For and Against CSR with Focus Being on Friedman Milton and Mintzberg Henry - Literature review Example

Corporate Social Responsibility Name of student Tutor 22 Aug, 2011 Corporate Social Responsibility Part A Comparing and Creating an Argument for and Against CSR with Focus Being on Friedman Milton and Mintzberg Henry Corporate Social Responsibility is the legal, economic, discretionary and ethical expectations of the society on a company at a particular time or during specific situations (Carroll and Buchholtz, 2003). Though a trend that has become common among many organizations today, arguments on what roles businesses should play in society continue to emerge as organizations look for ways on how to either minimize or increase their responsibility towards the society around them. This part of the paper focuses on the arguments for and those against Corporate Social Responsibility with a look at the work of two authors; Milton Friedman in his work “The social responsibility of business is to increase profits” and Henry Mintzberg in the work “The Case for Corporate Social Responsibility”. Mintzberg, H. (1986) "The Case for Corporate Social Responsibility", Journal of Business Strategy, 4 (2): 3 – 15 Arguments in support In support for Corporate Social Responsibility, Mintzberg (1986) is of the opinion that for a sustainable and flourishing economy and society, businesses need to endorse social responsibility. According to the author, CSR activities are undertaken for ethical reasons. Mintzberg looks at CSR in four forms. The first form which is the pure form of CSR is whereby businesses are engaged in CSR activities for the good of the society and with no motive of gaining from the act. The author refers to the other forms as unethical and that are therefore not sustainable. These include the practice of CSR for self interest whereby the business expects to gain. The other is when CSR is done as an investment meaning that the business will reap back from the market shares(theory of sound investment)(Bowman, 1973) while the third is when businesses engage in CSR to act in accordance with the law and to avoid interference from the government. Mintzberg believes that CSR should be practiced in its pure and first form and believes that the arguments related to self interest and which are in support of CSR make stronger arguments for other companies. According to him, CSR being a good investment is so because there is pressure from other groups to make it that (Mintzberg, 1986). Mintzberg may have been correct in saying that the ethical form of CSR should be the main motive for any company (Mintzberg, 1986). This is important in such a way that if this became the drive for businesses, then they would be socially responsible even in situations where they are not likely to gain from their actions. Arguments against Mintzberg’s view that the pure form of CSR is the only one that can survive (Mintzberg, 1986) is however also incorrect. This is because regardless of their motive, companies practicing CSR for self gain are after all benefiting the society. The only difference in their action lies only in the motive but at the endow it all, the end product is supporting and positively changing the society. Mintzberg may have had a good opinion in identifying pure CSR as being the sole ethical process of being socially responsible but this still leaves a lot of questions. This is because it is highly unlikely that most businesses engage in CSR without the thought of seeking to gain or enhancing their businesses. In the case of the self interest form of CSR for example, a company may be developing a long term strategy of benefiting in such a way that their actions towards the society are not beneficial immediately but in the future. The fact that they act out with an aim of reaping in the future does not make their act of social responsibility less beneficial than that by a company acting out for ethical reasons. In support of CSR as a business strategy, Caroll and Buchholtz (2003) say that businesses need to have a focus greater than the short-term gains and instead look at current actions as investments expected to bring in huge gains in later years. Friedman, M. (1970) “The Social Responsibility of Business is to Increase its Profits.” The New York Times Magazine. 13 Sept. 1970. 26. Arguments against In his argument against Corporate Social Responsibility, Friedman (1970) is of the opinion that businesses cannot have social responsibility and it is only individuals who can have such a responsibility. Friedman unlike Mintzberg believes that CSR activities are undertaken for economic reasons. With this view, the author insists that social responsibility should only be taken charge of by the executive in a given company but not by the entire company. The executive’s main responsibilities according to this author is to the workers as well as to manage the company with the aim being to create the highest level of profits while at the same time acting in accordance with the rules set out by the society (Friedman, 1970). Friedman calls for the existence of a society that is free and believes that a businesses’ sole responsibility should be to utilize the resources available to it and take part in activities likely to raise the profit level just as long as this is done in accordance with the set rules. He argues that social responsibility disrupts the true economic nature of business, CSR only imposes costs on the business and hence causes competitive disadvantage and that businesses are not competent enough to deal with social issues (Friedman, 1970). In my own opinion, Friedman’s view on Corporate Social Responsibility is to some extent incorrect. There are situations whereby, organizations may exercise CSR and in turn get to attract new and more customers by their act of goodwill. This does not however mean that that was the company’s main reason for its acts. Many companies have for example been found to have a foundation through which they are able to offer their assistance to the less privileged members of the society. In most cases, this foundation is not created for the benefit of the society but rather as an act of giving back to the society and of giving assistance to the disadvantaged groups such as the poor and orphans. Such acts can be said to be in line with Mintzberg’s views and thus oppose those of Friedman. The view that CSR should only be aimed at maximizing profits (Friedman, 1970) could be a dangerous one if companies were to solely adapt it. This is because if companies would have that as their main and most concentrated on goal in terms of CSR, then they are likely to put emphasis only in the areas that are likely beneficial to them and not on the most crucial needs of the society. Exercising CSR with an aim of gaining from the society could also mean that the business will have to pass on the social responsibility costs to the society. The question is in this case whether the society will be in a position to deal with the imposed costs (Marquez & Fombrun, 2005). Arguments for On the other hand, Friedman’s view can strongly be seen as the root and driving force for most companies. Additionally, a company that takes part in CSR activities, with or without the intention of gaining from the society, ends up benefiting from their acts. Companies that are socially responsible for example attract more clients and leave their workers feeling proud of being a part of it (Post et al., 2002). Conclusion From the above discussion, Mintzberg and Friedman view on what role CSR should play is in complete contrast with Friedman believing that the main aim of any business should be to make profit while Mintzberg is of the opinion that businesses exercise CSR but without expecting any benefits. This creates two possible motives for companies’ involvement in CSR; as a business strategy and as an ethical stance. Though some businesses may practice CSR on the basis of ethics, it does not necessarily mean that ethics is the main reason behind their actions. It is the goal of every business to grow, hence the highest possibilities are that if engaging in CSR is going to be of benefit to the business, they will most certainly do it. This view therefore makes Friedman’s opinion and argument the strongest among the two. Friedman is more convincing as he analyses CSR with a business and strategic mind and takes into consideration that in whatever action is to be done, none of the parties involved stands to lose. It however does not rule out the fact that CSR could be done for ethical reasons and not as a business strategy. Mintzberg however only assumes that a business will plan for any of their social undertakings without putting into consideration the expected outcome or benefit on their part and that they will act as a noble gesture and nothing else. This is in the real sense an unlikely move for any business. Generally, organizations need to have social responsibility while at the same time be capable of meeting their set out aims of ensuring that maximum profits are made and that clients, stockholders and employees are satisfied with the goods and services offered to them. In the long run, whether the motivation for taking part in CSR is business or ethics related, the act will have a positive impact on the success of the business. This impact may be short or long term. It is therefore important that all businesses be socially responsible if they are to remain successfully functional in any given society. Part B Caroll, B. (1991).The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34, (4): 39-48. Abstract This article looks at what makes up Corporate Social Responsibility as a way of seeking to understand its nature. A CSR pyramid framework is used. Introduction Companies have over time acquired a clearer understanding of CSR. The companies therefore have come to understand the various roles that they need to play to ensure that they exercise responsibility to the society; the environment, customers and employees. There is difficulty however, when it comes to striking a balance between the companies’ commitments to its owners and to its said stakeholders. In response to the above mentioned difficulty this that this article seeks to explore on the main components of CSR (moral or ethical). The identified components in the article create ways through which companies will be able to balance their obligations. Discussion This part of the article brings out the views of other scholars in the concept of CSR. In a bid to identify a most suitable definition for corporate social responsibility; different authors have made their contributions. Davis (1960) defined it as the actions or decisions that businesses make in the interest of others and not directly linked with their economic interests. Eells and Walton (1961) on the other hand define it as the problems companies experience when they strongly influence the society (required principles of ethics). Different authors have used different theoretical models to explain CSR. These models have been effective in analyzing CSR in various dimensions. The Committee for Economic Development explains CSR in terms of the concentric circles with the inner circle constituting the basic functions, the intermediate circle suggesting that companies need to be aware of the changing priorities and values in the society while exercising these functions while the outer circle depicts developing responsibilities companies need to embark on to improve the society (CED, 1971). In their analysis other authors shift their focus from social-responsibility to social- responsiveness. The authors argue that focus on responsibility overlooked performance by exclusively looking at business obligation. The emphasis on social responsiveness is on corporate action, social role implementation and pro-action. The remaining question here is on reconciling the company’s orientation on the economy with that on the society. Answering this question called for a complete CSR definition to be done. This entailed assessing it in terms of related economic, legal, philanthropic and ethical responsibilities. Contribution This paper has been effective in contributing towards Corporate Social Responsibility in such a way that it creates a greater understanding for the concept and its nature. The author’s CSR pyramid model has indicated the relative value of legal, ethical, philanthropic and economic responsibilities. Exploring on the CSR components allows businessmen to strike a balance between their business and societal obligation .By analyzing the ethical components that make up CSR and relating it to the various perspectives of the three main ethical management approaches, the article has brought out the concept of ethical or morally upright management of stakeholders. Conclusion From the various findings obtained in this article, business ethics can only be improved through good leadership. This therefore means that moral management creates a leadership perspective which every manager should work towards attaining. It is however important that this kind of judgment be viewed in terms of the existing relationship between an organization and its stakeholders. By doing this, an organization can be able to strike a balance between its obligations towards the society and that towards its owners. If the focus of an organization is creating a society that is good, then that becomes the preoccupation and aspiration of the management. Further research is however necessary in this area to ensure that this same view is held by others whose focus will be on balancing between business growth and CSR. Critique From the analyzed article, Corporate Social Responsibility can be described as the legal, ethical, economic and discretionary/ philanthropic expectations of society members on companies in particular situations. In his article, Carroll is of the idea that other than making profits, companies have moral, philanthropic and ethical responsibilities. Additionally they have a duty of ensuring that their actions are in accordance with the law. The concept brought out by this article is in line with the three CSR domains discussed by Wood (1991) and that include organizational, individual and institutional. Institutional refers to a society’s power and the need for a company to legitimately act in accordance with the power. Organizational requires managers to consider what their actions will result into while Individual refers to the companies’ moral actions and requires managers to know and understand issues surrounding them and utilize them in the processes of innovation, marketing, production and even communication in finding solutions to problems. The view by Carroll and by various other authors opposes the conventional view that companies have only an obligation towards its stockholders or owners. The author’s view can therefore be said to have given new obligations to corporations by requiring them to encompass responsibilities towards customers, employees, local communities, suppliers, the environment, state, federal government as well as other groups of special interest (Margolis & Walsh, 2001; Orlitzky et al., 2003). Though Carroll’s pyramid is seen as a useful and durable model for exploring and defining CSR, its simplicity fails to bring out the complexity of Corporate Social Responsibility in practice. The model fails to offer the solution to what would happen if two or even more of the identified responsibilities were in conflict (Crane & Matten, 2004). According to Carroll, a company’s increased orientation towards economic responsibilities means less emphasis on the other three responsibilities. The author doses not however provide a solution for this kind of conflicts. Another criticism for Carroll’s model is that, the author fails to effectively understand various related but competing concepts like corporate citizenship, stakeholder management and business ethics in his effort to fix them into the CSR pyramid. Carroll according to McIntosh, Thomas, Leipziger, & Coleman (2002) only tries to identify a common concept in terms of the existing relationship between society and business through the incorporation of related themes but leaves a lot of gaps in terms of corporate sustainability and environmental management which are missing in the pyramid. The growing trend calling for integration between the economic, environmental and social CSR aspects makes these two omitted concepts very crucial for effective CSR to occur hence their omission from the pyramid reduces its instrumental value for managers who are working towards sustainability (Elkington, 1994). In my own opinion, Carroll’s conceptualization of CSR into the four parts is durable and reliable. Other than being easy and simple to understand, the author’s model has over the years been reproduced in many CSR journals. Additionally, empirical tests have been done on it and given supporting findings (Pinkston & Carroll, 1994; Aupperle, Carroll, & Hatfield, 1985). The model has incorporated and emphasized on economic scope as a CSR aspect, likely to endear business owners and researchers. Arguments against the model need to be further supported for them to be fully conviencing. From Carroll’s analysis, CSR relates a lot to business ethics which entails the moral behavior and judgment of an individual or group of people within a firm. It is therefore important for business ethics to be looked as a CSR component. Garriga, E. and Mele, D. (2004).Corporate Social Responsibility Theories: Mapping the Territory. Journal of Business Ethic, 53 (1): 51–71. Abstract In trying to make clear the various theories of Corporate Social Responsibility, this article classifies them as instrumental, political, integrative and ethical theories. Introduction The known theories that relate to Corporate Social Responsibility have often been regarded as being complex and difficult to understand. This has made it necessary for the theories to be simplified an issue that this article seeks to address. To make the theories easier to understand, the article has also brought out other important CSR terms that have further created more knowledge for companies. Examples of such terms include corporate sustainability and co-operate citizenship. These have been added to the commonly known terms used to explain the CSR environment and that include stakeholder management, management of social issues, corporate accountability. Discussion In a bid to classify CSR theories into groups that will be easier to understand, Garigga and Mele create a hypothesis indicating that the main theories of CSR are those whose focus is on particular social reality aspects such as politics, economics, ethics and social integration. This hypothesis was obtained from the four constituents of the social system; ability to adapt to the environment (concerned with economics and resources), attainment of goals (concerned with politics), latency or maintenance of pattern (concerned with social culture and values) and social integration (Parsons, 1961). It is this hypothesis that allows for the classification of CSR theories into the four groups; instrumental theories, political, integrative and ethical theories. Many authors regard these dimensions as being key in any existing relationship between businesses and society and maintain that they an integration exists between them (Parsons, 1961; Wood 1991; Davis, 1973). the integration of two or more of these dimensions is for example evident in the formation of theories such as the Corporate Social performance theory by Wood (1991) which deals with the integration of social demands and which accepts that businesses are granted power and legitimacy by the society. The main problem identified is the fact that many theories do not explicitly bring out the effects of every dimension in relation to other theory groups. The questions posed are therefore related to what the main focus of CRS should be. Wood in this case brings about integrative and political dimensions but keeps ethical and economical theories implicit, an aspect that is criticized by Swanson (1995). Researchers call for more studies to be conducted to analyze the 4 CSR approaches and their relationship in the key theories ensuring that their limitations and contributions are considered. They have used other literature ad findings from previous researches to support their arguments. Contribution By classifying the theories of CSR into the four main groups, this paper has helped clarify what was before very complex and controversial. Each of the theories identified has in turn presented four main dimensions which political performance, profits, ethical values and social demands. Exploring on each of this theories and related dimensions has allowed further knowledge and understanding on CSR and what it should entail to be attained. The article has also explored on how a number of the identified dimensions integrate within a particular theory indicating which of the dimensions are implicit or explicit in each theory. Conclusion The findings obtained in this article have made CSR theories easier to understand and hence easier for managers to apply as they have gained clearer knowledge in the area. From the findings, CSR theories can be said to be focused on 4 major aspects which include gaining long term profits, ensuring that business power is responsibly used, integration of social demands and being ethical in our actions and contribution towards the society. This in turn classifies CSR theories into 4 main groups; political, value, integrative and instrumental theories. Integration between two or more of these dimensions in the various theories has been identified. There is however need for more to be done in the development of new theories which integrate all the four dimensions. Further research should be done to analyze the limitations and contributions of these dimensions. Critique Domenec Mele and Elisabet Garriga articulated the unwieldy field of theories into four aspects. Theses aspects clearly show that the academicians CSR to cover as the “central themes” researched. As note by Frans Paul Van de Putten, these central theoretical themes relate to profits, ethical values, community performance and social demands. However in the mapping of the four theoretical approaches to the study of CSR, Domenec Mele and Elisabet Garriga in their work: Corprate Social Responsibility Theories: Mapping the Territory, note that the CSR field not only presents a landscape of theories but also a proliferation of approaches which are complex, controversial and unclear. The arguments by Garigga and Mele stand up in the light of other readings; Donati (1991) suggests that, the concept of society and business relationships should include the four dimensions or aspects – (goal attainment, adaptation, latency and integration) and there should be an existing a link among them. This has to be revealed in all theories. In Friedman it is easy to discover these connections and dimensions but not easy in other theories. His main concern is in some cultural values concerning private property, free market and the view that creation of wealth is fine for the society. Friedman as well as Jensen (2000) acknowledges the integration of social demands that are profitable in the long run into the company. However, the CSR theories that take long term profits as the key goal are usually descriptive and use an experimental methodology, although they clearly present a conditional recommendation. Their general statement may obtain the form; for you to maximize profits you have to assume CSR as proposed by the theory. To the contrast, the ethical theories are usually perspective in nature and use a normative methodology. Integration of CSR normative and empirical aspects, or ethics and economics is a big challenge. (Brandy, 1990; Etzioni, 1988; Trevino and Weaver, 1994 among others) are some of the authors who have considered this as a problem and it is far from being solved. The lack of integration has been denounced as the cause of the lack of a model for the society and business field. (Swanson 1999). Further research is necessary to analyze the four dimensions; (integrating of the social demands, contribution to the society ethically, meeting the objectives that produce profits in the long term and using business power responsibly) and their connections in the relevant theories and reflect on their limitations and contributions. How to develop a theory to overcome the limitations is quite challenging, this requires exact knowledge of “Reality” and “Sound Ethical Foundation”. The limitations of CSR can be curbed by developing a large number of varying ethical theories. Though each of the theories in practice state universal principles, the worldwide effect is one of the bold relativism. References Aupperle, E., Carroll, B. & Hatfield, D. (1985). An Empirical Examination of the Relationship Between Corporate Social Responsibility and Profitability. Academy of Management Journal, 28(2): 446-463. Brandy, N. (1990). Ethical Managing: Rules and Results. London: Macmillan Pub. Bowman, H. (1973). Corporate social responsibility and the investor. Journal of Contemporary Business, winter: 21-43. Carroll, B., and Buchholtz, K. (2003) Business and Society: Ethics and Stakeholder Management. 5th ed. Australia: Thomson South-Western. Committee for Economic Development (1971) Social Responsibilities of Business Corporations. New York: CED. Crane, A. & Matten, D. (2004). Business Ethics. Oxford: Oxford University Press. Davis, K. (1960)"Can Business Afford to Ignore its Social Responsibilities?" California Management Review, 2(3):70-76. Donati, P. (1991) Teoria relazionale della societa. Milano: Franco Agnelli. Eells, R. and Walton, C. (1961) Conceptual Foundations of Business. Homewood, ill.: Richard D. Irwin. Elkington, J. (1994). Towards the Sustainable Corporation: Win-Win- Win Strategies for Sustainable Development. California Management Review, 36(2):100. Friedman, M. (1970) “The Social Responsibility of Business is to Increase its Profits.” The New York Times Magazine. 13 Sept. 1970. 26. Margolis, J. and Walsh,J. (2001). People and profits? The search for a link between a company’s social and financial performance. Mahwah, NJ: Erlbaum Marquez, A., & Fombrun, J. (2005). Measuring Corporate Social Responsibility. Corporate Reputation Review, 7:304–308. McIntosh, M., Thomas, R., Leipziger, D. & Coleman, G. (2002). Living Corporate Citizenship: Strategic routes to socially responsible business. London: Financial Times & Pearson. Mintzberg, H. (1986) "The Case for Corporate Social Responsibility", Journal of Business Strategy, 4 (2): 3 - 15 Orlitzky, M., Schmidt, L. and Rhynes, L. (2003). “Corporate Social and Financial Performance: A Meta-Analysis,” Organization Studies, 24(3), 403–441. Parsons, T. (1961). An Outline of the Social System. New York: Free Press. Pinkston, S. & Carroll, B. (1994). Corporate Citizenship Perpectives and Foreign Direct Investment in the US. Journal of Business Ethics, 13(3):157-169. Post, T., Lawrence, P. & Weber, J. (2002). Business and Society. 10th ed. Boston: McGraw-Hill. Swanson, D. (1999) ‘Toward an Integrative Theory of Business and Society: A Research Strategy for Corporate Social Performance’. Academy of Management Review, 24(3):506–521. Wood, D. (1991) “Corporate Social Performance Revisited.” Academy of Management Review. 16 (4): 691-718. Read More