Does CSR Work?
Adam Smith founded the modern study of economics on the premise that all businesses are driven by the invisible hand to seek as much profit as possible while society will take care of itself. However, as the public’s opinion of big business has steadily declined in the recent decades, big business has developed a social conscience to improve all aspects of society from worker compensation to protecting the environment to helping the needy. As Stephen Cook indicates in the January 2003 edition of Management Today: “Everyone cares these days. You can hardly walk through the door of a major company in the western world without tripping over stacks of glossy reports telling you how they care for the environment, their
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Ruggie indicates that coke has spent $5 million a year to combat AIDS for African bottlers’ employees. While hard numbers such as these bring the consumer satisfaction while quelling the uproar of social activist groups, Cook indicates that many reports do not tell the whole truth. Cook cites Craig Bennett of Friends of the Earth: “Oil companies are presenting themselves as solar companies, and companies that promote giant agribusiness and oppose consumer information are claiming to be the solution to world hunger.” While clever public relations and glossy reports may seem like the easy way out, big companies are realizing more and more that hiding the truth isn’t flying with the public anymore. The best example of public dismay is Enron. Once a highly touted company, both on the business and CSR side, Enron has since collapsed in a massive scandal that has both killed its reputation and its profits.
The main problem with certification is the lack of a standard. Gereffi et al. indicates four distinct categories of certification: first party, where the company sets its own rules; second party, where an industry sets the certification rules; third party, where non-governmental organizations set the certification rules; and fourth party, where the government sets the certification rules. The plethora of rule setting bodies has created general disagreement as to the extent of a company must be socially
In summary, if, as Smith contended, self-interest is a chief motivator and the invisible hand really works, then as companies seek to maximize profits, the greatest public good will result for the greatest number.
The expectation that businesses behave responsibly and positively contribute to society all while pursuing their economic goals is one that holds firm through all generations. Stakeholders, both market and nonmarket, expect businesses to be socially responsible. Many companies have responded to this by including this growing expectation as part of their overall business operations. There are companies in existence today whose sole purpose is to socially benefit society alongside businesses who simply combine social benefits with their economic goals as their company mission. These changes in societal expectations and thus company purpose we’ve seen in the business community over time often blurs the line of what it means to be socially
Listening to Michael Porter speak about the reason why business can be good at solving social problems, the one thing that stuck out for me in his monologue was that business profits from causing social problems. In his view, it is conventional wisdom that business is the problem and the solution is to change how business sees itself. Training, clean drinking water, protection of forests and other good things that bring good to us as a human race, they are the solution to the social problems and can be reached by understanding that when these needs are met, business creates wealth. Business creates wealth and we seek to meet the needs again. It sounds like a circle that keeps rounding and feeding one and the other.
Can business thrive by profit alone? Barry (2000) described Milton Friedman’s short essay, in the 1970’s, as extremely controversial, in which he denied that corporate executives had any moral duty to relax the conditions of profit maximization on behalf of the wider interests of society. This example of the “bottom line” of business has been demonstrated within the past couple of decades by publicly criticized companies, for fraudulent activities, such as, Enron, WorldCom, and HealthSouth along with many others. These company executives were willing to sacrifice the vast majority and greater good of society for profit gains. This mindset left many of loyal investors, consumers and employees without a sound stabilized future. There are also many businesses that produce a high yield on their investments;
We will look at the Enron Corporation and discuss its application of Corporate Social Responsibility (CSR) or in actuality its irresponsible behavior as related to social responsibility. We will revisit what CSR is and discuss Enron’s philosophy regarding its use and function within the corporation. We will discuss the consequences of Enron’s irresponsible behavior and the far reaching effects it had on society.
Enron was named the most admired company for six years in a row, and it was widely considered one of the best companies to work for by Fortune magazine. Enron shocked the world, and it's stockholders when it was revealed at the end of 2001 that the company’s “reported financial condition was sustained substantially by institutionalized, systematic, and creatively planned accounting fraud”. (Enron, 2011, para. 1) Enron maximized it’s long-run profits for itself, but not within the limits of the law. Enron disregarded it’s social responsibility to it’s stackholders when the company only strive for it’s maximized profits, and didn’t strive
This is a persuasive paper defining various business terms like corporate social responsibility and equal distribution of wealth. The thesis statement does state that the CSR programs are applied in various developed organizations to set an example for small and rising enterprises whereas the anti thesis statement is that there are no moral obligations felt by businesses to be involved in CSR. The financial aspect of CSR activities is also discussed; at times it is thought that involvement of business in any environmental friendly work may lead to higher costs whereas an opposite point of view is that CSR increases long run profit (Aras & Crowther, 2009). Now day’s Triple bottom line concept is aligned with business which is another
Milton Friedman wrote in his famous 1970’s article in The New York Times Magazine, that “the one and only social responsibility of business, is to increase profits for shareholders.” Milton Friedman's view on business responsibility accentuates the importance of maximizing firm's value. He pointed that the “there is one and only one social responsibility of business –to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engaged in open and free completion without deception or fraud’’ and by taking on the burden of social cost, the business becomes less efficient (Milton Friedman, 1962).
Current approaches to CSR are fragmented and/or disconnected from business goals. Many firms still consider CSR as another generic public relations problem in which media campaigns and CSR reports are used to paint the company as a positive ethical, social and or environmental advocator and supporter. For example, the annual reports discuss a firm’s sensitivities to CSR issues, but completely lack the entire story and offer no further forward commitments from the firm. Further, the ratings and rankings measurements are self-appointed by the firm, not always accurate to validate the work and direct impact to what they are measuring, and the criteria base varies widely and weighed differently in the final scoring. Worst of all the data lacks impartial auditors for validating the data to ensure the ratings have been accurately met, and data is statistically significant and a good proxy for what it is supposed to reflect. This has resulted in reactive initiatives designed to appease vocal
Coca-cola boasts of being the world’s largest beverage company serving approximately one billion customers daily. The most dominant products distributed by Coca-cola are Coke, Fanta, Sprite and Diet Coke. This strategy is aimed at ensuring that every customer gets satisfied whenever they use a Coca-cola brand. Coca-cola has large distributions across the globe making it the largest distributor in the world. The late Roberto Goizueta termed Coca-cola to be an American company with large international business and a sizeable American business (Ferrell, 2008). This has helped a lot with brand selling as it is the most recognized brand in the whole world. “Coca-Cola has the most valuable brand name in the world and, as one of the most visible companies worldwide, has a tremendous opportunity to excel in all dimensions of business performance” (Ferrell, Fraedrich, & Ferrell, 2008). Coca-cola, however, has not been smoothly running over the decades in operation. It has on numerous occasions been criticized for overlooking some ethical standards that it should have rather upheld. This essay aims at looking into some of the issues facing Coca-cola, the most significant of them, how they were resolved and how Coca-cola should have solved them.
Business Industry has witnessed the outcomes of bad moral decisions taken by business leaders. Enron’s story is only one example of corporate scandals and cases of bad moral decisions, which has not only shaken the public trust in corporations, but also affected the bank accounts of investors and employees. Before the bankruptcy of Enron; it was included in one of the fortune 500 companies after its fraudulent accounting case the share went down to $1 (Enron scandal, 2010; PBS, 2002; Godwin, 2006; Godwin, 2008).
For a long time now, there has been much debate over the social responsibility of a business. Friedman is one of the most influential
“A Coke is a Coke, and no amount of money can get you a better Coke than the one the bum on the corner is drinking. All the Cokes are the same, and all the Cokes are good. Liz Taylor knows it, the President knows it, the bum knows it, and you know it."(Andy Warhol, 1975) Regardless of its corporate reputation, the organizational performance and its social responsibility of Coca-Cola makes it loved around the world. Ever since its creation in 1886 Coca-Cola has been a household brand known globally for generations of families. I have to mention, of all the cases researched this is my least favorite not only because of my childhood love for the product because the ethical issues in one way or another always manage to resolve themselves not before further tainting the reputation Coke worked so hard to obtain. Most times, whether an organization is innocent of an unethical act, it becomes secondary to the suspicion of the original act. Almost as if the court of public opinion has the power to ruin the reputation of an organization based on an unfounded accusation. In spite of my loyalty after having ready the case, I do believe Coca-Cola to be flawed. The contamination scare in Belgium is a great example of a public relations nightmare. The slightest hint of impurity should have pushed Coca Cola into crisis management mode but they were slow to react, citing it a minor issue (Ferrell, Fraedrich, & Ferrell, (2011). It was not until local officials
In Switzerland, a company such as Nestle dedicates a certain amount of information in its annual report to the value it generates to society at large. Surprisingly, their annual report seems to lend itself to the practices of equity-oriented countries likely due to its international presence and immense exposure to the United States. In any event, their annual report discloses their compliance with applicable laws and international conventions in order to ensure the activities protect the environment (Nestle Annual Report 2010, p. 8). Furthermore, Nestles’ report includes communication reemphasizing their dedication and efforts in the issue areas of human rights, labor practices, the environment and anti-corruption.
Coca-Cola is a big recognized brand that produces many products than just soda drinks. With all the money and brand recognition the company possesses, there are possibilities for the company to past the scandals and keep up in the business market, like we have discovered the company has invested money to cover illicit activities. However, it is very important for the company to act ethically and respond to the scandals that the company has been accused. If Coca-Cola responds morally correct, it will shows the customers that the company cares about social responsibility, but if the company does not act fast and ethically, it exists the possibilities that the company’s sales keep declining.