Corporate Social Responsibility Theories - Coursework Example

Compare and Contrast the Two Views of Corporate Responsibility Name Institution’s name Date Compare and Contrast the Two Views of Corporate Social Responsibility Introduction Corporate Social Responsibility is a theme attracting immense significance in the world today; corporations in both developed and developing nations are increasingly indulging in CSR (Jamali and Sidani, 2008). According to Kotler and Lee (2011), corporations have a huge impact on various tenets of the society, thus the need for them to develop frameworks of enhancing social responsibility. The social responsibilities of organizations have been a hugely debated phenomenon in the corporate circles. The classic and socio-economic views of corporate social responsibility play a huge role in determining how the management of companies relate with their internal and external structures (Kotler and Lee, 2011). For this reason, detailed comparison of the two approaches is instrumental in understanding CRS. The purpose of this essay is to have an in-depth discussion on corporate social responsibility, its impact on the society as well as on the operations of corporations. With a focus on the classical and socioeconomic views of CSR, the essay also aims to unearth the theoretical arguments for, and against the concept. In achieving its purpose, the essay begins by defining CRS and providing a broad comprehension of the concept. In addition, the essay will discuss the classical view of CSR and the arguments against CRS. The essay will also examine the socioeconomic view of CSR and the arguments for CRS. Finally, the essay will give a summary of its main arguments on the topic. Definition and Understanding of CSR Corporate Social Responsibility refers to the actions taken by a corporation to address environmental, economic and social issues in a bid to contribute towards the growth and development of the society (Luo and Bhattacharya, 2006). Devinney (2006) further points out that, CSR is a social sanction obliging a corporation to play a significant role in accruing benefits to the society. “From a traditional tenet, society’s social sanction to corporations calls for organizations to operate within the social, legal and economic values of the society, as well as enhancing the development of the values” ( Devinney, 2009 p. 46). A critical analysis of the ideas pointed out unearths that a company’s decisions should mirror its commitment towards social responsibility. Moir (2001, p 18) argues that, “Corporate Social Responsibility stems from a significant relationship between companies and the society.”Consequently, according to Moir (2001), corporations, in maintaining the principles of corporate social responsibility, are entitled to produce products and services that the society needs. Lee and Kotler (2011) agree with Moir (2001) by asserting that through CSR, organizations and the society are interdependent entities that benefit from each other. CSR covers a myriad of issues including, community development, consumer considerations, social growth, human rights, and employees’ working environment (Lee and Kotler, 2011). In this respect, CSR has a huge impact on a company’s stakeholders. Corporate social responsibility derives benefits for both the internal and external environments of a company. Major benefits to a company that embraces CSR are its enhanced corporate image and greater employee constancy (Luo and Bhattacharya, 2006). For instance, a company embracing corporate social responsibility adheres to ethical labor principles, hence creating a favorable working environment for its employees. Moreover, external benefits of CSR include social and environmental growth, as well as customer satisfaction (Luo and Bhattacharya, 2006). For example, corporations engage in philanthropic endeavors by donating money to the community, or even producing goods and services that are eco-friendly. Thus, companies are increasingly investing in CSR business models. For example, Tom’s Shoes is a company that has invested heavily in its CSR framework by donating shoes to needy people across the world. Corporate social responsibility is a broad concept describing the relationship between companies and the society. The increasing awareness on national and global concerns is pushing corporations to embrace CSR as central tenet. Classical view of CSR and arguments against CSR According to the classical view of corporate social responsibility, the core business of a corporation is ensuring that it maximizes on its profits (McWilliams, Siegel and Wright, 2006). The management of a company is obligated to enhance the interests of the company and its shareholders. According to Brammer, Jackson and Matten (2012), the classical view of CSR holds a narrow standpoint on a company’s stakeholders. This implies that as opposed to proponents of CSR, the classical view does not perceive CSR as a principle objective for a corporation. The management of a business should ensure that it does not engage in social activities that increases its costs. For example, companies are hesitant in increasing their employees’ salaries because this affects their financial status. Instead, a business enterprise should only seek ways of enhancing its financial endowment. Luo and Bhattacharya (2006 p 3), argue that the “responsibility of corporate officials is to make as much money as possible for its stakeholders” In light of the classic view, opponents of CSR put forward various arguments against a company’s social responsibility. One of the arguments against CSR according to the classic view is that social actions should not burden the financial performance of a company. Jamali and Sidani (2008 p 333) asserts that, “If social activities limit the capacity of a company to make profits, then it is not worth investing in them.” For example, since reducing pollution is costly for manufacturing industries, there are companies that do not invest their resources in reducing pollution. Critically, opponents of CSR believe that it is a conflict of interest for companies to incur extra costs on social objectives. Moreover, proponents of the classic view assert that CSR weakens an organization’s business purpose, and consequently loses its competitive nature against other organizations (McWilliams, Siegel and Wright, 2006). Additionally, proponents of the view argue against CSR by asserting that companies participating in CSR wield intense social power without matching their accountability credentials (Brammer, Jackson and Matten, 2012). The classic view of CSR advocates that a company can only meet the interests of the society, if its management maximizes on profitable returns. Socio-economic view of CSR and arguments for CSR The socio-economic view highlights that apart from a company’s pursuit of corporate profits, it has a responsibility to ensure that it meets the needs of the society (Kotler and Lee, 2011). Improving the welfare of the society is a principle objective of companies. Jamali and Sidani (2008 p 335) highlights that, “The socio-economic perspective holds stakeholders as imperative entities in the running of modern corporations.” Kotler and Lee (2011) argues that the socio-economic view of corporate social responsibility focuses on the expanded perspective, which not only centers on financial endowment but also in the development of the social and economic endowment. There are various arguments that, proponents of the socio-economic view expose in supporting corporate social responsibility. Improving the corporate image of a corporation is a major argument for the establishment of CSR as a business model. Devinney (2009) indicates that being socially responsible enables a company to have a higher customer base; hence enhancing its public image. “Social and environmental awareness in the market place triggers consumers to favor companies and businesses that embrace corporate social responsibility” (McWilliams, Siegel and Wright, 2006 p 15). For example, customers will find it more appealing to purchase goods from companies that are conscious of the environment. In other words, they interact well with companies with anti-pollution policies. Additionally, it is worth noting that an increased corporate image in the public’s spectrum translates into profits. According to Devinney (2009), research shows that there is a significant relationship between CSR and a company’s financial performance. Furthermore, proponents of socio-economic view assert that CSR plays an instrumental role in improving the internal environment of an organization. A company embracing ethical labor principles is able to be mindful of its employees; hence, empowering human capital. On the same vein, Moir (2001) highlights that CSR provides the impetus for a better working environment, thus enhancing employee retention. For example, giving employees pay hikes and bonuses are significant ethical practices that enhance their performance (Luo and Bhattacharya, 2006). Of importance still, Moir (2001) and Devinney (2009) argue that since the society creates a favorable infrastructural environment for corporations to operate, it is the obligation of a company’s management to integrate its goals within the needs of the society. Therefore, the socio-economic view of CSR posits that businesses have a greater and broader obligation to the society than just investing in corporate profits. Conclusion Corporate Social Responsibility is increasingly gaining prominence in today’s world, as companies are seeking to establish closer relationships with societal realms. CSR is an influential force in determining the actions and decisions of a company. Through the significance of CSR, companies are aligning their products and services according to the interests of the society. The society and corporations relate in a complex structure that accrues benefits to both entities. Understanding CSR brings forth the classical and socio-economic approaches of the concept. The classical view ascertains that the core purpose of organizations is to make profits, as opposed to investing in the society, while the socio-economic view highlights that societal growth is equally important as a company’s profit index. Globalization has triggered organizations to operate in more than one country, thus expanding their social and corporate jurisdictions. The ability of organizations to employ a CSR business model on a globalization platform brings about various challenges to organizations. In light of CSR, globalization requires organizations to invest immensely in its resources in order to meet legal, ethical, philanthropic and social responsibilities. This requires corporations to put in extra efforts to maintain their CSR obligations. Another challenge stemming from globalization is the increasing competitive nature of the corporate world, as large organizations use CSR to enhance their competitive advantage in the market. Certainly, CSR is a business model that influences greatly the way the management team of a company handles its operations. References Brammer, S., Jackson, G. and Matten, D. (2012). Corporate Social Responsibility and institutional theory: new perspectives on private governance, Socio-Economic Review, 10, 3–2. Devinney, T.M. (2009). Is the Socially Responsible Corporation a Myth? The Good, the Bad, and the Ugly of Corporate Social Responsibility Academy of Management Perspectives, vol. 23 (2) 44-56. Jamali, D. and Sidani, Y. (2008). Classical vs. Modern Managerial CSR Perspectives: Insights from Lebanese Context and Cross-Cultural Implications. Business and Society Review, 113:3 329–346. Kotler, P. and Lee, N. (2011). Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause. John Wiley & Sons. Luo, X. and Bhattacharya, C.B. (2006). Corporate Social Responsibility, Customer Satisfaction, and Market Value. Journal of Marketing, Vol. 70, No. 4 (Oct., 2006), pp. 1-18. McWilliams, A., Siegel, D.S. and Wright, P.M. (2006). Corporate Social Responsibility: Strategic Implications. Journal of Management Studies. Vol 43 (1) 1-18. Moir, L. (2001). WHAT DO WE MEAN BY CORPORATE SOCIAL RESPONSIBILITY? Corporate Governance, Vol 1(2) 16-22. Read More