What is Corporate Social Responsibilty?

What is Corporate Social Responsibilty?

What is Corporate Social Responsibility?

 

Introduction.

Would you believe it if I tell you that the Nobel Prize-winning economist Milton Friedman (1962) had opposed to the underlying premise of Corporate Social Responisibilty and feel that the sole responsibility of business is profit maximization.

 

He wrote in his book, Capitalism and Freedom, this statement:

 

“The view has been gaining widespread acceptance that corporate officials……have a social responsibility that goes beyond serving the interests of their stockholders….This view shows a fundamental misconception of the character and nature of a free economy, there is one and only one social responsibility of business – to use the resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.”

 

This statement portrays a narrow and selfish view of business.

 

It implies that the social responsibility of managers is “to make as much money for the stockholders as possible”. This view reflects the character and nature of a free economy.

So this view is defended by the argument that is frequently used in a free economy, which is “Let the market decide”.

 

 

The issue of corporate social responsibility (CSR) has been of growing concern among business communities in recent years. For example, Lord Sieff, the former chairman of Marks & Spencer plc, said that business only contributes fully to society if it is efficient, profitable and socially responsible (Cannon, 1992). Corporations like Johnson & Johnson also believe it is a company’s responsibility to be fair, honest, trustworthy, and respectful, in dealing with all its constituents (Johnson & Johnson, 2000).

 

Volkswagen defined CSR as the ability of a company to incorporate its responsibility into society to develop solutions for economic and social problems. These positions suggest that CSR is still a major concern among companies worldwide. CSR has also been viewed as the continuing commitment by business to behave ethically and to contribute to economic development while improving the quality of life of the workforce and their families.

 

Has time changed? Why have the views of managers of today changed so drastically from the narrow views of the Classical School?

 

Tiger Woods, the legendary world number 1 golfer, has invested hugh sums of money setting up golf training centres and educational establishments for the youths of today. He does not selfishly guard his immense earnings so that his future earning may grow at an even more enormous rate. Other world leading sportsmen and sports women have follow suit and are busy establishing socially desirable ventures to benefit the less fortunate citizens. 

 

Malaysian Experience

Although CSR has received most public attention in the developed countries, CSR has also been of major concern in Malaysia in recent years where several non-governmental organizations like “Sahabat Alam Malaysia”, Federation of Malaysian Consumers Association, and Consumers Association of Penang (CAP) and many others have raised issues relating to environmental pollution, health hazards products, product safety, discrimination against the handicapped, and drug abuse (Abdul Rashid, 2002).  These issues have raised the attention of the government and legislation has been introduced to prevent the problems becoming out of hand.

 

For example, the Environmental Quality Act was instituted in 1974 to enforce legislation against problems of environmental safety and pollution (Abdullah, 1991). Environmental Impact Assessment (EIA) was made compulsory for construction companies before they were to be allowed to develop new housing/property areas (Teoh and Thong, 1996). Several laws pertaining to drug abuse were also introduced by the Ministry of Health to reduce the distribution and supply of drugs that have potential side effects (Abdullah, 1991).

 

CSR Concepts And Approaches

 

In 1960, Keith Davis described social responsibility as businesses’ “decisions and actions taken for reasons at least partially beyond the firm’s direct economic or technical interest”. In 1971, the Committee for Economic Development made the following statement in regards to corporate social responsibility:

 

“Today it is clear that the terms of the contract between society and business are, in fact, changing in substantial and important ways. Business is being asked to assume broader

Pages: 1 2 3 4 5