The Concept Of Corporate Social Responsibility

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The classic origin of the concept of corporate social responsibility (CSR) came from the principle that the purpose of the corporation is to make profits for the stockholders. This view of Milton Friedman came to be referred to later as the classical theory of CSR (Bowie, 1991). Tom Donaldson argued that this theory derived from the concept of the social contract between the corporation and the society where it operates. This perspective, however, faced criticism over its inherently opportunistic and exploitative viewpoint. A corporate vision aimed only at upholding the shareholder’s right to profit for their investment logically will have to qualm of exploiting stakeholders to serve the end game of profit. It will have no qualms at paying…show more content…
The Stakeholder Theory of Ed Freeman (1984) moved forward the neoclassical thought through the proactive concept of “protection and promotion of rights,” incorporating the basic neoclassical theory with the managerial task of protecting and promoting the rights of various stakeholders. Thus, began the long and still unfinished debate over the concept of CSR, which will be discussed and argued further in this essay.

Freeman (1984) defined stakeholders as any group, or any member thereof, whose existence necessarily results to the survival of the corporation (Bowie, 1991). Thus, stakeholders include such groups as stockholders, employees, customers, suppliers, the local community, and the managers. In effect, the theory expanded the focus of benefits toward one stakeholder (the shareholder) into other stakeholders inside (e.g. employees and managers) and outside (e.g. customers, suppliers, and local community) the corporate premises. The Stakeholder Theory proposed that protecting and promoting the interests of all stakeholders will provide the corporation’s long-term profitability at the expense of the short-term gain. Wal-Mart should establish a “no-question-asked” return policy for its customers. CEMEX should pay for the cleanup of the surface waters near its cement manufacturing plant in the Philippines.

However, the classical theorist cannot find the logic and moral responsibility of
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