The Social Responsibility of Business

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The Social Responsibility of Business
Marta Kahancová Amsterdam School for Social
Science Research University of Amsterdam The
Netherlands
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Business Ethics / Corporate Social Responsibility
The concern of business organizations for the
society Public expectations towards the business
community The concern of business and the public
regarding the relationship between business and
the society in a particular socio-cultural
environment Commonly accepted social norms on
ethical and socially responsible ways of
conducting business affairs
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Important aspects in BE / CSR
Definitions History of the CSR concept Theoretical
approaches to CSR Operationalization of CSR
practices varieties of CSR Effectiveness of CSR
practices Monitoring and Regulating CSR
practices Challenges and dilemmas for CSR
initiatives
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Defining BE / CSR

• A socially responsible firm is one whose
  managerial staff balances a multiplicity of
  interests. Instead of striving only for larger
  profits for its stockholders, a responsible
  enterprise also takes into account employees,
  suppliers, dealers, local communities, and the
  nation (Johnson 1971 50).
• Purely voluntary corporate expenditures marginal
  returns to the corporation are less than returns
  from alternative expenditures (Manne and
  Wallich, 1972 4-6)
• An element of voluntarism in action corporation
  is at least in some measure a free agent and as
  such may exercise CSR beyond the social
  objectives imposed by law (Manne and Wallich,
  1972 40).

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History of the CSR Concept

• Formal writings on CSR are largely a product of
  the 20th century, most evident in the United
  States
• 1950s Bowen (1953) argued that large businesses
  were vital centers of power and decision making
  and the actions of these firms touched the lives
  of citizens. CSR contains an important truth that
  must guide business in the future
• 1960s attempts to formalize what CSR means
• 1970s new definitions focus on multiplicity of
  business interests (compatibility of profit with
  other interests)
• 1980s operationalization of the CSR concept,
  more research
• 1990s CSR in a broader context (institutional,
  organizational, managerial discretion)

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Theoretical Approaches to BE / CSR

• Economic / utilitarian perspective the social
  responsibility of business is to make profits
  (Friedman, 1971) social responsibility
  long-run profit maximization (Johnson, 1971)
• Philanthropic employers concerns for the
  society beyond own profitability (company
  values) moral incentives to act as good
  citizens
• Employers seeking societal legitimacy and
  responding to societal and environmental
  pressures organizations external to the firm
  place new demands on business (civil society,
  NGOs, consumers, investors)

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Theoretical Approaches to BE / CSR

• Socially aware profit maximizers
  social responsibility is more of
  an attitude, of the way in which a manager
  approaches his decision-making task, than a great
  shift in the economics of decision-making. It is
  a philosophy that looks at the social interest
  and the enlightened self-interest of business
  over the long run as compared with the narrow,
  unrestrained short-run self-interest (Steiner,
  1971 164)
• Adding value to the enterprise,
  incorporating ethical issues into business brings
  a range of benefits for all involved individuals
  and organizations (Kahancova 2006, 2007)

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Varieties of CSR

• Single and multi-company initiatives, hybrid
  partnerships
• Voluntary codes of conduct regulate behavior
  and labor standards of a single firm or of
  several supply chain participants possible
  response to problems in developing/enforcing
  effective multilateral regulation
• Social labeling programs by companies, NGOs,
  international organizations, trade unions (I.e.
  Clean Clothes Campaign, Fair Trade, Responsible
  Care)
• Shareholder and investor initiatives to influence
  company behavior leverage of socially
  responsible investment (investment fund screening
  prior to purchasing company stocks, exclusion
  from investment portfolios)

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Example Voluntary Codes of Conduct in
Multinational Firms

• Guiding the behavior of firms vis-à-vis
  employees ensuring honest dealing, fair
  treatment, general integrity of the organization
• Labor content of Codes (Diller 1999 review of
  215 codes)
• Occupational health and safety (75 of codes)
• Discrimination in hiring and employment
  conditions (66)
• Elimination of child labor (45)
• Reasonable wage levels (40)
• Prevention of forced labor (25)
• Freedom of association and collective bargaining
  (15)

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Benefits from Voluntary Codes of Conduct

• For companies
• Being under corporate control
• Subject to internal compliance procedures
• Avoiding extra-territorial impact of legislation
  contribute to shaping legislation or public
  regulation
• Reflecting consumer choice responding to
  consumer demands
• Reflecting purchaser choice various sourcing
  options and negotiable conditions
• Where other parties are involved (i.e. trade
  unions or NGOs) corporate control may be diluted

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Implementing Codes of Conduct

• Establishing commitment at the top
• Integrating ethical issues into the broader
  conduct of the business communication, diffusion
  of ethical policies into business functions (i.e.
  quality assurance, compliance in suppliers)
• Identifying and developing personnel competencies
  and resources to implement a plan
• Effective communication to target groups via PR

In practice the ethical function of business is
barely into its first generation most visible
are codes in large production and retail firms in
international trade
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Effectiveness of CSR Initiatives

• If corporate efforts are to be declared a
  success, need to be engaged with and convince
  NGOs, trade unions, governments, employees,
  shareholders, socially aware consumers
• Codes of conduct with the involvement of external
  actors may acquire a higher degree of external
  acceptance and legitimacy

• Research evidence (food, retail and apparel
  sectors)
• not enough sustainable solutions yet
• ad-hoc basis for addressing ethical concerns,
  need to develop more systematic and operational
  plans

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Monitoring and Regulating
Ethical Business Behavior

• Regulation via the market (shareholders, market
  competition)
• Non-market regulation (laws, rules, pressure from
  the society, international organizations, NGOs)
• Cooperative vs. non-cooperative monitoring by
  external actors

Drawing corporations into dialogue to persuade
them by means of ethical and prudential
arguments to practice ethical behavior (i.e.
supplement to collective bargaining) More
adversarial stance of confronters who believe
that corporations will act only when financial
interests are threatened (i.e. boycotts,
protests, court cases)
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Conclusion Challenges and Dilemmas

• Enforcement of sustainable ethical behavior
  voluntary or normative? (laws vs. market
  pressures/company values)
• Which actors should possess the power to define
  and develop ethical standards consumers/civil
  society/governments vs. multinational
  firms/business organizations/investors
• Self-reinforcing mechanism not underlined by law
  priority of business interests over interests
  of other social actors?
• Social responsibility vs. profits complementary
  or in conflict?
• The future of Codes improvements in
  operationalization, implementation, monitoring,
  feedback from the society

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Conclusion Challenges and Dilemmas

• Regulating and monitoring ethical behavior
  strengthening global external normative
  regulation/monitoring (WTO, NGOs, governments),
  or voluntary interest-driven initiative of firms
  (single or multi-employer initiatives)?
• Coordination of ethical initiatives among
  businesses dominance of single-employer or
  multi-employer actions?
• Is it sustainable and desired to maintain the
  stakeholder approach in business ethics in a
  shareholder-driven economy?

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References and Literature
Available upon request at kahancova_at_hotmail.com T
el. 49 228 227 5407