Paradigm Shift of Firms from Capitalism to CSR (Rationale) The integration of social responsibilities in business that emerged with the financial capitalists spurred a fierce debate on whether or mot CSR should be included in the corporate objective function. the earliest reference to such criticism appears to be Ghent, who in 1902 criticized this new trend for its similarity to the economic feudalism of the middle Ages, and who argued that CSR was being used as a tool for forestalling public criticism and regulation rather than from an actual concern for social issues (as reported by Heald, 1957). Similar but more specific arguments have since been provided by Levitt (1958), Friedman (1962: 1970) and recently Jensen (2002). Ghent did …show more content…
In order words, the only ethical approach to CSR, according to Levitt (1958), is to pursue CSR when profitable, but to also admit that profit is the real objective behind any socially responsible activities. Levitt (1958) further warns against the dangers of pursuing ambiguous corporate objectives, such as those implied by CSR, rather than the well-defined traditional objective of profit maximization. He argues that as soon as the corporate objective function includes CSR, this leaves managers with the luxury of making value judgments on which social issues to pursue and which not to pursue. in effect the multiple objective function reduces to the single objective of maximizing the manager’s utility. Maximizing the shareholder value A well-known approach is that which takes the straightforward contribution to maximizing the shareholder value as the supreme criterion to evaluate specific corporate social activity. Any investment in social demands that would produce an increase of the shareholder value should be made, acting without deception and fraud. In contrast, if the social demands only impose a cost on the company they should be rejected. Friedman (1970) is clear, giving an example about investment in the local community: ‘‘it will be in the long run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community or to improving its
Corporations are encouraged to conduct their activities in an ethically responsible manner, however neither the corporate world nor academia has produced a single – all encompassing definition of corporate social responsibility (CSR). The basic problem is that there are too many self-serving definitions that often lean toward the specific interests of the entities involved (Van Marrewijk, 2003). There has even been a quantitative study conducted on the many definitions of the term (Dahlsrud, 2006).
The purpose of this essay is to research the notion of CSR and uncover its true framework and outline what social responsibility truly means to corporate organisations, and whether it should be seriously considered to be a legitimate addition to the corporate framework of an organisation.
On the other side, as the legal personality of the corporations evolved in the 1800s, enterprises were no longer responsible for serving the public interest. Consequently, any social welfare was symbolic and procured from the economic function of organizations (Banerjee, 2008). Furthermore, it seems that corporations are using CSR strategies as a window to present favorable images and obtain economic benefits. Historically the relationship between revenues and investment in CSR programs is a controversial issue. Furthermore, the power of the economic CSR rhetoric lies in the ability to validate particular ideologies to consolidate the power of larger corporations (Banerjee,
Corporate Social Responsibility (CSR) is something that affects all companies and should be an active factor in the company’s decision making. It is something all corporations need to care about. CSR is when business’ or corporations take part in an initiative or campaign for a cause that will benefit society and/or in some way make the world a better place (Taylor, 2015). Initially, Corporate Social Responsibility started to take shape around the 1950’s, but some say that it dates all the way back to the 1800s, the idea of CSR was seen (Carroll, 2007). One may think that because it is dated so long ago, it doesn’t have an important impact today nevertheless, it is proven that Corporate Social Responsibility is a pathway for entities to self benefit as they are in the process of benefitting society.
Conventionally in the US, CSR has been well-defined in terms of a charitable model. Businesses earn revenues, unimpeded except by satisfying their responsibility to pay duties. Then they contribute a sure share of the proceeds to generous foundations. It is understood as doing the act for the corporation to obtain any advantage from the philanthropic activities.
The answer to the questions of Why does a business exist? and What purposes does/should it serve within society? are not agreed upon by all. The concept that companies having social obligations beyond their economic benefit is controversial (Chandler & Werther Jr., 2014). This paper will briefly examine the viewpoint of the well-known economist, Milton Friedman, whose assertions have been very influential in the debate surrounding corporate social responsibility (CSR). Arguments, both in support of, and against Friedman’s assertions, will be presented along with examples of two organizations having contrasting attitudes regarding CSR. Lastly, the paper will examine three organizations whose literal adherence to Friedman’s view has led to the rationalization of unethical behaviors.
Corporate Social Responsibility (“CSR”) is often described as the measures taken by companies to manage environmental, social and economic impacts of their business activities. Since the globalisation of economic and labour markets, CSR has become an argumentative topic. For companies to be considered as good in terms of CSR, they are required to go above and beyond of their legal requirements and take into consideration what is in the best interests of its stakeholders.
Pleas for corporate social responsibility will be truly embraced only by those executives who are smart enough to see that doing the right thing is a byproduct of their pursuit of profit. And that renders such pleas pointless” (Karnani, 2010). Meaning, the idea of CSR becomes a moot point, and brings us back to truth that companies will pursue markets where we demand products and services.
As corporate social responsibility (CSR) efforts continue to grow within industries world-wide, the pursuit of sustainably responsible investment (SRI) is becoming increasingly popular among investors looking to create a positive societal impact. Similar to ethical consumption, an organization’s sustainability initiatives can motivate investors to not only provide monetary support for their company (stock holdings), but to influence their business decisions through shareholder advocacy as well (Voorhis & Humphreys, 2011). Therefore, companies who highlight and publish their environmental, social, and governance (ESG) data are taking advantage of the increasingly popular market for SRI. In addition, community investing provides opportunities for investors to financially engage with communities directly in an effort to create social growth (Voorhis & Humphreys, 2011). Consequently, independent organizations and financial advisors are providing in-depth company research and industry examinations (screenings), which go beyond the financial aspects of investing and assist potential investors in their decision making processes. Within the power point presentation, a thorough analysis of both SRI and ESG factors are highlighted as well as their industry and investor significance. Furthermore, notable positive attributes of SRI are noted in an attempt to showcase its attractiveness along with specific examples of three corporations that have excelled in their ESG practices.
The term "corporate social responsibility" came into common use in the late 1960s and early 1970s after many multinational corporations formed the term stakeholder, meaning those on whom an organization 's activities have an impact. It was used to describe corporate owners beyond shareholders as a result of an influential book by R. Edward Freeman, Strategic management: a stakeholder approach in 1984.[2] Proponents argue that corporations make more long term profits by operating with a perspective, while critics argue that CSR distracts from the economic role of businesses. Others argue CSR is merely window-dressing, or an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations.
Archie Carroll defines corporate social responsibility (CSR) as “the social responsibility of business encompassing the economic, legal, ethical, and discretionary expectations that society has of these organizations at a given point in time.” (Crane, 5) Interesting enough, there has been an abrupt growth of firm’s engagement in CSR within all industries. This is the result of growing requests from the civil society demanding firms, of all sizes, to legitimize their practices. (Crane, 4)
This discussion will begin with one of the earliest and most quoted critiques of CSR by Milton Friedman (1970). Friedman’s view was that an employee has a responsibility to conduct the business according to the owner’s desire, which is generally to make as much money as possible, while conforming to the basic rules of society, both those embodied in law and those embodied in ethical custom (Friedman, M., 1970). Friedman goes on to state that if a person has responsibilities to his family, his city, his church etc. then these are the social responsibilities of individuals, not business (Friedman, M., 1970). According to Friedman, nothing that takes the focus away from
In 1953, the book ‘The social Responsibility of the Businessman’ was published by Howard Bowen and there began the first concrete step towards CSR. The definition of CSR was clearly stated in this book. He exhorted organisations to fall in line with those strategies, to put into practice decisions which are highly valued by our communities or to follow those lines of action
However, modern theory known as corporate social responsibility (CSR), has complicated the situation in that stating that companies are not only responsible to its shareholders, but also to the stakeholders which its actions may impact (Freeman 1984). While this may seem to contradict the mantra of profit maximisation, Russo and Perrini (2010) suggest that in today’s conscience-minded society, success is based not only on maximising profit but also on a corporation’s stakeholder relationships, which include social and environmental issues.
It has been debated for businesses, whether to invest in CSR activities. Researchers who are in favour of CSR argue for the benefits of involving in corporate social activities compared to just setting policies that will maximize only the value of the firm or its profits. Tobias, (2011) argued that companies that are involved in CSR are more profitable than their peers who are not socially responsible to their stakeholders. The critics argue that CSR is an activity that takes away the attention of managers from the objective of the organization. Managers are stewards of organization and their task is to invest the assets received from creditors and stockholders to increase profits and dividends. However, when they turn their attention to activities that are in the sole responsibility of the government, it will distract operational activities. Friedman (1970) argued in his article “The social responsibility of business is to increase its profit", artificial legal body is what companies are referred to by law. As an artificial person if they have any responsibilities to the society then it should be artificial social responsibility” this implies that corporations’ responsibility is not to the society but it is the work of the