Corporate social respobsibility:Is it positive or negative, Contradictory view points

1 © 2015, Ali Jiliow

CORPORATE SOCIAL RESPONSIBILITY: IS IT

POSITIVE OR NEGATIVE? CONTRADICTORY

VIEW POINTS

BY

ALI IBRAHIM JILI'OW

MBA, OUM

Nov, 2015


Introduction

The relationship between companies and the public has witnessed a remarkable change in the

past few years. Identifying the role and responsibilities of business in society has been the pursuit

and concern of many scholars for decades. In recent years the relationship between corporations

and society had experienced a massive revolution from the traditional classical view of business

as profit maximizing economic agents to a more ethical viewpoint that analyzes the better impact

of business on civilization ( Safwat, 2015).

The argument that the public and business are interwoven has been used on countless times by

scholars and campaigners of Corporate Social Responsibility. Business cannot function without

Society and on the contrary society will find it difficult, if not totally impossible to function

effectively without business (Filho, 2009).

However this paper discusses the theory of corporate social responsibility, its historical

background, meaning and definitions, advantages and disadvantages of corporate social

responsibility and last but not least the paper presents the different views about corporate social

responsibility, supporters and opponents of this concept.

Background

The origins of Corporate Social Responsibility dates back to the 1960s, when issues such as the

social rights movement and ecological activism became part of the open debate. During this

time, some companies initiated to question their responsibilities in areas such as staffing

employees from minority groups and caring to the surroundings. (Sources: www.cga-pdnet.org).

According to one of the oldest known written documents, that account of Genesis by the biblical

writer Moses, human being was instructed by his Creator to “fill the earth and govern it”

(Genesis 1, 28), and is later challenged (The Berlin International Economics Congress, 2012).

Theory of Corporate Social Responsibility

Company's Social Responsibility is one of the theories that is regularly used by different people

under a variety of names, as philanthropy and patronage, nevertheless, this concept is presented

also as “corporate responsibility,” corporate governance” and “responsible business, the concepts

has advocates as well as opponents (Melikyan, Corporate Social Responsibility:A Fashion Trend

or a Serious Approach?, 2010).


What is Corporate Social Responsibility?

Business social responsibility has been much admired amongst companies and top corporations.

particularly in the 21st century when environmental concerns, human rights, labor rights, fair

trade and many other concerns are becoming gradually more important to clients, stakeholders

and companies alike (Kan, Corporate Social Responsibility: A Profitable Alternative, 2012).

Company's social responsibility is not something that is obliging by law for businesses to pursue

and implement. Companies who want to carry out business more responsibly and contribute for

the better of society often prefer to implement Corporate Social Responsibility strategies (Kan,

Corporate Social Responsibility: A Profitable Alternative, 2012).

Interestingly, several scholars and authors have identified – different issues that fall within the

domain of CSR, according to Kotler and Lee (2005) the following issues fall within CSR

activities:

Issues that contribute to community health

Issues that encourage safety

Issues that enhance education

Issues that improve employability

Issues that enhance the quality of life in the natural environment

Issues that enhance community and economic developments

Issues that facilitate the provision of basic human needs and desires

Definition of Corporate Social Responsibility

There is no official definition of Corporate Social Responsibility. Number of authors defines

differently. A comprehensive definition of Corporate Social Responsibility was given by Carroll, who

stated that “The social responsibility of business covers the economic, legal, ethical, and optional

expectations that the public has of organizations at a given period of time” (Carroll, 2006, p. 16).

A Carroll, provided complete definition of Corporate Social Responsibility he stated that “The

social responsibility of business encompasses the economic, legal, ethical, and discretionary

expectations that society has of organizations at a given point in time” (Carroll, 2006, p. 16).

Discussions regarding advocates and opponents of Corporate Social Responsibility

According to Aya Mohamed (2015) , recognizing the role and responsibilities of companies

within the public has been the pursuit and concern of many scholars for our present generation.


More debates have been evaluated on the topic of who should start Corporate Social

Responsibility activities.

According to the literature of Corporate Social Responsibility there are three possibilities.

1) Corporate Social Responsibility is a obligation imposed by government regulation, with the

result of similar CSR programs because of the obligation to comply with regulation.

2) CRS is not led by government, but by union of companies, activist and Accountable

managers that begin Corporate Social Responsibility framework and distribute the benefits of

Corporate Social Responsibility, upholding its use in their businesses.

3) Corporate Social Responsibility is based on the at company level in early stage in the search

for strategic advantage and the alteration of different social and environmental threats in

opportunities as a competitive advantage (Catalin, 2014)

Therefore, company's approach towards Corporate Social Responsibility varies between two

extremes either of dismissing the view completely or supporting best practices out of genuine

belief that Corporate Social Responsibility is a vital part of their business actions (Safwat,

Corporate Social Responsibility: Rewriting the Relationship between Business and Society,

2015).Within the globe of business, the main "responsibility” for companies has traditionally

been to get profit and enhance shareholder wealth, However, in the last decade, a

associations defining broader corporate responsibilities–for the environment, for local

communities, for working conditions, and for ethical practices–has gathered momentum and

taken hold.

Advocates of corporate social responsibility

Corporate Social Responsibility advocates point out that no organization exists in

isolation. They believe that businesses, without exception, have an obligation to contribute

as well as draw from the community, on which they rely so heavily.

Proponents of Corporate Social Responsibility argue that socially responsible practices

can have a positive impact on the organization by improving employee recruitment and

retention, managing environmental risks by reducing harmful accidents, and

differentiating brand to achieve greater consumer loyalty.

Charles Handy makes a convincing and logical argument for the purpose of a business

laying beyond the goals of maximizing profit and satisfying shareholders above all other

stakeholders in an organization.

https://www.boundless.com/management/definition/recruitment

https://www.boundless.com/management/definition/retention


Philipp Kauffmann, a partner at the Center for Innovative Leadership, based in

Amsterdam, argues corporations that do not act in a socially responsible manner are

discovering they are not capable to attract or to retain “high potential” persons

According to Argandona ( 2008) companies should be socially responsible? Because

society represent most stake holder groups expectations, demands or requests.

Corporations should act accordingly within the society they operate, because the society

reflects the interest of of all stake holders, their demand, expectations and demands

(Argondona, 2011)

According to Stigson (2002) “it is clear that society expects much more from companies

than simply a well-made product or a reliable service at the right price” (p. 24)

Freeman (1984). Freeman argued that managers should tailor their policies to satisfy the

needs of all the stakeholders, not just those of the shareholders.

In 1932 American commentator Merrick Dodd argued „corporations, like persons, should

make every effort to be good corporate citizens by contributing to the public to a greater

extent than is generally Required‟ and therefore the corporation as an economic institution

has a social service as well as a Profit making function. (Kercher, 2006).

According to Svensson and Wood (2008:308), businesses are not just accountable for their

own economic requirements but are also expected to consider society‟s economic well-

being.

Opponents of Corporate Social Responsibility

M. Friedman (1970) argued that Corporate Social Responsibility provide only the

personal gain of company managers in increasing their reputation in the public,

consequently leading to higher personal wages, while shareholders would experience loss

because companies were not profiting from Corporate Social Responsibility activities as

these activities would incur Only expenses.

One of a very active opponents of Corporate Social Responsibility, Gerard Fontana,

advisor to the European trade Union Confederation, claims that corporations use

Corporate Social Responsibility concept as a means to reduce public authorities and to

weaken their role in the the public; to reduce the role of trade unions; as well as to replace

public laws and regulations by corporate Codes of Ethics or Codes of Conduct which do

not have any legal value.


According to Milton Friedman (1970), the social responsibility of business begins and

ends with increasing profits, where the self-interested actions of millions of participants

in free markets should lead to positive outcomes for the society.

Milton Friedman and other conservative critics have argued against corporate social

responsibility, stating that a corporation's purpose is to maximize returns to its

shareholders and that it does not have responsibilities to society as a whole.

Milloy‟s argument is similar to the reasoning of Adam Smith and Milton Friedman they

also claim the CEOs are being hired to maximize share holders wealth as they put their

money into the business.

Steve Milloy, a mutual fund manager and Critic of Corporate Social Responsibility,

proclaimed the following: “Shareholders do not hire CEOs to be the U.N., to act like a

government or to be a charity. They were hired to make money for Shareholders, (as

quoted in Weiss, Kirdahy, & Kneale, 2008, para. 5).

According to Schaefer (2008) business should legally maximize long-term shareholder

wealth, because they invest the money not knowing whether they will generate money or

not.

Whole concept of Corporate Social Responsibility is irrelevant to business (Freeman &

Liedtka, 1991), through those who see the significance, but think it is a bad idea for

business (Friedman, 1962), to the enormous group of authors who think that Corporate

Social Responsibility has strategic importance to business (Asongu1, 2007).

One of a very active challengers of Corporate Social Responsibility is, Gerard Fonteneau,

the consultant to the European trade Union Confederation, he says that this strategy

corporate social responsibility is increasing at a moment the multinational economic and

financial groups, definitely the international market economy itself, are going through a

serious internal crisis; witness many socially and ethically „‟irresponsible‟‟ practices:

deceitful bankruptcies, uncertain purchases, cheatings in the accounts, very high manager

salaries, disrespect for basic values. (Melikyan, Corporate Social Responsibility:A

Fashion Trend or a Serious Approach?, 2010).

My view point: It seems certain that there are many arguments for and against corporate

social responsibility regarding corporation's rule within the society, although the main

purpose of making business is to make a profit, this doesn't necessarily mean companies


should ignore the society it works within it, I am inclined to the advocates of social

responsibility and I do believe that corporations has responsibility with in the public it

operates with in it, ignoring society's responsibility will be disastrous because corporations

don't operate in a isolation, they require the society in one way or another, and it's the

society that provides corporations all they required as money to sustain their operations,

human resources to make operations smooth and most importantly all the cash it covers it's

expense daily, in my point of view without Corporate Social Responsibility, corporation

cannot gain its desired results and this will ultimately lead to its down fall.

Advantages of Corporate Social Responsibility

1) Corporations are performing more responsibly towards their workers, environment and the

public at large.

2) Corporate Social Responsibility helps to bring the businesses and the public closer through

diverse community directed projects.

3) Corporate Social Responsibility makes the corporations to Think globally and act locally.

4) Business‟ activities are obtainable in their Codes of Conduct and Codes of ethics presented in

the websites which leads to transparency of their functions

5) Corporate Social Responsibility activities help companies to advance their brand images, to

obtain more clients which in its turn in most cases leads to rising of the companies‟ revenues.

Disadvantages of Corporate Social Responsibility

a) Some corporations are presenting excellent examples of their Corporate Social Responsibility

activities and demonstrate a responsible attitude towards the people.

b) In pursuing their wellbeing, some companies often act very recklessly causing huge damages

to the atmosphere and community.

Some large corporations are carry out Corporate Social Responsibility activities on a community

in slight level butthey are damaging the planet on a greatly. (sources: Hasmik Melikyan 2010)

During the 1990s, criticism of corporate practices escalated. A series of corporate scandals

emerged in the US. Numerous environmental Disasters caused by global corporations occurred

(Broomhill, 2007)

Awareness of the use of sweatshops and child labour in developing countries attracted the

attention of community activists in developed societies, the 1990s therefore witnessed an


explosion in civil group activism which led to both protests against and engagement with,

corporations (Bendell 2004)

Conservative opponents of Corporate Social Responsibility politics say: merely profit

maximization allows companies to work well and complete their duty towards society (Rusconi,

Understanding CSR in the light of “Caritas in Veritate”, 2010)

Conclusions

Initially the main reason of most companies doing a business has been making money, and

maximizing share holder's wealth, whatever the circumstances are. This concept has now

considerably been changed throughout the world; the idea of social responsibility has come into

light. The concepts of Corporate Social Responsibility has been on the spot light for many

scholars and researches, however corporations should act appropriately when conducting their

business activities with the society. The corporation's main aim should not only be profit

generation but they should bear in mind their responsibility towards the environment and the

society at large.


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