What Social Responsibility, if Any, Do or Should Corporations Have in Society Today?

Consistent with McWilliams and Siegel’s approach in The Academy of Management Review, we define Corporate Social Responsibility (CSR) as the spectrum of undertakings in which the firm goes beyond compliance and engages in “actions that appear to further some social good, beyond the interests of the firm”. It is said to be the company’s way of giving back to the community it is making so much out of, i.e. a sort of return gift.

Gifts, of course, make consumers happy and this is the basic logic behind the social responsibility of corporations today: to make sure elated customers return to provide more business. This process of giving back to society adds to the goodwill of the company and ensures consumer loyalty. In professional language, this art of deceiving customers by producing a philanthropic image of a corporation is termed “corporate strategy”. It is a framework, as argued by Fombrun & Shanley in the Academy of Management Journal that demonstrates how the reputation of a firm captures returns to socially responsible behaviour. Consumers tend to give more business to a firm that perhaps donates a part of its income to some village in Saharan Africa, than to one that does nothing of the sort or does something similar but of a lesser magnitude.

For the same reason, Fortune 500 companies and multinational corporations are in a race over who can be more charitable, simply because CSR happens to have somewhat substituted direct advertising. Even though it is not legally required in most economies, companies seem to have diverted a significant proportion of their funds exclusively for CSR, rather than investing them in sales or advertising, as they traditionally did. They have realised that they can leverage social responsibility as a vehicle to bring customers to their doorstep, rather than making the effort of going to theirs. Therefore, we see a dramatic change in the policies of corporations today relative to just a few decades ago. They are using the same marketing budget in a much more efficient way and sustaining customer relationships by showing them a movie. The funny part is customers are actually enjoying the movie, but they fail to see the reality behind the seemingly altruistic endeavours of these corporations.

In Disney’s classic retelling of the fable Pinocchio, after the Blue Fairy grants him life, Geppetto’s wooden boy is granted a conscience. Now, since corporations do not have a conscience, they need a reliable external source to show them right from wrong. But what is that external source? Is it a set of laws like the several others these corporations never follow? Is it the government that in fact partners with them at times to privatise services like the provision of clean drinking water? Or is it people like you and me who are busy watching the movie these corporations are showing us?

Corporations have always had just one responsibility – the responsibility to serve themselves. They do not care about the consequences their activities have on society. After being declared “legal persons”, 288 of the 307 appellants who sought jurisdiction of the Supreme Court of the United States of America under the 14th Amendment, were corporations and not African-Americans, for whom the amendment had actually been made. This just goes on to prove how self-centred and blatantly selfish corporations are. But wait a minute, why shouldn’t they be?

Whether it be harm to human health by companies such as Monsanto or harm to the environment by a variety of industries, corporations can cross any limits and employees need not even regret their wrongdoings because well – limited liability – they’re safe! How can they be held accountable for decisions that a corporation took? After all, a corporation doesn’t have the ability to base decisions on morals or feelings, then how can we expect it to be socially responsible? But then, what is the social responsibility of businesses?

Milton Friedman once stated in the The New York Times Magazine: “The social responsibility of business is to increase its profits.” Friedman wanted to clearly bring out a distinction between the legal and ethical aspects involved in the debate on social responsibility, by affirming that businesses are simply groups of people and that only people have responsibilities, not inanimate entities! To quote J. Hood of the Foundation for Economic Education“If a corporation makes a donation to charity without the shareholders’ authorization, wrote Friedman, the managers are deciding how to spend other people’s money. It would be better to return the money to shareholders as dividends or capital gains and let them decide which charities to support.”

An alternative and opposite theory to Friedman’s was developed by Freeman, who argued in his book Strategic Management: A Stakeholder Approach that corporate social responsibility is a vital part of strategic management. His argument was based on the thought that firms are associated with numerous parties whose interests should be considered, since the firm can’t continue to survive without the support of these stakeholders – employees, customers, suppliers and the community. This view was expanded by Donaldson & Davis by the introduction of Stewardship Theory in theAustralian Journal of Management. According to this theory, there is a moral imperative for managers to “do the right thing,” without regard to how such decisions affect the firm’s financial performance. This rationale becomes difficult to adhere to internationally, because there may be no consensus on what “the right thing” is. However, this was a more ethically-centred approach.

But there’s a simpler question to be asked in all this scholarly debate. Before managing social responsibility outside their organisation, shouldn’t corporations focus on fulfilling their internal social responsibility? Paying a few cents to workers who produce products that sell for hundreds of dollars! Is it not hypocritical of companies to talk big about social responsibility while they exploit their own employees? It is clear to me that corporations survive on externalities and that they are purely utilitarian. They want to make others pay the cost for their impact on society, while they luxuriate in soaring profits. But then again, isn’t this why corporations exist in the first place?

I believe corporations do have a social responsibility, however, that responsibility predominantly lies confined to their own internal affairs: first, the demands of employees, financers and executives ought to be delivered. Commercial activity in itself comes with social benefits such as greater employment, improved standards of living, globalisation and a better quality of life. These benefits aren’t derived from any extra effort by corporations – it’s not obligatory for them to put in extra effort anyway – but they are derived simply by virtue of the existence of corporations. Since a corporation can’t think and feel like a human with flesh and blood, it need not care about any other social responsibility, unless it comes with an advantage. If community giving helps boost sales and multiply profits, implement CSR. This means we’ll still be watching a movie, however, there will certainly be a simultaneous social impact, to whatever small extent possible. So, corporations may consider their dedicated business undertakings a social responsibility, or, their newfound marketing technique – either one suits me…as long as it does some good, especially to those people on whom the corporation truly depends for its profits.


Shivang Singh

An ambitious, perseverant, and all-rounded parliamentarian in the making...

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