Importance of Corporate Social Responsibility
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Published: Thu, 14 Sep 2017
For corporations to be successful, they must abandon the shareholder first theory that so many companies utilize. In the movie “Enron: The Smartest Guys in the Room,” CEO Jeffrey Skilling made a statement during the Congressional hearing that in all his time with the company, all his decisions he made were in the best interest of the shareholders. By forgoing any responsibility to stakeholders and not having any social responsibility, Enron was, in fact, the modern-day Titanic where every day middle-class people went down with the ship. In today’s business world, you hear people say that a business needs to be responsible to society, but what does that mean? How are they responsible? Only by first answering these questions, will we be better suited to address the socially responsible dilemma. In this essay, I will deal with these questions and show how companies can achieve social responsibility by serving stakeholders and society ethically and morally the best way they can and still be considered a model of corporate social responsibility.
For me, corporate social responsibility is a commitment to behave in an ethical manner while contributing to the economic development of society. Additionally, it means improving the quality of life of employees as well the company’s impact on society. In chapter 6, Bowie talks about how the UN Global Social Compact guidelines have created a network of corporations that align their operations with the CSR strategy which makes them socially responsible by using the triple bottom line to achieve sustainability. By doing so, both the firm and the employees reap the benefits of profits from social responsibility. For the employee, the actions of the company improve their morale and allow employees to grow personally and professionally which leads to increased loyalty to the organization because of a positive atmosphere and employee self-worth along with bonuses. For the firm, being socially responsible ultimately generates greater profits through increased employee productivity as well as a positive image in the eyes of another stakeholder group known as society “without compromising the ability of future generations to meet their own needs.” (Bowie pg. 106) However, no matter how well a company treats employees, the other stakeholder group, society is who ultimately decides the fate of a company because of the court of public opinion.
Stakeholders are individuals or groups that have interests, in an organization and its activities. These customers, suppliers, employees, and can also be further combined into a larger group known as a society. Although they have different needs, they each have an interest in how an organization performs or interacts with them and if it is not to society’s liking, the company can be black balled. Additionally, these stakeholder groups can benefit from a company’s success or be harmed by its mistake which was evident by the Enron scandal. Hence, socially responsible companies must realize that there are certain obligations to society that come from running a business in that community besides charitable contributions. Enron lost sight of this obligation, if they ever saw it at all. In the movie, one of the ex-executives said that the traders ran the company and would cut Skilling’s throat to make more money. Enron’s lack of responsibility to society can be seen by the California power shortage. Instead of stepping up and helping the people in the state by being socially responsible, Enron traders held the state hostage to increase profits by driving up electricity prices and selling it back to California at exponentially high prices. If companies want to be socially responsible they can give back in a way that generates a win/win scenario for everyone. For example, corporations could sponsor community school districts. By doing so, they ensure schools have books and computers to help improve children’s education which in turn makes more profits because the community will buy from that company especially if they have children, additionally, it makes those children more marketable and competitive in the future. Another area that CSR benefits everyone is infrastructure. It is no secret that society cannot flourish without a functional infrastructure system, which provides a variety of critical services in determining any economy’s development and production possibilities.Â Although Significant increases in infrastructure require a substantial upfront investment, corporations can help their bottom line by investing in society’s transportation infrastructure improvements. There is no denying that the transportation infrastructure in the US is significantly outdated and typically for most states, this falls on public services, which typically do not have the funds to allocate to this problem because the amount of investment needed is quite staggering. Unfortunately, the problem is not going away and will only get worse. If corporations were to come together and give back to society to help fix this problem, it would be one of the biggest economic and social wins in our countries history. However, no matter what a company does to give back to society there will always be a dilemma that companies must face.
There are people in society that will always try and find the bad in any corporate endeavor, such as the people who say firms only sponsor schools, do charity, or improve our roads and bridges, do so to help their image to generate profit. For me, this is argument holds no water because firms have obligations other than to society and the environment, and that is to themselves; which can be argued as being the most important because, without corporate profits, they would go out of business which means society would also lose, such as the case when factories in small towns close and the town suffers economically.
This dilemma that companies face can only be resolved by society having realistic expectations of companies. For me, the corporate social responsibility dilemma can only be resolved by understanding that businesses are distinct social institutions with two specific responsibilities: financial and social. First, by generating financial profits, corporations can achieve social responsibilities by creating value, especially economic value, which benefits society because people express their preferences through the choices and tradeoffs. Secondly, their social duties should derive from the moral responsibilities we all have as rational human beings, and should not be defined by society as self-serving to only increase profits. If society defines or outlines corporations’ social responsibilities in a way that conflicts with their financial obligations, all society is doing is putting corporations in the impossible situation of having to violate one responsibility in favor of another. Instead, society should understand a corporation’s social responsibility as one that includes the universal rule of law: don’t lie, don’t steal, don’t defraud as their responsibility to create economic value. Regulations that make it impossible for a company to do all these things, then, are inadequate regulations that hamper sustainability as well as economic growth and society’s wellbeing. For a company to be sustainable, they must perform well financially and meet consumer needs, that’s why they are in business. Therefore, economic responsibility must be one of their key endeavors if they are to meet society’s needs for goods and services while making a profit. Furthermore, if they want to remain in business, they are expected to abide by corporate laws and regulations as well as societies moral laws like caring for others and not treating them as means to their end.
In conclusion, I have presented information that supports my belief that CSR is a good thing and companies need to help in any way possible. When companies are naturally benevolent and philanthropic, such as doing good deeds, serving, and helping communities the best way possible, everyone wins. However, a rational society must understand that no law requires companies to do so, other than moral law. Everyone company is different, and all of them have different financial liberties, for society to demand that corporations must be socially responsible for all of society’s problems is unethical and can be viewed as being hypocritical. Society cannot have it both ways; they cannot say that a company who gives millions in charitable contributions and enjoys increased profits is not a moral act but turn around and say that if society makes a company socially responsible is a moral act. In fact, one could argue that by society demanding CSR of all companies, society is in fact going against Kant’s secondformulation of the categoricalimperative and using the corporations as a means to society’s end.
Bowie, N and Werhane, P. (2005). Management Ethics. Oxnard: Blackwell Publishing
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