Moral issues in concerns and other administrations have ever been of great concern to philosophers, faculty members, research workers, politicians, and the general populace, and many have sought to put guidelines on how companies should act and what responsibilities it has towards the community in which it operates. Due to the subjective nature of Corporate Social Responsibility ( CSR ) , it is a heatedly debated issue and there is still no consensus on a universally recognized definition of CSR, go forthing uncertainness around the boundaries of CSR. Throughout the old ages, research and survey related to CSR has been more of an expansive nature instead than of an accumulative 1 ( Crane et al. , 2008:4 ) , doing it slightly hard for corporate directors to hold on what is expected of them in the daily running of the concern.
However, the prominence and importance of CSR has shown a inclination to increase both as an country of survey every bit good as a corporate scheme in many corporations worldwide. One cardinal factor that stemmed the rush of CSR was an increased involvement in Socially Responsible Investment ( SRI ) ( Crane et al. , 2008:4 ) , whereby investors were going more selective and demanding towards the companies they invested in, and expected them to show their ain single ethical values. Another factor act uponing corporations to implement CSR plans within corporate administration are Governments and NGOs ( Crane et al. , 2008:5 ) . Governments are interested in advancing CSR because this might restrict the demand of regulative supervising upon houses. Besides, by being more socially responsible, houses might be doing parts that would usually be expected from authoritiess, therefore, decreasing the demand for authorities intercession. However, on the other manus, some authoritiess may be more loath to step in in implementing the acceptance of societal duty within corporations because they do non desire to harm ‘international fight ‘ of the industrial sector ( Zerk, 2006:7 ) . NGOs are less positive that corporations should be left free to prosecute socially responsible activities and therefore exert force per unit area for new Torahs to better corporate transparence and answerability ( Zerk, 2006:33 ) . Consumers and the general populace besides exert force per unit area on houses, as they are more inclined to buy their merchandises from socially responsible houses ( Appleton Grant, 2009:6 ) . This shows an increasing inclination of consumer activism which may besides ensue from technological invention, easing scattering of information throughout the community and the general populace may now exercise more force per unit area and their sentiment may be easy voiced out through technological promotion particularly the cyberspace ( Zerk, 2006:21 ) .
In order to grok the implicit in rules qualifying the impression of CSR today, it is critical to hold an apprehension of its historical background and developments throughout the old ages.
During the 1800s many corporations were prosecuting chiefly in philanthropic activities whereby corporations sought to better life conditions for their employees and their households ( Carroll, 2008:22 ; Zerk, 2006:15 ) . However, by the terminal of the Civil War in America in 1865, merely a few big corporations emerged, concentrating power in the custodies of a few, which led to unethical behavior by such houses. Monopolistic power and unethical behavior led to the Great Depression taking, of class, to more external force per unit areas demanding corporations to be more socially responsible ( Carroll, 2008:23 ) .
As a construct, CSR has chiefly emerged during the 1950s, and the chief subscriber qualifying this period was Howard R. Bowen ( 1908-1989 ) , who is considered as the ‘father of Corporate Social Responsibility ‘ . Bowen raised inquiries as to what responsibilities towards society may be expected to be assumed by concerns. Harmonizing to Carroll ( 2008:25 ) , Bowen ( 1953 ) defines CSR as follows:
‘It [ Social Responsibility ] refers to the duties of business communities to prosecute those policies, to do those determinations, or to follow those lines of action which are desirable in footings of the aims of our society. ‘
However, the 1950s was more characterized by talk, instead than action with respects to CSR. During the sixtiess and 1970s efforts were made in order to seek and happen a distinct definition of CSR, but philanthropic gift was still the chief contributing factor implemented by corporations qualifying most of the sixtiess. During 1970s CSR activities were get downing to develop farther with houses prosecuting in more socially responsible corporate behavior and work for societal improvement instead than simply giving contributions to charity. ( Carroll, 2008:33 ) . During this period Archie B. Carroll contributed greatly in seeking to specify CSR, and his celebrated plants are still of relevancy presents. In 1979 Carroll offered the undermentioned definition of CSR ( Carroll, 2008:33 ) :
‘The societal duty of concern encompasses the economic, legal, ethical, and discretional outlooks that society has of administrations at a given point in clip. ‘
From this definition it can be seen that CSR was switching from a paternalistic position of CSR, towards the inclusion of the economic duties that the concern besides has towards society. Therefore, the concern has the duty to do net incomes non merely for its ain endurance, but besides for the benefit of society as a whole because good concerns generate employment and economic returns, while they still have to stay by the legal demands and act in an ethical mode. Carroll ‘s definition is besides depicted as the ‘Pyramid of CSR ‘ ( Carroll, 2008:33 ) .
Figure 1.1: CSR Pyramid[ 1 ]
During 1980s, the ‘Stakeholder Theory ‘ and ‘business moralss ‘ were germinating as options to CSR. The chief subscriber to the ‘Stakeholder Theory ‘ was R. Edward Freeman. With respects to corporate behavior, this decennary was chiefly characterised by concern dirts and unethical behavior of corporate directors. One illustration worth adverting for the purpose of this thesis is the Ivan Boesky insider trading dirt in 1980 ‘s ( Carroll, 2008:36 ) .
In the 1990s, really few theoretical parts were made to CSR, and alternatively, CSR principles served as a starting point for other complementary constructs and subjects such as the ‘Stakeholder Theory ‘ and ‘Corporate Social Performance ‘ ( CSP ) . Meanwhile many concerns started to include CSR policies in their corporate schemes. During 2000s the focal point was chiefly put on empirical research ( Carroll, 2008:39 ) and many tried to measure corporate public presentation in relation to socially responsible activities besides and non simply through economic public presentation.
This brief historical overview reveals the uninterrupted dynamic alterations underlying CSR thought and, to a certain extent, explains the uncertainness that still envelopes the inquiry: ‘What duties should be assumed by concerns towards society? ‘
Critics against CSR argue that concerns, as economic vehicles, should non be regarded responsible for anything but net income maximization for their proprietors. Milton Friedman ( 1912-2006 ) may be regarded as the chief representative of this position ( Crane et al. , 2008:6 ) . This position holds that the lone duty concerns have towards society is the creative activity of wealth and employment, yet still, concerns should neither lead on nor prosecute in deceitful behavior. All the remainder, harmonizing to Friedman, should lie in the custodies of authoritiess ( Zerk, 2006:16 ) .
A broad assortment of theories have been proposed in an effort at explicating what CSR means and how it should be quantified and implemented, and many writers tried to sort these theories. For the intent of this thesis nevertheless, I will be sketching merely four good known constructs of CSR ; these being: Stockholder Value Theory, Stakeholder Theory, Corporate Social Performance Theory, and Corporate Citizenship, which have been normally put to utilize by corporations in implementing CSR plans.
Corporate Social Responsibility Theories
From the apprehension that we now possess, we can reason that there is no individual, cosmopolitan manner in which CSR activities can be interpreted, or set into action. These four theories presented in this subdivision, may be considered as modern-day mainstream theories ( Mele , 2008:48 ) , and all of them seek to place the duties that concerns have towards society, and give ways in which these duties should be taken attention of by corporations. I will foremost explicate the Shareholder Value theory as this is the oldest theory of the four and in pattern it is more of a critic to CSR so a CSR theory in itself. Second, I will explicate and compare the Stakeholder theory with the Shareholder Value theory followed by Corporate Social Performance theory and Corporate Citizenship which are more late developed as theories of CSR.
Shareholder Value Theory
Shareholder Value Theory ( SVT ) contains several philosophical premises, peculiarly those arising from the British philosopher John Locke ( 1632-1704 ) , whose thoughts revolved around individuality and the impression that ‘the good of society is merely the understanding on single involvements ‘ ( Mele , 2008:58 ) .
It can be said that the importance of belongings rights, stems the impression that stockholders, being the merely true proprietors of concerns, are the exclusive entity that corporations should be apt towards. Concentrating and taking consideration of other stakeholders would be an irresponsible and unpatriotic act from the agents of the concern, who therefore, would be utilizing the proprietors ‘ belongings inefficiently and would non be perpetrating all of the fruits the concern bear to their rightful proprietors. This theory complies with the bureau theory, where the directors have fiducial responsibilities as agents, towards their stockholders as principals. The chief concern in this instance is to aline the agents ‘ involvements with those of the proprietors ‘ .
Friedman ( 1962 ) was one of the chief advocates of this theory, followed by others such as Sternberg ( 2000 ) in more recent plants.
The house is bound by a legion sum of contracts, and what is expected of the parties involved is clearly defined and set out in authorship, and that is all there is to it. It should non be assumed that corporations have a moral scruples, because they are non human existences but simply an economic vehicle that creates wealth to its proprietors.
This theory implies that all agencies are accepted every bit long as one arrives at the optimum terminal i.e. maximizing stockholder wealth. Because it has merely duties originating from contracts, the company should merely stay by the legal demands in order to go on runing within the community. Governments should put up legal demands in order to protect all the other entities that are being affected by the company ‘s activities. Of class, this minimalistic position towards societal duty contends that people are harmed the most where there is a weak legal construction that fails to protect those affected by corporate behavior.
One of the chief strengths associated with this theory is the efficiency in bring forthing economic wealth ( Mele , 2008:60 ) . Resources are entirely directed towards maximizing stockholder wealth, and therefore economic advancement can be achieved at a faster gait, hence, the overall economic system will profit. Furthermore, since resources are all targeted towards one terminal, it is more likely to bring forth invention and accomplishing economic systems of graduated table, since more capital is available for research and investing. Those who advocate of this theory contend that the revenue enhancement system implemented by authoritiess ensures that portion of the wealth generated is allocated to the benefit of the whole community, and besides that through appropriate Torahs and ordinances, the negative impacts of economic activity by concerns is avoided.
One may advert several failings underlying this theory. Chiefly, the overall economic public presentation of a system is non needfully the whole public good. Although wealth may be concentrated in the power of the few stockholders having the companies, the workers might be exploited, natural resources might be used irresponsibly and the environment might be earnestly damaged. Harmonizing to this theory, every bit long as wealth is created and legal demands are abided by, any development would be seen as a agency towards accomplishing a “ more worthwhile ” terminal i.e. increasing wealth to stockholders.
Another failing worth adverting is that stockholder wealth maximization frequently relates to short-run net incomes instead than long-run profitableness. As will be seen farther on in this chapter, societal duty is deemed to be healthy for sustainable long-run net incomes. This is because a strong relationship with all stakeholders is cardinal for the on-going growing and prosperity of the concern. By disregarding the demands of different stakeholders, dissatisfaction and misgiving will do it more hard and dearly-won for the endeavor to sell its merchandises, and to retain workers.
Hostile amalgamation and coup d’etat activities frequently take topographic point in the effort of training directors to aline their involvements with those of their employers. However, this may ensue in economic instability and insecurity ensuing from a loss in assurance by the general populace in concerns.
Another defect SVT has is that it assumes that belongings rights are the chief drive force behind a concern. Human resources are progressively going the chief plus of a concern, because they provide the know-how and expertness needed in order to spread out the concern and run expeditiously with its rivals.
It can besides be argued that the effects of Torahs and ordinances are limited while it is inconvenient to overly modulate the markets, since this will take to inefficiency, hinders invention and strangles the free market rule promoted by this theory. Besides, many Torahs are enacted after the happening of unwanted results, and therefore, it may be excessively late to counterbalance for, or correct the actions of economic activity.
Finally, SVT embodies a reductionist position of human existences and acknowledges opportunism as the exclusive driver of human behavior.
As opposed to SVT, the Stakeholder Theory takes into history all the assorted stakeholders of a company. One of the most quoted definitions of the term “ stakeholder ” proposed by R. Edward Freeman ( 1984 ) is the followers ( Cooper, 2004:3 ) :
‘Any group or person who can impact or is affected by the accomplishment of the organisation ‘s aims. ‘
The axiom of this theory is that corporations have duties towards all stakeholders and goes beyond those duties prescribed by jurisprudence or brotherhood contracts ( Mele , 2008:62 ) .
This theory nevertheless, is non ever described as a CSR construct ; Freeman himself regards this theory as a strategic direction tool and non an ethical theory ( Cooper, 2004:3 ) . However, because of its normative model for responsible concern towards society, it can still be considered as a CSR theory.
Stakeholder theory may be viewed as saying that corporations are responsible towards their stakeholders, and non towards society. This might connote that stakeholder theory takes into history stakeholder demands in order to construct good dealingss that finally result in maximizing net incomes and hence, those demands are non accounted for to lend to the demands of society ( Maclagan, 1998:147 ) . However, he believes that the chief purpose of CSR is to maximize stakeholder value, including the community, without dividing concern from moralss. Stakeholder value should be maximised through the maximization of the coveted end products of all the stakeholders involved. It is to be noted that stockholders have no particular privileges and are considered every bit as the other stakeholders. This requires directors to be able to happen a balance between the multiple claims of conflicting stakeholder demands. In order for the corporation to be able to clearly place stakeholder demands, it was suggested that stakeholder representatives should be incorporated in the administration of a company.
As Evan and Freeman ( 1988 ) argued, the involvement of the company is related to the involvement of all its stakeholders, and the concern is seen as a vehicle for organizing stakeholder involvements ( Mele , 2008:64 ) , instead than a vehicle for making economic wealth as was the instance with SVT.
This theory follows Kantian doctrine in saying that directors should non go against the rights of others in order to find their hereafter, and that they must presume duty for effects they imply upon others through their actions.
The Stakeholder Theory is considered as being ethically superior to Shareholder Value Theory and the construct of belongings rights fits better through the impression of distributive justness among all stakeholders. As opposed to SVT, stakeholder theory is more respectful with respects human self-respect and human rights.
Furthermore, Handy ( 2002 ) argues that a corporation is more than merely an owned belongings, but it is a community that serves a peculiar intent, and therefore a community can non be owned ( Mele , 2008:66 ) . Respect and duty towards persons doing up the community is therefore indispensable in the running of a concern.
Another advantage that can be mentioned is that this theory reduces the vagueness that surrounds the construct of CSR since it targets specific involvements of accomplished stakeholders and concrete duties towards such groups. Besides, it is an ethical theory incorporated within managerial strategic tools, and therefore this solves a job that was faced by CSP theory, specifically in that moralss were considered as an extra burdensome duty upon concerns, and was basically incompatible with the nature of economic activity.
Some critics of this theory argued that it may be interpreted as a comprehensive moral philosophy and might be seen as an alibi for directors to seek chances for themselves by masking them as ‘stakeholder demands ‘ . Another drawback with this theory is the subjectiveness involved when it comes to set uping who the stakeholders of a company are, and what their demands are.
Sternberg ( 2000 ) argues that the stakeholder theory destroys concern answerability, because a concern accountable to all is really accountable to none ( Mele , 2008:67 ) .
This theory has besides been criticised on the evidences that it seems chiefly concerned with the distribution of concluding end product. However, it really provides guidelines on who should hold a say in the input of decision-making in concern activity, every bit good as who should profit from the end product of such determinations.
Many do non hold that directors should keep fiducial responsibilities towards all stakeholders, alternatively argue that directors are merely apt towards the stockholders and merely the latter have a legitimate claim on the net incomes of the concern. Another unfavorable judgment stems from the idea that stakeholder representation may be damaging to the overall benefit of the company, and the economic system as a whole.
Corporate Social Performance THeory
In a nutshell, Corporate Social Performance ( CSP ) states that apart from wealth creative activity, concerns are besides vested with duties towards societal jobs caused by the running of the concern itself and by external forces ( Mele , 2008:49 ) . Therefore, a house should travel beyond its economic and legal duties.
Since power is acquired by concerns through society, these in bend are expected to function society by lending besides to societal demands and non merely by making economic wealth ( Mele , 2008:49 ) . If concerns do non execute as society wants, they would endure damaging effects, since concerns may go vulnerable and their repute would be harmed, impacting besides their economic viability. This may connote that concerns should lend to societal demands in order to make good economically.
Donna J. Wood ( 1991 ) may be considered as the chief booster of this theory ( Mele , 2008:52 ) . CSP revolves around the construct of power and its usage by concerns. Power should connote duty and therefore, concerns ought to presume duty towards the impacts left on society through concern activities. Since society ‘s perceptual experience and thought is dynamic and alterations overtime, concerns should accommodate to the altering demands and outlooks of society and, if non, the concern will be harmed. Wood ‘s statement here is really similar to that of Keith Davis ( 1973 ) , who was another cardinal subscriber to the field of CSR.
Following the thought of Preston & A ; Post ( 1975, 1981 ) , Wood elaborates further and asserts that concern and society are mutualist systems, and therefore houses should be responsible because they exist in a shared environment ( Mele , 2008:53 ) . Directors, as moral histrions, are personally apt for concern impacts on society.
This theory has been widely criticized for its obscure attack towards CSR and lacks integrating between ethical normative facets and concern activity. Another failing found in this theory is that it separates the economic nature of concern from moralss. The concern ‘ ethical behavior lies outside its economic range. This job might hold been stemmed as a consequence of relativism linked to ethical rules present during the development of this theory.
Corporate Citizenship ( CC ) actively engages in Acts of the Apostless or plans to advance human public assistance or good will and suggests that concern should take part in society. In Aristotelean moralss, concerns are seen as an built-in portion of society and therefore they have to lend to its common good ( Mele , 2008:71 ) . The construct with CC is the engagement of corporations in society instead than simply esteeming human rights.
Following the Aristotelean idea, a good citizen has the responsibility and duty to take part in the public life of the province. Therefore, corporate citizenship chiefly focuses on the responsibilities and duties concerns have in being a portion of a wider society. It is the community itself that created the corporation and so it can ne’er be seen as foreign to society, but alternatively, it is an built-in portion of the community. Like the Stakeholder Theory, CC asserts that it is important to keep healthy relationships with all the assorted stakeholders of the house by making concern good.
In 2000, the UN Global Compact was launched in seeking to turn to the uprising idea that corporations should non merely lend to the common good of all but to lend besides in work outing environmental, societal and governmental issues ( Annual Review – United nations Global Compact, 2010:7 ) . With the execution of this globalised effort in furthering a more holistic attack towards the impression of what a concern entails, duties that are usually implied upon single citizens were now being attributed to concerns as good. Today the UN Global Compact has grown to be one of the largest voluntary corporate sustainability enterprises with over 8000 companies as participants in 135 states ( Annual Review – United nations Global Compact, 2010:7 ) .
Logsdon, Wood ( 2002 ) and others developed a theory of concern and society relationship, viz. the Global Business Citizenship ( GBC ) ( Mele , 2008: 72 ) . GBC identifies an administration as a vehicle for attesting human creativeness and has to stay by cosmopolitan ethical criterions. Therefore, corporations arrive at economic excess through human creativeness, and the chief range of administrations is to take part in social issues while they contribute their services and merchandises to society and doing an equal net income out of such parts.
The chief strength of this theory is that it incorporates corporations within society. In contrast with other theories, the range of concern is non merely for economic intents, but besides in lending to society through its operation.
By concentrating on cosmopolitan ethical criterions, and non trusting on authorities intercession makes this theory more plausible and practical to be implemented in today ‘s globalised economic system, where some corporations do non fall under any specific governmental legal demands.
Moon et Al. ( 2005 ) knock this attack for non placing the metaphorical deductions of the term ‘corporate citizen ‘ and that it does non lend anything new in the apprehension of business-society dealingss. Furthermore they argue that it lacks a normative base for the societal function of a corporation and fails to analyze actions such as political contributions, buttonholing and engagement in regulation devising ( Mele , 2008:74 ) .
Another drawback related to this theory is that it has small empirical support and it does non truly demo why corporations should desire to prosecute in such duties and what it is that they are seeking in return. Harmonizing to Crane et Al. ( 2008:74 ) , in relation to the theory ‘s beneficent nature, Windsor ( 2001 ) argues that users of this construct are taking advantage of freshly emerging societal outlooks by making more value in all maps and activities of a house. But it may besides be argued that CC is non merely about philanthropic gift, but about cosmopolitan human rights. This impression may be viewed as similar to the Stakeholder Theory, although one may besides reason that the latter provinces that concern should take into consideration the demands of a stakeholder because he owns a interest in the concern and therefore the concern has an duty towards stakeholders and does non in rule protect and promote cosmopolitan human rights. Besides, steps can be taken in order to do corporate answerability more effectual with the assistance of Corporate Citizenship Theory.
A farther job originating from this theory is the deficiency of lucidity when it comes to placing those responsible for making these cosmopolitan ethical criterions. However, it can be said that a possible campaigner is found in the UN, who contributed greatly in assisting to place a universally accepted set of human rights and ethical criterions.
Current Trends Of Corporate Social Responsibility
Because of the different industries, markets, communities, and fortunes in which concerns operate, it is hard to take which one of these theories works best. Besides, the pick in the execution of CSR depends chiefly on the attack chosen by the direction of the corporation, although, of class, external forces may encroach upon houses and act upon their behavior. Harmonizing to Mele ( 2008:76 ) many companies in the US follow the stockholder value theoretical account, while others in Europe and Japan focus more on the stakeholder theory. The popularity of the corporate citizen theoretical account is besides easy increasing, particularly among international corporations.
Having a sound cognition of past developments, and underlying constructs of CSR is an equal readying to the apprehension and concentrating upon present tendencies qualifying our period, and what are the likely results in the close hereafter with respects to CSR constructs.
Economic alterations have increased the necessity for CSR to be employed by multinationals and corporations. A more globalised market created multinationals which are excessively large to be handled by domestic authoritiess, some of them holding a turnover bigger than the GDP of less deveolped states ( Zerk, 2006:21 ) . Besides, the power that these multinationals get in lobbying and in the engagement of rule-making makes it even harder to modulate such endeavors. Furthermore, the deficiency of answerability and transparence on behalf of certain corporations, followed by dirts and unethical behavior such as the instance of Enron and Worldcom, increased concern and misgiving.
On the other manus, a more educated general populace is get downing to demand and anticipate more societal behavior from corporations. Fast turning engineering makes it easier to entree information about corporations and to voice out the populace ‘s concerns and sentiments. Employees are besides seeking to lend more towards society and are more loath to work for companies that do non encompass basic CSR rules. Corporations are progressively including CSR studies in their profiles in order to go more attractive and are more cognizant that reputes may be enhanced by being more sensitive towards societal issues in communities.
Several recent surveies indicate that societal duty is recommended for sustainable concern success in the long term. Good CSR policies help to make long-run competitory advantage ( Black & A ; Quach, 2009:2 ; Zerk, 2006:17 ) . The European Commission embraces the impression that there may be a nexus between CSR and fight and therefore is promoting CSR enterprises adopted by corporations. The 2008 European Competitiveness study analyses how CSR may lend to competitiveness.[ 2 ]
It is an progressively common thought that CSR is advantageous both to society and to the concern itself. Through CSR schemes, a house is more likely to beef up its relationships with all stakeholders, constructing more client trueness and trust within the community. As a consequence, repute and trade name name will be enhanced, increasing further its economic public presentation which will in bend make it more accessible to obtain capital.
With this thought in head, CSR policies may function as a shield against unfavorable economic alterations, as has been the instance during the crisis of 2008. With good strategic ends rooted in the field of CSR, inauspicious fortunes may be less harmful, because of a stronger strategic place acquired by the house through CSR.
All these factors show a inclination that it is more likely for CSR to go on to turn in popularity in the close hereafter, despite the uninterrupted changing perceptual experiences and rules with respects to CSR.