CSR and Capitalism: Ethical Issues - Term Paper Example

CSR AND CAPITALISM By Name Course Instructor Institution City/State Date Table of Contents CSR AND CAPITALISM 1 Table of Contents 2 CSR and Capitalism 2 1.0 Introduction 2 2.0 Discussion 3 2.1.0 Corporate Social Responsibility 4 2.1.1 Arguments for and Against CSR 6 2.2.0 Modern Social Issues 8 2.2.1 Environmental Issues 8 2.2.2 Global Issues 9 2.2.3 Technology Issues 10 2.3.0 Capitalism Effect 10 2.3.1 Moral Perspective 13 3.0 Conclusion 15 References 16 CSR and Capitalism 1.0 Introduction The corporate social responsibility (CSR) notion is indefinable given that questions what way and which companies are responsible. Increased focus on the manner that corporations carry out their activities is comprehensible and should be welcomed. Equally, care must be taken in distinguishing diverse perspectives on the corporations’ role in society as well as their significances for corporate governance. A one-dimensional approach that concentrates on one certain social viewpoint to the omission of others is doubtful to perform justice to the intricacy of decision-making by the corporate or the general corporations’ contributions to the society. Therefore, a balanced approach, as underlined by Ferreira et al. (2010, p.208) through which firms are judged based on their overall financial status as well as other impacts and contributions, which includes how they handle environmental and social issues pertinent to their business, is more consequential and productive. The notion of CSR has come to be acknowledged as an element of business sustainability and growth however, succeeding in innovative economy comes with a range of challenges, and these challenges need business together with their executives to think further than conventional means of searching temporary goals. Rather it needs business as well as the individuals inside such heavyweights to embrace a much wider viewpoint, which includes all stakeholders. The challenge of refining corporate capitalism as well as advancing more equitable and inclusive patterns of development need confirming social control over big business and markets through different regulation forms in addition to the redesigning of power relations. In this case the essay seeks to justify that Corporations have a responsibility to consider and redress the social impact of their business activities, but they are unable to do so effectively because of the demands of the capitalist economic system. 2.0 Discussion CSR as per Aguinis and Glavas (2012, p.933) has to be based on the company going out of its way to instigate actions, which will positively impact on its environment, host community as well as the general public. This may be observed as a means of recognizing the verity that a number of business fall outs have unfavorable consequences on the society and citizens in addition to making attempts to make certain that this negative impact are counterbalanced. In point of fact, Kitzmueller and Shimshack (2012, p.51) believe that CSR connotes that a company must be held responsible for all its actions that may have an effect on communities, people and its environment. This indicates that business activities that negatively impact society and people must be recognized and corrected, if at all possible. It can necessitate a corporation to go without some profits in case its impacts to the society are sincerely damaging to a number of its stakeholders or in case its finance may be utilised to support a helpful social good. Undoubtedly, acknowledging the business role in sustainable development, as well as the noteworthy impacts brought about by their activities is imperative. 2.1.0 Corporate Social Responsibility CSR can be defined as the ethical, legal, economic and flexible expectations that society need from a company at a certain occasion. Besides, the CSR concept connotes that corporation have philanthropic, ethical and moral responsibilities over and above their responsibilities of earning a fair profit for investors as well as abide by the law. A conventional view of the corporation points out that its key, if not exclusive, responsibility is to its stockholders, or owners, but, CSR needs companies to espouse a wider vision of its responsibilities, which entails not just stockholders, but scores of other populations also, including the local community, environmental groups, customer, workers, suppliers, federal, state and local governments, in addition to other unique interest groups. Jointly, the diverse groups impacted by the organization’s actions are acknowledged as stakeholders. CSR is associated with, but not equal to, business ethics given that whereas CSR includes the discretionary, ethical, legal, and economic responsibilities of the company, while business ethics normally concentrates on the behavior as well as moral judgments of persons and groups in organizations. Therefore, business ethics studies can be viewed as a constituent of a bigger study of CSR. The four-part CSR definition by Carroll and Buchholtz makes clear the versatile character of social responsibility. In this case, the financially viable (economic) responsibilities mentioned in this definition talk about the expectation of the society that corporations will manufacture products and services that are desirable and most wanted by customers as well as put on the market those goods as well as services at affordable price. Besides, organizations are anticipated to be resourceful, cost-effective, and to keep the interests of shareholders in mind. The second part is the legal responsibilities which associate with the anticipation that corporation will abide by the laws lay down by society to oversee marketplace competition. Corporations always have lots of legal responsibilities governing nearly all facets of their undertakings, which include product and consumer laws, employment laws, as well as environmental laws. The third part of CSR definition is the ethical responsibilities, which is mainly based on societal anticipations that rise above the law, like the anticipation that companies will carry out their businesses fairly and justly. This connotes that companies are anticipated to do above just abiding by the law, but as well make practical attempts to expect and meet the societal standards even though those standards are not officially ratified in law. Lastly, the organization discretionary responsibilities denote the expectation of the society that the corporations will be excellent citizens. This as per Ferreira et al. (2010, p.211) may entail things such as charitable support that benefit the society or it can as well entail donating time and expertise of the employee to laudable causes. 2.1.1 Arguments for and Against CSR In contemporary literature, there subsist arguments in support of and against CSR. For instance, economic argument not in favour of CSR is maybe more strongly related to Milton Friedman, an American economist who argued that the business key responsibility is making return, even though whilst abiding by the law. Based on Friedman view, the egocentric actions of free markets’ partakers will, from a utilitarian point of view, result in positive societal results. Therefore, of the free market operation lacks the ability to resolve a social problem; it government becomes responsible, and not the organisation, to handle the issue. Those supporting CSR posit that the rise of the contemporary business generates and continues to generate scores of social setbacks, and so the corporate world must take responsibility for dealing with such problems. Ultimately, it is in best interest of the corporations to take social responsibilities given that CSR will heighten their future opportunities and decrease the possibilities of heighted regulation from the government. Bigger companies have enormous reserves of financial and human capital, so they must dedicate at least a number of their resources so as to address social issues. Antagonists of CSR argue that taking on moral as well as social issues is not economically possible, so companies must concentrate on earning revenue for their shareholders and leave issues within the society to be solved by others. This is because taking social responsibilities give the involved corporations a competitive disadvantage as compared to those who non-partakers. In this case, they argue that those most accomplished must deal with social issues since the corporate world are not set to handle social issues. The competitive argument acknowledges the verity that handling social issues costs the business, to the level that businesses the costs of CSR are internalized; as a result, it harm the company’s competitive position as compared to their its competitors. Basically, this argument is above all pertinent in an internationally competitive setting; that is if business undertakings in a certain nation use up assets to deal with social issues, but businesses a different nation do not. Given that CSR is more and more turning out to be a worldwide concern, the disparities in expectations within the society across the globe can be anticipated to diminish in the future. Lastly, scores argue that most corporations are badly equipped to deal with social issues, and this capability argument points out that managers are usually well skilled in fields of operations, marketing, and finance management, but most are not knowledgeable in handling multifaceted societal issues. Therefore, they lack the skills or knowledge required to handle social problems. This argument point out that the participation of the company in social problems may in fact make the situation bad. Still, there are a number of arguments supporting CSR; for instance, corporate world critics hold the view that bigger companies generate scores of social problems, so they have to try to deal with and resolve them. They mostly condemn the environmental, accounting, marketing and production practices of the companies by claiming that companies can do a god job of producing safe and quality products while carrying out their undertakings openly and honestly. Self-interest argument is an extremely distinct argument supporting CSR, and it suggests that companies must conduct themselves in a manner that guarantees they will still offer an encouraging operating setting in the future. This argument posits that companies have to look further than the end result, short-term viewpoint and should know that present societal investments will bring in benefits at some point. Lastly, a number of CSR supporters propose that companies must take social responsibilities for the reason that they are amongst the few private organizations with adequate resources to do so. 2.2.0 Modern Social Issues Companies handle a broad range of social problems and issues, a number of which are directly associated with their operations. 2.2.1 Environmental Issues Companies have for decades been censured for their negative impact on the environment with regards to misusing natural resources as well as being part of environmental challenges like climate change and pollution. The utilization of fossil fuels is believed to be a major contributor of climate change, and there subsists pressure from both societies and government on companies to stick to more rigid environmental standards as well as to willingly revolutionize the processes of production so as to less damage the environment. Additional problems associated with natural environment consist of deforestation, waste disposal, land degradation, as well as acid rain. This has created the need for corporate responsibilities in the coming years to alleviate the situation. 2.2.2 Global Issues More and more, companies are operating in an international environment, and business globalization seems to be an unalterable trend; however, there are scores of adversaries to it. Globalization critics point out that it results in the overexploitation of developing countries as well as employees, environment destruction, in addition to heightened abuses of human rights. They further posit that globalization mainly profits the rich and broadens the gap between the poor and the rich. Globalization supporters argue that open markets results in improved living standards for all and sundry, higher salary for employees’ across the globe as well as economic growth in poor countries. Scores of big companies are transnational in scope and will go on facing ethical, social, and legal issues caused by the heightening business globalization. Regardless if one is a supporter or adversary of globalization, it does not alter the verity that companies operating internationally experience overwhelming social problems. Possibly labor standards in various nation across the globe is the most burning issue. Scores of companies have been punched by disclosures that their factory plants across the globe were sweatshops and/or were employing children of young age. This predicament is multifaceted for the reason that societal expectations and standards concerning working conditions as well as children employment differ considerably across the globe. In this regard, companies have to make a decision concerning the responsible alternative: espousing the countries’ standards wherein they are operating or inflicting a general standard across the globe where it operates. An additional issue in international business is the issue of promoting products and services in the global marketplace. A number of companies in U.S., for instance, have promoted their products in different continents following the banning of their products in U.S. 2.2.3 Technology Issues A different modern social issue associates with technology as well as its impact on society. For instance, scores of new marketing avenues has been opened by the Internet, bust still the same platform offer the chance of abuse by companies. The Internet as well offers issues of privacy as well as security of private information, which must be solved. Based on the aforementioned contemporary issues, it is evident that CSR is a multifaceted topic, and there is no query that the discretionary, ethical and legal anticipations placed on companies by the society are bigger than in the past. Hardly any corporation completely ignores social problem and issues, and most allege to follow not just the goal of higher profits and revenues, but as well the goal of societal and community betterment. Research purports that those companies that create repute as being socially ethical and responsible benefit from increased performance levels. Still, the eventual inspiration for companies to become socially responsible must not be a monetary motivation, but an ethical and moral one. 2.3.0 Capitalism Effect For corporations desiring to move quicker towards sustainable business paradigms, this is a challenge, since capital markets have a tendency to reward temporary success instead of long-standing strategies that back a healthy society or environmental sustainability. Scores still hold the view that the key corporate responsibility is to make profits. The complexity for corporations is that, whilst bettering working conditions in factories based in developing nations supporting the business economic sustainability is hard since such initiatives need lasting investments that may ultimately fail to pay off. Critics argue that whereas corporations boast with programmes that profit the environment or society, they yet to do much so as to handle the negative effect of business operations. Apart from aiding in solving societal issues and problems, corporations may as well contribute to them as evidenced by death of over 1,100 Bangladeshi employees following the factory complex collapse, from which scores of UK clothing brands sourced garments. These occurrences are producing a wave of anti-corporate activism, which comes subsequent to the age wherein lots of the relationships between NGOs and companies have been rooted in collaboration, instead of boycotts or advocacy. Even though, such partnerships persist, disappointment is mounting on the side of human rights and environmental activists who argue that in spite of progress in a number of areas, corporations are slow to act in reducing their undesirable effects on the planet and its inhabitants. An additional unsolved query is the level to which customers can play part in driving companies towards practices that impose a lesser amount of damage on the environment as well the communities. Some proof subsists of increasing consumers’ niche that desire to equal their environmental and ethical values with their buying. Equipped with social media paraphernalia, scores are ready to turn into being more vocal upon seeing intimidating corporate behaviour. Basically, business behaviour that is ethical has turn out to be a multifaceted worldwide challenge. Lots of ethics associations have surfaced, majority arguing to have knowledge on how to run a business morally. A modern vocabulary has born again unexpectedly from an old glossary. Phrases and words like moral compass, cooking the books, global humanization, brute capitalism, bubble, oversight, and nationality accountability have turn out to be part of the fresh CSR language, aimed at offering stakeholders with an understanding that is more transparent concerning the kind of company with which they are allied. Recently, a lot has been achieved with the fast passing of new regulations and laws intended for significantly lessening fraud in the corporate world. For instance, in the U.S., the 2002 Sarbanes-Oxley Act was adopted by congress, and the act is a wide-ranging, comprehensive law that impacts almost all facets of the corporate governance of corporations in U.S. that are publicly held. Scores of big and small companies have equally acted faster to espouse new practices by endorsing and putting into practice revisions to their governance programs, policies, and structures. Still, effectiveness questions linger the stakeholders’ minds as they mull over contemporary changes in the corporate world. These changes still questions the viability of morality: that is, if moral capitalism is possible. In spite of the verity that scores of unknown risks and unanswered questions linger, laws and regulations changes, with concomitant stress on CSR as well as business ethics, act as a supportive crucial step in providing optimism and infusing confidence amongst stakeholders. Even moral capitalism as mentioned by Duarte (2006, p.385) cannot carry on lacking access to money. Investors and owners, the capital providers, are as essential for success of business as every other stakeholder. Since their important investments in any company is connected to public confidence and trust, the running of a public or private corporation in the multifaceted international community has come with new setbacks for business leaders to conduct themselves more responsibly and ethically. Still, for the international community to function more morally, Shah (2007, p.17) posits that there have to be a set of universally acknowledged standards. Thus far, no such universal system subsists. The corporate world still must adopt a codex of up to standard business principles that can double as a common universal denominator of CSR and business ethics. 2.3.1 Moral Perspective Milton Friedman a Nobel Laureate provided a comprehensive critique of corporate social responsibility in his article, where he argues that the sole social responsibility of corporations is to make profits. He further argues that businesses should make use of its resources to take part in activities intended for increasing its earnings provided that it stays inside the game rules; that is engaging in free and open competition exclusive of fraud or deception. Friedman suggests investors should make lots of money as possible whilst adhering to the basic societal rules, both those personified in the rule of law as well as those personified in moral custom. Evidently, Friedman supports the basic commerce morality and holds the view that what corporations undertake day after day is their social responsibility, provided that they do not infringe the ethical norms and laws. Believably, scores of, but definitely not all, proponents of CSR would theoretically concur with Friedman assertion that corporations must work for revenues and profits, in fact with no profits they may stop existing to participate in CSR activities. The CSR proponents appear to wish for companies to go further in the course they believe worthy; that is to make lots of money, and instead of sharing the profits with the shareholders, they should share with workers, communities, as well as the environment. These days, a lot of energy is used in coming up with innovative schemes and methods to carry out this sharing, as well as in bringing this sharing into line with the core business activity. An explanation of three vital concepts results in a different comprehension of the business nature as well as its social responsibility, distinct from that of CSR advocates and Friedman. These three concepts include: maximization of profits, ethical custom, and laws. With regard to profit maximisation, Friedman and proponents of CSR both view the business work as divided into two distinct sections: (1) the economic activity, commercial, for-profit; and (2) them moral activity, socially responsible, non-profit (Shah, 2007, p.6). The actual setback of operating a business in the epoch of capitalism is that one must balance athwart numerous margins at the same time. For instance, the CEOs first do not capitalise on the profits margin and afterward become frightened of brand image, human resource, public relations, and most significantly, their individual values. They function along all these margins at the same time. The conventional neoclassical economics perception of enterprises as centres for maximising profits is a false impression of what business in the real world actually does. The paradigms of ideal competition as well as universal stability offer phony comprehension of the management processes in a company. Economic institutions that put emphasis on fuzziness, dispersed knowledge, as well as process of discovery provides a more sensible and compassionate knowledge of, competition, entrepreneurship as well as business success (Dimitriades, 2007). What makes up profits is subjective and so it is wise to see companies as maximisers of value, notwithstanding one of the key values is profits; however, that is not all what businesses struggle to accomplish. Basically, the course that results in maximisation of profit is itself subjective; so it is not just an optimisation quandary that can be solved by computers as insinuated by neoclassical economics. The right path for profit maximisation are not impartially described by production and utility, functions but are individually surmised by agents through their technical expertise and the better comprehension of the social, material, as well as political space of corporate world (Shah, 2007, p.8). 3.0 Conclusion In conclusion, it has been argued that moral responsibilities of corporations is to pursue the well-known ethical customs, and are not obliged to go further than that. Proponents of CSR advocates stress the need for a higher corporate moral responsibility as well as provide scores of ideas on how to abide by that accountability. No one however see investors as moral entrepreneur: defining and developing ‘ethical customs’ themselves. Importantly, managers of companies do have a contractual and fiduciary responsibility to stockholders, but this principal-agent association inflicts responsibility on both sides. As argued in the paper, corporations’ social responsibility must be well thought-out against the milieu of the wider corporate governance argumentation in relation to the relationship between the shareholders, management and board, the effect of diverse corporate outrages, as well as recent alterations in the governance framework. Being attentive to concerns of communities, suppliers, and customers makes good sense of the business. Most of activities undertaken under CSR may sincerely be justified under customer relationship, marketing, and public relations. For that reason, CSR is at risk of turning out to be only a hyped ticket for otherwise money-making business activities. Entities in companies must not forgo their individual ethics for profits, given that their contractual responsibility to employers is to maximise profits, but not to the detriment of their personal ethics. Notably, employees are hired not only for their knowledge and skills but also for the entirety of their personality as human beings entrenched in a certain individual, cultural and social space. The existing setback is that corporations as well as the frameworks through which they function were by no means intended for making the world a better place thanks to the demands of the capitalist economic system. References Aguinis, H. & Glavas, A., 2012. What We Know and Don’t Know About Corporate Social Responsibility: A Review and Research Agenda. Journal of Management, vol. 38, pp.932-68. http://jom.sagepub.com/content/38/4/932.full Dimitriades, Z.S., 2007. Business Ethics and Corporate Social Responsibility in the e-Economy: A Commentary. Electronic Journal of Business Ethics and Organisation, vol. 12, no. 2. http://ejbo.jyu.fi/articles/0701_1.html Duarte, F., 2006. Spivs, Shonks and Sharks: The HIH Collapse as a Moral Tale of Corporate Capitalism. Social Responsibility Journal, vol. 2, no. 3/4, pp.282-90. http://researchdirect.uws.edu.au/islandora/object/uws:4954 Ferreira, D.A., Avila, M.G. & Faria, M.D.d., 2010. Corporate social responsibility and consumers' perception of price. Social Responsibility Journal, vol. 6, no. 2, pp.208 - 221. http://www.emeraldinsight.com/doi/abs/10.1108/17471111011051720 Kitzmueller, M. & Shimshack, J., 2012. Economic Perspectives on Corporate Social Responsibility. Journal of Economic Literature, vol. 5, no. 1, pp.51-84. https://www.aeaweb.org/articles.php?doi=10.1257/jel.50.1.51 Shah, P.J., 2007. CSR Capitalism at its best or an anti-capitalist mentality? Working Paper. Potsdam, Germany: Friedrich Naumann Foundation International Colloquium. http://www.econbiz.de/Record/csr-capitalism-at-its-best-or-an-anti-capitalist-mentality-shah-parth/10003618483 Read More

It can necessitate a corporation to go without some profits in case its impacts to the society are sincerely damaging to a number of its stakeholders or in case its finance may be utilised to support a helpful social good. Undoubtedly, acknowledging the business role in sustainable development, as well as the noteworthy impacts brought about by their activities is imperative. 2.1.0 Corporate Social Responsibility CSR can be defined as the ethical, legal, economic and flexible expectations that society need from a company at a certain occasion.

Besides, the CSR concept connotes that corporation have philanthropic, ethical and moral responsibilities over and above their responsibilities of earning a fair profit for investors as well as abide by the law. A conventional view of the corporation points out that its key, if not exclusive, responsibility is to its stockholders, or owners, but, CSR needs companies to espouse a wider vision of its responsibilities, which entails not just stockholders, but scores of other populations also, including the local community, environmental groups, customer, workers, suppliers, federal, state and local governments, in addition to other unique interest groups.

Jointly, the diverse groups impacted by the organization’s actions are acknowledged as stakeholders. CSR is associated with, but not equal to, business ethics given that whereas CSR includes the discretionary, ethical, legal, and economic responsibilities of the company, while business ethics normally concentrates on the behavior as well as moral judgments of persons and groups in organizations. Therefore, business ethics studies can be viewed as a constituent of a bigger study of CSR. The four-part CSR definition by Carroll and Buchholtz makes clear the versatile character of social responsibility.

In this case, the financially viable (economic) responsibilities mentioned in this definition talk about the expectation of the society that corporations will manufacture products and services that are desirable and most wanted by customers as well as put on the market those goods as well as services at affordable price. Besides, organizations are anticipated to be resourceful, cost-effective, and to keep the interests of shareholders in mind. The second part is the legal responsibilities which associate with the anticipation that corporation will abide by the laws lay down by society to oversee marketplace competition.

Corporations always have lots of legal responsibilities governing nearly all facets of their undertakings, which include product and consumer laws, employment laws, as well as environmental laws. The third part of CSR definition is the ethical responsibilities, which is mainly based on societal anticipations that rise above the law, like the anticipation that companies will carry out their businesses fairly and justly. This connotes that companies are anticipated to do above just abiding by the law, but as well make practical attempts to expect and meet the societal standards even though those standards are not officially ratified in law.

Lastly, the organization discretionary responsibilities denote the expectation of the society that the corporations will be excellent citizens. This as per Ferreira et al. (2010, p.211) may entail things such as charitable support that benefit the society or it can as well entail donating time and expertise of the employee to laudable causes. 2.1.1 Arguments for and Against CSR In contemporary literature, there subsist arguments in support of and against CSR. For instance, economic argument not in favour of CSR is maybe more strongly related to Milton Friedman, an American economist who argued that the business key responsibility is making return, even though whilst abiding by the law.

Based on Friedman view, the egocentric actions of free markets’ partakers will, from a utilitarian point of view, result in positive societal results. Therefore, of the free market operation lacks the ability to resolve a social problem; it government becomes responsible, and not the organisation, to handle the issue.

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