Corporate Social Responsibility in today's world (Narrow view vs Broad view)

Corporate Social Responsibility (CSR) has been conceptualized in many aspects during the last few centuries, by many philosophers, libertarians, economists, etc (Tripathi & Bains, 2013). Milton Friedman, Adam Smith, John Maynard Keynes, and Adolf Berle had been arguing from time to time to define the fundamentals of CSR. An early model of CSR can be traced back to the time in ancient Mesopotamia around 1700 before century, an ordinance or code (by Hammurabi) for all the business firms, including builders, innkeepers or harvester were put to death if they harmed others for own benefits (Tripathi & Bain, 2013).

In the 18th century, the father of modern capitalism named Adam Smith published an article regarding social responsibility, titled “An Enquiry into the Nature and Causes of The Wealth of Nations”. In general, it is about the needs and the wants of the public could be best by freely interacting with each other in the marketplace. However, the marketplace participants or business firms must have followed certain ethics codes such as honesty and integrity (Arthaud-day, 2005). To recognize the concept of CSR, Cadbury first introduced a corporate responsibility practice for the benefits of its laborers. The benefits included fund education, free employee training, medical protection, and pension (Franks et al., 2004; Ella, 2009).

In the 19th to 20th Century where industrialization began and the bloom of new technology had led to an increase in business productivity, which impacted society as well as the environment (Tripathi & Bains, 2013). During that time, a lot of tycoons were created especially in the USA and European Countries. However, very few of these wealthy businessmen were concerned about the welfare of the employees, society, and environment. In 1906, the Kellogg Company stepped out the first move in participating in CSR. Unlike other companies, Kellogg focused on broad areas of the company's CSR such as protecting the environment, selling nutritious products, and also ensuring the safety of its workers. Kellogg believed that doing CSR could keep them far and extend its quality of products (Asongu, 2007).

An industrialist, Andrew Carnegie (1835-1919), who was one of the greatest firms in the steel industry back then, he donated most of his wealth to society, especially the education field and scientific research. Following in the footsteps of Carnegie, John D. Rockefeller also donated his wealth to society. However, industrial betterment and welfare movements at the time were viewed as a combination of humanitarianism and business acumen (Writer, 2019a).

Although the responsibilities of companies had existed for more than a decade, the term CSR was only defined in 1953 by Sir Howard Bowen in his publication, titled Social Responsibilities of the Businessman. He questioned, “what responsibilities to society may businessmen reasonably be expected to assume?” (Bowen 1953, p xi).

During the time 1990s, the CSR was restructured and further added by Georgia Archie B. Carroll, in the publication, titled the Pyramid of Corporate Social Responsibility. Carroll (1991) highlighted four main responsibilities of an organization’s CSR project: Economic, Legal, Ethical, and Philanthropic (Writer, 2019b).

The world business council states that CSR is the continuous commitment businesses must have to no refrain from committing unethical acts, helping the government to develop the economy and most importantly help to improve the quality of lives for the local community and the society itself (Soudarya, 2013).

In the past decades, corporations have started committing to corporate social responsibility (CSR). CSR requires that a company not only treats their workers well, sell their products at a reasonable price and make reliable products as well, but the corporations have to assist the public when and take action when it comes to social problems and the concern for the environment (Byars & Stanberry, 2018). Companies that are making large profits are demanded to contribute back to the public which they operate in.

In 1991, Archie Carroll constructed a pyramid of CSR detailing the four levels of CSR [refer to appendix 1]. Ever since the pyramid was viewed as one of the most prominent CSR theories. At the lowest level of the pyramid is economic responsibility. Firms aim to be profitable at this level because, without profits, a business would not be able to ensure that their employees are well paid. Profit is the main factor for a business’s long term survival. Moreover, profits allow businesses to pay their employees well. Before any CSR is conducted, they have to take care of the firm’s own employees. This also means that businesses need to create products and services at a good price for the public. The second stage of the pyramid is legal responsibility. This refers to businesses having the obligation to follow the law. This ranks at the utmost importance in the pyramid as it defines how a firm conducts its business. Firms are required to follow the law set such as taxes paying, employment law, and ensuring the safety of their employees. Breaking the law can result in a business losing plenty of customers. The third layer of the pyramid is an ethical responsibility. Unlike the previous two layers, ethical responsibility is not required however it would be best to have. Businesses should not only follow the law but should also be ethical. Being an ethical company makes customers more comfortable with purchasing products from them. Firms can be ethical by taking care of the welfare of the environment and treating their workers well. Moreover, shareholders will be viewed as individuals with good morals. The last layer of the pyramid would be philanthropic responsibility. Firms are always being blamed for the depletion of natural resources and pollution of the environment. In order to take away some of the criticism, companies should contribute back to society. Although it sounds simple, contributing back to the local community in which the business operates will improve the public image of the company (Thacker, 2019).

As mentioned above, corporations are expected to assist and provide financial help when it comes to social causes or human rights and helping to maintain a healthy environment by practicing environment-friendly working methods such as using fewer papers, not polluting the air and water throughout their production process. If the environment is in tatters, this would mean that there are fewer resources for corporations to use which means fewer profits for the corporation and fewer business opportunities (Byras & Stanberry, 2018).

Under the eyes of the law, corporations are its own separate legal entity. The corporation will bear the risk or reward for the acts committed under their name. Under the rules of a separate legal entity, a corporation can sue and be sued. A corporation is an entirely separate legal entity from the members that are operating within the company. This allows the law to help determine what are the rights of the corporation (Pandia & Charan, 2020).

Many have argued a corporation's ability to make moral and ethical decisions. At the end of the day, the corporation is only an artificial being and the humans inside the corporation are responsible for making the decisions. The concept of vanishing individual responsibility is often applied to corporations when a bad outcome is faced by the company. Vanishing individual responsibility allows an individual to avoid criticism and backlash for a bad outcome or decision. This helps to diffuse the responsibility and accountability the individual is facing. This concept makes it difficult to decide which individual is responsible for an outcome (Shaw, 2017).

Concept of Limited liability

Limited liability implies that the proprietors in the terms-investors of companies, just as chiefs and administrators, are ensured by laws expressing that as a rule, their misfortunes in the event of business disappointment can't surpass the sum they paid for their portions of possession (Byars & Stanberry, 2018) A similar insurance applies to proprietors of some different business substances, for example, limited liability companies (LLCs). An LLC is like a company in that proprietors with limited liability; in any case, it is sorted out and overseen more like an association. In order to grant proprietors protection of limited liability, each state can use a few types of entities, including corporations, limited liability companies, limited liability partnerships, and limited partnerships (Byars & Stanberry, 2018.).

If the state is without joining laws, entrepreneurs would be dependent upon individual liability for business misfortunes, which could make a few impediments. Proprietorship would be more hazardous, so proprietors could have more trouble selling their possession advantages. They could likewise be dependent upon an ace rata portion of personal duties. These sorts of individual budgetary liability could restrict the capacity of organizations to raise capital by selling stock. Limited liability, by diminishing the sum an investor can lose from putting resources into an organization by purchasing its stock, expands the speculation's appeal to possible new investors (Byars & Stanberry, 2018.).

At last, corporate status increments both the possible number of willing speculators and the measure of capital they are probably going to contribute (Byars & Stanberry, 2018). All things considered, be eager to put your cash in a business on the off chance that you knew not just that you could lose the capital you contributed, yet in addition that you could be sued by and by for all obligations of the business?

Corporate status is presented upon a business by state law and regulation when a state gives the business a contract of consolidation. The defensive shield of corporate status empowers organizations to mingle their misfortunes such that conventional ownerships and associations cannot do. Mingling a misfortune is a way to amortize it or spread it out over society as a rule, so the proprietors do not retain it separately. Amortization is like the thought behind protection, wherein numerous individuals bear a little offer in a misfortune, instead of one or a couple of individuals bearing every bit of it.

In this way, it is precise to state that society empowers companies to exist, both by passing laws that make them and by restricting the budgetary danger presentation of their proprietors. With the option to fuse and make unlimited benefits with limited liability, a sensible individual could presume that companies owe an obligation to society consequently (Byars & Stanberry, 2018). Corporations’ quid pro quo, a Latin expression meaning this, which is about the acknowledgment of corporate social obligation, to profit the numerous partnerships to whom enterprises may owe an obligation, including clients, the network, the environment, employees, media, the legislature and government (Byars & Stanberry, 2018).

Corporate Moral Agency

Corporate Moral Agency refers to the fact that corporations can be the bearer of moral responsibilities without involving its corporate members. It goes without saying that the corporations require the humans within it to make the moral decisions, but it does mean that businesses can be held responsible for committing unethical acts that can be differentiated from its employees. Corporate Moral Agency should be clearly distinguished from Collective Moral Responsibility as collective moral responsibility allocates moral responsibility to all corporate members (Rönnegard, 2015).

The concept of corporate internal decision (CID) draws the line between personal actions and corporate actions. Several Philosophers argue that the corporations shouldn’t be held responsible, instead the individuals within the corporations should bear the punishment. They believe that individuals are the ones to make the morally right or wrong decisions. Therefore, only they are able to make the decisions. There are also several philosophers who are agreeing with the concept of corporations can be held responsible. Following the structure of CID, it collects information like an ordinary person and weighs the consequences of the action such as environmental impact. According to Professor Kenneth Goodpaster and John Matthews, there is no logical excuse as to why corporations cannot show the same sympathy and kindness as any other individual. Due to the debate of corporate moral agency, the question of corporate punishment also arises. Corporations cannot be fined the same way individuals can. For instance, you can put a guilty individual in jail whereas the same thing cannot be done to an entire corporation. Financial punishment can be a hefty punishment for corporations. While it prevents corporations from committing more illegal acts, it also hurts innocent people who can get involved. Workers within the corporation will get laid off and face pay cuts (Shaw, 2017).

Due to the structure of CID, it can be hard to pinpoint which individual is responsible for a certain corporation’s outcome. This is referred to as Vanishing Individual Responsibility. This concept allows corporations to deflect blame and avoid accountability. For example, if a customer gets hurt using a product, who is to blame? The quality control team, the manufacturing team, or even the company’s CEO. More often than not, it is impossible to blame a certain individual as under the CID structure, many people are making decisions at the same time which contributes to the problem. This leads to the diffusion of responsibility which means that the individuals that are responsible will get off scot-free. Until CID is restructured, the concept of vanishing individual responsibility will remain prevalent in the corporate world (Shaw, 2017).

View on CSR: Narrow View

Generally, the views of Corporate Social Responsibilities (CSR) are divided into two categories which are known as the narrow and broad view (Shaw 2017, p.164). In the context of various philosophers especially those who practice utilitarianism and adopt the personality of an egoist, they tend to think that Corporate Social Responsibility is something which should not be done as this act may be seemed as losing extra profits which investors, shareholders, or the board of directors could potentially gain (Lawrence & Weber 2010, p.79). Moreover, many philosophers also argued that through the enforcement of Corporate Social Responsibility, there are certain issues which may arise from the execution of CSR such as lower economic efficiency and profits, the rise of unequal cost between Competitors, required skills for businesses to run may lack, and many other factors (Fisher, Lovell & Silva 2012, p.341). As there are many viewpoints from different philosophers on the narrow view of business, we shall discuss a few major philosophers’ contents regarding the narrow view of CSR such as Milton Friedman, Albert Carr, John Locke, and Jeffrey Olen.

Milton Friedman: Friedman Doctrine

Referring to many videos and analytics of Milton Friedman, we can determine that he was a pure consequentialist or rather an egoist. His mindset is purely towards a business perspective. In fact, he developed a theory which is known as the Friedman Doctrine which states his view on ethics and business ethics (Fisher, Lovell & Silva 2012, p.343). Within the theory, his narrow view suggests that Corporate Social Responsibilities (CSR) programs are nothing but a waste of resources in terms of money, infrastructure, and manpower. Within his point of view, he states that there is only one objective or rather social responsibility which the company is responsible for is to increase their profit as long as they play within the rules of the game which are the laws and the code of ethics which are set by the government and the society. Of course, he stated that playing the game must be fair and square without fraud or deception which violates the code of ethics (Gawu & Inusah 2019, p.2). He further states that the main responsibilities of managers or higher positions lie within the interest of shareholders. What he is trying to say is that managers are hired to maximize the profits and revenue of stakeholders where the spending on CSR programs is out of the topic (Vaccaro, 2016).

Albert Carr: Is Business Ethically Bluffing?

According to Albert Carr which is also a well-renowned consequentialist and egoist as Friedman. Within an article which he wrote named “Is business bluffing ethical?”, Carr stated that doing a business is like playing poker which has its very own unique set of rules and standards in which the code of ethics might need to be obligated (Carr, 1968). The acts which are considered as unethical conducts such as lying, deception and manipulation within Carr’s theory are all the main components of a successful business (Carr, 1968). Furthermore, he even quoted another philosopher known as Henry Taylor where he pointed out that misrepresentation stops to be a lie when it is perceived on all sides that the fact of the matter isn't required to be spoken (Carr, 2020). From the above statement, we could already know that Carr does not support CSR as he does not even want to benefit society. What he perceives is the gain of his own as he believes that playing is to win, it is only wrong when you are caught (Carr, 1968).

John Locke: The Famous Libertarian or Capitalist

Another famous philosopher that we could refer to is John Locke which is usually called a renown libertarian or capitalists. Locke’s views as capitalists or libertarians are usually concerned about the development of corporations and property rights. According to Locke’s theory, he stated that every person has their own persona or property in which nobody has the right nor the authority to question their properties but the owner themselves (Gawu & Inusah 2018, p.2). Furthermore, he also argued the same point as Milton Friedman where he states that the sole priority of businesses is to maximize their profits and revenue to the most extent. Acts that are deemed as unprofitable towards the company should not be conducted as it has the potential to profit the company (Gawu & Inusah 2018, p.2). In summary, we could deem that CSR within Locke’s narrow view is unnecessary as it is an act which is deemed unprofitable and may waste the resource of the company.

Jeffrey Olen: Legal Persona and Moral Sense

Within Jeffrey Olen’s theory, he as a pure consequentialist and egoist argues that even though companies are enlisted as legal entities, it does not mean that they are bound by moral means. He further argues that companies are nothing more than an artificial creation of the legal systems (Gawu & Inusah 2018, p.3). Acts that are conducted by a corporation whether it’s moral or immoral should never be questioned. Even when they conduct something which is unacceptable to the community, they have their rights to disclose the issue or leave it as it may be. Through this statement, we could clearly see that the need for CSR is already unnecessary as through Olen’s narrow view, he already stated that it is unnecessary to clean up your mess as we all know CSR is mostly done when a corporation does something bad or wants something in return (Gawu & Inusah 2018, p.3).

View on CSR: Broad View

Originally Businesses were focused mainly on creating a monetary return, which we have stated above. On the other side of CSR, its primary objective is to maximize profits business and be responsible for the society and community (Amao, 2011). The beneficiaries included agents who have directly or indirectly related to the business practices (Dudovskiy, 2013). Defenders of the broader view conceptualize a business entity’s primary self-interest lie on social welfare (Gawu & Inusah, 2018). First and foremost, the broad viewers argued that if the corporations wanted to be sustainable, it must first embark on social initiatives, as well as create welfare for the society (Gawu & Inusah, 2018). Secondly, the argument on supporting corporations that have obligations to all the stakeholders (employees, customers, suppliers, the society, and the environment. Goodpaster and Matthews (1982) indicated that corporations must acknowledge and take responsibility for problems that have been created through social intervention programs. We will be further discussing how broad viewers emphasize the importance of CSR's broad view.

R. Edward Freeman: Stakeholder Theory

Freeman & McVea (2001) indicated that the central idea of stakeholders emphasized that authorities must formulate and implement processes or activities which satisfy all (those who have a stake under the business context. Putting the argument of this into CSR, it is believed that corporate long term success is usually relying on the relationships and interests of shareholders, employees, customers, suppliers, society, and the environment. Stakeholders prioritize how the business agents shared their interest with the members of the society (Freeman, 1984). In Freeman’s publication, businesses should have a new framework of how managers rule their corporations. The old-school business frameworks were neither helping managers to find the purpose of operating business nor helping managers to create new opportunities from time to time. In general, the objective of the business should have adjusted. “Our current theories are inconsistent with both the quantity and kinds of change that are occurring in the business environment……A new conceptual framework is needed…” (Freeman 1984, pg.5). As for this, the best system in the corporate must integrate the interest of all stakeholders, but not only maximizing the position of ones within limitation (Freeman & McVea, 2001).

Keith Davis: Stakeholder model (Broad view)

Davis (1960) argued that social responsibility referred to “firms’ decisions and actions taken for reasons at its acceptable level….” In other words, businesses shall always investigate their corporations’ financial health before committing CSR. If we look into the broader view of CSR, Davis emphasizes how one corporation acting on goods will eventually affect the interest of others (Davis, 1960). Davis believes that CSR helps in the long-run self-interest of business. Let us take an example of recruitment. The firm that taking care of community welfare will result in a lower turnover and absenteeism in its organization. This is because society prefers corporations that have a high level of morality.

As this has proven the statement of Davis. “Businessmen cannot make decisions only for economic aspects, because all the elements are interrelated in the business and social system...” (Shaw, 2017). In general, CSR is a good practice for all corporations to act on. The argument can be extended in all directions showing social welfare produces a good environment back to business (Davis, 1960).

The argument of it may seem a sophisticated concept of “long-run profit maximization”. It sounds like people who spend more money on CSR are expecting more rewards and returns. However, it is a norm of creating a better community and a better society which these projects bring (Davis, 1973).

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