The Social Responsibility of Business to Increase its Profits - Literature review Example

Name: University/ College: Lecturer: Date: Corporate social responsibility The corporate social responsibility (CSR) entails the considerations of corporations and businesses in addressing the social, economical and environmental factors within the sphere of their operations. The societal and individual welfare is usually the focus of corporations in CRS. However, this definition is not all encompassing as different situation regards CSR variously. Debate has arisen as to where the clear line should be in terms of making the corporations morally obligated and committed to CSR. CSR occurs in many areas but the ‘overly’ addressed areas include; environmental management, business ethics, medical care inter alia. In this discourse, McDonalds CSR report of 2009 and a business article from USA Today will be the focus. McDonalds CSR report OF 20009 highlights its policy in relation to CSR, domains of intervention to social needs, human resource development and environmental custodianship. Besides, the USA TODAY, gives specific cases where corporations have effected the CSR. Narrow classical economic view Simon et al, postulates that every entity has an obligation to avoid and remedy a self caused injury in what they refer to as moral minimum. In this article relayed by the USA TODAY, it raises the following issues in regard to corporate social responsibility among others. Firstly, the article reviews the need for companies to grow more socially conscious. Second, it unequivocally illustrates that the aim of business is to please the shareholders by immense returns besides the influence that the shareholders have acquired in many companies. Third, it presents a statistic that 23% of the population feel that the corporations ought not to mix business with social issues while marketing their brands. Additionally, it shows that it is valuable for companies to embrace CSR. The narrow classical economic view represents the lowest level of responsibility in the CSR continuum and in preventing harm caused by the practices of the corporations. Prevention of harm is the affirmative duty of every corporation who hold this perspective. Besides, as indicated above the role of business is to serve the shareholders by maximizing the returns of the company and hence profiting them. In this view, the article stresses the importance of the shareholders in the companies as the owners. The shareholders are now objecting the hefty pay that the CEO’s are earning in the pretext that the company cannot afford. This clearly that CSR even within the organization is being inhibited no to compromise the profits of the organization. A part of the article sees the perceived positive impacts of the CSR as blown out of proportion as the sole aim of corporations is not to save the world but to increase sales, make returns and please the shareholders. In additional a significant number of companies sees it unwise to incorporate social issues in business. Self interests reign supreme in a capitalistic world and attempts to introduce CSR is a manipulation and distraction of the Socialism (Friedman, 1970). This coincides with the classical alignment depicted by Bowie and Duska that the obligation of any business other than making profits is to operate within the law, cause no unreasonable harm and interfere in specific situations to prevent harm though not obliged to. According to Immanuel Kant’s ethical utilitarianism, the respect for lawfulness motivates our actions (Baron, 1995:45). A number of corporations see CSR inappropriate owing to the costs that the company would have to incur if the industry’s profits were to be channeled to it. This represents the respect for moral duty – to protect the interests of the shareholders. The manager is placed in the company as an agent of the shareholders who are the agents while the shareholders are the principals. Consequently, the agent is expected to ensure that the shareholders reap utmost profits as long as the law is upheld besides enshrinement of free market solutions. Further, the article elucidates that the companies should feel morally obligated to face the challenge of addressing social needs as this is valuable and even profitable in the long run. In this perspective where free markets characterize the market composition, the company may feel obligated to interfere with such effects of its operations as pollution if they become an economic cost. Moreover, the imperfect competition that typifies free markets requires some sort of regulatory body. The obligation of these companies should be in line with Kew Gardens principle of responsibility. In the event that there is eminent need that requires the attention of the company, responsibility should be borne by the corporate organization. Besides, if the corporation is aware of the need and the need is within the area of the operations of the company the company also bears the responsibility to intervene. However the company will only be responsible if it has the capability to address the need since it would be outside the realms of reason to spend all its revenues on CSR. Thus, CSR is should not be taken for philanthropic gestures but it involves moral obligation of any company. Broader Socio – economic view In the continuum of corporate social responsibility, the supremacy of the stockholders is overlooked in favor of the stakeholder’s interests. All players that the company uses as means to achieving its goals are the stakeholders. The corporation considers the stakeholders interests as prime. The corporation deems the interest of everyone in the context of its operations. The society, the workers and the environment are among the stakeholders of business enterprises. This perspective is beyond the profit making motive and appreciates the role that all people with a stake in the business play (Bowie and Duska, 1942) As depicted by the McDonald’s report, CSR in broad socio-economic entails the efforts to incorporate interests of the stakeholders in the company’s goals. The corporate affirmative duty of every corporate organization is to respond to societal needs. Thus, socially responsible company is driven by dedication to serve their clients besides the desire by the company to do the right thing and cause no harm. Besides it is imperative in this perspective as CSR to operate in a manner to prevent harm in the society The affirmative duty of Macdonald’s as illustrated in the report is to ensure that all stakeholders are satisfied by their practices. The minimum moral in broad socio – economic view is to mitigate negative effects of their practices and to do no harm. MacDonald’s has successfully been able to achieve this through its clear in the enterprise policies. The social responsibility of the business is to ensure satisfaction of stakeholders as the prime objective. The rationale for adopting the concept of CSR without losing on revenues gives the company competitive edge over its rivals while ensuring that all stakeholders’ concerns are addressed. MacDonald’s appreciates the fact that the operations of the business entail complex nature of social relationships. The company should train and recruit people as an affirmative duty to accomplish its mandate in addressing the societal needs (Simon Et al, 1972:41). McDonalds is renowned for supporting its workers to develop their abilities by building capacity through rigorous process of formal training. Application of this view has been applied in the company in the manner that it extends its CSR to the worker. Workers receive competitive salaries and other remuneration as a way of ensuring their welfare is well taken care of and as such it was awarded as the top company for glomming leadership and for commitment and inclusion of biodiversity by fortune magazine (McDonald’s report, 2009: 4). Through its strategies in addressing the community needs, the company has established numerous initiatives all over the world. Giving back to the community is inculcated in the company’s system in which there is specific department social responsibility. In line with Kew Garden’ principles, McDonalds has felt the need to address the extreme needs of the society as one of their specific objective is to help children with serious illnesses and who cannot access proper medical care. This is among many initiatives that the company started globally to target the community as equal stakeholders in the business. McDonald’s environmental policy reinforces its commitment to developing appropriate tools and programs that reflect the concerns of the environment. The company has continued to sensitize the community on reduced consumption of the non renewable resources. Further, the company has set out a clear policy on water management policy to its subsidiaries all over the world. It is in the interest of the environment and the community that McDonalds’s has set up management team to manage its industrial waste to counter pollution. This illustration by McDonald’s has explicitly shown the broader economical perspective of moral minimum where all stakeholders in the company are directly or indirectly considered in the daily operations of the company. The company bears the social responsibility and commits itself to addressing the needs of the society. Broader maximal view In the above concept, the social obligation of a corporation is at its highest in regard to the moral minimum where business operates with the intention to ‘doing good’. Many companies continue making exorbitantly high returns around the world. The public expects these companies to redistribute a proportion of their profits to the society through acts of corporate social responsibility and as an expression of gratitude. For instance, the profits of the leading five corporations in the world are larger than the GDP of all countries in the sub – Saharan Africa (The American, 2009:32). In line with this calling, USA TODAY postulates that investors have exponentially increased the amount directed towards CSR initiative from $12 billion by 1995, to a whooping $179 billion in 2005. (USA Today, 2008 February 14). Businesses are even working together as partners with the civil society. At this level, companies bear the obligation of correcting the negative effects of their business practices. According to USA today, 2007, DuPont parted with a $16 million in 2004 as a settlement for emitting carcinogen to the atmosphere. The company has reduced the emissions of carcinogen by 92% for a more socially sustainable good. Rittenhouse, the CEO of the company says, “What's good for business must also be good for the environment and for people worldwide” Most flourishing businesses worldwide are credited for strong environmental and social records. The improvement in performance causes them to become even more socially responsible. Their CSR policies are well spelt out in the organizational structures. As earlier stated the McDonald’s department for corporate social responsibility is an illustration where companies in the maximal economic view focus on CSR not as a public strategy to woo customers but as strategy that yields having economic value. For instance, Toyota took the initiative of manufacturing hybrid brand of cars (Prius) that significantly reduce auto emission (HBR: Kramer and Porter, 2007:17). At the face value, this is CSR of the company in line with protection of the environment. However, buying of myriad units of the brand in principal improves the company’s sales and consequently maximized on returns. In the world full of needs many multinationals should take the responsibility of helping the situation and still make returns. According to Simon et al 1972, the more the society’s needs the more obligated the corporations become to attending to those needs (1972: 29). The knowledge that the corporations possess in relation to the needs of the society, culminates to actual notice of the reality that the needy society face. According to Kew Garden principles of social responsibility, this adds up to proximity which renders a corporation responsible. Further, it is real that, many multi national corporations operate round the global have the physical proximity to the needs of the society especially in the third world. According to Kant the notion of ‘ought to assume can’ is reflected in the corporate world. The high flying corporations are capable of intervening to help the needy in the society (2008:46). The Kew Garden principle of capability requires the corporations to bear the responsibilities of correcting the social problems if they are capable of doing it. However, it is within the spheres of reasonability for a company not to sacrifice all its profits for charity at the expense of itself. Finally, the corporate world is socially responsible to assist the society where the government has failed. The principle of the last resort will apply and increase the responsibility of the corporations in cases where the needs of the society have no other entity to attend to them yet the corporations are capable and fail to respond (Simon et al, 1972: 12). Conclusion Many classical economists have regarded the concept of CSR as distractive to company’s prime objective – making profits. They disregard the social responsibility as a corrective measure for harmful effects of the business practice. According to their arguments, free market is the sole regulator of an economy and extensions as such would culminate to market confusion. Although, they seem adamant to accept CSR in the corporate world, the concept is an advertising avenue for companies to sell their brands. Besides, evidence has shown that it gives the company an edge over the rest. Nonetheless, many question the intents of companies that venture in CSR and get blurred in the notion that, the main motive is to pacify the public and in turn improve the public image by creating an outlook of a good and socially responsible organizations. The responsibilities of corporations according to Kew Garden principles, is to enshrine the affirmative duties that protect every stakeholder in the context of the business. CSR is a morally upright phenomenon that should be adopted by all corporations for the betterment of the human race. References Bowie . N. And Duska R. (1942) Business Ethics, 2nd Edition, New York. Friedman Milton . (1970) The Social Responsibility Of Business To Increase Its Profits. New York Time Magazine September 11. Immanuel Kant,( 2008) Groundwork of the metaphysics of morals. New Jersey: wilder publication. Porter, M and Kramer M (2006, Dec 01) Strategy and Society: The Link between Competitive Advantage and Corporate Social Responsibility: Harvard Business Review: R0612D-PDF-ENG Porter, M , Kramer, M and Zadek S. (Feb 01, 2007) Redefining Corporate Social Responsibility Harvard Business Review: 1678-PDF-ENG Simon,J. Powers W, and Gunnemann,J. (1972) The Responsibilities of Corporations and Their Owners," in The Ethical Investor: Universities and Corporate Responsibility. New York: Yale University Press. USA Today’s Money Section February 14, 2007 Read More