A number of business organizations and trade or industry associations across the globe have now embraced the importance of corporate social responsibility or CSR. By definition, a CSR is a concept pertaining to policies and practices directed toward the creation and realization of value for a broad range of stakeholders.
Based on the socioeconomic model of corporate responsibility or the stakeholder theory of corporate governance first introduced by R. Edward Freeman in 1984, CSR demonstrates the need for a business to be responsible not only towards its owners or investors but also towards its suppliers, employees, customers, and the community.
Management scholars Michael E. Porter and Mark R. Kramer also explained that the competitiveness of a business organization and the welfare of the community are fundamentally interweaved. Corporate social responsibility allows a business to promote a shared value, thus creating a win-win situation with the stakeholders.
The Arguments Against and Criticisms Toward Corporate Social Responsibility: What Is Wrong With CSR?
The Only Responsibility of a Business is to Maintain Profitability
Another theory of CSR challenges the assertions made under the stakeholder theory of corporate governance of Freeman and the shared-value model of Porter and Kramer. This is the economic model of corporate social responsibility or the shareholder theory of corporate governance.
Prominent economist Milton Friedman first introduced the economic model of CSR in 1962. He argued that the only social responsibility of a business organization is to promote and protect the welfare of its owners and investors or shareholders by generating profits and maximizing its profitability while adhering to the laws of the locale where it operates.
Friedman explained that the profitability and success of a business would eventually benefit the society. Hence, there is no need for it to spend time and effort in initiatives that do not bring in profits. Forcing a business to serve the society through charitable or philanthropic works defeats the principle of the free-market economic system.
Besides, when it comes to advancing or promoting the welfare of the society, the economic model also argues that this responsibility rests on the shoulders of the government, other social institutions, and non-profit organizations.
Corporations Use CSR to Distract and Misdirect the Stakeholders
One issue with corporate social responsibility is that it creates a principal-agent problem. Some CSR programs reflect the personal interests or values of corporate executives or members of the top management and not the interests and values of its investors. Hence, they implement a CSR initiative at the expense of the shareholders.
An exploratory study by K. S. Jahdi and G. Acikdilli mentioned that CSR could harm the identity or brand of a company. Some philanthropic efforts have increased public cynicism because they seemed inauthentic. To be specific, there seems to be a disconnect between the nature of the operations of certain companies and their CSR policies or programs.
Some have argued that companies would resort to publicizing their CSR initiatives to distract the public from ethical problems emerging from their core operations. Others have asserted that the purpose of CSR is to justify the position of power held by large corporations and thus, redirect the public from the fact that they hold substantial affluence and influence.
Some companies allegedly use CSR as a mere publicity stunt. The study of S. C. Jones, A. Wyatt, and M. Daube noted that manufacturers of liquor or alcoholic beverages are using social marketing to direct criticisms away from the harmful practices of the entire alcohol industry. Hence, the seeming altruistic behaviors of businesses might have self-serving motives.
FURTHER READINGS AND REFERENCES
- Freeman, R. E. 1984. Strategic Management: A Stakeholder Approach. New York: HarperCollins
- Friedman, M. 1962. Capitalism and Freedom. Chicago: University of Chicago Press
- Friedman, M. 1970. “The Social Responsibility of Business is to Increase its Profits.” The New York Times. Available online.
- Jahdi, K. S. and Acikdilli, G. 2009. “Marketing Communications and Corporate Social Responsibility: Marriage of Convenience or Shotgun Wedding?” Journal of Business Ethics. 88(1): 103-113. DOI: 10.1007/s10551-009-0113-1
- Jones, S. C., Wyatt, A., and Daube, M. 2015. “Smokescreens and Beer Goggles: How Alcohol Industry CSM Protects the Industry.” Social Marketing Quarterly. 22(4): 264-279. DOI: 10.1177/1524500415621558
- Porter, M. E. and Kramer, M. R. 2006. “Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility.” Harvard Business Review. Available online
- Porter, M. E. and Kramer, M. R. 2011. “Creating Shared Value: Redefining Capitalism and the Role of the Corporation in Society.” Harvard Business Review. Reprint. Available online.
- Pineda, Mathew Emmanuel. 2018. “Theories of Corporate Social Responsibility.” Profolus. Available online