Why should companies care about things other than maximizing profit? Is the obligation of ‘social responsibility’ really under their purview? Milton Friedman–in a 1970 New York Times piece–commented that imposing such demands on companies is problematic in both principle (that a company is ultimately accountable to their stakeholders and should not be acting like public servants who utilizes ‘tax’ for ‘public good’) and consequence (that a company simply may not have the expertise to uphold ‘social good’ and yet be able to focus on keeping the company efficient).
Question: Do you think these criticisms still hold today?
Consumers often share a love-hate relationship with big corporations, lauding them for providing us everything and demonizing them for taking away everything. This trailer from the documentary ‘The Corporation’ just about sums up the key issues we have with these money-making entities today.
Question: What are the key issues raised in the short trailer? What do the film makers seems to ‘expect’ from corporations? Are these expectations justified?
And so we come back to Corporate Social Responsibility (CSR). Jagdish Bagwhati has outlined, in her piece “Whose Corporate Social Responsibility”, what this means for companies today:
CSR can be divided into two categories: what corporations should do (say, contribute to a women’s rights NGO or build a village school) and what they should not do (say, dump mercury into rivers or bury hazardous materials in landfills). The latter is wholly conventional and subject to regulation (and recently to questions about how corporations should behave when there are no host-country regulations)
In our modern context where discourses of environmentalism, poverty, human rights and ethical consumerism now run rife, the corporation is increasingly pressured (from both governments, NGOs and activists) to be ‘socially responsible’. Even UN is actively pushing for it through its UN Global Compact arm–adding an international dimension. A brief discussion with my home class today surfaced 3 key reasons why such a dimension is integral to the company today.
- Image and reputation (it looks good to consumers, and so more people will buy your goods)
- Moral and ethical obligation (being the biggest consumers of resources, companies should give back–this also shields them from increasingly extremist activists groups)
- Long term profit and sustainability (e.g. adopting green technologies helps reduce long term costs
If businesses ultimately becoming more effective, efficient and competitive with social responsibility initiatives, doesn’t that resolve the problems Friedman mentioned above?
Well, Bhagwati also raises in her article that imposing CSR might still be problematic as it may actually give reasons for people to avoid taking personal responsibilities (e.g. lawsuits against Fast Food companies) and cause further complications among a company’s stakeholders if they cannot agree on the exact ‘responsibility’ to take on. This article by Sanjay Jha also highlights how the “forced measures encourage crafty circumvention” where corporations might exploit it for overt brand-building and tax-breaks.
Question: Looking at both the problems and benefits of CSR, what would you suggest?
So, how are exactly are companies today fulfilling their CSR? Here’s a list of range of company CSR initiatives to give you a brief survey.
Task: Analyzing the different CSR initiatives above, which do you find most effective and why? If you were the CEO of these companies, would you have done it any differently?