Corporate Social Responsibility: For societal legitimacy should the ‘caring-face’ of capitalism yield to the moral whims of society?
https://southwales.academia.edu/CarlTaylor
The object of this LLM assignment-based paper was to briefly explore the extent to whether the current voluntary concept ofcorporate social responsibility (CSR), of pursuing shared social values between business and society is a fair and just system or whether it lacks governmental legitimacy and adequate accountability mechanisms. Historically corporate social responsibility’s (CSR) is a mootpoint amidst business entities, governments and academics thatare still unable to agree on how the concept should be defined. Nevertheless critics on both sides of the argument doaccept CSR by its nature is voluntary. The United Kingdom (UK)government in line with Europe distinguishes CSR as a voluntary exercise business takes above and beyond the minimumlegal requirements to enhance and manage their economic, environmental and societal impact. Therefore by its very nature the definition of the concept of CSR has been precludedfrom the legislative agenda. This in itself has led to dissention to the effectiveness of corporate voluntarism and self-regulation over governmental mandatory regulation to manage and enhance societal needs. The core divergence is ostensibly whether entrepreneurial corporations in search of corporate self-interest and profit can also embrace morality through a strategic approach to integrate shared values for business and society without government intervention. With India paving the way as the first country to mandate CSR activities and expenditure should the United Kingdom (UK) alter their voluntary position and align their legislation accordingly.
by Carl Taylor
More Info: Key Words: Corporate Social Responsibility; Capitalism; Morality; Shared Values and; Self-Interest
Publication Date: May 14, 2014
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Publication Name: USW - LLM Assignment Paper
Research Interests:
Law, Corporate Social Responsibility, Legal Theory, Philosophy Of Law, Capitalism, and 3 more
Table of Statutes
UK Statutes
Companies Act 2006 (2006 c.46)Human Rights Act 1998 (1998 c.42)
National Minimum Wage Act 1998 (1998 c.39)
The Equal Pay Act 1970 (1970 c.41)
Employment Rights Act 1996 (1996 c.18)
Pollution Prevention and Control Act 1999 (1999 c.24)
Health and Safety at Work etc Act 1974 (1974 c.37)
Equality Act 2010 (2010 c.15)
Partnership Act 1890 (1890 c.39)
The Consumer Protection from Unfair Trading Regulations 2008
(2008 No.1277)
The Consumer Protection Act 1987 (Product Liability)
(Modification) Order 2000 (2000 No. 2771)2
International Statutes
The Companies Act 2013, (No. 18 of 2013) India, at
http://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf
accessed 19 April 2014
Official Publications
UK
Department of Business and Innovation Skills, ‘Corporate
Responsibility: Good for Business & Society: government
response to call for views on corporate responsibility,’
(April 2014) at
https://www.gov.uk/government/uploads/system/uploads/attachmen
t_data/file/300265/bis-14-651-good-for-business-and-society-
government-response-to-call-for-views-on-corporate-
responsibility.pdf accessed 14 April 2014
Official Publications
EU
The European Commission, ‘Communication from the Commission to
the European Parliament, The Council, The European Economic
and Social Committee and the Committee of the Regions: A
renewed EU strategy 2011-14 for Corporate Social
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Responsibility,’ Brussels, 25.10.2011, COM (2011) 681 final at
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?
uri=COM:2011:0681:FIN:EN:PDF accessed 14 April 2014
Commission of the European Communities, ‘Green Paper:
Promoting a European framework for Corporate Social
Responsibility’ Brussels, 18.7.2001 COM (2001) 366 final at
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?
uri=COM:2001:0366:FIN:EN:PDF accessed 15 April 2014
‘We live in the house we all build’
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- Earthshare Environmental Organisation1
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Society is based upon the collective interaction of peoples’
differing needs and goals brought together through different
organisational forms depending upon individual groups’
desires. These organisations can be labelled based upon their
purpose and common goal. At the most basic classification
organisations fall within one of three categories: for-profit;
non-profit or; governments. The latter form the rules of
society within which the other organisations must operate for
societal legitimacy. The former seeks to maximise gains in the
form of profits for its primary stakeholders being its owners,
shareholders and investors. This is through the interaction of
its secondary stakeholders for example: its employees;
suppliers and; consumers. The non-profit organisations mainly
referred to as non-governmental organisations2 (NGOs) perform a
humanitarian or environmental watchdog role. These voluntary
civil society groups hold other organisations to account when
1 This was published as a full-page advertisement in the New York Times Newspaper by the Environmentalist Action Group, earthshare.org taken from their Summer Newsletter in 2008 at http://www.earthshare.org/psa/earthshare_printpsa_2008.pdf accessed 04 April 2014.2Non-governmental organizations are non-profit, voluntary civil groups organized at either a local, national or international level. They are driven by task-oriented people of a similar common interest who engaged actively within the debates surrounding CSR. See the inter-active site of world NGOs at http://www.wango.org/resources.aspx?section=ngodir accessed 04 April 2014.
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either the political will or profit motivation negatively
impinges on the social good of society.
Society’s existence is dependent upon this mix of different
organisations co-existing and interacting to provide social
capital through exchange transactions. Providing this process
of exchange interaction is executed in a socially responsible
way, the expected result is a well-functioning society. The
benchmark of what constitutes social responsibility of
business exchanges is referred to as corporate social
responsibility (CSR). For many proponents of CSR this
principle should embrace ‘…the economic, legal, ethical and
discretionary expectations that society has of organisations
at a given point in time.’ 3
Achieving a consensus to what is socially responsible
behaviour is proving to be problematic. This is attributed to
global societal differences for example: culture; wealth;
poverty and; governance. Such idiosyncrasies can influence
societal expectations: for what one sees as responsible
behaviour another may view the same action not only socially
irresponsible but morally repugnant too.
Still, such difficulties within the process of exchange
interaction have easily been overcome by the majority of 3 A B Carroll, ‘Corporate Social Responsibility: Evolution of a Definitional Construct’ (1999) Business & Society 38 (3) 268-295, 283 at https://www.academia.edu/419517/Corporate_Social_Responsibility_Evolution_of_a_Definitional_Construct accessed 31 March 2014 citing from his previous article; A B Carroll ‘A three-dimensional conceptual model of corporate social performance’ (1979) Academy of Management Review 4, 497-505, 500.
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national businesses and/or multi-national enterprise (MNEs).4
This is because not only is a corporation’s participation in
CSR entered into voluntarily5 but also, the fluidity of the
concept of CSR as having ‘both a means and an end’6 is
nebulous. In other words, adoption of CSR initiatives to
maintain societal legitimacy is corporate driven. That is to
say, the corporation is free to choose the means on how it
will deliver its goods or services and how to achieve the end
result of profit maximisation.7
In Europe, the Commission of European Communities encourages
corporations to embrace this voluntary perspective. The
Commission envisaged ‘…companies are investing in their future
and, they expect that the voluntary commitment they adopt will4 These multi-national enterprises are also often referred to within various academic literature as transnational corporations (TNC’s) or even multi-national corporations (MNC’s) but all have the same function of the ability to globally trade and set up operations in different countries. 5 Department of Business and Innovation Skills, ‘Corporate Responsibility: Good for Business & Society: government response to call for views on corporate responsibility,’ (April 2014), 3 para1.1: ‘Corporate responsibility (CR) is the voluntary action businesses take over and above legal requirements to manage and enhance economic, environmental and societal impacts.’ at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/300265/bis-14-651-good-for-business-and-society-government-response-to-call-for-views-on-corporate-responsibility.pdf accessed 14 April 2014; Seealso, The European Commission, ‘Communication from the Commission to the European Parliament, The Council, The European Economic and Social Committee and the Committee of the Regions: A renewed EU strategy 2011-14 for Corporate Social Responsibility,’ Brussels, 25.10.2011, COM(2011) 681 final, Introduction, 3 para 1: ‘a concept whereby companies integrate social and environmental concerns in their business operations and in theirinteractions with stakeholders on a voluntary basis.’ at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0681:FIN:EN:PDF accessed 14 April 2014.6 W B Werther Jr., and D Chandler, Strategic Corporation Social Responsibility: Stakeholders in a Global Environment, (2nd edn, Sage Publications, 2011) 7.7 ibid 7.
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help to increase their profitability.’8 The Commission further
expected that CSR would ‘help to tackle child poverty...’9
Nonetheless, Rhys Jenkins10 in a special issue of International
Affairs11 questioned such claims by suggesting ‘despite the
enthusiasm of many development agencies…it is also doubtful
whether reform of CSR can make it more amenable to achieving
this objective.’12 In his conclusion he felt ‘CSR …is unlikely
to play a significant role in reducing poverty in developing
countries…’13 In his support further critics argue whether the
‘current CSR agenda may be inappropriate for addressing social
problems in developing countries and may divert attention from
broader political, economic and social solutions for such
problems.’14 The overall underlying message from the
contributors of the International Affairs special issue was it
is unlikely CSR could alleviate poverty therefore such claims
by CSR proponents were unwarranted.15 Moreover, contributors
felt the ‘need for a [more] critical approach to the strengths
8 Commission of the European Communities, ‘Green Paper: Promoting a European framework for Corporate Social Responsibility’ Brussels, 18.7.2001COM(2001) 366 final, Executive Summary, 3 para 1 at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2001:0366:FIN:EN:PDF accessed 15 April 20149 ibid 14 para 57.10 A Professor of Economics at the School of Development Studies in the University of East Anglia.11 ‘Globalization, Corporate Social Responsibility and Poverty’ (2005) International Affairs 81(3), 499-671.12 R Jenkins, ‘Globalization, Corporate Social Responsibility and Poverty’(2005) International Affairs 81(3) 525-540, 540.13 ibid 540.14 J G Frynas, ‘Globalization, Corporate Social Responsibility and poverty’ (2005) International Affairs 81(3) 580- 598, 583.15 M Blowfield and J G Frynas, ‘Setting new agendas: critical perspectives on Corporate Social Responsibility in the developing world’ (2005) International Affairs 81(3) 499-513, 499.
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and limitations of CSR’16 especially in developing countries
which are impoverished and marginalised: ‘one that poses
questions that hitherto have been unasked or neglected.’17
Such postulations are underpinned by the claim that CSR
mainstream approaches ‘underestimate the importance of power
in the relationship between corporations and the communities
in which they invest.’18 It is this underestimation of power
in the relationship that permits corporations to manipulate
the use of CSR as an effective strategy to overcome
operational negativity. As Peter Newell19 argues:
“Voluntarism and self-regulation suggest dangerous
precedents where state regulation remains unenforced or
actively subverted, where compliance needs to be
established before ‘beyond compliance’ initiatives can
sensibly be contemplated.”20
Professor Newell’s argument of regulation over voluntarism and
self-regulation is a moot point amongst academics, governments
and business entities. One school of thought argue self-
regulation and voluntary CSR is clearly inadequate to protect
16 ibid 499.17 ibid.18 N Garvey and P Newell, ‘Corporate accountability to the poor? Assessing the effectiveness of community-based strategies’ (2005) Development in Practice 15(3&4) 389-404, 389.19 Professor of International Relations (International Relations, Centre forGlobal Political Economy, International Development) at University of Sussex.20 P Newell, ‘Citizenship, accountability and community: the limits of the CSR agenda’ International Affairs 2005, 81(3) 541-556, 556.
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stakeholders’ interests such as fair pay, safe working
conditions, exploitation of child labour and the environment to
name but a few. Advocates of this reasoning call for stricter
regulatory control. Proponents of the other school of thought
disagree by warning regulation of CSR is not only dangerous but
undesirable as ‘mandating CSR…would render [it] meaningless.’21
Dr Raymond Broomhill22 examined these key issues and debates
and identified a similar dichotomy amongst the observations of
competing socio-political writers. He deduced from a Liberal
perspective23 there was generally a ‘taken-for-granted
assumption…CSR initiatives will be voluntary.’ 24 Whereas Neo-
Keynesian writers25 questioned whether governmental mandatory
regulation is needed and whether corporate adoption of
voluntary CSR initiatives could ensure sufficient benefits to
the wider stakeholders. The latter group apparently argue for
governments to take a more proactive position towards voluntary
CSR through improving ‘civil and market regulation of
corporations, and also…strengthen corporate law.’26 This
approach is framed on the claim global governmental trend to 21 J Fox, ‘CSR in perspective’(2006) Business Community Intelligence, February, 22-23 cited by R Broomhill, ‘Corporate Social Responsibility: KeyIssues and Debates’ (2007) Dunstan Papers No.1, 1-59, 1722 Associate Professor in Labour Studies at the Australian Institute for Social Research, University of Adelaide, South Australia.23 A school of thought advocating individual rights and civil liberties within the political, social or economic spheres whereby, such institutionsassure unrestricted development of human enterprise.24 R Broomhill, ‘Corporate Social Responsibility: Key Issues and Debates’ (2007) Dunstan Papers No.1, 1-59, 17.25 The Neo-Keynesian economics is a contemporary school of macroeconomic thought that has synthesised John Maynard Keynes economic writings established during the post-war period.26 N Hertz, ‘Corporations on the Front Line’ Corporate Governance, 2004, 12(2), 202-209, 202.
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encourage voluntary CSR initiatives or self-regulation by the
corporation is inadequate.
Critics believe there is too much governmental ambivalence
towards corporate irresponsibility and criminal behaviour
because there is ‘a desire not to ruffle the feathers of its
tax-paying citizens.’27 Nonetheless, commentators call for
voluntary CSR to be ‘beefed up’28 on the foundation corporate
behaviour can cause far greater harm than any single dangerous
human being.29 There may be some headway with this argument as
recently India became the first country to mandate CSR.
India amended its Companies Act 201330 (the Act) for the first
time in fifty years. Within ‘the Act’ there is now a mandatory
requirement a corporation must set up a CSR Board Committee
consisting of at least three directors of which one must be
independent.31 Additionally the corporation’s committee must
ensure the corporation spends at ‘at least 2 per cent of the
27 J Gobert and M Punch, Rethinking Corporate Crime, (1st edn, Butterworths, 2003) 37.28 T Royle, ‘Realism or idealism? Corporate social responsibility and the employee stakeholder in the global fast-food industry’ Business Ethics: A European Review, 2005, 14(1), 42-55, 21 para 2 at http://aran.library.nuigalway.ie/xmlui/bitstream/handle/10379/2606/Royle_RealismOrIdealism.pdf?sequence=1 accessed 19 April 2014.29 Gobert and Punch [n27] 37.30 The Companies Act 2013, (No. 18 of 2013) India, at http://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf accessed 19 April 2014.A more user-friendly version of the salient points has been written by Chhavi Ghuliani, ‘India Companies Act 2013: Five key points about India’s ‘CSR Mandate’ Eco-Business: Asia Pacific’s Sustainable Business Community, published 28 November 2013 at http://www.eco-business.com/opinion/india-companies-act-2013-five-key-points-about-indias-csr-mandate/ accessed 19 April 2014.31 The Companies Act 2013 (India), Part II s135(1).
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average net profits of the company made during the three
immediately preceding financial years’32 on CSR activities33.
Failure by the corporation to spend this amount will need
justification through the disclosure within the CSR Board
Annual Report.34 Amid other requirements this corporate law
amendment affects any company incorporated in India whether
domestic or a foreign subsidiary.
Meaningfully, these additional CSR activities have come on the
thirtieth anniversary of the cataclysmic Bhopal industrial
disaster which killed over five thousand of India’s citizens
with an estimated further two million injured:35 Debatably,
Union Carbide were neither prosecuted nor convicted of any
corporate negligence after reaching a settlement with India’s
government.36
Nonetheless, India’s CSR inroads will fuel the debates of
mounting concern of the increasing pressure upon all
governments, especially within developing countries, to replace
voluntary CSR for mandatory regulation. There is clear support
for such corporate mandatory regulation progression, like
32 ibid s135(5).33 ibid Part II s1 schedule VII: Lists ten CSR activities for example; eradicating hunger and poverty; gender equality and empowering women; promote vocational skills; reduce child mortality and environmental sustainability. 34 The Companies Act 2013 (India), Part II s135(5).35 BBC “1984: Hundreds die in Bhopal chemical accident” (BBC NEWS, 03 December 1984) at http://news.bbc.co.uk/onthisday/hi/dates/stories/december/3/newsid_2698000/2698709.stm accessed 10 May 2014.36 Gobert and Punch [n27] 37.
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India, on the grounds it is in ‘our collective interest’.37 In
opposition the claim is ‘the greatest potential for harm…[is]
to regulate the world as a whole…It is liable to hold back the
development of poor countries through the suppression of
employment opportunities within them.’38
Therefore the academic debate seems polarised between two
points of issue; firstly, whether corporations should continue
with voluntary CSR and self-regulation whilst pursuing their
economic goals without independent scrutiny; or secondly,
should corporations be made more accountable through
legislative requirements so to curtail individual profit-making
without individual responsibility. Thus the sum and substance
of the debate ostensibly falls on who is best placed to enforce
CSR’s incorporation so capitalism is capable of having a caring
face whilst pursuing self-interest.
‘Neither the claims of ownership nor those of control can stand against theparamount interests of the community. It remains only for the claims of the community to be put forward with clarity and force.’
- A A Berle & Gardner C Means39
37 Hertz [n26] 202.38 D Henderson, Misguided Virtues: False Notions of Corporate Social Responsibility (1st edn, Institute of Economic Affairs 2001) 17.
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II
Although the concept of CSR per se is not a legal requirement
its norms can be made legally binding through the back-door.
This claim is premised on a business’s fundamental
responsibility to comply with any country or local community’s
legal or regulatory obligations: ‘[to] break these regulations
is to break the law…which does not constitute socially
responsible behaviour…’ 40 Hence, national and international
countries, through their legislative powers, can impose
society’s expectations towards acceptable social and
environmental standards on corporations.
Such standards are achieved through governmental and judicial
decision-making. These governmental institutions enforce
legitimate enactments of various strict regulatory strictures
and laws to restrict corporate irresponsible behaviour. In the
United Kingdom (UK) corporations must comply not only with
national corporate laws and legislation but European
regulations and directives too, for example: fair wages; 41 39 A A Berle, handwritten research notes, 1929-1930. Special Collections, (1931, Columbia UniversityLaw Library) cited in R L Grossman and F T Adams, Taking Care of Business: Citizenship and the Charter of Incorporation, (1st edn, Cambridge, Mass, Charter, Inc. 1993) 1 at http://web.stcloudstate.edu/lroth/mgmt451/Charter%20of%20Incorporation.pdf accessed 07 May 2014.40 Werthers [n6] 8.41 National Minimum Wage Act 1998; an Act to make provision for and in connection with a national minimum wage; to provide for the amendment of certain enactments relating to the remuneration of persons employed in agriculture; and for connected purposes. The Equal Pay Act 1970; this Act is to prevent discrimination, as regards terms and conditions of
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workers’ rights protection;42 pollution control;43 health and
safety measures;44 consumer protection;45 product safety;46 and
equality47 to name but a few. Indeed, these strictures are imposed to enhance corporate
social and environmental standards of responsibility aimed to
protect societal and environmental interests. Such visible
legal strictures set minimum moral and ethical standards of
behaviour expected by any business wishing to operate within
the country’s borders. This therefore enables corporations to
make the economic decision of whether or not it is viable to
set up operations. Cost implications of any stricture
adherence, implementations or future transgressions leading to
threat of litigation can be fiscally factored in to the
manufacturing or product cost more effectively. Given the
increase in corporate globalisation it is in the interest of
the government policy-makers to keep such corporate legal
strictures to a minimum. employment, between men and women.42 Employment Rights Act 1996; this Act is to consolidate enactments relating to employment rights.43 Pollution Prevention and Control Act 1999; an Act to make provision for implementing Council Directive 96/61/EC and for otherwise preventing and controlling pollution; to make provision about certain expired or expiring disposal or waste management licences; and for connected purposes.44 Health and Safety at Work etc Act 1974; An Act to make further provision for securing the health, safety and welfare of persons at work, for protecting others against risks to health or safety in connection with the activities of persons at work, for controlling the keeping and use and preventing the unlawful acquisition, possession and use of dangerous substances, and for controlling certain emissions into the atmosphere; to make further provision with respect to the employment medical advisory service; to amend the law relating to building regulations…45 The Consumer Protection from Unfair Trading Regulations 2008.46 The Consumer Protection Act 1987 (Product Liability) (Modification) Order2000.47 Equality Act 2010.
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If strictures become too repressive it may cause corporations
to relocate in a low-cost environment in a developing country
overseas. Such a decision by a corporation to implement a cost
minimization strategy has a knock-on effect on the original
host country. Not only does the country lose domestic jobs but
also fiscal revenue to the local community and the government
itself.48 In this worst case scenario a corporation can
withdraw its operations altogether, de-stabilising the local
economy.
Thus to prevent this and maintain some sort of status quo
governments are best suited to incorporate minimum repressive
legal standards. In return, governments expect corporations to
maintain a moral and ethical duty to embrace voluntary higher
standards of responsibility as in the UK. 49 Failure to do so
means corporations run the risk of mandatory strictures
initiated in the future.
48 Werthers [n6] 279.49 Companies Act 2006 Pt 10 Ch 2 s172 (1)A director of a company must act inthe way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to—(a)the likely consequences of any decision in the long term,(b)the interests of the company's employees,(c)the need to foster the company's business relationships with suppliers, customers and others,(d)the impact of the company's operations on the community and the environment,(e)the desirability of the company maintaining a reputation for high standards of business conduct, and(f)the need to act fairly as between members of the company.
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These legal strictures are spread throughout a multitude of
corporate legislation and regulations whereby their collective
purpose is to influence corporate social behaviour. Therefore
one can logically deduce the norms of CSR can legally be
enforced albeit indirectly under various labelled legislative
classifications.
Nonetheless, it does not matter how social responsibility is
labelled for ‘legal compliance is merely a minimum condition
of CSR.’50 Therefore, in return for minimum legal strictures
governments aim for corporations to voluntarily adopt CSR so
to benefit their operational communities. This aim is
ostensibly achieved through the corporations’ ability to re-
evaluate their own CSR initiatives in light of their growing
demands upon their operational communities and environment. By
doing so corporations are envisaged to rise alongside societal
expectations. Accordingly, providing businesses stay within
the legal rules they should be left to choose on whether to
adopt a higher standard of social responsibility.
Theoretically this is achieved through self-regulation of
either adopting a pro-active or reactive attitude towards
voluntary CSR.
Adoption of proactive CSR is hypothetically considered as
fundamentally the most moral and ethical approach for a
corporation. Prior to entering into its operational field the
for-profit corporation will not only considers its gains but
will also focus beyond profit. The corporation will factor in 50 Werthers [n6] 8.
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mitigation costs of any foreseeable impact upon the local
community’s social and environmental well-being. Such
mitigation costs can improve an impoverished community’s
social welfare through such forms as new or improved schools;
medical centres; water irrigation; or even improving the
transport infrastructure.
The thought behind this proactive approach is business is not
only seen as a “good citizen” acting morally and ethically
responsible but, its inward investment is believed to be
sustainable within its operational community. Supporting this,
the former Chief Executive Officer (CEO) for Hewlett-Packard,
Carly Fiorina stated: ‘I honestly believe that the winning
companies of this century will be those who prove with their
actions that they can be profitable and increase social value
– companies that both do well and do good…’51
Still, the claim that capitalists can achieve economic
sustainability by being “good citizens” is dubious to say the
least. This proactive approach is questionable on the grounds
it is no more than buying social legitimacy through an
indirect form of incentive pay-outs. This results in corporate
justification to operate with only one objective in mind:
procuring viable profit maximisation for its shareholders. One
critic purported this is an unfortunate and shameful
51 C Fiorina, ‘A World of Change.’ Speech to the APEC CEO Summit in Shanghai, China, October 2001 at http://www.hp.com/hpinfo/execteam/speeches/fiorina/apec_01.html under heading THE DIGITAL RENAISSANCE para 7 accessed 02 April 2014.
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development by capitalism.52 Moreover ‘[t]he idea pushed by
advocates that pursuit of private profit is inconsistent with
public good does not stack up…’53
Besides, there is a further claim the unclear definition of
proactive CSR within corporate governance is inherently
paradoxical.54 Such inconsistencies arise from the paucity of
formal mechanisms capable of holding corporations accountable
for their so-called ethical reasoning on prioritising social
responsibility.55 It is also claimed until such paradoxes have
been addressed then CSR is no more than an illusion
‘legitimately…branded an invention of PR.’56 In such
occurrences corporations are using proactive CSR as a form of
‘window dressing’57 or ‘greenwashing’58 to promote their image
as being “good citizens”. Such PR exercises give an impression
the corporation is taking the moral and ethical lead within
their operational field of proactive CSR incentives when in
reality, it is concealing irresponsible corporate behaviour.
52 J Albrechtsen, “This business of moral coercion is just a hoax” (The Australian, 29 March 2006) 12, 123 cited in R Broomhill, ‘Corporate Social Responsibility: Key Issues and Debates’ (2007) Dunstan Papers No.1, 1-59, 753 ibid. 54 P Frankental, ‘Corporate social responsibility – a PR invention?’ (2001) Corporate Communications: An International Journal 6(1)18 – 23, 18-19.55 ibid.56 Frankental [n54] 23.57 ibid 20.58 F Pearce, “Green advertising rules are made to be broken: A UK governmentchecklist of claims for advertisers will fail to stop cynical greenwash without a legally enforceable framework” (The Guardian 23 March 2010) at http://www.theguardian.com/environment/2010/mar/23/green-claims accessed 20 April 2014.
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On the other hand, corporations whom adopt the narrower
reactive approach to CSR are not driven foremost by the moral
expectations from society. Instead, to retain societal
legitimacy the corporation attempts from the outset to operate
within the society’s legal and regulatory framework. At the
same time, the corporation will exploit to their advantage any
loopholes found within these frameworks: thus, attempting to
maximise the corporation’s strategic goals, mainly profit,
whilst avoiding societal sanctions. Therefore, it is in the
self-interest of such corporations to avoid confrontation so
to maintain social legitimacy. Any loss of public goodwill may
lead to social activism, strictures or mandatory compliance
resulting in constraints of the corporation’s freedom to
accomplish its economic goals.59
Once the corporation’s operational venture has been exposed by
NGOs and/or social activists as being socially irresponsible,
the corporation will react according to its self-interest. If
cost-effective, it may decide to commit voluntarily to select
CSR to appease public admonishment and prevent government
initiating mandatory strictures. If the latter is imminent
then, whilst waiting for the mandatory requirement, the
corporation’s deployment of CSR to regain public confidence
can be advantageous.60
59 A Murray “Twelve Angry CEOs – The Ideal Enron Jury” (Wall Street Journal 15 Feb 2006) cited in W B Werther Jr., and D Chandler, Strategic Corporation Social Responsibility: Stakeholders in a Global Environment, (2nd edn, SagePublications, 2011) 17. 60 A B Carroll ‘A Three-Dimensional Conceptual Model of Corporate Performance’ (1979) Academy of Management Review 4(4) 497-505, 500-502.
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Due to the slow uptake of governments and the very nature of
the process to impose laws and strictures, time is in the
corporation’s favour. A corporation can exploit this timely
process to their advantage so to maximise its profits,
regardless of the moral or rational arguments to deploy CSR.
Besides, this timely process gives the corporation the ability
to try and influence the government’s position to either
weaken or withdraw any mandatory strictures. Such is the power
of the corporation, it can threaten to destabilise the host
country’s economy if mandatory measures are imposed by moving
its operation to another country. This form of corporate
‘[c]osmopolitan globalism weakens national boundaries and the
power of national and subnational communities, while
strengthening the relative power of the transnational
corporations.’61
Most governments in developing host countries are therefore
caught between a rock and a hard place – a moral or economic
dilemma. A dilemma that many host governments would find
difficulty in justifying to their people why they took the
decision to place moral obligations before poverty resulting
in the loss of prosperity. Furthermore, such governments would
not relish the task of being held to account by their people
for the destruction of its valuable culture and environment so
to attract such big companies. Such candidness to this form of
devastation is found in an advertisement published by a
Philippine government:
61 Herman E Daly, Farewell lecture to the World Bank, January 1994 at http://www.whirledbank.org/ourwords/daly.html accessed 21 April 2014.
21
“To attract companies like yours…we have felled
mountains, razed jungles, filled swamps, moved rivers,
relocated towns…all to make it easier for your business
to do business here.” 62
Nevertheless, all this social and environmental devastation is
meaningless to a corporation in search of self-interest. It
can withdraw its operations altogether then watch ‘…a
civilisation destroy itself because it is unable to re-examine
the validity under totally new circumstances of an economic
ideology.’ 63
Such is the proficiency of the corporation’s capability to
move money globally at an instance gives it the ability to
make or break a developing host country’s economy overnight.
For that reason corporations are seen not only as economic
powerhouses but a serious political force which can influence
governmental policies and decision-making to their favour. As
Business Week Magazine accentuated:
“In this new market money moves faster than ever…
billions can flow in or out of an economy in seconds.
So powerful has this force of money become that
observers now see the hot-money set becoming a sort of
62 Philippine government advertisement (Fortune Magazine 1975) cited in D C Korten, When Corporations Rule The World: Towards a Green Revolution. (Reprint, Kumarian Press, San Fransisco 1999) 159.63 J Goldsmith, “Free Trade, up to a point” (The Times Newspaper 05 March 1994) 18.
22
shadow world government – one that is irretrievably
eroding the concept of the sovereign powers of a nation
state.”64
This imbalance of power gives corporations aptitude to hold
the upper-hand in negotiating their position with governments
when threatened with mandatory impositions resulting in profit
loss. Governments are more likely to yield to its corporate
tax-payers demands not to impose moral obligations than risk
the loss of the economic benefits generated by a corporation
to another country. Such is the competition between developing
countries to attract global corporations there is a
willingness not to fetter corporations with any societal moral
expectations and demands for CSR. Therefore for profit
maximisation corporations in developing countries are more
likely to adopt a reactive approach to CSR than proactive.
Thus benefiting only the corporations at the detriment of the
impoverished population of developing countries:
“The recent quantum leap in the ability of
transnational corporations to relocate their facilities
around the world in effect makes all workers,
communities and countries competitors for these
corporations’ favor. The consequence is a “race to the
bottom” in which wages and social conditions tend to
fall to the level of the most desperate.”65
64 Business Week, “Hot Money’ Cover Story” (Business Week Magazine 19 March 1995) para 10 at http://www.businessweek.com/stories/1995-03-19/hot-money accessed 15 April 2014.65 J Brecher, ‘After NAFTA: Global Village or Global Pillage?’ (1993) The Nation 06 December, 685-688, 685 col.2 at http://thenation.s3.amazonaws.com/pdf/globalvillagepillage1993.pdf
23
No better unfortunate example of this claim is the 2013 Rana
Plaza factory building collapse in Bangladesh killing over one
thousand impoverished garment workers.66 The building was
declared unsafe but due to competition abroad and the threat
of losing global corporations business factory owners ignored
safety concerns at the detriment of 1,130 workers. Furthermore
planning regulations, quality control of building materials
and environmental impact was almost non-existent. Moreover, at
that time Bangladesh had the lowest wages in the world.67 It
was this amalgam that created the economic driver for many
global garment corporations to base operations there. In such
circumstances the promise of financial opportunity to the
impoverished leads to an imbalance of power favouring the
corporations’ self-interest of profit over social
responsibility. Thus, globalization has created a loss of
democratic control weakening the ‘power of individuals and
communities to shape their destinies.’68
This power imbalance gives corporations the ability to
minimise their social responsibilities from the onset of
economic operations. Only when the corporation is exposed for
socially irresponsible behaviour will it react accordingly.
This is more akin to a symbolic response to overcome societal
accessed 28 March 2014.66J Burke, “Rana Plaza: one year on from the Bangladesh factory disaster” (The Guardian 19 April 2014) at http://www.theguardian.com/world/2014/apr/19/rana-plaza-bangladesh-one-year-on accessed 04 April 2014.67 ibid.68 Brecher [n65] 685 col 2.
24
denunciation. The corporation will attempt to renegotiate its
position by offering to adopt voluntary CSR measures to
prevent mandatory strictures being imposed: thus salvaging not
only reputation but societal legitimacy.
But then, certainly in the advancement of economic liberalism
within a free market economy this emblematical reactive
approach to CSR would be considered the best way forward. This
postulation is centred on voluntary participation and self-
regulation being economically safer and more profitable than
further repressive mandatory strictures initiated. Thus,
sanction avoidance can be claimed as the primary economic
driver over moral expectation.
Is self-interest a bad thing?
We want our leaders to be pure and good,
but at the same time we want them to be
25
effective, and to be effective you often
have to be ruthless and not bound by
ideology or the same morals that we
pretend to hold ourselves to.’
- Beau Willimon69
III
On the surface, whether one agrees a corporation should commit
voluntarily to either proactive or reactive CSR so to achieve
a desired outcome, will mainly depend on one’s school of
thought. The CSR debate can be divided between two sets of
opposing thoughts. These are either a free market economy
giving greater autonomy to corporations or, greater societal
intervention and governmental control.70 Although both
arguments assumingly fall towards the philosophical
standpoints of utilitarianism or rights, the core divergence
is seemingly the interpretation of corporate self-interest and
profit.
By taking a utilitarian-based approach then the argument is
profit must be more than a means to an end in itself. In other
words, the strategic benefits must not only benefit the
corporation’s economic viability’s end result but must also
69 Beau Willimon is an American playwright and screenwriter http://www.brainyquote.com/quotes/quotes/b/beauwillim590835.html#SzGfzGlu969Yqblr.99 accessed 24 April 2014.70 D Crowther and L Rayman-Bacchus (eds), Perspectives on Corporate Social Responsibility (1st edn, Ashgate Publishing Ltd 2004) 13: Introduction.
26
achieve the means of accomplishing social responsibility. This
concurs to Jeremy Bentham’s71 utilitarian position that to
maximise the pleasure of collective human well-being then,
certain individual rights will undoubtedly be painfully
overridden:72 in this instance the painful element is corporate
autonomy within the free market economy. Yielding such rights,
proponents claim corporate activities can therefore be morally
good through providing collective maximisation of the well-
being of humanity.
This persuasive argument was highlighted through the lengthy
but poignant postulation of Charles Handy73:
“The purpose of a business….is not to make a profit,
full stop. It is to make a profit so that the business
can do something more or better. That “something”
becomes the real justification for the business….It is
a moral issue. To mistake the means for the end is to
be turned in on oneself, which Saint Augustine called
one of the greatest sins…It is salutary to ask about
any organization, “If it did not exist, would we invent
it?” “Only if
71 English philosopher, jurist and, social reformer (1748-1832): a brief account is available at http://www.utilitarianism.com/bentham.htm accessed 05 May 2014.72 J Bentham, An Introduction to the Principles of Morals and Legislation’ (first published 1789) reprint by J H Burns and H L A Hart (eds) (Oxford University Press, 1996).73 Charles Handy is a professor, accomplished author and philosopher in the field of organisational behaviour. He was also a co-founder of the London Business School.
27
it could do something better or more useful than anyone
else” would have to be the answer, and profit would be
the means to that larger end.”74
This clearly captures the moral argument for CSR whereby a
corporation has a moral obligation to move beyond the
capitalists’ goal of maximising profits for its shareholders.
Professor Handy advocates a corporation is indebted with a
moral duty for the benefits bestowed upon it from society.
Therefore the corporation is morally obliged to repay such debt
by means of corporate social responsibility. Profit is
therefore only part of the means to the end. As Peter Drucker75
articulated, ‘[p]rofit for a company is like oxygen for a
person. If you don’t have enough of it, you’re out of the game.
But if you think your life is about breathing, you’re really
missing something.’76
Drucker’s assertion again is framed within the moral boundaries
of a given society. It is this society that makes it possible
for a corporation to prosper therefore establishing a
reciprocal obligation on part of the corporation. In return for
74 C Handy, ‘What’s a Business For?’ (2002) Harvard Business Review 80(12), 49-55, 54: also cited online at page 5 col2 para 2at http://actoolkit.unprme.org/wp-content/resourcepdf/Handy%20What%5C's%20a%20Business%20For.pdf accessed 29 April 2014.75 P F Drucker was a writer, professor, management consultant and self-described social ecologist at http://www.druckerinstitute.com/link/about-peter-drucker/ 76 T Henderson, “What type of brand are you?” (The Brand Mine Blog 20 April 2012) citing Drucker at http://wbranddevelopment.com/profit-for-a-company-is-like-oxygen-for-a-person-if-you-dont-have-enough-of-it-youre-out-of-the-game-but-if-you-think-your-life-is-about-breathing-youre-really-missing-something-peter/ accessed 29 April 2014.
28
social legitimacy the corporation is expected to offer jobs in
a safe and healthy environment or contribute towards the
enhancement and well-being of its local communities.
Transgressions of these obligations can bring loss of societal
legitimacy. It is therefore argued this loss of social
legitimacy will result in loss of long-term viability and
sustainability of the corporation.
Nevertheless there is seemingly a straightforward flaw within
the aforementioned moral argument. The shortcoming is simply
the unenforceability of any moral boundaries defined by
societal expectations with which the corporation is obliged to
operate. The reasoning behind this opinion is any reciprocal
obligation entered into by a corporation is done so on a
voluntary basis only. Any overbearing governmental
intervention to enforce such voluntary obligations will
arguably be seen as repressive to the individual’s right to
exploit profit within a free market economy.
Therefore, unlike the utilitarian-based position, rights-based
proponents believe rights and property are paramount to
individuals thus any intervention by government should be kept
minimum.77 Under this theory the government’s legitimacy only
arises from the power entrusted by its citizens.78 Therefore
any governmental intervention judged to be failing its citizens
77 Crowther and Rayman-Bacchus [n70] 13.78 John Locke (1632-1704) English philosopher and social contract theorist acclaimed to be the father of classic liberalism: see R Wacks, UnderstandingJurisprudence: An introduction to Legal Theory (2nd edn, Oxford University Press 2009) 23-24.
29
can result in the removal of power and thus loss of government
legitimacy.79 Therefore the moral argument for voluntary CSR
seemingly underestimates the power disparity between societal
expectations and a corporation’s capitalistic right to search
for profit as a means to an end in itself.
To believe collectivist ends can be achieved without
collectivist means is profoundly subversive according to Milton
Friedman80 who critically suggested:
“[T]here 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,
engages open and free competition without deception or
fraud.”81
Friedman ostensibly argues, providing the corporation abides
by the host country’s commerce laws and international
regulations then it can freely operate, without a moral
conscience, with only profit in mind.
Ironically, Friedman’s claim that corporations have no moral
content just self-interest has been argued as being unsound. 82
79 ibid.80 M Friedman, “The Social Responsibility of Business is to Increase its Profits” (The New York Times Magazine, 13 September 1970) 1-4, 4, para 8 at http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html accessed 30 April 2014.81 ibid 4, para 8.82 J Friedman, ‘Milton Friedman was Wrong about Corporate Social Responsibility’ (Huffington Post: Business Blog, 25 February 2014) at http://www.huffingtonpost.com/john-friedman/milton-friedman-was-
30
For one to remain within the ‘rules of the game’83 and engage
‘without deception or fraud’84 suggests that corporations must
act within the parameters of a moral conscience of right and
wrong. Therefore it is claimed the statement from the
forefather of the movement against CSR holds integral elements
of today’s corporate responsibility – ‘integrity and ethics’.85
Drawing from this it is contended capitalistic self-interest is
not a bad thing providing it has moral content.
Can capitalism be “caring”?
- Juan Jose Palacios86
wrong_b_3417866.html accessed 30 April 2014.83 M Friedman (n80).84 ibid.85 J Friedman (n82) para 2. 86 J J Palacios, ‘Corporate citizenship and social responsibility in a globalized world’ (2004) Citizenship Studies 8(4), 383-402: article discusses whether corporations can transform themselves through inducement so to accept compatible ways to exist within desirable moral and ethical principles.
31
IV
The difficulty and uncertainty surrounding corporate social
responsibility is how the definition can vary depending on
one’s moral, societal, environmental or economic perspectives.
However, the common ground established within most literature
agrees CSR is problematic because it is conceptual. As
Professor Devinney’s passage clearly encapsulates;
“One can make or disparage a claim that any corporation
is or not socially responsible by the definition of CSR
that one believes is relevant and the level of
specificity at which it is applied…Attempts to be all
encompassing lead to overly complex fuzzy
conceptualizations that are virtually impossible to
validate or refute empirically. The science of
corporate social responsibility suffers thereby.”87
Such complex conceptualizations are nebulous due to the
unpredictable shift in opinions concerning the increasing
expectations and demands from society for corporations to
adopt socially responsible behaviour. This is further
87 T M Devinney, ‘Is the socially responsible corporation a myth? The good, the bad, and the ugly of corporate social responsibility’ (2009) Academy ofManagement Perspectives May 44-56, 45 col.2 para3 at http://aom.org/uploadedFiles/Publications/AMP/May09CorpSocialRespbyDevinney.pdf accessed 16 April 2014.
32
compounded by the lack of consensus on what is deemed
reasonable criteria to evaluate such corporate behaviour as
being either adequate or appropriate.
According to David Sigurthorsson:88
“This uncertainty and confusion subsequently create and
sustain the susceptibility of the concept to
opportunistic interpretations and manipulation by
charlatans and opportunists in the practical realm.”89
Sigurthorsson suggests the main opportunists are companies.
These companies drive forward commercial activities outlining
their perception of what society expects as socially
responsible behaviour. Sigurthorsson believes this is serious
because it empowers corporations to ‘mould and manipulate
society’s expectations in the first place.’90 This manipulation
is debatably hidden under the cloak of CSR. This tenet is
based on the fact the very nature of a for-profit corporation
has conflicting virtues and vices which make it impossible to
be sincerely socially responsible.
The reasoning for this claim is two-fold:
88 Ethics Researcher at the Centre for Applied Ethics, LinkÖping, Sweden.89 D Sigurthorsson, ‘The Icelandic Banking Crisis: A Reason to Rethink CSR?’(2012) Journal of Business Ethics 04 February 1-10, 3 para 2 at http://csringreece.gr/files/research/CSR-1331564022.pdf?user=bd31a3168ebac47053af2648943f5351 accessed 17 April 2014.90 ibid.
33
Firstly, corporations are artificial creations by law which
empowers them with a legal personality capable to enforce
similar rights and obligations as human beings. In fact, these
corporations ‘have won more rights under law than people have
– rights which government has protected with armed force.’91
Nevertheless, one must agree such artificial personalities are
devoid of the basic human instincts of autonomous thoughts,
feelings and emotions and the concept of right or wrong.
Therefore it goes without saying corporations by their very
nature are incapable of having a conscience to decide what
constitutes as moral or ethical social behaviour.
That being said, one could argue the “collective conscience”
of the Board of Directors or the Chief Executive Officers
(CEO), whom act as agents between the legal personality
(corporation) and the owners (shareholders), give the
artificial legal entity a conscience to act in a socially
responsible way. Unfortunately, most small-to-middle size
companies are run by directors who are also the owners who
arguably are in business first and foremost for self-interest.
Take the Partnership Act 1890’s92 definition of a legal
partnership being two or more persons setting up a business
with the view to make a profit.93 Nowhere within the
legislation does it state in view of making such economic 91 R L Grossman and F T Adams, ‘Taking Care of Business: Citizenship and theCharter of Incorporation (Cambridge, Mass, Charter Inc. 1993 online) 1-21, 3 at http://web.stcloudstate.edu/lroth/mgmt451/Charter%20of%20Incorporation.pdf accessed 18 April 2014.92 Partnership Act 1890 section 1(1): Partnership is the relation which subsists between persons carrying on a business in common with a view of profit.93 ibid s1.
34
profit it must be made responsibly so to be legally
accountable to society in a socially and sustainable way.
The second part of the claim is the fiduciary relationship the
agents (directors) owe to the shareholders to act in their
best interests at all times. Amongst other duties, this
includes ‘promot[ing] the success of the company for the
benefit of its members as a whole.’94 Disputably, this can be
interpreted to imply a further duty to maximise shareholders
dividend payments through continually increasing company
profits. Thus, failure to maintain profit maximisation will
result in directors being held accountable to their
shareholders. Therefore in theory, directors should not adopt
views looking beyond profits to manage the company’s
operational impact to protect society at the expense of the
shareholders. To do so, it could be considered an act of
economic irresponsibility causing a reduction in profit
maximisation. Such an act may possibly be not in the best
interest of the shareholder. Consequentially, this could lead
to a claim of a breach of director fiduciary duties for going
beyond their legal obligations as agents.
The counter-argument for the agent’s act of corporate social
responsibility resulting in profit loss in the short-term
could be CSR increases reputation and therefore maximises the
company’s sustainability. Hence, in the long-term, operational
validity through societal legitimacy maximises profit.
Nonetheless, not all agree for according to Devinney the ‘holy94 Company Act 2006 [n49] s172(1).
35
grail of CSR—“doing well by doing good”—is an illusory goal
that is noble in spirit but unachievable in practice.’95 It is these types of highly charged claims that fuel the
debate. This results in CSR being a lively contested but a
difficult concept to pin down. Any definition will inevitably
be challenged by those who promulgate differing versions of
application of CSR.96 This is because the CSR concept has
various overlapping conceptual influences such as corporate
citizenship; stakeholders’ theory; the triple bottom line
which consists of social, environmental and business ethics
accountability; together with the concept of sustainable
business. Together with CSR, these concepts are not only
controversial but critical because the ‘for-profit sector is
the largest and most innovative part of any free society’s
economy.’97
Such companies’ influences are entwined within the very fabric
of the communities they operate within. There is a further
mutual understanding that both the companies and society will
benefit because ‘businesses are the engines of society that
propel us toward a better future.’98 Corporations from multi-
national enterprises (MNE) to small business firms bring
employment; pay taxes; make charitable donations; even 95 Devinney [n87]45-46.96 J Moon, ‘Government as a Driver of Corporate Social Responsibility’ (2004) University of Nottingham, International Centre for Corporate Social Responsibility, Research Paper Series, No.20, 1-27, 2: Models of CSR at http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.198.8346&rep=rep1&type=pdf accessed 02 May 2014.97 Werther [n6] 4, para 3. 98 ibid.
36
influence governmental policies. Thus, without their
participation a society could see a significant decline which
‘negatively [affects] the wealth and well-being of society as a
whole.’ 99
Then again, many commentators advocate such threat of
negativity to the well-being of society should not mean a
corporation has a carte blanche approach to its operational
economic responsibility. Archie B Carroll100 was the first to
develop a thesis identifying the pyramid of corporate social
responsibility. He believed a corporation does not only have
an economic responsibility but a legal, ethical and
discretionary responsibility too.101 His suggestion purports a
corporation must look beyond its profits to its moral and
ethical responsibilities within the society in which it
operates. By doing so the corporation should rise alongside
societal expectations. Any lapse in CSR brings prohibiting
sanctions imposed by the stakeholders namely such penalties
as, naming and shaming or boycott of products or services.
In contrast, according to Friedman102 the only ‘social
responsibility of business is to increase its profits.
[S]ociety benefits most when businesses focus on maximising
99 ibid.100 Archie B. Carroll is professor emeritus in the Terry College of Business, University of Georgia, USA.101 A B Carroll, ‘The Pyramid of Corporate Social Responsibility: Towards the Moral Management of Organisational Stakeholders’ (1991) Business Horizons 34(4) 39-48, 42.102 Milton Friedman was an economist, statistician, and writer who taught atthe University of Chicago.
37
their financial success.’103 As a Liberalist, Freidman
supported economic freedom as an end in itself to political
freedom. Any political beliefs or laws restricting such
economic arrangements were a deprivation of an individual’s
freedom of choice. He felt such freedom of economic
arrangements was essential to the de-concentration of
political power. Therefore Friedman was disparaging towards
corporations which he felt had been cozened to embrace the
principles of CSR by stating; ‘businessmen who talk this way
are unwitting puppets of intellectual forces that have been
undermining the basis of a free society these past decades.’104
Many disagreed with Freidman’s philosophy as did David
Packard, the co-founder of Hewlett-Packard;
“I think many people assume wrongly that a company
exists simply to make money. While this is an important
result of a company’s existence, we have to go deeper
and find the real reasons for our being.”105
Packard’s suggestion clearly falls into the realm of the
persuasive argument towards a corporation’s moral obligation
moving beyond capitalism’s goal to maximise profits for its
103 M Freidman, ‘The Social Responsibility of Business is to Increase its Profits’ (New York Times Magazine 13 September 1970) at http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html accessed 20 March 2014. 104 ibid.105 D Packard, ‘The HP Way: How Bill Hewlett and I Built Our Company’ (2nd edn, Harper Business 2013): includes speech by Dave Packard to HP Managers within introductory pages; also at http://gizmodo.com/5634378/the-hp-way-how-bill-hewlett-and-i-built-our-company accessed 10 April 2014.
38
shareholders: the very same philosophical argument highlighted
by Charles Handy.
However if one accepts both Packard’s and Professor Handy’s
account that a company’s existence has deeper meaning than
existing purely for profit then, one is accepting an
artificial entity must be capable of expressing compassionate
human feelings of morality and integrity. If this is the case
then, to be a “good citizen” the corporation must place
morality before profit – virtue before vice. For, it must
forego its Liberalist roots of a free market economy and
embrace utilitarianism to maximise the greater well-being of
society. In doing so, one can claim capitalism can have a
caring face.
39
‘Corporation: An ingenious device for obtaining individual profit without individual responsibility.
Responsibility: A detachable burden easily shifted to the shoulders of God, Fate, Fortune, Luck or one’s neighbor. In the days of astrology it was customary to unload it on a star.’
- Ambrose Bierce, The Devil’s
Dictionary (1911)106
V
106 A Bierce, ‘The Collected Works of Ambrose Bierce: The Devil's Dictionary’ (Vol. VII, Neale, New York 1911) at http://www.ambrosebierce.org/dictionary.htm accessed 01 April 2014.
40
To achieve such a caring face, the corporation is expected to
yield to the moral whims of society to retain its societal
legitimacy. This notion is justified on the account society
makes it possible for a corporation to prosper. Therefore, it
is morally obliged to repay such debt by means of corporate
social responsibility. For if it does not it could result in
the inherent risk of hostility imposed by its stakeholders
through the phenomenon of a ‘bottom line backlash.’107 This may
result in loss of corporate legitimacy through campaigns of
naming and shaming or boycott of products or services.
However, scepticism surrounds the potential benefits of
stakeholders’ pressure to control corporations in such a
manner. Critics argue many corporations only incorporate
social and environmental initiatives if the inherent cost of
implementing such CSR objectives can be incorporated into
their economic decisions.108 The rationale is corporations are
capitalists at heart therefore are reluctant to forego profit
for moral compliance from stakeholders’ pressure. Moreover, to
maintain profit maximisation at any cost to implement
voluntary moral compliance will result in products or services
being subject to a premium price.
Nevertheless, for compliance, corporations expect a reciprocal
obligation by the stakeholders. The corporation needs these
stakeholders, the majority being consumers, to practice what
107 D Porritt,‘The Reputation Failure of Financial Success: The Bottom Line Backlash Effect’ (2005) Corporate Reputation Review, 8(3) 198-213, 198-199.108 C Valor, ‘Corporate Social Responsibility and Corporate Citizenship: Towards Corporate Accountability’ (2005) Business and Society Review 110(2), 191-212, 197: The First Condition for Accountibility: Changes in the System, para 2.
41
they preach by being “good citizens” too. The consumers’
reciprocal obligation expected is loyalty. Thus, consumers
have a social responsibility to support a morally responsible
corporation by purchasing its premium-priced products or
services.
Therefore, the paradigm of CSR, whether voluntary or
mandatory, is underpinned by the fairness of reciprocity
between the corporation’s economic goals and societal social
and environmental protection: in other words, a mutual trade-
off of price for morals.
Drawing from this exemplar one can concluded socially
responsible behaviour should be a two-way street. However,
the reality is more inclined to lean towards one-way traffic
as the majority of people’s allegiance to corporate products
is driven by price not principles. Thus, corporations adopting
CSR take the brunt of people’s wishes of what is morally and
ethically responsible behaviour without the mutuality of
consumers’ loyalty.
Therefore it is not befitting that only corporations should
change their economic behaviour on the whim of stakeholders’
opinions to what is deemed socially responsible. Especially
when in practice, the stakeholders themselves will not change
their behaviour to support such a socially responsible
corporation – a “good citizen”.
For CSR to work effectively it requires total commitment from
all stakeholders, especially consumers of all types of
affluence. Thus, for corporations to succeed the goodwill of
42
consumers is needed to purchase their brands. As critics
expressed;
‘[c]orporate executives dream of a global market made
up of people with homogenized tastes and needs…Logos on
bottles, boxes and labels are global banners, instantly
recognisable by millions who could not tell you the
color of the U.N. flag.’109
Clearly a for-profit corporation’s brand name if marketed
correctly is not only its reputation but a corporation’s
passport to profit maximisation. Much time, effort and
financial investment needs to be deployed by a corporation for
such a brand to be globally recognised. Thus, corporations are
most likely to react quicker against any negative media
coverage in fear of a stakeholders’ backlash than they would
do to incorporate any mandatory requirements of CSR. Therefore
the power of the people can be mightier than the legislator’s
quill when a corporation has been ousted for unethical
behaviour. However, the burden of responsibility to act
ethically should not be laid at the door of one group as
everybody owes a responsibility to the society because – ‘we
live in the house we all build.’110
On the above foundations the conclusion is laid: CSR is
destined to remain no more than an ideological concept based on
109 R J Barnett and J Cavanagh, ‘Global pop the sound of money: Pop Imperialism moves to a global beat’ (Sojourners magazine, Washington, January 1994) 12 at http://www.aislingmagazine.com/aislingmagazine/articles/TAM25/GlobalPop.html accessed 19 April 2014.110 Earthshare [n1].
43
what people think is morally and ethically right but, in
reality do quite the opposite for self-interest. It is this
self-interest that creates a division in labour.111 It is this
very division that creates an imbalance in wealth which the
corporations need to succeed. We may all live in the house we
build but, we are not of equal wealth. Consequently, this
capital inequality successfully drives the free market economy
because, rich or poor self-preservation is contingent on self-
interest. In closing, one can take heed to the human
observations of Adam Smith:112 ‘[i]t is not from the benevolence of the
butcher, the brewer or the baker that we expect our dinner, but from their regard to
their own self-interest.’ 113
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