Just as there are some who overemphasize the importance of corporate social responsibility, there are others who criticize the concept and propose that any acts of social responsibility which would drain the profits of the corporation would be outside the realm of legitimate business functions and would defy the very purpose of the existence and objectives of the corporations.
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These critics view the economic and social objectives as contradictory to each other and as separate ends of a continuum.
Arguments for CSR:
The proponents of corporate social responsibility have put forth arguments supporting the concept. Some of the reasons cited in favour of CSR are summarized as follows:
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i. Business is unavoidably involved in social issues:
Managers are first and foremost citizens, in the same way as the individuals are. As such they have the same responsibility as individual citizens to improve society as a whole.
Furthermore, a business operates with social resources and it is the management’s responsibility to put these resources to the best possible use. The businesses would be benefitted by being concerned about such societal concerns as unemployment, inflation and so on.
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ii. CSR programmes create a favourable public image:
The community shows respect for such businesses that display socially responsible behaviours. A socially conscious enterprise would win the goodwill of the community. It would create better environment for business- customer relations and for worker-management relations, which is good for organizations.
iii. The society expects the businesses to be socially sensitive and responsive:
The public opinion runs deep in expecting the productivity goals to co-exist with the quality of life social goals.
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iv. Businesses have the resources:
The modern businesses command enormous wealth, huge wealth generating capacity, a rich stock of technical, financial and managerial resources and a pool of expertise that can solve many societal problems and provide leadership to society.
v. Avoidance of excessive government regulations and interference:
Laws cannot be passed for all circumstances and hence businesses must assume responsibility to maintain an orderly society. As has been evidenced by waves of anti-trust, equal employment opportunity, air and water pollution control legislation, truth in advertising and other similar legislation being enforced in America, it is apparent that government will force the businesses to do for social benefit what it has failed to do voluntarily. Thus, the more socially responsible the businesses are the less government regulations can be expected
Based upon these arguments; it would be natural to assume that it is beneficial for businesses to integrate expanded social responsibility into their activities and their philosophy. Keith Davis has summed up his views regarding managerial social responsibility as follows:
“Society wants business as well as all other major institutions to assume significant social responsibility. Social responsibility has become the hall mark of mature, global civilization………. the business which vacillates or chooses not to enter the arena of social responsibility may find that it gradually will sink into consumer and public disfavor.”
Argument against CSR:
The major anti-CRS arguments are summarized as follows:
i. The management is under moral and contractual commitment to the stock holders only:
The primary duty of the management is to work for the shareholders who expect maximum returns on their investment. The policies of profit making and social responsibility are mutually exclusive and hence any contributions made for social causes reduce profits. Economists like Milton Friedman believe that such practices conflict with the basic premises underlying U.S. capitalism.
ii. In a free and democratic economy, all groups are expected to take care of their own problems and responsibilities:
Why should the managers be concerned with the interests of the workers and consumers? The prices should be fixed by the economic forces of supply and demand and not by the capabilities of the consumers to pay. The consumers must look after their own interests. Similarly, the workers should be responsible for their own safety and well being.
iii. The management is not properly equipped and trained in handling social issues and activities:
It would be better to leave social interests in the hands of people more skilled in social programmes such as teachers, social workers and so on. Furthermore, management is so heavily involved in enormously imposing tasks of managerial functions that it will not be desirable to impose an additional task of social responsibility.
iv. Big businesses already hold enough economic power:
Businesses control the economy of the country. Giving them the social power as well would be detrimental to the general and optimal welfare of the society. Such social power could influence political results and hence legislative results which would undermine the true principles of democracy. For example, contributions to a favourite charity of a legislator could tip the legislation in favour of given business which would be counter to democratic principles.
Areas of Social Responsibility:
There are a number of social issues where the businesses are expected to get involved. The managerial responsibility to various constituencies was discussed in Chapter 1. Some other areas of organizational social responsibility are:
1. Environment:
A critical area of social responsibility relates to natural environment. It is very important to use the natural resources wisely. Our society is already facing shortages and depletion of resources that have been overused. It is the management’s responsibility to be involved in research to find new sources of energy. For example, forests cut for production of paper should be replenished.
In the area of pollution control, the management owes it to society to ensure that their production processes or usage of their products does not cause air pollution or water pollution.
Other waste products that are not acceptable to society and must be managed by the management are: toxic wastes, excessive noise, chemical pesticides, automobile exhaust, packing boxes, aluminum cans, newspaper waste and so on, because these wastes spoil the natural outlook.
Management must adopt such recycling policies that would eliminate or at least minimize the negative impact of such pollution and waste. According to Jeremy Main, companies need to develop economically feasible ways to avoid contributing to acid rain, and global warming; to avoid depleting the ozone layer; and to develop alternative methods of handling sewage, hazardous wastes and so on.
2. Consumers:
Protecting consumer interests is a social obligation and organizational policies and practices affect consumers in many areas including pricing, product performance and so on. These responsibilities extend to:
Product line:
This includes product quality, safety, design, average life of the product, service policies, guarantees and warranties, degree of disposability and recyclability and so on.
Marketing:
This policy includes accuracy of advertising claims, adequate information about product use and misuse, fair pricing, consumer complaint answering policies, clear explanation of credit policies, and existence of pressure tactics in selling and so on.
3. Human resources:
Issues related to human resources include:
i. Fair employment practices:
These include employment practices concerning minorities and women, programmes to ease integration of minority groups and women into company operations, promotional policies, employment and advancement of disadvantaged individuals such as the handicapped, former criminals, drug addicts, mentally disadvantaged and so on.
ii. Employee advancement:
Employees must be provided with education and training facilities, facilities for leave of absence for educational courses, budget allocated for formal vocational training, special training programmes for disadvantaged employees and so on.
iii. Employee safety and health:
Management must be involved in physical and mental health of the employees and should provide employee physical fitness and stress management programmes, should monitor accident frequency and severity and provide for safe equipment and safe working conditions. Management should also institute alcohol and drug rehabilitation programmes and other measures that assist employees to stay physically and mentally healthy.
4. Community involvement:
Socially responsible organizations can make a substantial difference by providing leadership and assistance in meeting community needs and aspirations. Contributions for community welfare can be in the areas of education, art, health services, community recreation programmes and so on. Management can encourage employee involvement in such social projects as disaster assistance, urban renewal, park festivals and so on.