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Corporate Social Responsibility

September 19, 2011

This post also appears on the IDEA CETL’s blog.

In writing a teaching unit on CSR recently, I was forced to try and articulate what has long bothered me about the idea, so I thought I would share my conclusions:

One common criticism that is levelled at academic approaches to business ethics is that they hold relatively little relevance to those people actually engaged in the practice of business. In recent years, however, one set of ideas that is identified in explicitly ethical language has gained significant traction in the business world – that which falls under the title of ‘Corporate Social Responsibility’ or ‘CSR’.

This popularisation of CSR brings with it the clear advantage of impacting the day to day practice of business activity; but it also brings significant challenges, not least that of ensuring that the popular understanding and practice of CSR retains a coherent (or indeed any!) ethical dimension. A further significant challenge is that in order to engage meaningfully in the CSR debate a grasp of the common usage and understanding of the term is required. This is particularly difficult when it is unclear whether such a common understanding exists.

CSR, then, is worth pursuing as an idea because of its potential to make a practical difference to business activity. To do this, we must identify exactly what is problematic about the concept. My three suggestions are as follows:

What has ‘social’ got to do with it?

While ‘CSR’ has become such a widely accepted term, why do we talk about corporate ‘social’ responsibilities? Why not just corporate responsibilities? Such a focus strikes me as particularly problematic for at least two reasons. First, it seems entirely unclear what a ‘social’ responsibility is – we don’t talk about such responsibilities in any other context; individual people, as far as I can make out, aren’t suppose to have them; so we lack clarity both over the content of these responsibilities and to whom they are owed.

This lack of clarity is well illustrated by Crane, Matten and Spence’s survey of the different elements CSR is supposed to take into account (See ch1 of their 2008 book Corporate Social Responsibility: Readings and Cases in Global Context). Often these disagreements seem less over whether each element represents genuine obligations, but whether they are ‘social’ obligations. But if we accept that they are genuine obligations, then why argue any further? Why not just set about trying to express them clearly and satisfy them all?

The second reason why focus on ‘social’ responsibilities is problematic is that it inevitably leads us to look at a subset of supposed corporate responsibilities in isolation. In particular, the relationship between social responsibilities and the business’ responsibility to make profits for its owners is at best tackled superficially. I consider this more in the next point.

Before going on to this, however, it is worth highlighting one positive reason to focus on the ‘social’ responsibilities, and this is a pragmatic one. Such talk provides a tool for drawing attention to ethical issues in the business environment, particularly given the widespread acceptance of this kind of language in the business community. It may be sloppy, but if it has positive ethical outcomes that might well be a price worth paying.

What happens when responsibilities conflict?

As I mentioned above, talk of ‘social’ responsibilities tends to isolate a whole range of purported corporate responsibilities from other core responsibilities, particularly that of making a profit for the company’s owners (the shareholders). Such a division of focus tends to avoid the question of whether conflicts exist, particularly between making profit and fulfilling supposed ‘social’ responsibilities. Where this question does arise, effort is often made to demonstrate how, in fact, there is no conflict and fulfilling social responsibilities has the fortunate side effect of being profitable at the same time. It would be incredibly naïve, however, to think that no such conflict will ever occur

It is this challenge with which Friedman presents us (in his much anthologised and just as frequently misunderstood article in the New York Times entitled “The Social Responsibility of Business is to Increase its Profits”). In his view the exercise of ‘social responsibility’ by businesses is either an underhand way to make more profit or mitigate risks (in which case it is not an exercise of such responsibility at all) or it is an exercise which conflicts with the primary responsibility of making profit for shareholders (and so is overridden). Because of this there can be no real ‘social’ responsibilities. If we are serious in arguing that corporations have real social responsibilities then we must tackle head on the tricky examples when they conflict with the aim of maximising profit.

I think it is clear that social responsibilities can win such conflicts. Goodpaster makes an important point when he contrasts responsibilities actively to promote someone’s interests with responsibilities not to harm them (in his 1991 paper “Business Ethics and Stakeholder Analysis” in Business Ethics Quarterly). It seems obvious that businesses do have responsibilities to avoid grievous harms, even when this would generate greater profits. Whether they have responsibilities to promote the interests of parties beyond shareholders is a harder question to answer.

One way to answer this challenge would be to question what we mean by ‘the corporation’ here. It is usually assumed that shareholders sit outside, and are owners of, the corporation and it has responsibilities to them. However, if we think of shareholders instead as part of the corporation, broadly conceived in some way as a whole system of economic cooperation, then we might think differently about what, if any, interests it should be promoting.

Whose responsibility?

The final point that I find particularly important is the question of where exactly corporate responsibilities fall. There is much debate on the kind of things that corporations are, and whether they can themselves have responsibilities. If they cannot, then this begs the obvious question of whose responsibility it is to fulfil corporate responsibilities. Sooner or later we will need to explain what the existence of such a responsibility means for the individual people that populate the organisation (and perhaps some beyond it). If we cannot do this then it would appear that talk of corporate responsibilities is simply empty.

Even if it does make sense to think of corporations themselves being the kind of things that can have responsibilities we must still work out the implications for individual people related to that corporation. Many of the corporate scandals of recent times have been characterised by both a generally accepted corporate failure and a general abdication of personal responsibility by all those associated with it.

While this phenomenon might in part be explained by saying that the corporate failure is a result of coordination problems between individuals rather than ethical failures on their behalves, it strikes me that significant ethical failures have also been present. The challenge, however, is in articulating exactly what these are.

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