The Concept of Corporate Social Responsibility by Friedman and Freeman - Research Paper Example

?Corporate Social Responsibility Corporate social responsibility has been identified as a model of self-regulation within the business environment. The inclusion of various components of this model involves the process of self-monitoring a business, and is aimed at ensuring compliance with business law, norms and the desired industrial standards. Within some instances, the implementation of CSR includes a firms’ engagement in various non-business related social issues. As a process, CSR aims at ensuring that a company presents positive impacts on the neighbouring environment, communities and members of the public who might be deemed as a company’s stakeholders. Corporate social responsibilities commonly affect the various stakeholders directly. Many CSR models, adopted by various companies, focus on enhancing stakeholder participation in company activities. The concept of CSR has been argued and described differently by various economists such as, Friedman and Freeman. Milton Friedman first described the concept of CSR during the 1970s, where he appeared to discredit the concept. Friedman argued that corporates cannot have responsibilities, as only individuals can undertake responsibilities. Though the direct arguments presented by Friedman seem to discredit the CSR theory, they support the notion of stakeholder theory. Friedman describes stakeholders as the individuals who might be considered as employers of corporates in the long run. This could be identified as the beginning of stakeholder theory when it comes to corporate social responsibility discussions. Stakeholders’ interests are fundamental elements of business, as they continually affect numerous business activities. Though he presents stakeholders as important towards business success, Friedman’s support for the idea is not attached to CSR, but to capitalism. Friedman describes the purpose of business as that of utilising the available resources and engaging in activities aimed at increasing company profits. Though he presents the idea of social responsibility and stakeholders, the various activities must be aimed at increasing corporate profitability. The importance of stakeholders, according to this theory, does not lay on corporate social responsibility, but on enhancing profitability. The stakeholders and the community described by Friedman remains a resource which businesses should utilise in increasing profitability (Friedman, 1970). Though he discussed the importance of stakeholders to business, Friedman described stakeholders as individuals who could be affected directly by business activities, and not those involved within the various business activities. According to Friedman, profitability is the only reason and purpose of corporate social responsibility. He continues to indicate that corporates lack responsibility, but the people working within these corporates have responsibilities. His ideas negate the proposition of corporates being independent, entities which can be accorded responsibilities. The various individuals working within these corporates are assigned to the different responsibilities; hence, the corporates cannot be said to have any responsibilities. The activities undertaken by corporates as CSR, therefore, remain associated with the individuals undertaking them, rather than the corporates funding or employing the people. His theories present a corporate as being a virtuous body, whose activities and other functions are associated with the individuals working there. The identity of corporates, therefore, is seen through the presence of employees and other stakeholders. With the sole responsibility of making profits, corporates lack other responsibilities as presented by stakeholders and owners. Executing social responsibilities would become equivalent to failure in undertaking fundamental functions bestowed upon employees. Involvement in non-profit making activities could be viewed as seeking to completely eliminate the business by reducing business profitability. According to Friedman, business executives have the responsibility of ensuring business profitability, and involvement in social responsibilities is a contradiction of this basic business responsibility. All business activities, irrespective of the target individuals should always present an element of increasing profitability; otherwise, the activities should be ignored, and consequently not pursued (Friedman, 1970). Activities pursued by businesses for purposes of societal growth, should not consume finances from the corporate accounts as this would reduce profitability. These activities should either have external sources of income, or not require any monetary input from the corporate. Freeman described and defined various business stakeholders, consequently identifying their significance to different business activities. Within the business environment, numerous stakeholders exist, with each having a different function in enhancing business continuity. While all stakeholders remain important to a business’s existence, the effects of stakeholders varies differently depending on the stakeholder category. The management of the different stakeholders, therefore, remains fundamental in ensuring a business’s survival and increasing profitability as well (Freeman, 2010). Freeman describes the various stakeholders as either primary or secondary stakeholders, with both having a significant influence on a business’s survival, based on their roles on the corporates operations. Business customers and other individuals affected by the business presence comprise of various stakeholders, who should be handled properly for business survival. The action of enhancing the proper management of stakeholders defined as corporate social responsibilities. Freeman identified social responsibilities as activities undertaken by businesses to satisfy numerous requirements and expectations. These activities range from economic to legal, and present a different opinion from that of Friedman who suggested that social responsibilities should only seek to enhance profitability. All individuals and organisations with the different expectations from the various business activities become stakeholders of the specified business. Companies should, therefore, engage in activities that seek to ensure that these stakeholders are satisfied with the different business activities. Economic responsibilities might be imposed by external stakeholders, but they also present an element of increasing profitability through the need to comply with the set regulations (Carroll, 1991). A business might, for example, be required to produce products that meet certain regulations imposed by activist bodies. Though this might be a legal responsibility, through such compliance, the company products might gain significant popularity among organisations supporting the legal policy. Both Friedman and Freeman describe stakeholders as important parts of enhancing continuity of businesses and corporates as well. According to Friedman, corporate executives normally perform their actions aimed at ensuring stakeholders’ comfort by satisfying the stakeholders’ requirements (Schwartz & Carroll, 2003). This satisfaction, however, occurs through the introduction of profitable business activities, while totally ignoring non-profit making activities within the business. While the individuals might have responsibilities bestowed upon them, all the responsibilities must remain limited to the stakeholders’ requirements and contribute towards stakeholders’ satisfaction. Freeman, on the other hand, although realising the significance of stakeholders within businesses, identifies various stakeholders and their importance in corporate social responsibility. According to him, company executives must always ensure the existence of proper relationships between different business stakeholders. Stakeholder management is fundamental in enhancing business survival, and by ensuring that stakeholders are satisfied with the various corporate activities. Friedman ignores the contribution of external stakeholders, like the general public, towards ensuring business survival. External stakeholders have been identified by Freeman as the secondary stakeholders, who are directly affected by corporate activities, consequently, becoming relevant to the survival of the business. The general public, for example, could become environmentally affected by corporate activities within their residential areas. Undertaking activities with regard to these individuals constitutes social responsibility. According to Friedman, however, such activities should only be undertaken by corporates through external funding, as they do not form part of a corporate’s core business. Neglecting these stakeholders could potentially contribute towards corporate risk liabilities initiated by the stakeholders. In corporate social responsibilities, the contribution of stakeholders remains a fundamental consideration, and should be aimed at ensuring stakeholder satisfaction with the various corporate activities. Corporate executives could be identified as the figures representing the corporates to the various stakeholders. The roles and decisions made by corporate executives appear to represent the general decisions of the corporates they head. The individuals chosen to become corporate executives have the responsibility of ensuring the development of proper strategies aimed at enhancing the profitability of business organisations (Freeman, et al., 2007). These individuals, however, should always operate within the regulations provided by their employers in managing various aspects of the businesses. Corporate social responsibilities normally offer chances and opportunities for ensuring the proper management of different stakeholders’ expectations. Identifying the significance of the various stakeholders of a business is fundamental towards ensuring that the social responsibilities satisfy the stakeholders’ expectations. References Carroll, A. B. (1991). The pyramid of corporate social responsibility: toward the moral management of organizational stakeholders. Business horizons, 34(4): 39-48. Freeman, R. E. (2010). Strategic management: A stakeholder approach. New York: Cambridge university Press. Freeman, R. E., Harrison, J. S., & Wicks, A. C. (2007). Managing for stakeholders: Survival, reputation, and success. Masechusetts: Yale University Press. Friedman, M. (1970, September 13). The Social Responsibility of Business is to Increase its Profits. The New York Times Magazine, pp. 1-7. Schwartz, M. S., & Carroll, A. B. (2003). Corporate Social Responsibility: A Three-Domain Approach. Business Ethics Quarterly, 13(4):503-530. Read More