anti-democratic.

Similarly, since we mentioned shareholders, Edward Freeman (1994) shares similar thoughts with his Stakeholder Theory. Freeman states that the shareholders or stockholders are the owners of the company, and the firm has a binding fiduciary duty to put their needs first, to increase value for them. The catch to his theory is that other parties are involved including governmental bodies, political groups, trade associations, trade unions, communities, financiers, suppliers, employees, and customers. In the end, for both Friedman and Freeman, the main objective of CSR is to satisfy the needs of shareholders.

In contrast, let's take a look at Entine & Jennings' views on the matter. As mentioned earlier, Jennings' definition of CSR not only addresses the needs of the shareholders but also that of the stakeholders. The problem is... not every stakeholder is the same. Jennings and Entine point out several flaws with CSR including:

• Does not provide resolution when stakeholder interests are at odds.
• Only applies to large companies.
• "Rain-forest chic" used as a screen for buying decisions (Entine & Jennings, 1998).

So, clearly, many flaws have been identified with the system, and it is still being developed today. What are your thoughts on Corporate Social Responsibility?

References

Friedman, M. (1970). The Social Responsibility of Business Is to Increase Its Profits. New York Times Magazine, (32-33), 122-126.

Jennings, M. (2012). Business Ethics: Case Studies and Selected Readings (7th ed.). Cincinnati: West Educational Pub.