Business Ethics: Corporate Social Responsibility - Coursework Example

CORPORATE SOCIAL RESPONSIBILITY By Location Corporate Social Responsibility Introduction In the 21st century,there is an increasing pressure for corporates to integrate their business strategies with corporate social responsibility strategies. Although corporate social responsibility has gained popularity in the 21st century, it was a concept developed in the 20th century. In the 1930s and 1940s, some authors had developed theories concerning corporate social responsibility. Prior to the development of corporate social responsibility, businesses had the objective of maximizing profits. However, corporate social responsibility requires businesses to promote the social agenda by participating in solving social problems. In addition, proponents of corporate social responsibility highlight that businesses should consider all the stakeholders without limiting their commitment to shareholders. Opponents of corporate social responsibility have argued against the compulsion of businesses to spend their profits in promoting the social agenda. For many of the opponents, businesses have expertise in profit maximization. However, the realities surrounding climate change and the urgency with which the environment needs protection has introduced a salient need for businesses to participate in corporate social responsibility. This paper will carry out a critical analysis of the different perspectives of corporate social responsibility, highlighting strategies used by companies in the modern day. In addition, the paper will highlight key findings and recommendations that businesses can implement in the future. Milton Friedman and Corporate Social Responsibility In 1970, Friedman authored an article titled The Corporate Social Responsibility Of Business is to Increase Its Profits. According to Friedman, the only responsibilities businesses have is profit maximization. Friedman opined that it was impossible to say that a business has responsibilities. He highlighted that individuals associated with the business are the ones with such responsibilities. In his view, the free-enterprise system that defines the modern business front has corporate executives who are employees of the stockholders. In simpler terms, the corporate executive team is employed by the owners of the business to head operations that promote profit maximization. Therefore, corporate executives are responsible and accountable to the business owners. Their main objective is to promote the interest of the stockholders. Business leaders and managers only serve as agents of the real owners of the company. According to Friedman, compelling corporate executives to participate in corporate social responsibility only means that the executives will fail at one point to promote the interests of the stockholders. For example, Friedman highlights that corporate executives who fail to increase prices of products with the motivation of corporate social responsibility agenda cause a disadvantage to the business owners. Friedman also opined that if corporate executives were to spend more funds on controlling environmental pollution beyond the regulations defined by the law, then that would be happening at a disadvantage to the business owners. Therefore, Friedman argues that it would be unfair for corporate executives to use business money in the promotion of social interests (Friedman, 2001, p. 67). In the article, Friedman also highlighted that some corporate social responsibility strategies compelled the corporate executives to use the money belonging to the employees or to the customers through increased prices. Evidently, Friedman was against the idea of a corporate executive promoting the social agenda instead of serving the stockholder, customers, and employees faithfully. According to Friedman, participation in corporate social responsibility only served to transform corporate executives who are operating in a private enterprise to public employees. From a political point of view, Friedman argues that if corporate executives are to promote social objectives, then they should be elected through a political process. According to Friedman, this is not the case with corporate executives. The lack of the political election process justifies Friedman’s opinion against corporate social responsibility. Evidently, Friedman’s ideas define one of the leading arguments against corporate social responsibility. Opponents of corporate social responsibility argue that businesses do not have the obligation to promote the social agenda. In a free market system, businesses only need to develop strategies of maximizing profits while exhibiting the compliance to the existing laws and regulations. Notably, different governments have in place laws and regulations that define the operations of companies in different industries. Supporters of Friedman comply with the existing laws and regulations, but do not move a step further to promote social objectives. Opponents of corporate social responsibility argue that business leaders have to focus on their main responsibility of promoting the interests of the stockholders. The social responsibility exhibited by such business leaders should only be limited to the stockholder, employees, and customers who are of critical importance in determining profit margins. In the current business world, supporters of capitalism and freedom believe that promoting corporate social responsibility affects the economic system negatively. They support the views of Friedman that businesses only have an obligation of monitoring the rules of the game in an effort to maximize profits. Such organizations believe that the government should take up the responsibilities of promoting the social agenda. In their views, the government should not compel organizations to promote the social agenda, as that would exhibit negligence on the side of the government. Without doubt, different authors have challenged the Friedman’s views. Organizations that focus on maximizing profits have registered a negative reputation. For example, in the case of the BP Oil Spill, the company’s failure to take measures of protecting the environment served to taint its reputation (Ferrero, Hoffman, & McNulty 2014, p. 41). Consequently, the company’s stock prices reduced immensely. Many businesses that focus on maximizing profits do not carry out a stakeholder analysis before making decisions. With the increasing emphasis on corporate social responsibility in the 21st century, businesses may have no choice, but to promote the social objectives. In the fast food industry, there has been an emphasis on the need for companies to promote healthy eating habits. Companies that focus on maximizing profits in their industry have had a negative reputation that has affected profitability. It becomes evident that Friedman’s opinion on corporate social responsibility is very narrow. Friedman did not give attention to the broader context of corporate social responsibility. Businesses have an Affirmative Duty to Prevent Harm in Accordance with the Kew Garden Principles Opponents of corporate social responsibility have argued that participating in the promotion of the social agenda is a deviation from their primary objective. Although this view has become very popular because of Friedman’s article and his supporters, organizations still have an affirmative duty in promoting the social agenda. Notably, every individual has the responsibility of preventing any form of social injury. Therefore, corporate executives have a duty that they cannot avoid in accordance with the affirmative duties defined by the minimum moral expectations. In addition, businesses are under the obligation to correct any social injury that has occurred in the society. Notably, corporate executives who do not comply with the law governing the expected moral minimum of preventing social injury may be prosecuted and fined. Therefore, this introduces a new dimension of viewing corporate social responsibility (ORiordan & Fairbrass, 2014, p. 133). Although organizations may claim that their main objective is promoting profit maximization, they are under legal responsibility for correcting and preventing any form of social injury. According to the Kew Gardens Principle, there are certain factors that determine the affirmative duty of correcting and preventing social harm. One of the factors is a need. Evidently, a society that has increasing needs only serves to reflect the weighty responsibilities of people to correct social injury. For example, a business that operates in poverty-stricken regions is under the compulsion to assess the needs of the people and contribute positively to alleviating social injury. Therefore, businesses have a responsibility of assessing the needs of communities and determining the level of responsibility that they have in helping the people (Hack, Kenyon, & Wood 2014, p. 49). Therefore, businesses cannot claim that they are under no obligation to participate in corporate social responsibility. The second factor discussed under the Kew Garden Principle is proximity. In this case, physical proximity may determine one’s legal responsibility in alleviating social injury. Proximity determines whether the individual was close enough to recognize the existing need for intervention. However, proximity does not denote the spatial aspects only. According to the Kew Garden Principles, proximity denotes the function of notice. Evidently, anyone who has knowledge of an existing social injury or harm is under the obligation to intervene. Failure to intervene may compel the individual to face charges. In the case of businesses, it becomes evident that they are responsible for intervening in social problems that they are aware. Failure to intervene when proximity analysis reveals that they were aware reveals that they acted irresponsibly. The Australian Broadcasting Corporation (ABC) television can be held legally responsible for alleviating any form of social harm that the media house is aware of. In one of its programs titled Devil’s Dust, the company has taken the mandate of exposing corporate scandals. The move is remarkable because exposing the companies can lead to further investigation and litigation. However, the ABC TV has a further mandate of actively participating in correcting the social injury. It is evident that the company’s responsibility has a wider scope. Notably, the ABC media house plays critical media roles (Glac 2014, p. 64). The media have been criticized immensely for failing to take part in the corporate social responsibility agenda. The media carry out investigative assignments that may highlight the existing social injury in different areas of Australia. According to the legal responsibility defined under the Kew Garden Principles, the ABC Company should participate actively in correcting social injuries that they have reported over time. Evidently, a close consideration of the legal responsibilities that organizations have as defined in the Kew Garden Principles serves to widen the scope of corporate social responsibility. It is impossible for any company to claim that its sole responsibility is profit maximization (Carroll 1999, p. 280). The third factor described under the Kew Gardens Principle is capability. The capability principle makes it evident that anyone who has proximity to a social injury, recognizes the need, and is in a position to do something can be blamed if he or she does not take any action. Therefore, the application of this principle in business practice makes it evident to those businesses that have the capacity to intervene in solving social problems, especially if the company has contributed in developing the problems, and then it is legally bound to participate in corporate social responsibility (Carroll 2000, p. 461). For example, in the case of the BP Company mentioned above, it had the capacity to mitigate injury by taking safety measures of protecting the environment and its employees. Therefore, the company could be held responsible for the damage that resulted from the oil spill. The fourth principle is the last resort. Many organizations are likely to notice social problems and assume that other social agencies will intervene effectively. In addition, many organizations waste time trying to find out the last resort to intervene in any social problem. Failing to intervene because of any of these factors may hold an organization legally responsible. However, the application of this principle in business practice is complex because it is difficult to determine if the organization had notice of the existing problem and if it failed to act due to the last resort excuse (Burchell 2008, p. 79). Evaluation of the Philanthropic Affirmative Duty to Contribute to the Society As corporate social responsibility receives more emphasis in the 21st century, some governments have exhibited their interest in mandating all the organizations to participate in promoting social and ethical agenda. Some countries such as India have introduced a legal obligation for organizations to extend their philanthropy to the society. The argument for placing a legal obligation on organizations to promote social and ethical agenda is on the basis that organizations should give back to the society. Evidently, organizations benefit from the society by gaining resources (Crane, Matten, & Spence 2008, p. 78). Without resources, it would be extremely difficult for organizations to grow. However, when organizations do not feel compelled to give back to the society, some governments choose to place legal obligations. The mandate of compelling Indian companies to participate in corporate social responsibility with eligibility defined according to the net profits of companies received a lot of criticism. The government introduced specific requirements for organizations to spend a certain percentage of their net profits in promoting the social agenda. Opponents of the legal mandate opined that the affirmative duty might have a negative impact on the corporate social responsibility efforts (George 2001, p. 41). Apparently, many of the companies required to set aside 2% of their net profit for philanthropic projects had been spending more than the 2% in promoting social objectives. Therefore, the Act may serve to reduce the impact of corporate social responsibility (Jackson & Nelson 2004, p. 86). Opponents of the legal obligation argue that corporate social responsibilities should remain voluntary. However, proponents of mandating organizations to participate in corporate social responsibility argue that organizations will become more aware of their social responsibilities and prove to be more ethical in their dealings. In addition, communities will benefit because each organization would have a responsibility for contributing positively to community development (Werhane 2000, p. 190). However, the debate surrounding the affirmative duty is still ensuing. In countries whereby no legal obligations exist, businesses should recognize the potential benefits of corporate social responsibility and integrate business strategy with corporate social responsibility. In the Australian case, businesses are under no legal mandate to participate in the corporate social responsibility agenda. However, the ABC TV has integrated a remarkable corporate social responsibility strategy with its business strategy (Garriga & Mele 2004, p. 69). Conclusion and Recommendations Evidently, Friedman seems to have developed a strong argument against corporate social responsibility. However, according to the Kew Garden Principles, every organization has a minimum responsibility of preventing and correcting social injury. Therefore, every business has a mandate to do something in an effort to promote social and ethical agenda. According to the principle of proximity, businesses have the obligation to solve social problems that exist in the regions where they operate. Organizations can benefit immensely by participating in corporate social responsibility. The following are some of the recommendations that modern businesses can implement the integration of corporate social responsibility with business strategy. 1. Australian companies should be more willing to initiate corporate social responsibility activities 2. Companies should carry out a stakeholder analysis in an effort to determine their scope of social responsibility. 3. Companies need to analyse their decisions critically considering every stakeholder without the sole purpose of profit maximization. 4. Lack of corporate social responsibility agenda may reduce the profitability of a company. Therefore, companies should integrate corporate social responsibility strategies with business strategies in order to build a remarkable reputation and increase profitability at the same time (Black 2006, p. 36). 5. Companies should be willing to give back to the society because they have been relying on societal resources on their progress. 6. Every business has a legal responsibility to promote social objectives. 7. Businesses have the capacity required to promote the social agenda. Bibliography Black, LD 2006, Corporate Social Responsibility as Capability, Journal of Corporate Citizenship, 23, pp. 25-38. Burchell, J 2008, The Corporate Social Responsibility Reader, London: Routledge. Carroll, AB 1999, Corporate social responsibility, Business and Society, 38, 3, pp. 268-296. Carroll, AB 2000, A commentary and an overview of key questions on corporate social performance measurement, Business and Society, 39, 4, pp.466-479. Crane, A., Matten, D. & Spence, L 2008, Corporate Social Responsibility: Readings and Cases in a Global Context, London: Routledge. 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