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Corporate Social Responsibility and Globalization


Milton Friedman has argued that the social responsibility of business is simply ... If Regulation were effective and appropriate, Friedman's approach is fine. ... – PowerPoint PPT presentation

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Title: Corporate Social Responsibility and Globalization

Corporate Social Responsibility and Globalization
  • Prof. Lok Sang Ho
  • Centre for Public Policy Studies Lingnan
  • Peoples Council for Sustainable Development

Why CSR?
  • Multinational Companies today have become
    extremely powerful, and are not like any of the
    private enterprises that existed, say, two
    decades ago
  • To put it mildly, the future of humanity is very
    much at their mercy.

CSR and Free Market Economics
  • Milton Friedman has argued that the social
    responsibility of business is simply to maximize
    the rate of return to the general shareholders,
    consistent with the law.
  • This Legal Approach implies Regulation.
  • If Regulation were effective and appropriate,
    Friedmans approach is fine.

Limitations to the Regulatory Approach
  • Transnational Regulations are notoriously
    ineffective because there is no one to enforce
  • National Regulations are often not enforced
    because of widespread corruption in many
    developing nations
  • Globally needed regulations are often not even in
    place because of short-term behavior of people in
    power or because of poverty.

Examples of Regulatory Failures
  • Bhopal disaster and Union Carbidecompensations
    by Indian standards may be affordable and within
    the law, but are we content with having had the
  • Human cost of coal mine accidents in China
  • Politicians and their constituents may not be
    sensitive to pollution that drifts across
    national borders and causes only small short term
    problems at home

Advantages of the CSR Approach
  • Often more effective than the regulatory
  • CSR implies a constant dialogue between the
    corporation and the community, and allows
    considerable leeway for implementation that may
    reflect the changes of the times
  • The CSR approach allows struggling small and
    medium enterprises greater room for survival

How much is Perfectly Legal worth?
  • David Cay Johnston, a Pulitzer Prize-winning
    reporter for the New York Times, reveals how the
    government provides the "super rich"--from
    private individuals to profitable
    corporations-to hide their wealth, to defer or
    evade tax payments, and to pass the bill to
    law-abiding middle-class Americans.

CSR and the Bottom Line
  • If corporations operate within the law and
    maximize profit by disregarding industrial
    safety, because industrial safety is more costly
    than paying compensations when accidents do
    occur, is this acceptable?
  • If corporations cause serious environmental
    damages but the law allows that, is this

Supply and Demand
  • When numerous suppliers vie for the business Big
    Corporations can keep costs very low and profits
    very high
  • When hundreds of thousands of workers vie for the
    scarce jobs Big Corporations can pay very low
    wages and raise their profits
  • The low costs and wages may have nothing to do
    with low productivity, and are often the result
    of the working of supply and demand.

Human Costs
  • When profits are the result of huge human costs,
    they are unhonorable and the world should be made
    aware of it
  • Productive and hardworking but poor should be
  • Avoidable industrial disasters should be history

Sustainable CSR Corporations generate sufficient
profit to sustain their operations over the long
term while
  • paying their workers and providing a clean
    working and safe working environment
  • paying their suppliers reasonable prices
  • paying due respect to the environment

A Better World
  • With a living wage, hundreds of thousands of
    manufacturing and service workers will be able to
    unleash their newly found spending power on goods
    and services, and this will cause a BOOM in
    investment and a new prosperity
  • More inequality and less waste
  • A sustainable, happier and more peaceful world.