Chapter Five Corporate Social Responsibility

5.1. Describing social responsibility

Corporate social responsibility (CSR) has had many definitions to date; one is the way a corporation
achieves a balance among its economic, social, and environmental responsibilities in its operations so as
to address shareholder and other stakeholder expectations

Rather than use a precise definition, researchers have identified the elements or topics that might be
included. Buchholz identified five key elements found in most, if not all, definitions:
• Corporations have responsibilities that go beyond the production of goods and services at a profit.
• These responsibilities involve helping to solve important social problems, especially those they have
helped create.
• Corporations have a broader constituency than shareholders alone.
• Corporations have impacts that go beyond simple marketplace transactions.
• Corporations serve a wider range of human values than can be captured by sole focus on economic
values.
In another example of this approach, Dahlsrud examined 37 definitions through content analysis and
found that five dimensions of CSR existed:
• Environmental: the natural environment
• Social: the relationship between business and society
• Economic: socio-economic and financial aspects
• Stakeholder: stakeholders and stakeholder groups
• Voluntariness: actions not prescribed by law
5.2. The Corporate Social Responsibility Debate

The discussion of the appropriateness and meaning of social responsibility continues. This debate is
treated in two ways in this chapter: through a listing of the arguments for and against social
responsibility, and through a summary of the theories used to represent the variety of views toward
social responsibility.
The Case for Involvement
Many arguments support the involvement of business in society; that is, they support the social
responsibility or social responsiveness of business. Business must realize that society is a "system" of
which corporations are a part, and that the system is interdependent.
Therefore, if business institutions interact with others in society, the need for social involvement along
with increasing interdependence brings the need to participate in the complex system that exists in
society. There are many mutual involvements among individuals, groups, and organizations in society,
or among subsectors of society. Business is vulnerable to the actions or events that occur in other
subsectors. As a result, business should operate in such a way as to fulfill society’s needs or
expectations. It should do so for a very pragmatic reason: it is believed in some quarters that business
functions by the consent of society and therefore must be sure to satisfy the needs of society.
The Counterargument to the Case for Involvement
Although several arguments can be made for social involvement by business corporations, there also are
many arguments against business social involvement. Profit maximization is the primary purpose of
business, and to have any other purpose is not socially responsible. To have anything other than a profit-
maximizing goal is to sabotage the market mechanism and distort the allocation of resources. Generally,
then, it is contrary to the basic function of business to become involved in social matters. It should not
be forgotten that business is an economic institution, not a social one, and its only responsibility is to
manage efficiently within the law. The corporation would be irresponsible if it did not pursue profits and
operate in the efficient market.
5.3. Social Responsibility Theories

Klonoski sets out to address a fundamental question: "Does business and the corporation have a social
nature, or not?" The answer given by any stakeholder can be associated with a theory of corporate social
responsibility, and these theories fall into three categories: amoral, personal, and social.
The Amoral View
This category represents a traditional view of business and the role of the corporation; that is, the
corporation is seen as a "highly individualized rights bearing economic entity designed for profit making
and legitimatized by the laws governing incorporated businesses." Free market defenders and legal
recognition theorists are among those holding this view, including some who believe there is no such
thing as corporate social responsibility. The amoral view is still held by some in the business. The
"amoral" view should be carefully defined and not confused with an "immoral" view. Amoral refers to
an activity without a moral quality; that is, something that is neither moral nor immoral: moral
standards, restraints, or principles do not exist. This is quite different from immoral, which denotes
activities that are not moral and do not conform to usually accepted or established patterns of conduct.
Amoral means lacking in morals, good or bad, while immoral connotes evil or licentious behavior.
Although in some contexts being amoral is considered as reprehensible as being immoral, that is not the
position taken by most advocates of the theories listed in this category.
The Personal View
This view discusses the nature of the corporation in ascertaining whether it can be held accountable. The
question involved is whether corporations are "moral agents" or "full-fledged" moral persons.
Corporations are viewed as collectives that act as individuals; they exist as legal persons and can be held
responsible for their actions. This question has been extensively discussed in the literature. Those
arguing that corporations are persons claim that corporations are responsible for their actions in a way
comparable to the actions taken by natural persons or individuals. Therefore, the corporation can be
morally blamed in a way that is identical or very similar to natural persons.
The Social View
This view holds that the activities of corporations occur within an interpersonal and, most likely, social
context. The corporation is considered a social institution in society, with social responsibilities. The
extent of corporate social responsibility depends on the theoretical foundation used to support the view.
It is argued that the corporation should be considered a social institution, as it exists because individuals
come together to achieve some objective related to the provision of goods and services. Today,
corporations exist because society implicitly sanctions them to operate in that form. Many in society
believe that corporations now operate within the "social" view of corporate social responsibility despite
the continuing claims of those who argue the "amoral" view, with its incomplete vision of the
corporation operating as a private institution with a solely economic purpose.

5.4. The Pyramid of Corporate Social Responsibility

One way to view corporate social responsibility is through Carroll's pyramid, which he claims presents
the concept such that social responsibility will be accepted by a conscientious businessperson. There are
four kinds of social responsibility-economic, legal, ethical, and philanthropic-which can be depicted
in a pyramid, as presented in Figure Carroll contends that all of these responsibilities have always
existed to some degree, but ethical and philanthropic responsibilities have become significant only in
recent years.
Economic responsibilities relate to business' provision of goods and services of value to society. Profits
result from this activity and are necessary for any other responsibilities to be carried out. It is assumed
that corporations will be as profitable as possible, maintain a strong competitive position, and maintain a
high level of operating efficiency. These are responsibilities that the corporation "must do" and the key
stakeholders are shareholders, creditors, and consumers.
Legal responsibility society expects business to conform to laws and regulations formulated by
governments that act as the ground rules under which business must operate. Corporations are expected
to pursue profits within the framework of the law, which establishes what are considered fair operations.
Society expects that all goods and services and relationships with stakeholders will meet at least
minimal legal requirements.
Ethical responsibilities include those activities that are not expected or prohibited by society as
economic or legal responsibilities. Standards, norms, or expectations that reflect concern for select
stakeholder input are fair, just, or in keeping with their moral rights. Ethics or values may be reflected in
laws or regulations, but ethical responsibilities are seen as embracing the emerging values and norms
that society expects of business even if not currently required by law. These responsibilities can be
thought of as things the corporation "should do." These responsibilities are more difficult for business to
deal with as they are often ill-defined or under continual public debate. Ethical responsibilities also
involve the fundamental ethical principles of moral philosophy, such as justice, human rights, and
utilitarianism.
Philanthropic responsibilities involve being a good corporate citizen and include active participation in
acts or programs to promote human welfare or goodwill. Examples are contributions to the arts,
charities, and education. Such responsibilities are not expected in an ethical or moral sense, making
philanthropy more discretionary or voluntary on the part of business even though society may have such
expectations of business. Few in society expect corporations to have these responsibilities, and they can
be thought of as things corporations "might do. "Carroll views the pyramid as a basic building-block
structure, with economic performance as the foundation. At the same time, business is expected to obey
the law, behave ethically, and be a good corporate citizen.

In summary, Carroll views the total social responsibility of business as involving the simultaneous
fulfillment of the four responsibilities-which, stated in pragmatic terms, means that the corporation
should strive to make a profit, obey the law, be ethical, and be a good corporate citizen.
An outcome of this shift toward integrating economic, social, and environmental responsibilities has
been the emergence of new concepts, several of which are discussed in the following section.
Corporate social responsibility is the terminology still widely used to represent business' social
responsibilities. However, other terms have appeared that incorporate the consideration of economic
responsibilities as well, including corporate sustainability, reputation management, social impact
management, triple bottom line (TBL), and corporate citizenship.
. Corporate sustainability (CS) refers to corporate activities demonstrating the inclusion of social and
environmental as well as economic responsibilities in business operations as they impact all
stakeholders. Marrewijk identified five levels of CS that are similar to how CSR could be viewed:
• Compliance-driven CS-Involves following government regulations and responding to charity and
stewardship considerations considered appropriate by society.
• Profit-driven CS-Consideration is given to the social, ethical, and environmental aspects of business
operations provided they contribute to the financial bottom line.
• Caring CS-Initiatives go beyond legal compliance and profit considerations where economic, social,
and
environmental concerns are balanced, as it is the right thing to do.
• Synergistic CS-Well-balanced and functional solutions are sought that create value in the economic,
social, and environmental areas, as it is a winning approach for all stakeholders.
• Holistic CS-Corporate sustainability is fully integrated and embedded in every aspect of the
corporation's activities, as this is important to the quality and continuation of life on this planet.
Corporate sustainability has been recognized by the financial markets because it creates long-term
shareholder value by embracing opportunities and managing risks as the result of economic, social, and
environmental developments.
Reputation Management
Reputation management is any effort to enhance the corporation's image and good name. In the past, the
focus of these efforts was on media and public relations and, to some extent, crisis management. Today,
reputation management is being extended to relations with all stakeholders. Many managers believe that
reputation management enhances financial performance, improves competitive positions, and increases
public approval of corporate activities, and studies support this view.
Social Impact Management
One of the main advocates of social impact management is the Aspen Institute. The Institute defines
social impact management as "the field of inquiry at the intersection of business needs and wider
societal concerns that reflects and respects the complex interdependency between the two." This is very
much a "business and society" approach, stressing the need for contemporary business to recognize and
understand this interdependency if business and the society in which it operates wish to thrive
Triple Bottom Line (TBL)
The triple-E (economic, ethical, and environmental) bottom line evaluates a corporation's performance
according to a summary of the economic, social, and environmental value the corporation adds or
destroys. A variation of the term is the triple-P bottom line: people, planet, profit. The narrowest
meaning of the term is a framework for measuring and reporting corporate performance against
economic, social, and environmental indicators.