In light of a slew of recent ethical infractions in business, commercial organizations are increasingly expected to exhibit ethical behavior and moral management, and rightly so. However, firms are now also being called to practice “corporate social responsibility” (CSR), not always rightly so.
The problem is that the concept of CSR is fuzzy, with unclear boundaries and debatable legitimacy. To clear things up, we propose that there are three types of CSR, only the first and third of which are legitimate:
1• ethical CSR;
2• altruistic CSR; and
3• strategic CSR.
Ethical CSR
Ethical CSR is morally mandatory fulfillment of three parts of Archie Carroll's four-part definition of CSR. These include:
1• economic responsibilities , which comprise being profitable for shareholders while providing economic benefits to other corporate stakeholders, such as fair-paying jobs for employees and good quality, fairly-priced products for customers;
2• legal responsibilities , which involve conducting business legally by complying with laws and playing by the rules of the game; and
3• ethical responsibilities , which go beyond the law by avoiding harm or social injury; respecting peoples' moral rights; and doing what is right, just, and fair. These duties exist even if the business might not benefit. For instance, firms should not impose social costs like unnecessay pollution or knowingly produce harmful products.
Altruistic CSR
Altruistic CSR relates to Carroll's fourth type of CSR, philanthropic responsibilities . These entail voluntarily “giving back” time and money to good works which contribute to the well-being of various societal stakeholders, even if this sacrifices part of the business' profitability. Firms practice altruistic CSR to help alleviate various social ills within a community or society that they have not caused, such as lack of sufficient funding for educational institutions, urban blight, drug and alcohol problems, or illiteracy.
However, the philosophy underlying altruistic CSR is socialistic: that a company is a social institution with responsibilities that extend beyond delivering a return on investors' capital. Milton Friedman (1996) famously argued from an economic perspective that a corporation's only social responsibility is its fiduciary duty to maximize shareholder wealth whilst obeying the law and basic canons of ethics. In other words, a business exists solely to secure an acceptable return on the money invested in that business.
We wish to go further and argue that from an ethical perspective altruistic CSR is immoral. It violates shareholder property rights, unjustly seizing stockholder wealth, and it bestows benefits for the general welfare at the expense of those for whom the firm should care in close relationships, viz. employees and customers.
Altruistic CSR is not capitalistic, but rather socialistic for several reasons:
• Corporations are formed for limited economic purposes that include profit maximization for their owners but not promoting societal welfare. Where philanthropic actions reduce profit, they are against the interests of the owners.
• Private individuals or private charitable and social service organizations can voluntarily practice altruistic CSR since there is no involuntary taking of others' property. For businesses to take on such duties is to involuntarily charge stockholders (through lower stock prices), consumers (through higher product prices), and/or workers (through lower pay). It is a form of “taxation without representation” by spending other peoples' money.
• Getting agreement on which causes are “socially responsible” is impossible in a pluralistic society. Consequently, stockholders might unwittingly support causes they do not advocate, such as the pro-life and gun control movements. One person's social responsibility is another's corporate waste and yet another's political correctness—one person's “good works” are another's “bad works.”
• Corporations need not guiltily “give back” to society since a business pays taxes in return for any benefits it receives.
Altruistic CSR is also unethical on several counts as these ethical perspectives show:
Utilitarianism – suggests ethical actions result in the “greatest good for the greatest number.” However, altruistic CSR will lead to the interests of those closest to the firm (stockholders, employees, and consumers) being outweighed by stakeholders such as the local community and public at large.
Deontology – suggests firms should fulfill their duties to significant stakeholders. Duty-based ethics suggests that a manager's first duty is to the stockholders on whose behalf he or she acts, and second-ranked duties are to dedicated employees and loyal customers.
Justice theory – suggests that firms should give a person what he or she deserves or can legitimately claim . This argues against altruistic CSR because it is unfair to take away stockholders' earnings, which are earned at their risk, or to lower employee pay or raise consumer prices, unless these groups are willing to sacrifice for the cause.
Ethics of care – suggests special relationships that one may have with particular individuals, such as employees and customers, should take precedence over more distant relationships, such as people living in other communities or third world nations.
Strategic CSR
Strategic CSR consists of philanthropic activities, that benefit the community or society socially, as well as the firm financially through positive publicity or goodwill, thereby accomplishing strategic business goals. After all, the idea of “stakeholders” to whom the firm is responsible because they have a “stake” in the firm which is not necessarily financial resembles the public relations notion of a firm's “publics.”
The greatest benefit of such activities to the firm lies in their marketing communications value and accrued goodwill among publics. Strategic CSR activity should improve corporate image and increase motivation and loyalty, primarily among employees and customers, but also with other key constituencies such as suppliers of marketing services and retailers.
For instance, “socially responsible” firms like Ben & Jerry's Homemade, Inc., the Body Shop, and Tom's of Maine have clearly benefited in immense goodwill from their good works, which means that, as Ben & Jerry's mission statement tellingly reveals, “As we help others, we cannot help but help ourselves.” Thus, corporations contribute to their constituencies not only because it is a kind and generous thing to do, but also because they believe it to be in their best financial interests to do so, thereby fulfilling their fiduciary responsibilities to the stockholders.
Strategic CSR is moral and commendable because it benefits stockholders while helping other stakeholders. Even here, however, controversial causes should be avoided and efforts should be targeted only to receptive publics. This not only minimizes harm to the firm's image but also ensures that stockholders are not unknowingly fund activities that go against their own values. When volunteerism leads to higher employee morale and hence productivity gains, or contributes to the local community, gaining better quality recruits for the business, there is a “win-win” situation that benefits both the firm and its constituencies.
Managing Strategic CSR
So how can you manage strategic CSR? First, senior management leadership for this entity is vital. One of the most important factors in the literature on corporate culture is the influence of leaders within the organization. It is their behavior that serves as a model and message-sender to all. Therefore, top-management commitment to strategic CSR is key. Some activities here include:
1• Clearly communicating with stockholders . State the causes that they support in investment prospectuses, annual reports, and other corporate communications and provide a breakout of the costs and benefits of various CSR efforts. This will give potential and current investors “informed consent” in deciding to purchase shares.
2• Investing time and money in good employee relations . The firm benefits from more dedicated employees, less turnover of staff, and workers advocating for the firm.
3• Investing in social programs that support the local community. The returns include patronage by local shoppers and a steady stream of good workers recruited through employee training programs. For example, Victorguard, a UK care home operator, used a local recruitment strategy during construction of a new home. Not only was good publicity obtained from recruiting local unemployed people, but the approach also helped to almost eliminate vandalism and theft during the construction period.
4• Philanthropic giving, which should be viewed as a type of investment from which the corporation can expect a future return . The firm will get the most bang for its altruistic buck if it supports causes that relate closely to its mission and core competencies and that are of interest to its target market. For instance, Avon, whose primary target market is women, sponsors a Breast Cancer Awareness Crusade, whereby breast cancer education and early detection services are offered to low-income, minority, and elderly women for a nominal charge or else gratis. Avon believes that this has resulted in sales spikes and more enthusiastic support among the firm's female sales force.
5• Sponsoring worthy causes. For example, Walt Disney's sponsorship of the Special Olympics has helped boost its image as a family-friendly company.
Second, as the business function most closely related to satisfying and communicating with most of the organization's constituencies, marketing should take a leadership role in responsibility for CSR planning and implementation. This includes:
• Embodying the business' commitment to strategic CSR in a corporate credo—a succinct statement of the organization's philosophy of business, core values, and ethical and social responsibilities to its stakeholders. Measurable and achievable goals should be set in each of the CSR activities, including expected benefits to both stakeholders and the firm.
• Educating a public (through communications of trade associations and industry groups) which increasingly expects businesses to undertake community service projects, on the fact that it is unfair to expect stockholders, employees, and customers to pay for such benevolence. They should also be educated on the “win-win” nature of strategic CSR and shown that it is not merely “self-serving.”
• Using public service advertising. This is advertising rendering a public service, such as beer marketers' moderation campaigns.
• Using cause-related marketing—an offer by the firm to contribute a specified donation to a designated cause in proportion to its customers' purchases.
• Engaging in social alliances—collaborative efforts between corporations and nonprofit organizations that entail close, long-term partnerships designed to accomplish strategic goals for both parties. For example, Avon 's Breast Cancer Awareness Crusade is done in conjunction with the National Alliance of Breast Cancer Organizations.
In short, “corporate social responsibility” can be an ethical, capitalistic force for good, if done with both the interests of the firm and of society in mind. To neglect the business' welfare in the process is to behave socialistically, and hence, unethically.
Geoffrey P. Lantos, Professor of Business Administration, Stonehill College North Easton , USA & and Simon Cooke, Conservative Councillor and Deputy Leader Bradford City Council, UK
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