Ethics and Corporate Social Responsibility - Book Report/Review Example

Ethics and Corporate Social Responsibility Introduction Corporate social responsibility is a concept that requires corporations to exhibit greater responsibility to all its stakeholders rather that focus on profit-making activities alone. Although profit making is the priority of many businesses, the introduction of the corporate social responsibility concept sought to move the responsibility of corporations from that narrow view to a broader view. The narrow view considers the sole priority of businesses as generating profits in an effort to satisfy the needs of the shareholders. On the other hand, corporate social responsibility introduces a broader view, which takes into account the effect of corporate activities to all its stakeholders. In the 20th century, corporate social responsibility perspectives were different from those prevailing in the 21st century. In the 20th century, there was active criticism of large corporations that did not exhibit responsibility to all their stakeholders. In the 1970s, the society began to have expectations of businesses to register active participation in addressing social problems (Barnett, 2007). This is when the concept that corporations should focus on addressing social issues and not just making profits. This report will present a critical comparison of both the narrow and broad view of corporate social responsibility as well as the arguments presented by theorists either in support or against both views. In addition, the report will bring in the ethical concentrations of adopting either of the views in the business world. Narrow Views of Corporate Social Responsibility The narrow view of corporate social responsibility focuses on the fact that corporations have the sole responsibility of maximizing the process of profit generation for the sake of the business owners. Supporters of this view believe that taking into consideration the environmental issues as well as addressing the social problem is not a responsibility of corporations, but the role of governments and other non-governmental organizations pursuing a social agenda. The narrow view separates the role of businesses highlighting that they should only concentrate on increasing monetary returns (Crowther & Aras, 2010). One supporter of the narrow view is Milton Friedman, who highlighted his opinion that corporations should not divert from their principle purpose of making profits. He argued that a diversion from profit making to the participation in social responsibility will present negative effects on the economic system. Friedman had the conviction that individual shareholders, customers, and even employees had the freedom to use their money in promoting social agenda. However, he did not see any reason for corporations to use their funds in support of corporate social responsibility. According to Adam smith who was a strong proponent of the narrow view, corporations did not need to participate in corporate social responsibility ventures. Smith highlighted that the “Invisible hand” comprising of demand and supply forces had the capacity to create favorable conditions in the business that could benefit everyone. The invisible hand argument highlights that each individual in the market system should pursue self- interests. Supporters of this argument believe that the overall outcome of the invisible hand forces results to the wellbeing for all. Other supporters of the narrow view believe that the government should take its responsibility in regulating the activities of businesses (Fraser, 2005). This argument has its basis on the fact that individuals exhibit a selfish and inquisitive nature, which does not create a favorable environment for everyone. Therefore, the government should play a critical role in intervening promptly. It should do so by introducing regulations and laws that ensure that businesses do not misuse their power. In addition, supporters of the narrow view of the corporate social responsibility argue that business executives do not have the required social expertise to pursue a social agenda. Their expertise is limited to making economic decisions. Therefore, supporters of the narrow view argue that placing social responsibilities on businesses is expecting them to perform a role that they cannot handle effectively. There is also the fear that participating in corporate social responsibility will lead to the materialization of society (Frederick, 2008). This means that the supporters of the narrow view have the fear that corporate managers will introduce their materialistic ideas to the society. Eventually, this will affect the society adversely. Arguments against Narrow View of Corporate Social Responsibility Opponents of the narrow view argue that corporations should not only focus on making profits. On the contrary, corporations should realize that assumptions associated with the narrow view are not factual. For example, opponents of the narrow view do not support Friedman’s opinion that participating in corporate social responsibility will affect the economic system adversely (Gottschalk, 2011). Actually, corporations that have participated in corporate social responsibility are reaping financial benefits from such efforts. This is through the integration of business strategy and corporate social responsibility. Moreover, the free market conditions that smith called the invisible hand is entirely different from the contemporary business world. Therefore, the smith’s view that supply and demand forces can contribute to benefits for all is irrelevant because the modern business world operates differently (Hack, Kenyon, & Wood, 2014). Moreover, modern day corporations have exhibited their potential to yield a high amount of power. Such power makes the free market conditions unequal. This makes Smith’s view irrelevant. Other opponents of the narrow view of corporate social responsibility have the conviction that interventions from the government may be insufficient to address the issues in the modern day business world (Ilieş, 2012). Moreover, government interventions may not promote the interests of all the stakeholders. An additional view of these opponents is that some of the large corporations have the potential to influence the government so that it can support and protect the company’s interests. Even in cases whereby the government intervenes, the action is reactive and negative effects may already have resulted (Isaksson, Kiessling, & Harvey, 2014). Opponents of the narrow view opine that managers are individuals with a clear understanding of moral expectations and have the capacity to act ethically. This is contrary to the view that managers lack the social expertise required to pursue the social agenda. In any case, there exists an expectation for every individual to act morally irrespective of his or her career and specialty. Therefore, business leaders should learn to utilize the existing resources in an effort to tackle the ethical dilemmas (James & Rassekh, 2000). This places them in a better position to participate in corporate social responsibility because they can mobilize resources. The fact that many training institutions, especially universities are integrating business ethics into the curriculum should prepare business leaders in corporate social responsibility. Therefore, arguing that business leaders are unable to pursue a social agenda because of lack of expertise becomes irrelevant. In addition, opponents of the narrow view do not find it a strange idea that corporations will impose materialistic values on the society (Karnani, 2014). This is because businesses have already done so through extensive advertising strategies. Therefore, they do not consider that an excuse for failing to participate in corporate social responsibility. Broad Views of Corporate Social Responsibility The proponents of the broad view of the corporate social responsibility argue that businesses have the potential to affect different stakeholders. Therefore, they should take the initiative of protecting the interests of the different stakeholders. Although government regulation is important, businesses should exhibit a level of moral responsibility. If businesses are to prove successful, they should consider corporate social responsibility as an agenda (Kochan, 2014). Other theorists have highlighted that it is possible for businesses to integrate corporate social responsibility agenda and business agenda. However, business leaders should make it a point to give priority to social responsibility instead of focusing on profit making alone. Proponents argue that businesses have the capacity to yield a high amount of power in the society. This power can either affect stakeholder in a beneficial manner or adversely. Therefore, businesses should focus on ensuring that they do not harm any of the stakeholders (Little, 2012). Some of the stakeholders include employees, customers, the society, the environment, as well as the competitors. Arguments against the Broad View of Corporate Social Responsibility As highlighted above, opponents of the broad view are the supporters of the narrow view of the corporate social responsibility. They have the conviction that businesses only have a responsibility to their owners and should only engage in profit making. They do not recognize the power yielded by many businesses and the potential effects that businesses can have on the society (Mallin, 2012). Whereas supporters of the broad view recognize that business rely on resources from the society, and should be willing to participate in the addressing of the social problems, opponents of the broad view prefer to focus on profit generation in the view that participating in corporate social responsibility will affect the economic system. These opponents fail to realize the potential future benefits of participating in corporate social responsibility ventures. The opponents of the broad view assume that participating in social responsibilities may place them at a competitive disadvantage (Manzoor, 2014). This is contrary to what is happening in the real business world because participating in corporate social responsibility is making corporations highly competitive. Personal Position in Relation to CSR Debate In my opinion, the broad view of corporate social responsibility is more realistic because it recognizes that businesses have the capacity to influence different stakeholders. Specifically, the power exhibited by businesses can affect both secondary stakeholders and primary. Primary stakeholders include the business partners, employees, customers, future generations, communities, natural environment, and the shareholders. On the other hand, secondary stakeholders include local and federal governments, different regulatory bodies, civic institutions, trade and industry groups, competitors and other special interest groups (Pava, 2008). Moreover, businesses have the required resources that can enable them to participate in addressing the social problems. Businesses utilize resources from the society and the natural environments and hence should have an upper hand in promoting environmental sustainability and protecting the interests of communities. If businesses remain socially irresponsible, they will have no resources left in the future to support their business activities and their reputation will be highly tainted. The fact that participating in corporate social activities can present numerous benefits to the organization is an additional reason why the broad view is more realistic and acceptable. Many businesses have integrated their business strategy with corporate social responsibility strategy. They have benefited both in the long and short term. In addition, establishing a mutually trusting relationship with primary stakeholders has the potential to present financial values of the organization (Przychodzeń & Przychodzeń, 2014). This serves to create a competitive advantage of the organization over its competitors. As the chief executive officer of a large company, adopting the broad view of the corporate social responsibility, I would be in a position to register positive impact on the society. My view would not only contribute to economic development, but also contribute positively in improving the lives of employees, the local community, as well as the entire society. Moreover, the broad view would help my company promote environmental sustainability. This means that the decisions made by the organization would reflect the interests of all the stakeholders. Through the integration of business strategy and corporate social responsibility strategy, I would be in a position to generate profits while pursuing a social agenda. As the CEO, I would be in a position to mobilize resources in an effort to preserve the environment and improve the quality of life of the local communities (Shaw, 2009). Moreover, I would develop initiatives for improving the quality of life of the entire society and addressing social problems. Application of Utilitarianism in the Broad View of Corporate Social Responsibility Utilitarianism is an ethical theory that seeks to promote the maximization of utility. According to utilitarian, an individual should pursue causes of action that present maximum benefits to the majority in the society. At the same time, the pursued cause of action should be the one that presents minimal adverse effects to the people involved. Utilitarianism is based on the analysis of the consequences of an action. Prior to undertaking any action, one should consider both the positive and negative consequences that may result from the action. The right thing to do should be the one presenting more positive consequences and minimal adverse effects. Worth noting is the fact that both long term and short term effects to all the stakeholders involved should be given proper consideration. The ethical decision made should reflect maximum benefits to the majority of the stakeholders. A modern application of utilitarianism should consider the types of consequences that are more likely to present a pleasurable effect. For example, some consequences should be given priority over others. In the case of businesses dealing with automobiles, the safety of individuals requires a priority over monetary returns. Therefore, the application of utilitarianism should seek to promote maximum benefits to the majority of the stakeholders. A close analysis of the consequences and the determination of the ones maximize utility should occur carefully if an ethical decision is to result. As the chief executive officer of a large company, utilitarianism would be an effective, ethical theory when making certain decisions that affect different stakeholders. The first step would be the identification of all the stakeholders involved. The stakeholders in this case would be the shareholders, employees, customers, suppliers, business partners, communities, future generations, and the natural environment. Moreover, secondary stakeholders such as government and regulatory bodies, special interest groups and civic institutions with a stake in the organization would also be of critical consideration (Tumay, 2009). After highlighting all the stakeholders, the second step would determine both the positive and negative consequences that the decision would present to each stakeholder. In order to make a final decision, weighing up of consequences in an effort to determine the greatest benefits to the majority of the stakeholders would follow. Evidently, weighing up the consequence to each stakeholder should also bring into concept the importance of the stakeholder to the business. The interests of some stakeholders such as customers are not subject to compromise. Therefore, the process of weighing up the consequences in order to determine the final decision requires a critical understanding of both the short term and long term effects of any business decision to all the stakeholders. Notably, utilitarianism would be an effective guideline when making decisions in situations whereby the law does not outline the appropriate cause of action. In such cases, it is proper to take the cause of action that satisfies the needs and interest of the majority of the stakeholders (Yazici, 2010). In some cases, the company may face the compulsion of foregoing its interests in support of the interest of the stakeholders. Evidently, such a critical application of utilitarianism would represent an ethical decision. Conclusion Evidently, corporate social responsibility is becoming one of the important aspects in modern business. This is especially the case because critics believe that large corporations contribute to the creation of numerous social problems. Therefore, they should take an active role in addressing these social problems. Other proponents of the corporate social responsibility recognize that business entities have the required resources to participate in addressing social problems. This is in accordance with the broad view of corporate social responsibility, which highlights that businesses affect a diverse range of stakeholders. On the contrary, there is a narrow view of corporate social responsibility that exhibits the conviction that businesses only have the responsibility of making profits. In the contemporary business world, the broad view of corporate social responsibility is more realistic and advantageous. The ranking of companies according to their views on corporate social responsibility motivates more businesses to venture into corporate social responsibility ventures. 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