The Moral Approach To Corporate Social Responsibility Essay
This essay discusses the perplexities and challenges of corporate social responsibility (CSR). The essay features the “what”, “why”, and “how” of CSR.
The Challenge of Corporate Responsibility
To augment the Essential Knowledge Project, this essay discusses the perplexities and challenges of corporate social responsibility (CSR). The essay features the “what,” “why,” and “how” of CSR. As they help formulate CSR standards and give voice to organizations, public relations practitioners can use experts’ carefully considered thoughts as well as research findings to determine the best plan of action. Internally and externally, practitioners can help build a foundation for image/reputation management, brand equity, relationship management, issues management, and crisis management.
“Are you a good corporate citizen?” That rhetorical question was asked by Ben W. Heineman Jr., senior vice president for law and public affairs at General Electric Corporation, writing in the Wall Street Journal (6/28/2005). His question helps set the tone for the topic of corporate social responsibility as a vital part of the Essential Knowledge Project. The column explained how GE sets a challenging goal—high performance with high integrity—for successful companies and, indeed, for 21st-century capitalism” (p. B2). High performance and high integrity are good for the bottom line. Citizenship requires a “rigorous, unwavering compliance with the law.” It blends strict adherence to capital performance with integrity to never allow that commitment to corrode those principles. Quality judgments support, rather than defeat, a commitment to financial standards and to the globe where the organization works, including commitment to “reduce greenhouse gases and increase energy conservation” (p. B2).
What is CSR?
When discussing CSR, some prefer corporate responsibility (CR) to avoid the assumption that it is limited to “social” concerns (strategic philanthropy and community relations). Others use “social” responsibility to avoid the stigma that this topic only relates to businesses driven to place profit over social principle. Those who prefer “social” without the modifier “corporate” recognize that non-profits and governmental organizations are and should be held to responsibility standards. By whatever name, interests of organizations cannot long be at odds with mutual interest and common good.
Consideration of corporate social responsibility is as old as organizations themselves. The central question always has been this: Does each organization, as it strives to achieve its mission and vision, add value to the society which franchises its existence? Long before consideration focused on business, especially large corporations, questions about CSR addressed the rationale and acceptability of government and church.
History: A Long-term Perspective
Despite this timeless concern, the topic came to receive serious discussion and management policy development during the 1950’s in nations with large corporations—or those working to overthrow governmental and capitalist colonialism. In developed nations, social movement activism and principles of social democracy offered not only a rationale but also a voice for the concern that mass production/mass consumption societies had spawned large corporations that were slowly dominating the standards of business performance in ways that distorted not only their rationale in society but also the wholesomeness of the private sector. Efficient and rational business practices could in fact harm the society that franchised the organizations to operate.
In the 1960s, interest in CSR became feverish as activists at all points of the ideological and geographical compass called for higher standards of business and government performance. Non-profits asked to share business profits. Academics argued over the differences between the modern and post-modern organization.
As Basu and Palazzo (2008) observed: “The last three decades have witnessed a lively debate over the role of corporations in society” (p. 122). This scrutiny revealed how CSR standards are defined by the ideology of each society. Public relations practitioners contribute to this ideology as they discuss business performance internally and externally. Critics have reasoned that CSR can become insulated, self-serving, and self-affirming—often to the detriment of the society where it was supposed to be a social, political, technical, and financial benefit. Public relations can help organizations craft their standards and implement them through actions and statements.
One of the primary discussants in that 30 year-long dialogue, Freeman Freeman & Liedtka, 1991) observed 17 years ago: “The idea of corporate social responsibility has failed to help create the good society. Long seen by academics and managers alike as the missing link in capitalism, the concept of corporate social responsibility has not delivered on its promise” (p. 92). Convinced of its failure, they reasoned that it is a “dangerous idea” (p. 92), which led them to agree in principle but not detail with Freidman (1970).
Debate Around Friedman’s Arguments
In one way or another, all discussions of CSR recall the famous, or infamous, claim of economist Milton Friedman (1970) that CSR is bunk. He sparked decades of controversy by arguing that the only responsibility of publicly held companies is to increase profits—the efficiency paradigm of organizational excellence. Companies should pay only as much wage/salary as necessary to operate efficiently and pay taxes reluctantly. Some today laud his sentiments, and indeed many empirical tests have not found a positive relationship between CSR activities and major corporate financial performance indicators such as profit (e.g., Agle, Mitchell, & Sonnenfeld, 1999; Auppede, Carroll, & Hatfield, 1985). Agle et al. (1999) stressed the methodological challenge: “Corporate social performance is notoriously difficult to quantify” (p. 515).
Others argue that Friedman’s view of the role of companies too narrowly addresses the key issue. Stovali, Neill, and Perkins (2004) fought the traditional interpretation of the Invisible Hand of Adam Smith, which serves to legitimize the maximization of shareholder wealth, and as a result, shareholder-dominant corporate governance. A broader view of the Invisible Hand considers a “sympathy principle,” or the ability and propensity of human beings to consider the interests of others. This view may be more aligned with the dominant concept of CSR and promote a broader, multiple stakeholder approach to corporate governance. If sympathy suggests only philanthropy, we add that CSR demands empathy, an outside-in way of thinking and planning to help management reflect on its role in and impact on the society where it operates. Critics believe that Friedman failed to understand the positive advantages to be gained from CSR: Reduce business costs and bolster profits (See the section on Profits and CSR).
Public Relations Practitioners’ Views
Public relations practitioners added their voices to this controversy. Senior public relations practitioner, John L. Paluszek (1995) reasoned that advocates of CSR can be committed to profits and the community where they are generated,
Business is increasingly in society not only in its traditional role of improving the standard of living—by generating jobs, offering products and services and paying taxes—but also via an overlay of sensitivity that supports employees, empowers customers and investors, and relates to the needs of local, national and international communities. (p. 49)
The daunting question raised by this debate is this: Does the price of enjoying the franchise to operate in a society where profits are generated include increasing operating standards so that the organization adds value to that society beyond merely making a profit? Clark (2000) quoted public relations giant Arthur Page: “All business in a democratic country begins with the public’s permission and exists by public approval” (p. 364). In fact, he might say the same of business in “undemocratic countries.” If it lacks public support, it operates on a questionable franchise.
The legendary John W. Hill (1958) (co-founder of Hill & Knowlton) advised us to understand sound management as the initial step toward appreciating the roles and challenges facing public relations professionals.
It is not the work of public relations—let it always be emphasized—to outsmart the American public in helping management build profits. It is the job of public relations to help management find ways of identifying its own interests with the public interest—ways so clear that the profit earned by the company may be viewed as contributing to the progress of everybody in the American economy. (p. 21)
Another senior practitioner, Raymond Ewing (Allstate Insurance) (1987) reasoned, “A corporation exists for the optimization of the satisfactions of its stakeholders” (p. 32).
This history of CSR discussions leads to many conclusions, including the following ones:
- Knowing and achieving legal and ethical standards are not inherently opposed to one another, but they are not one and the same (Bowen & Heath, 2005);
- Knowing and achieving engineering and operating standards that advance quality of work life, product quality and the community well-being where organizations operate is fundamental to CSR;
- Understanding and appreciating that the franchise to operate is granted by and required to serve the positive interests of society;
- Adopting standards that blend the public and private interest is basic to achieving aligned and mutual interest.
Thus, higher standards of employee or consumer safety help manage risks and reduce the likelihood of crisis related to employment and consumption.
Source of the Controversies
The Role of Business in Society: (Is CSR a Responsibility, an Advantage, or a Just a Liability?)
During the 1980s, discussion of CSR progressed logically from responsiveness to responsibility and rectitude: The ability “to act with rectitude, to refer their policies and plans to a culture of ethics that embraces the most fundamental moral principles of humankind” (Frederick, 1986, p. 136). The heart of CSR is a firm interdependence between business and society.
Although his statement is fraught with the irony surrounding the tobacco industry, George Weissman (1984), former Chairman and Chief Executive Officer of Philip Morris, Inc., set corporate responsibility into its sociopolitical context: “Like property, the corporation is a creation of the state. It gets its charter from the government. To survive, the corporation subjects itself to regulation by government, and to serving the needs of government and the commonwealth.” This point “is fundamental to understanding the concept of corporate responsibility in its current context; to understanding that we are not dealing with a fad; and to understanding that we are dealing with the fundamental existence and survival of the corporation” (p. 67). Businesses are expected to be involved in community affairs, formerly the exclusive responsibility of government, reasoned Chrisman and Carroll (1984) in their efforts to reconcile profits, business goals, and society.
CSR is basic to each organization’s character, good, bad, or in between. Its character depends on how well it can align its interests with those of consumers, audiences, and publics. For this reason, CSR is not merely a communication challenge; it is a management planning and performance challenge.
Public relations can help an organization know the standards needed to achieve CSR through issue monitoring. Such issue monitoring facilitates an outside-in approach to considering what makes an organization good—the standards and expectations by which it is judged. An outside-in approach makes pragmatic and ethical sense because activists and other critics play a significant role in the raising of CSR standards and in evaluating private sector performance.
Platitudes are likely to foster as well as frustrate efforts to discover which standards of corporate responsibility truly make a difference in the quality of relationships with key stakeholders. The challenge is to know how the organization’s interests align with those of its stakeholders. One goal of such discussions is to achieve the common good (Mahon & McGowan, 1991) and to enhance community (Heerema & Giannini, 1991).
Meeting stakeholder expectations is a vital part of achieving the legitimacy needed to operate. Sethi (1977) coined the legitimacy gap between organizational performance and the expectations of myriad stakeholders. At least in part, questions about legitimacy express “concern for a corporation’s image” (Clark, 2000, p. 364). Is it a crisis (therefore the rationale for crisis management and communication) when an organization’s image is damaged because its legitimacy is questioned because it fails to meet established CSR principles?
Heath (1997) featured the legitimacy gap as the rationale for his discussion of the four pillars of strategic issues management (SIM):
- Strategic business planning which includes foresight judgment, budgeting, and choices among options that lead to organizational success within a sociopolitical environment.
- Issue monitoring which can help organizations understand the alignment of interests, points of misalignment, as well as power resources and challenges by various stakeholders.
- Corporate responsibility, the standards by which an organization is judged.
- Issues communication, the dialogue to better understand facts, develop appropriate evaluations, create vital identifications, advance reputations, and foster public policy positions that achieve mutually beneficial interests. Such discourse defines terms, establishes principles and standards, and thereby creates the socially constructed meaning that guides CSR.
SIM sees CSR/CR as the socially approved expenditure of material and human resources to advance the strategic business plans in ways that meet stakeholder expectations. When firms’ operations offend stakeholder expectations, legitimacy gaps motivate stakeholders to correct those operations. Such logic applies not only to the private sector, but also to non-profit organizations and government agencies.
Without oversimplifying the topic, four general themes seem to dominate the discussion of business CSR/CR:
- Profits efficiently earned may not constitute a sufficient CSR standard.
- Companies should engage in strategic philanthropy whereby good acts improve operating conditions and quality of life—and serve society.
- Companies should partner with non-profits and government agencies to solve social, economic, and psychological problems in society.
- Companies should meet or exceed stakeholder expectations of performance standards needed to satisfy the moral rectitude that business contributes to the long-term business climate by collaborative decision making and operating in the public interest.
In such matters, CSR might be defined as corporate strategic philanthropy, even narrowed to “effective public relations” where images are massaged by wordsmiths who tout the excellence of the organization and build accommodating relationships with stakeholders. It can be viewed as cause-related marketing. At best, it can be conceived of as knowing, achieving, and communicating about higher standards of performance in the public or community interest.
Profits and CSR: Partners or Opponents? (Are We More Able to Generate and Use Revenue Wisely by Meeting Stakeholder CSR Expectations?)
Does the cost of achieving CSR decrease, increase, or have no effect on “profit” –the cost-benefit residual? What communication activities add impact to CSR performance? In addition to making general claims that corporate responsibility is good for business (Makower, 1994) and observing the trend that companies are integrating environmental values and competitive strategizing (Elkington, 1994), many empirical studies offer data that demonstrate the relationship between profits and CSR.
Most studies have identified a positive relationship (although not always linear) between CSR activities and organization performance as measured by various indicators such as shareholder returns, profit, or marketing impact. For example, the data from Ogden and Watson (1999) suggested that despite the cost of improving the quality of customer service performance, “shareholder returns respond in a significantly positive manner to such improvements” (p. 526).
Beliveau, Cottrill, and O’Neill (1994) found that the CSR-profit relationship is not linear and varies by industry as well as by different company performance indicators. For instance, some industries are rewarded for being innovative more than others. In addition, stock market measures lead in CSR performance, while accounting measures lag CSR. Including sociological factors (such as social impact of an industry) can help explain CSR impact on performance measures. Finally, perceptions of management reputation can have a social and economic advantage.
Sen and Bhattacharya (2001) discovered that CSR performance can increase marketing clout if it relates to product quality and/or consumers’ personal preference views on key social issues. This study suggests that aligned interest is crucial to and accountable for positive impact of CSR, but also cautions that such facts don’t count if key stakeholders don’t know about the organization’s accomplishments.
Awareness counts. Sen, Bhattacharya, and Korschun (2006) used survey data to conclude that knowledge of companies’ CSR (primarily defined as strategic philanthropy) is fairly low. When consumers are more aware of what companies are doing philanthropically, that knowledge increases desire to purchase from the company, and makes it more attractive as a place to work and in which to invest. The motives (positive or negative) attributed to companies for this action affect the perception of and motivation to respond favorably to the company.
Rochlin, Witter, Monagahn, and Murray (2005) discovered that “by building a business strategy that aligns social, environmental, and economic performance with long-term business value, corporate responsibility becomes part of core business and is tied to long-term value creation for both business and society” (p. 8).
Other studies have shown how CSR decisions relate to people’s attitudes and behaviors toward organizations. CR can sell products (Gildea, 1994-1995) but is best when CR decisions lead to increased sales and reputation management, rather than when sales drive CR. Based on ranking data, the following list was compiled, ranging from most important to least important factors in making decisions relevant to a specific company: business practices, community support, employee treatment, quality, environment, service, price, convenience, and stability. Analysis revealed that:
- 34% of the respondents would avoid buying a product or service from a company they perceived as unethical.
- 16% seek information to consider a company’s business practices and ethics as part of their decision making.
- 50% intended not to purchase a product or service from a company they considered not to be socially responsible.
Ellen, Webb, and Mohr (2006) found consumer opinions on CSR performance are complex rather than simple—either serving economic or social ends. Customers are more positive when they see CSR as being values driven and strategic. They think badly of companies whose efforts are attributed to egotism or as merely accommodating.
Using social identity theory, Cornwell and Coote (2005) found that if supporters of a non-profit organization know of a mutually beneficial relationship between it and a company that knowledge and the identification with the non-profit positively predict consumer purchase intentions. Barone, Miyazaki, and Taylor (2000) found a positive connection between cause-oriented marketing and consumer relations.
CR also has shown value by reducing costs and gaining support. Carroll (1991) argued that CR pays for itself. Other assumptions relevant to the bottom line are these:
- CR reduces the propensity and rationale activists have to call for excessive and punitive legislation/regulation and the cost of such mistakes.
- CR protects organizations, at least for a while, during a crisis and can reduce various costs, such as litigation and related punitive damages.
- CR increases the likelihood, on the part of non-profits and governmental agencies, that they will get funding they need because they are accomplishing a mission which stakeholders support.
These factors translate into axioms that Carroll (1991) argued serve the good of the company and community: Do good for the community, be ethical, obey the law in spirit as well as principle, and make a profit (or generate revenue regardless of the type of organization) that is put to proper purpose.
Carroll (1991) used these principles to formulate the pyramid of corporate social responsibility:
- the foundation is economic responsibility (to produce an acceptable return on investment)
- legal responsibilities (to act within the legal framework),
- ethical responsibility (to do no harm to its stakeholders and operating environment),
- philanthropic responsibility (or more proactive, strategic behaviors that can benefit the firm and society, or both):
“Be a good corporate citizen; contribute resources to the community; improve quality of life” (p. 42). To accomplish CSR, effective management requires the appropriate balance between an orientation toward owner/shareholders, and employee stakeholders, customer stakeholders, and community stakeholders. To make society “good” becomes a reality only when this high expectation “becomes the aspiration and preoccupation of management” (p. 48).
Defining CSR: An Evolving Concept and Standards
A Variety of Definitions
As is often the case on thought provoking topics, the CSR literature has produced a variety of definitions, each of which features the advantages to be accrued from CSR.
- Kotler and Lee (2005) defined it as “a commitment to improve community well-being through discretionary business practices and contribution of corporate resources” (p. 3). These authors found an increased commitment to give more, to report on the giving, to set high social goals for organizational success, and to use such details to build corporate reputation and brand equity.
- Basu and Palazzo (2008) reasoned that CSR is “the process by which managers within an organization think about and discuss relationships with stakeholders as well as their roles in relation to the common good, along with their behavioral disposition with respect to the fulfillment and achievement of these roles and relationships” (p. 124; italics in the original). CSR is “the continuing commitment by business to behaving ethically and contributing to economic development while improving the quality of life of the work force and their family as well as the community and society at large” (Watts & Holmes, 1999 cited in Sims, 2003, p. 43).
- Mahon and McGowan (1991) adopted common-good principles of CSR: “it is clear that most authors mean corporate social responsibility to include behavior and actions beyond merely profit making that serve to improve the conditions of society and individuals within that society” (p. 80).
- Ihlen (2005) suggested that Bourdieu’s (1986) concept of social capital offers a constructive approach to the power elements within a relationship between an organization and those on whom its success or failure depends. Whether instrumental, symbolic, or purely relational, the quality of each relationship rests on whether one entity wants another to continue operation in the current fashion.
- In his entry on Corporate Social Responsibility in the Encyclopedia of Public Relations, Rawlins (2005) proposed that CSR means “doing well by doing good.” That means, for instance, that organizations with high CSR become the employers of choice (an excellent place to work), a neighbor of choice (community where it operates is pleased to have it operating there), and vendor of choice (avoiding bad product design and safety issues—giving full value). The real challenge is for organizations to be accountable beyond financial obligations.
However platitudinous various CSR definitions are, at least four realities are ever present in management discussions and strategic planning regarding CSR:
- Every organization operates in a multiple stakeholder arena where each stakeholder is likely to hold different expectations of how it should operate.
- No absolute standards of corporate responsibility exist; they are defined (socially constructed) by each generation.
- Executives are outraged by accusations that they prefer unethical business practices. For this reason, how discussion transpires within an organization accounts substantially for its positive or negative impact on helping management to be reflective: take an outside-in approach to their planning, operations, and evaluations.
- Calls for operating in the public interest, or community interest, often requires profoundly complicated analysis that defines this interest as an interlocking set of multidimensional determinants of mutual interest. The details move discussions beyond platitude. The devil is in the detail.
Such considerations demand that CSR is more than strategic philanthropy or community relations, such as efforts to sponsor little league teams and engage in goodwill fundraising. It is more than the sort of odious public relations where accommodation and being nice is seen to be more effective than engaging in policy development and implementation that achieves a true community of interest, now ever more global and focused on sustainability.
Expectations of how organizations should perform change over time. “Reshaping the corporate citizenship debate poses challenges to both the advocates and critics of corporate social responsibility. But it is where the debate should occur” (Heineman, 2005, p. B2). Advocacy over standards is likely to occur within as well as outside of each organization (Berger & Reber, 2006; Heath, 2007). The broadest set of ethical concerns arises from the organization’s economic, social, and political interests (Wartick & Cochran, 1985).
Why is CSR Important?
Answers to this question, partially addressed in the previous section, depend on how CSR is defined and what obligations that definition hold for an organization’s mission and vision, its standards of corporate performance, as fundamental to its planning and operations—and the conceptualization of the societal obligation of the organization to satisfy its franchise. As Basu and Palazzo (2008) concluded, “Such a process view of CSR locates the phenomenon as an intrinsic part of an organization’s character (i.e., the way it goes about making sense of its world), with the potential to discriminate it from other organizations that might adopt different types of sense making processes” (p. 124).
One of the strongest CSR roles of public relations is to participate in the social construction of the meaning that defines and evaluates CSR standards by type of organization and during a given era. In contrast to Milton Friedman’s narrow and conservative concern, a more reflective answer to the question of CSR’s importance can be seen in the metaphor that once offered the challenge: What is good for General Motors is good for America. The contrasting point, and the theme of post-modern discussions of corporate responsibility, is this: What is good for society is good for General Motors.
Framed this way, CSR is important for an organization’s success for two primary reasons: (1) To enhance its reputation as being morally bound to rectitude, a rational discretionary choice bringing in economic benefits (Werther & Chandler, 2006), a means for boosting brand equity and sales, and (2) to advance the organization’s credibility and character in public policy battles and during the early stages of a crisis.
Mutual, Aligned Interests and Moral Argument
CSR is the foundation for achieving mutually aligned interests and winning the moral argument about the social relevance of the organization. The modern approach to organizational management was to communicate in ways that shaped markets to the advantage of businesses—an inside-out approach to relationships. A post modern approach suggests that an outside-in approach is more capable of creating and sustaining relationships by achieving truly mutual and aligned interests.
This attention to mutual and aligned interests forms a moral argument for CSR. This argument, similar to the business citizenship perspective, also known as normative stakeholder management (Donaldson & Preston, 1995; Jones & Wicks, 1999), states that organizations consider themselves to be duty bound and deeply embedded in the strength and wholesomeness of community. A large part of corporations’ success comes from the values, expectations, and principles of the wider society within which they operate and which franchises them to operate. In a sense, a social contract exists and conforms corporations to society’s objectives (Wartick & Cochran, 1985). Within the corporate social performance (CSP) framework, Carroll (1979) stated that corporate social responsiveness is measured by the degree to which management responds to the social sphere by enacting each of the firm’s social responsibilities.
Systematic consideration of CSR can be used to reduce friction and increase harmony with stakeholders and increase the organization’s strategic business advantage. To do so requires issue monitoring and critical thinking which are second nature to effective strategic issues management as public relations:
- Ascertain the standards of corporate responsibility held by key stakeholders.
- Compare those standards to those preferred and used by the organization.
- Determine whether differences exist and, if so, whether they strain the relationship.
- Ascertain whether differences in facts account for the disparity in expectations.
- Decide whether value differences constitute the disparity between the organization and its key stakeholders.
- Budget for change options, whether communication strategies, public policy efforts, or redefined strategic business strategies to respond to stakeholder expectations.
- Alter performance or operating standards to lessen the legitimacy gap.
- Take a communication or public policy stance based on correct facts or preferred values when the community interest would be better served.
- Eliminate misunderstanding and disagreement by supplying facts or redefining standards vital to the community interest.
- Incorporate preferred standards of corporate responsibility in strategic business planning, and communicate with key external stakeholders.
- Integrate standards into individual, unit, and corporate performance review, including efforts to achieve total quality management.
- Use improved standards of corporate responsibility to achieve competitive advantage.
- Integrate these standards into product, service, and organizational reputation messages.
- Achieving mutually beneficial interests is not easy in a multiple-stakeholder- environment.
Not all stakeholders see the world in the same way. Interests often conflict. Priorities differ. High standards of corporate responsibility foster aligned relationships and can avoid costly conflict. Good performance is a bottom-line issue.
Cost Reduction and Marketing Advantage (Rational and Economic Arguments)
CSR is important because it is the foundation for reducing cost and gaining marketing advantage.
- Cost reduction (outcome): CSR can reduce cost. Conflict can raise costs, through litigation, legislation, and regulation. These can be dysfunctional means for making decisions of public policy when outrage drives the discussion of stakeholder expectation.
- Marketing advantage (outcome): By achieving appropriate standards of CSR, an organization has a more favorable image and is preferred by customers and other commercial stakeholders. Thus, CSR can increase revenue. CSR is more important when customers can vote their performance expectation with purchase dollars. It has advantage when market conditions prevail so some can achieve market advantage through higher standards. David, Kline, and Dai (2005) offered this challenge: “consumers’ knowledge of CSR practices of an organization is a function of corporate communication activities” (p. 298). This knowledge can lead to positive perceptions of the company, as well as purchase intention and behavior. Perception of an organization’s willingness to engage in discretionary CSR practices and moral/ethics predict belief that the organization has strong corporate social values. Using the theory of reasoned action, Werder (2008) reasoned that knowledge of CSR initiatives can foster salient beliefs about the company, but do not predict attitudes toward it or behavior intention. Luo and Bhattacharya (2006) reasoned that CSR initiatives with stated financial, marketing, and communication objectives can enhance company visibility, enhance customer satisfaction, and generate financial gain. Impact is greater when CSR standards are perceived to be more altruistic than self-interested. As Porter and Kramer (2002) claimed, “The acid test of good corporate philanthropy is whether the desired social change is so beneficial to the company that the organization would pursue the change even if no one ever knew about it” (p. 67).
These two outcomes build a rational or economic argument for CSR. CSR offers a rational argument for managers who seek to maximize their performance by minimizing operational and financial constraints, especially in today’s globalizing world, where activist organizations feel empowered to enact change. This view of CSR builds on what is best about the efficiency and rational market argument supporting the private sector. In addition, CSR is an argument of economic self-interest for business because it allows companies to reflect the needs and concerns of their various stakeholder groups and thus gain its societal legitimacy and maximize its financial viability.
Indeed, Clarkson’s (1995) ten years of research project on corporate social performance found a clear distinction between stakeholder issues and social issues. Similarly, Freeman (1984) suggested the stakeholder framework argues the firm is not responsible to society at large, but to specific stakeholders. Different from the moral argument, this view is similar to strategic philanthropy, or instrumental stakeholder management (Donaldson & Preston, 1995). CSR should focus on specific activities and target publics that are most desirable in terms of loyalty, trust, and goodwill (Fombrun, 1996), consumer purchase decisions, and the goals of the corporation so that ultimately the shareholder value is increased in ways that affirm the franchise to operate.
Globalization/Free Flow of Information and Changing Trends (Reflectiveness and Stakeholder Expectations)
CSR is the foundation for understanding and meeting the challenges of global stakeholders. In the last half of the 20th Century, activist publics formed to change every aspect of business and government. What tended to start as local concern and networking increased to global proportion. With the Internet, virtually every aspect of business and government around the globe can receive instant and detailed attention 24/7.
For this reason, the stakeholders of any organization play an increasingly important role in its standards of CSR. This stakeholder reciprocity/common good rationale for CSR was introduced by Freeman (1984) for strategic management and effective public affairs. This approach reasoned that key stakeholder expectations were crucial to building harmony with targeted organizations.
Basu and Palazzo (2008) highlighted the stakeholder driven approach to CSR is fundamental to a content approach whereby stakeholder standards are important for an organization to know and implement. Planning and performance combine to achieve those standards. The motivation for achievement rests on the principle that reputation counts; it can bring revenue and reduce costs.
This stakeholder rationale motivates authors such as Fombrun (1996) to merge public policy battles and crisis response. Stakeholder adjustments are important. The foundation of successful CSR rests on outside to in thinking: effective CSR goes beyond the question “what’s in it for us” to focus on the higher moral position, “what’s in it for them” or even for “us”?
Related to the stakeholder argument, social capital is thought to be a “stockpile of goodwill” that can aid an organization in addressing and recovering from crisis. It can also increase the likelihood that it will be a desirable relational partner in many ways such as a preferred provider of products or services.
Discussing social capital and its specific role in collective action regarding climate change, Adger (2003) reasoned that such topics “inform the nature of adaptive capacity and normative prescriptions of policies of adaptation. Specifically, social capital is increasingly understood within economics to have public and private elements, both of which are based on trust, reputation, and reciprocal action” (p. 387). Such dialogue can be framed as matters of the public good and ability of organizations to make appropriate adaptations to change. As a resource challenge is framed in terms of economics, CSR (as related to social capital) must come to grips with this reality: “…adaptation processes involve the interdependence of agents through their relationships with each other, with the institutions in which they reside, and with the resource based on which they depend” (p. 388). By this analysis, “social capital is an important determinant of human well-being, along with the traditional factors of production and natural capital” (p. 391). As a force in organizational and societal decision making, social capital can be seen as both bonding through shared meaning and governmental intervention and networking through shared interests and expectations. Such reasoning agrees with Bowie’s (1991) challenge that a stakeholder CSR features “reciprocal duties” (p. 62).
In similar fashion, Clark (2000) concluded that CSR and public relations “have much in common” (p. 369). Her communication-management approach (CMA) works “to join the most compelling arguments made by CSR and public relations, that is, to use the knowledge of identifying stakeholder groups and a corporation’s responsibility to them with the ability to strengthen these relationships through effective communication” (p. 373).
To achieve the fully functioning quality of each relationship, the client organization must have the management procedures and cultural commitment that lead to admiration rather than condemnation. No efforts to foster effective relationships can preclude the need for the organization to be good, as a first step to being a good communicator (Heath, 2001).
How to Implement CSR
How organizations implement CSR depends on how they define it, whether as a moral obligation and a rational approach to stakeholder satisfaction. It serves best when it is part of organizations’ culture, planning, and management. It has implications for budgeting, return on investment, and measures of effectiveness. As mentioned above, public relations practitioners not only participate in the dialogue to define CSR standards but they also play a crucial role in helping markets, audiences, and publics to be aware of the standards client organizations are willing and able to implement.
Plan of Action: Three-factor Model of CSR Implementation and Application to Public Relations
CSR requires a comprehensive approach that, according to Basu and Palazzo (2008, see especially page 208), features the classic troika of human nature:
- Cognitive: Matters of identity and legitimacy that define what and how firms think
- Linguistic: Matters of justification, positioning, and transparency that define what firms say
- Conative: Matters of posture, consistency, and commitment that define how firms behave.
Practitioners can participate in the cognitive, linguistic, and conative aspects of their organizations to foster the alignment of mutually beneficial interests in society.
Cognitive: Public relations, through issues monitoring, can play a vital role in helping the organization to know and think about changing CSR standards and the means for achieving them. The reality, however, is that beyond scanning for changing stakeholder expectations and helping to create a matrix of multidisciplinary players to learn about and analyze such changes, public relations is not expert on many of the matters that are at the core of CSR standards and performance management. Others in management must commit to a strong CSR program. Accountants must recognize, appreciate, and implement higher financial management standards, as must general counsel, engineers, process experts, human resources specialists, nutritionists, environmental impact specialists, to mention only a few of the key disciplines.
Effective public relations and CSR requires every discipline in an organization to understand how an organization can improve, how that improvement enhances stakeholder relationships, and how it can be communicated. Such planning often requires practitioners to convince management that stakeholders are calling for higher engineering standards and processes to achieve employee or product safety, or even more daunting—sustainability. Practitioners may not know what is required in terms of engineering standards or accounting practices. But, practitioners can ascertain that strains occur when key stakeholders expectations are not being met—or when they are being met but the stakeholders do not know that fact.
Linguistic: Exploring the interconnection of communication and management (public relations and CSR), Clark (2000) observed that these two disciplines “have similar objectives: both disciplines are seeking to enhance the quality of the relationship of an organization among key stakeholder groups. Both disciplines recognize that to do so makes good business sense” (p. 376). Making this conclusion, she also noted that “questions as to the chosen message and how it affects the reputation or perception of an organization as responsible remain” (p. 376). Relevant to reputation and issue position are the terms that define a good organization and the socially responsible position on key issues. In such matters, meaning matters.
From this linguistic perspective, public relations can play a leadership role in understanding the terminology or linguistic changes in the communities where each organization operates—outside-in thinking. As the famous language theorist Kenneth Burke (1973) observed, we are interested in co-created meaning. Human experience can never free itself from the terminology operating at a given moment that filters views of physical and social realities (including standards of corporate responsibility). As Burke reasoned, “We must use terministic screens, since we can’t say anything without the use of terms; whatever terms we use, they necessarily constitute a corresponding kind of screen; and any such screen necessarily directs the attention to one field rather than another” (p. 50). Looking as he did so well for the chinks in the armor of communication, he warned: “If language is the fundamental instrument of human cooperation, and if there is an ‘organic flaw’ in the nature of language, we may well expect to find this organic flaw revealing itself through the texture of society” (Burke, 1934, p. 330).
No useful discussion of CSR can ignore the terminological challenges, and the role of public relations in such efforts. “In any process of institutionalization, meaningfulness is never ‘given’ but has to be struggled for, has to be secured, even against the resistance of others” (Clegg, Courpasson, & Phillips, 2006, p. 8). Public relations helps to define key terms that become part of the general dialogue which influences how the ideology of and evaluation of CSR performance is conceived in each society in any era. Therefore, practitioners should be especially trained and positioned to understand, appreciate, and respect the development of idioms that are current in private and public sector thinking and decision making.
Conative: Discussing the conative dimension of CSR, Basu and Palazzo (2008) reasoned that it focuses on matters of posture, consistency, and commitment that define how firms tend and prefer to behave. Organizations enact the standards of CSR in all that they say and do. The operational enactment of each organization’s standards of CSR occurs by “putting their money where their mind and mouth are.” This enactment opens the door for another key role of public relations: To help the organization communicate internally and externally its commitment to various standards and goals and the actions that demonstrate that commitment. Best practices companies believe transparency includes stating their CSR goals and then reporting how well they meet those goals. Such statements can help reduce any legitimacy gap by demonstrating how organizations meet or exceed the expectations of others.
In this way, effective public relations can foster mutually beneficial relationships, which Heath and Coombs (2006) reasoned exhibit the following characteristics:
- Openness and transparency: Letting others see whether the organization has sound CSR principles and whether it meets them
- Trustworthiness: Demonstrating that the organization uses CSR principles to be seen as reliable, non-exploitative, and dependable.
- Cooperation: Enacting collaborative decision making regarding what standards should be met and the measures needed to achieve them
- Alignment: Showing that the organization is responsible, responsive, and able to achieve rectitude through shared interests, rewards, and goals with its stakeholders
- Compatibility of views/opinions: Co-creating (socially constructing) through dialogue the standards and implementation of CSR
- Commitment: Planning and operating in ways that achieve a balance between the interests of the organization and those of the persons whom the organization affects and whose support the organization needs for its success
Although CSR and public relations are not identical they must be interdependent to be effective: Being the good organization as prerequisite for being a good communicator.
In truth, few articles on CSR focus on how it can be communicated. Clark (2000) sought to correct this flaw by showing the parallels between CSR and communication management approaches to public relations which features problem identification, conflict resolution, and relationship quality.
We may add scope to Clark’s argument and show public relations to have a dynamic role in the processes by which organizations advance their CSR performance, in pursuit of strengthening the relationships between them and their stakeholders. In this way, public relations can help organizations to make society more fully functioning (Heath 2006) by solving collective problems rather than merely managing relationships in ways that can accommodate various entities to one another. Having a good relationship does not mean that organizational standards of CSR will be raised. In fact, an antagonistic relationship is more predictive of the kind of change that has led to higher standards of CSR. They have been forged through heated debates (issue communication focusing on fact, value, and policy) by various groups engaged in power resource management, at various times with the good of society genuinely not under consideration but merely the good of a sector of the society, perhaps to the disadvantage of some other sector.
As cases, Enron and other businesses in crisis demonstrate that often the organization with what seems to enjoy the best relationships with stakeholders may not actually—and substantively—be the ones adhering to high CSR standards. The paradox is image driving substance rather than substance driving image. The quality of such relationships needs to be based on solid principles and the willingness and ability of each organization to meet or exceed stakeholder expectations over the long term. Sometimes, and cases are ample to demonstrate this point, organizations foster positive relationships to seem to be good when those relationships actually mask a crisis in the making. Once the crisis manifests itself, the relationships are not only demonstrated to be based on false assumptions and performance standards, but the damage of falsely built relationships makes crisis response and recovery difficult, and even impossible. A sound foundation of CSR commitment can help an organization recover from crisis. In sharp contrast, if the crisis results from inadequate or fraudulent CSR commitment, it is very likely to be even more damaging.
Black and Hartel (2004) conceptualized a model which they tested empirically to better understand the connections between their concepts and the way that public affairs and CSR can make organizations more effective.
- Public relations can support value attuned behavior and dialogue.
- CSR can define and support ethical business behavior and accountability.
- More socially aware organizations exhibit a higher commitment to and ability to achieve genuine dialogue and engagement with stakeholders,
- Organizations with higher CSR exhibit a caring atmosphere (commitment) in the workplace and higher standards of business ethics and
- “foster employee beliefs about the value of accountability” (p. 140).
In such matters, organizations under attack may smooth relationships instead of making true change in ways to reduce the honest hostility of critics. Advocacy as a cognitive variable can, and probably should, be seen as a positive communication option since it addresses from many perspectives the key issues upon which standards of corporate responsibility are forged and framed.
Implementable Strategies and Tactics
However hard an organization strives to meet high CSR standards, that effort can be squandered if targeted publics do not know of this accomplishment as evidence of the organization’s commitment to CSR. Reputation, crisis response, relationship development and other benefits of public relations depend on how well it can communicate about an organizations’ CSR performance.
Fundamentally, public relations practitioners can and must bring discussions of CSR into management decision making to refine and implement mission/vision statements, budgeting, performance standards, and a philosophy or culture of working for a fully functioning society that defines and supports the organization. It must engage in outside-in thinking, issues monitoring, by which it aids other disciplines as well as brings its own expertise to play on knowing the standards expected by various stakeholders. It must engage with other voices to discover, consider, evaluate, and implement facts and opinions that individually and collectively advance the common good. Finally, it must not only help to create and define the culture of CSR excellence internally, but also report the organization’s achievement and commitments externally. Finally,
Specific action steps identified by Werther and Chandler (2006) and discussed by other authors offer short-term strategies including top down commitment, the creation of a CSR framework, CSR position statement, CSR ombudsman, CSR audit and report, and awareness creation. After these basic conditions are created, organizations may engage in more long-term strategies such as stakeholder involvement, corporate governance, and managing key messages. Not all of these strategies should or can be managed by public relations practitioners—but they can add value to internal discussions and planning and are essential to external communication.
- Top down commitment: The integration of CSR into an organization’s operational culture should start with top management, preferably the CEO (or the other top organizational leader such as a vice president of corporate responsibility), who should collaboratively establish the necessary components of an effective CSR policy and institutionalize it within the firm—and use the standards for the assessment of individual, unit, and organizational effectiveness. To this end, the leadership must take a stakeholder perspective rather than input/output approach to strategic management (Donaldson & Preston, 1995).
- CSR framework: Structural support for CSR is needed. CSR should be at the same executive level as other key corporate governance issues. To gain visibility and sponsorship, ideally a CSR officer position should be taken by a company executive and must be backed by the CEO.
- CSR position statement: This statement, with the CEO’s active support, should involve the organization’s key stakeholders and their perspectives and contain a conflict resolution process that seeks mutually beneficial solutions. It also provides practical guidance by reinforcing the importance of CSR through rewards and sanctions and by specifying how CSR is to be implemented on a day-to-day basis. From a business perspective, Hess, Rogovsky and Dunfee (2004) suggested that the CSR process needs to connect to the company’s core values and core competencies, the response to moral pressures, and set clear objectives and means of measurement.
- CSR audit: CSR audit with published results will further awareness among interna
l and external stakeholders. Using survey methodologies in consultation with stakeholders has been considered an effective method (Jackson & Bundgard, 2002) in this procedure. One of the earlier efforts in public relations to facilitate the CSR auditing process was reported by J. Grunig (1979) who used situational theory to explain communication behavior and attitudes of publics arising around issues of CSR. Essentially that study helped managers to select certain social issues for attention and auditing as well as to devise a communication program to inform publics about responsible corporate acts.
- CSR annual report: This report should incorporate triple bottom line thinking: financial, environmental, and social performance. For an “ideal” CSR report, Middlemiss (2004) suggested the following:
- Takes account of the demand (stakeholders) and not of the supply (company).
- Focuses on management systems and doesn’t list too many detailed indicators.
- Doesn’t consist of more than 50 pages and is complemented by the internet and special publications.
- Reveals its key messages within, at most, 30-minutes reading time.
- Is written in a business like fashion and sparsely illustrated.
- Financial report (report to shareholders or donors/followers): Financial stakeholders appreciate firms’ ability to generate profits in ways that demonstrate preferred standards of responsibility. Some mutual funds are designed and managed to feature CSR standards to justify why organizations deserve investment dollars. Such claims are strengthened when they demonstrate how improved ethical standards increase profits, especially by avoiding increased amounts of regulatory constraint, limiting legal liability, increasing market share, or operating efficiently. Sometimes, companies realize that by improving their engineering standards, for instance, they can use more of the feedstock materials they purchase while reducing environmentally damaging wastes and emissions, thereby avoiding unnecessary regulatory constraints. Companies can tout the reduction in raw materials used, improved processes to lessen environmental impact, lowered accident rates, and other practices that mark financial and ethical improvements. They can avoid crises associated with discoveries such as child labor practices, sweatshop conditions, and economic colonialism.
- Online Reports: Printed reports have traditionally been circulated to tout an organization’s CSR standards and accomplishments. Many printed documents never get circulated or only reach those who are not particularly interested in such reading. Today, many organizations place such reports, or at least summaries of such reports with the full report available by link, on their home pages. In this venue, organizations tout their standards of CSR with text and even pictures (including video). Rather than languishing on shelves of public relations practitioners, online versions are available 24/7. The interested reader can even follow links to find additional comments by organizations that positively comment on the focal organization’s standards and achievements. Links can be used to bridge between a business and its non-profit partners in CSR. It is wise as well to continually report on progress and be willing to combat against unsupported or biased claims to the opposite. This online venue can allow for CSR accomplishments to be attached to related messages such as marketing and organizational history.
- Employee communication: Another means for communicating corporate responsibility lies in the array of vehicles, including executive statements and the intranet, used to reach employees. Organizational culture is vital to the way employees conduct themselves and perform their work. This culture is crucial to the ability of an organization to achieve CSR (Hosmer, 1991).
- Advertising and other promotional options: These tools can integrate CSR claims into product and service advertising, as well as arguments by government agencies for funding and by nonprofits for fund-raising. Such claims demonstrate how an organization’s actions truly benefit its stakeholders.
- CSR ombudsman: This position serves as a key component of the continuous internal reinforcement necessary for an effective CSR policy.
- Awareness creation: Rewards and measures are key in creating an organizational culture that is sensitive to CSR. Many articles report that key stakeholders are less aware of CSR performance than the sponsoring organization should prefer.
Medium to Long-term Strategies:
- Stakeholder involvement: Here public relations practitioners can, for instance, change the focus from financial reporting and investor relations to include social issues and relationship building with all key publics. Smith (2003) indicated that such stakeholder engagement should be at the core of designing any CSR strategy. Lack of awareness about a firm’s obligations to its stakeholders can produce a legitimacy gap. Therefore, stakeholders’ engagement is more likely to lead to informed management thinking and decision making. Given the foreseeable difficulties in this process (such as a lack of skill set and openness of the management), diverse perspectives of stakeholders and management, and the unwillingness of certain stakeholder groups to engage in such a dialogue, some firms hire talent from the non-profit sector.
- Corporate governance: Transparency and accountability are the key words. Shareholder activism is increasing and drives reform in the area of corporate law.
- Manage the message: Strategic CSR requires that stakeholder expectations are met in reality and that excessive self-promotion should be avoided otherwise CSR efforts fail to demonstrate the other interest or mutual interest orientation needed.
- Measure social performance: Smith (2003) suggested developing appropriate metrics, essentially benchmarks for measuring social and environmental performance and goal setting.
- Communication strategy guidelines: Framing strategies for communicating about corporate responsibility, Sims (1992) offered the following sage bits of advice: (a) Be realistic and do not promise what the organization or industry cannot deliver, (b) encourage organization or industry-wide input into the standards and the best means for accomplishing them (as well as the stumbling blocks), (c) allow diversity, (d) allow whistle-blowing, (e) provide ethics training, (f) recognize the ambiguity that is inherent in ethical standards and their implementation, and (g) integrate ethical decision making into employee and operating unit appraisal.
Summary: The CSR Ethics of a Fully Functioning Society
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Public relations is ideally positioned to help organizations make communities more fully functioning because of its close interdependency with CSR. CSR is the means by which an organization is good first as a foundation for being an effective communicator. Organizational culture and character count. Both as a “listener” and communicator, public relations can aid organizations’ ability to foster mutually beneficial interests proactively as a problem solver rather than reactively as lessons learned.
The constructive role of public relations in CSR planning, implementation, and communication simply must be reflective (van Ruler & Vercic, 2005; see also, Black & Hartel, 2004 and Holmstrom, 2004). One size of CSR does not fit all. In such matters, “it depends” is not a stumbling block but a foundational principle.
Abbott, W. E, & Monsen, R. J. (1979). On the measurement of corporate social responsibility: Self-reported disclosures as a method of measuring corporate social involvement. Academy of Management Journal, 22, 501-515. This early study reviewed three types of published research to derive usable measures of corporate social activities, i.e., (1) social accounting, (2) reputational scales, and (3) content analysis of corporate publications. This study used the third method and examined the use of self-reported disclosures as a means of constructing a quantitative scale, identified as the Social Involvement Disclosure (SID) scale. The data in this article, the annual reports of the Fortune 500 companies, also showed effectively (1) the change over time of social involvement, (2) the direction and scope of this involvement, and (3) the effect of this involvement on corporate profitability.
Adger, W. N. (2003). Social conflict, collective action, and adaptation to climate change. Economic Geography, 79, 387-404. This economist examined the impact social capital (as an individual and collective resource) has on the ability of society to resolve conflict and take collective action. Goodwill, as social capital, is an invaluable ingredient in decision making calling for extreme change.
Agle, B. R., Mitchell, R. K., & Sonnenfeld, J. A. (1999). Who matters to CEOs? An investigation of stakeholder attributes and salience, corporate performance, and CEO values. Academy of Management Journal, 42, 507-525. This article justified bringing the stakeholder voice into discussions of corporate social performance. It examined what kind of stakeholder groups (i.e., stakeholder attributes of power, legitimacy, urgency) will CEOs pay more attention to (stakeholder salience). Results supported the attribute-salience relationship and addressed relationships among CEO values, salience, and corporate social performance. However, it found no support for a salience-financial performance link, thus suggesting the need for continued development of normative stakeholder theory.
Aupperle, K. E., Carroll, A. B., & Hatfield, J. D. (1985). An empirical investigation of the relationship between corporate social responsibility and profitability. Academy of Management Journal, 28, 446-463. This is one of the early studies that found no relationship between CSR and profitability, i.e., different levels of social orientation did not correlate with the different levels of firm performance.
Barone, J. J., Miyazaki, A. D., & Taylor, K. A. (2000). The influence of cause related marketing on consumer choice: Does one good turn deserve another? Journal of Academy of Marketing Science, 29, 248-262. This article provides evidence that awareness of a businesses commitment to a cause increases its marketing impact.
Basu, K., & Palazzo, G. (2008). Corporate social responsibility: A process model of sensemaking. Academy of Management Review, 33, 122-136. Among other insights, these authors argued that academic discussions and management implementation of CSR requires understanding of three fundamental lines of CSR inquiry: Stakeholder driven, performance driven, and motivation driven. Based on what these perspectives tell us, the authors reason that a process approach to CSR is fundament to a content approach. How does the organization know CSR and implement it?
Beliveau, B., Cottrill, M., & O’Neill, H. M. (1994). Predicting corporate social responsiveness: A model drawn from three perspectives. Journal of Business Ethics, 13, 731-738. This study examined how factors such as industry norms, market share and indicators of management reputation predict variance in CSR. Different from studies that found no relationship between CSR and profit, this study found that CSR levels and their relationship with profit vary by industry. Various performance measures respond differently to CSR measures. Stock market measures lead CSR, while accounting measures lag CSR.
Bird, R., Hall, A. D., Momente, F., & Reggiani, F. (2007). What corporate social responsibility activities are valued by the market? Journal of Business Ethics, 76, 189-206. This article aimed to resolve the conflict between advocating solely for the interests of stockholders and for those of stakeholders. It this examined the relationship between a company’s positive (strengths) and negative (concerns) corporate social responsibility (CSR) activities and equity performance. This study found that taking a wider stakeholder perspective will not necessarily jeopardize the interest of its stockholders, although different areas of CSR activities do make a difference in terms of market values. Their findings are that most recently firms generally do well in the market if they were most proactive in the area of employee-relations but do not go beyond the minimum requirements in the areas of diversity and environmental protection.
Black, L. D., & Hartel, C. E. J. (2004). The five capabilities of socially responsible organizations. Journal of Public Affairs, 4, 125-144. These authors establish a model which they test to determine the five capabilities of socially responsible organizations: Value-attuned public relations, stakeholder engagement, accountability, business ethics, and dialogue.
Blumenthal, D. & Bergstrom, A. J. (2003). Brand councils that care: Towards the convergence of branding and corporate social responsibility. Journal of Brand Management, 10 (4/5), 327-341. This article discusses the relationship between CSR and branding. Based on interviews with corporate and consultative brand practitioners, this paper describes the practice of the brand council. It also discusses the rationale for integrating brand council with CSR.
Bowen, S. A., & Heath, R. H. (2005). Issues management, systems, and rhetoric: Exploring the distinction between ethical and legal guidelines at Enron. Journal of Public Affairs, 5, 1-5. Using Enron as a case study, this article discusses how Enron violated ethical and legal standard in its business practices. The authors reasoned that an organization must be good internally and make decisions from an outside-in perspective.
Bowie, N. (1991). New directions in corporate social responsibility. Business Horizons, 34(4), 56-65. Rather than narrowing the scope of the discussion, he believed that as an academic topic as well as a management function, CSR needed to be structured on reciprocity and founded on moral pluralism. He reasoned that CSR includes the duty to solve social problems, not merely or primarily for the good of the organization but for the common good.
Buchholz, R. A. (1991). Corporate responsibility and the good society: From economics to ecology. Business Horizons, 34(4), 19-31. Buchholz is one of many writers who prefers corporate responsibility, without social as a modifier. He was one of the first to connect CR and sustainability.
Burke, K. (1934, May 2). The meaning of C. K. Ogden. New Republic, 78, 328-331. Burke offered insights into ways that flaws in language produce flaws in society.
Burke, K. (1973). The philosophy of literary form. (3rd. ed.) Berkeley, CA: University of California Press. This is one of several books by the esteemed Kenneth Burke that examines language as a foundation for understanding and judging human individual and collective social action.
Burke, L. & Logsdon, J. M. (1996). How corporate social responsibility pays off. Long Range Planning, 29, 495-502. This article identified five key dimensions of strategic CSR: centrality (closeness of fit to the firm’s mission and objectives), specificity (ability to capture private benefits by the firm), proactivity (degree to which the program is planned in anticipation of emerging social trends and in the absence of crisis), voluntarism (the scope for discretionary decision-making and the lack of externally imposed compliance requirements), and visibility (observable, recognizable credit by internal and/or external stakeholders for the firm).
Carroll, A. B. (1979). A three-dimensional conceptual model of corporate performance. Academy of Management Review, 4, 497-505. The author suggested three distinct aspects of corporate social performance: (1) A definition of social responsibility (i.e., Does our responsibility go beyond economic and legal concerns?) (2) An enumeration of the issues for which social responsibility exists (i.e., What are the social areas – environment, product safety, discrimination, etc. – in which we have a responsibility?) (3) A specification of the philosophy of response (i.e., Do we react to each issues or proact?)
Carroll, A. B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34(4), 39-48.
CORPORATE SOCIAL RESPONSIBILITY
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Corporate social responsibility (CSR) can be defined as the "economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time" (Carroll and Buchholtz 2003, p. 36). The concept of corporate social responsibility means that organizations have moral, ethical, and philanthropic responsibilities in addition to their responsibilities to earn a fair return for investors and comply with the law. A traditional view of the corporation suggests that its primary, if not sole, responsibility is to its owners, or stockholders. However, CSR requires organizations to adopt a broader view of its responsibilities that includes not only stockholders, but many other constituencies as well, including employees, suppliers, customers, the local community, local, state, and federal governments, environmental groups, and other special interest groups. Collectively, the various groups affected by the actions of an organization are called "stakeholders." The stakeholder concept is discussed more fully in a later section.
Corporate social responsibility is related to, but not identical with, business ethics. While CSR encompasses the economic, legal, ethical, and discretionary responsibilities of organizations, business ethics usually focuses on the moral judgments and behavior of individuals and groups within organizations. Thus, the study of business ethics may be regarded as a component of the larger study of corporate social responsibility.
Carroll and Buchholtz's four-part definition of CSR makes explicit the multi-faceted nature of social responsibility. The economic responsibilities cited in the definition refer to society's expectation that organizations will produce good and services that are needed and desired by customers and sell those goods and services at a reasonable price. Organizations are expected to be efficient, profitable, and to keep shareholder interests in mind. The legal responsibilities relate to the expectation that organizations will comply with the laws set down by society to govern competition in the marketplace. Organizations have thousands of legal responsibilities governing almost every aspect of their operations, including consumer and product laws, environmental laws, and employment laws. The ethical responsibilities concern societal expectations that go beyond the law, such as the expectation that organizations will conduct their affairs in a fair and just way. This means that organizations are expected to do more than just comply with the law, but also make proactive efforts to anticipate and meet the norms of society even if those norms are not formally enacted in law. Finally, the discretionary responsibilities of corporations refer to society's expectation that organizations be good citizens. This may involve such things as philanthropic support of programs benefiting a community or the nation. It may also involve donating employee expertise and time to worthy causes.
The nature and scope of corporate social responsibility has changed over time. The concept of CSR is a relatively new one—the phrase has only been in wide use since the 1960s. But, while the economic, legal, ethical, and discretionary expectations placed on organizations may differ, it is probably accurate to say that all societies at all points in time have had some degree of expectation that organizations would act responsibly, by some definition.
In the eighteenth century the great economist and philosopher Adam Smith expressed the traditional or classical economic model of business. In essence, this model suggested that the needs and desires of society could best be met by the unfettered interaction of individuals and organizations in the marketplace. By acting in a self-interested manner, individuals would produce and deliver the goods and services that would earn them a profit, but also meet the needs of others. The viewpoint expressed by Adam Smith over 200 years ago still forms the basis for free-market economies in the twenty-first century. However, even Smith recognized that the free market did not always perform perfectly and he stated that marketplace participants must act honestly and justly toward each other if the ideals of the free market are to be achieved.
In the century after Adam Smith, the Industrial Revolution contributed to radical change, especially in Europe and the United States. Many of the principles espoused by Smith were borne out as the introduction of new technologies allowed for more efficient production of goods and services. Millions of people obtained jobs that paid more than they had ever made before and the standard of living greatly improved. Large organizations developed and acquired great power, and their founders and owners became some of the richest and most powerful men in the world. In the late nineteenth century many of these individuals believed in and practiced a philosophy that came to be called "Social Darwinism," which, in simple form, is the idea that the principles of natural selection and survival of the fittest are applicable to business and social policy. This type of philosophy justified cutthroat, even brutal, competitive strategies and did not allow for much concern about the impact of the successful corporation on employees, the community, or the larger society. Thus, although many of the great tycoons of the late nineteenth century were among the greatest philanthropists of all time, their giving was done as individuals, not as representatives of their companies. Indeed, at the same time that many of them were giving away millions of dollars of their own money, the companies that made them rich were practicing business methods that, by today's standards at least, were exploitative of workers.
Around the beginning of the twentieth century a backlash against the large corporations began to gain momentum. Big business was criticized as being too powerful and for practicing antisocial and anticompetitive practices. Laws and regulations, such as the Sherman Antitrust Act, were enacted to rein in the large corporations and to protect employees, consumers, and society at large. An associated movement, sometimes called the "social gospel," advocated greater attention to the working class and the poor. The labor movement also called for greater social responsiveness on the part of business. Between 1900 and 1960 the business world gradually began to accept additional responsibilities other than making a profit and obeying the law.
In the 1960s and 1970s the civil rights movement, consumerism, and environmentalism affected society's expectations of business. Based on the general idea that those with great power have great responsibility, many called for the business world to be more proactive in (1) ceasing to cause societal problems and (2) starting to participate in solving societal problems. Many legal mandates were placed on business related to equal employment opportunity, product safety, worker safety, and the environment. Furthermore, society began to expect business to voluntarily participate in solving societal problems whether they had caused the problems or not. This was based on the view that corporations should go beyond their economic and legal responsibilities and accept responsibilities related to the betterment of society. This view of corporate social responsibility is the prevailing view in much of the world today.
The sections that follow provide additional details related to the corporate social responsibility construct. First, arguments for and against the CSR concept are reviewed. Then, the stakeholder concept, which is central to the CSR construct, is discussed. Finally, several of the major social issues with which organizations must deal are reviewed.
ARGUMENTS FOR AND AGAINST
CORPORATE SOCIAL RESPONSIBILITY
The major arguments for and against corporate social responsibility are shown in Exhibit 1. The "economic" argument against CSR is perhaps most closely associated with the American economist Milton Friedman, who has argued that the primary responsibility of business is to make a profit for its owners, albeit while complying with the law. According to this view, the self-interested actions of millions of participants in free markets will, from a utilitarian perspective, lead to positive outcomes for society. If the operation of the free market cannot solve a social problem, it becomes the responsibility of government, not business, to address the issue.
Arguments For and Against CSR
|The rise of the modern corporation created and continues to create many social problems. Therefore, the corporate world should assume responsibility for addressing these problems.||Taking on social and moral issues is not economically feasible. Corporations should focus on earning a profit for their shareholders and leave social issues to others.|
|In the long run, it is in corporations' best interest to assume social responsibilities. It will increase the chances that they will have a future and reduce the chances of increased governmental regulation.||Assuming social responsibilities places those corporations doing so at a competitive disadvantage relative to those who do not.|
|Large corporations have huge reserves of human and financial capital. They should devote at least some of their resources to addressing social issues.||Those who are most capable should address social issues. Those in the corporate world are not equipped to deal with social problems.|
The "competitive" argument recognizes the fact that addressing social issues comes at a cost to business. To the extent that businesses internalize the costs of socially responsible actions, they hurt their competitive position relative to other businesses. This argument is particularly relevant in a globally competitive environment if businesses in one country expend assets to address social issues, but those in another country do not. According to Carroll and Buchholtz, since CSR is increasingly becoming a global concern, the differences in societal expectations around the world can be expected to lessen in the coming years.
Finally, some argue that those in business are ill-equipped to address social problems. This "capability" argument suggests that business executives and managers are typically well trained in the ways of finance, marketing, and operations management, but not well versed in dealing with complex societal problems. Thus, they do not have the knowledge or skills needed to deal with social issues. This view suggests that corporate involvement in social issues may actually make the situation worse. Part of the capability argument also suggests that corporations can best serve societal interests by sticking to what they do best, which is providing quality goods and services and selling them at an affordable price to people who desire them.
There are several arguments in favor of corporate social responsibility. One view, held by critics of the corporate world, is that since large corporations create many social problems, they should attempt to address and solve them. Those holding this view criticize the production, marketing, accounting, and environmental practices of corporations. They suggest that corporations can do a better job of producing quality, safe products, and in conducting their operations in an open and honest manner.
A very different argument in favor of corporate social responsibility is the "self-interest" argument. This is a long-term perspective that suggests corporations should conduct themselves in such a way in the present as to assure themselves of a favorable operating environment in the future. This view holds that companies must look beyond the short-term, bottom-line perspective and realize that investments in society today will reap them benefits in the future. Furthermore, it may be in the corporate world's best interests to engage in socially responsive activities because, by doing so, the corporate world may forestall governmental intervention in the form of new legislation and regulation, according to Carroll and Buchholtz.
Finally, some suggest that businesses should assume social responsibilities because they are among the few private entities that have the resources to do so. The corporate world has some of the brightest minds in the world, and it possesses tremendous financial resources. (Wal-Mart, for example, has annual revenues that exceed the annual GNP of some countries.) Thus, businesses should utilize some of their human and financial capital in order to "make the world a better place."
THE STAKEHOLDER CONCEPT
According to Post, Lawrence, and Weber, stakeholders are individuals and groups that are affected by an organization's policies, procedures, and actions. A "stake" implies that one has an interest or share in the organization and its operations, per Carroll and Buchholtz. Some stakeholders, such as employees and owners, may have specific legal rights and expectations in regard to the organization's operations. Other stakeholders may not have specific rights granted by law, but may perceive that they have moral rights related to the organization's operations. For example, an environmental group may not have a legal right in regard to a company's use of natural resources, but may believe that they have a moral right to question the firm's environmental policies and to lobby the organization to develop environmentally friendly policies.
All companies, especially large corporations, have multiple stakeholders. One way of classifying stakeholder groups is to classify them as primary or secondary stakeholders. Primary stakeholders have some direct interest or stake in the organization. Secondary stakeholders, in contrast, are public or special interest groups that do not have a direct stake in the organization but are still affected by its operations. Exhibit 2 classifies some major stakeholder groups into primary and secondary categories.
Table based on Carroll and Buchholtz, 2003: p. 71
|Primary Stakeholders||Shareholders (Owners)|
|Secondary Stakeholders||Local, State, and|
|Civic Institutions and|
|Special Interest Groups|
|Trade and Industry|
The owners of a firm are among the primary stakeholders of the firm. An organization has legal and moral obligations to its owners. These obligations include, but are not limited to, attempting to ensure that owners receive an adequate return on their investment. Employees are also primary stakeholders who have both legal and moral claims on the organization. Organizations also have specific responsibilities to their customers in terms of producing and marketing goods and services that offer functionality, safety, and value; to local communities, which can be greatly affected by the actions of resident organizations and thus have a direct stake in their operations; and to the other companies with whom they do business. Many social commentators also suggest that companies have a direct responsibility to future generations and to the natural environment.
An organization's responsibilities are not limited to primary stakeholders. Although governmental bodies and regulatory agencies do not usually have ownership stakes in companies in free-market economies, they do play an active role in trying to ensure that organizations accept and meet their responsibilities to primary stakeholder groups. Organizations are accountable to these secondary stakeholders. Organizations must also contend with civic and special interest groups that purport to act on behalf of a wide variety of constituencies. Trade associations and industry groups are also affected by an organization's actions and its reputation. The media reports on and investigates the actions of many companies, particularly large organizations, and most companies accept that they must contend with and effectively "manage" their relationship with the media. Finally, even an organization's competitors can be considered secondary stakeholders, as they are obviously affected by organizational actions. For example, one might argue that organizations have a social responsibility to compete in the marketplace in a manner that is consistent with the law and with the best practices of their industry, so that all competitors will have a fair chance to succeed.
CONTEMPORARY SOCIAL ISSUES
Corporations deal with a wide variety of social issues and problems, some directly related to their operations, some not. It would not be possible to adequately describe all of the social issues faced by business. This section will briefly discuss three contemporary issues that are of major concern: the environment, global issues, and technology issues. There are many others.
Corporations have long been criticized for their negative effect on the natural environment in terms of wasting natural resources and contributing to environmental problems such as pollution and global warming. The use of fossil fuels is thought to contribute to global warming, and there is both governmental and societal pressure on corporations to adhere to stricter environmental standards and to voluntarily change production processes in order to do less harm to the environment. Other issues related to the natural environment include waste disposal, deforestation, acid rain, and land degradation. It is likely that corporate responsibilities in this area will increase in the coming years.
Corporations increasingly operate in a global environment. The globalization of business appears to be an irreversible trend, but there are many opponents to it. Critics suggest that globalization leads to the exploitation of developing nations and workers, destruction of the environment, and increased human rights abuses. They also argue that globalization primarily benefits the wealthy and widens the gap between the rich and the poor. Proponents of globalization argue that open markets lead to increased standards of living for everyone, higher wages for workers worldwide, and economic development in impoverished nations. Many large corporations are multinational in scope and will continue to face legal, social, and ethical issues brought on by the increasing globalization of business.
Whether one is an opponent or proponent of globalization, however, does not change the fact that corporations operating globally face daunting social issues. Perhaps the most pressing issue is that of labor standards in different countries around the world. Many corporations have been stung by revelations that their plants around the world were "sweatshops" and/or employed very young children. This problem is complex because societal standards and expectations regarding working conditions and the employment of children vary significantly around the world. Corporations must decide which is the responsible option: adopting the standards of the countries in which they are operating or imposing a common standard world-wide. A related issue is that of safety conditions in plants around the world.
Another issue in global business is the issue of marketing goods and services in the international marketplace. Some U.S. companies, for example, have marketed products in other countries after the products were banned in the United States.
Another contemporary social issue relates to technology and its effect on society. For example, the Internet has opened up many new avenues for marketing goods and services, but has also opened up the possibility of abuse by corporations. Issues of privacy and the security of confidential information must be addressed. Biotechnology companies face questions related to the use of embryonic stem cells, genetic engineering, and cloning. All of these issues have far-reaching societal and ethical implications. As our technological capabilities continue to advance, it is likely that the responsibilities of corporations in this area will increase dramatically.
Corporate social responsibility is a complex topic. There is no question that the legal, ethical, and discretionary expectations placed on businesses are greater than ever before. Few companies totally disregard social issues and problems. Most purport to pursue not only the goal of increased revenues and profits, but also the goal of community and societal betterment.
Research suggests that those corporations that develop a reputation as being socially responsive and ethical enjoy higher levels of performance. However, the ultimate motivation for corporations to practice social responsibility should not be a financial motivation, but a moral and ethical one.
Arthaud-Day, M.L. "Transnational Corporate Social Responsibility: A Tri-Dimensional Approach to International CSR Research." Business Ethics Quarterly 15 (2005): 1–22.
Carroll, A.B., and A.K. Buchholtz. Business and Society: Ethics and Stakeholder Management. 5th ed. Australia: Thomson South-Western, 2003.
Garriga, E., and D. Mele. "Corporate Social Responsibility Theories: Mapping the Territory." Journal of Business Ethics 53 (2004): 51–71.
Marquez, A., and C.J. Fombrun. "Measuring Corporate Social Responsibility." Corporate Reputation Review 7 (2005): 304–308.
Post, J.E., A.T. Lawrence, and J. Weber. Business and Society. 10th ed. Boston: McGraw-Hill, 2002.
Also read article about Corporate Social Responsibility from Wikipedia
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