Corporate Social Responsibility

Corporate vs. Individual Responsibility

Corporations are considered artificial persons in the eyes of the law therefore they have rights
and responsibilities just like people do.
Managers have a responsibility to protect the investment of shareholders BUT they also have a
stakeholder responsibility and need to protect S.H as a whole.
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Moore, 1999 Argument for corporate responsibility is based around the idea that corporations
have agency independent of its members
Why do corporations have social responsibilities?
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Corporations cause social problems (pollution) and have a responsibility to solve these

problems
They are powerful social actors and should use this power responsibly
All activities have social impacts of one sort or another and corporations cannot escape

responsibility for those impacts

Rely on a wide set of stakeholders to function: hence have a duty to take their interests into
account

Not Responsible

Friedman, M (1970) argues that a company cannot be morally responsible for what
it does as the decisions are those of the people running it There is one and only one
social responsibility of business to use its resources and engage in activities
designed to increase its profits so long as it stays within the rules of the game, which
is to say, engages in open and free competition without deception or fraud

Friedman (1970) claims that only individual people have responsibilities and since a
corporation is an artificial person it therefore only has artificial responsibilities.
Business cannot have any responsibility.

However Friedman states that business executives have a responsibility toward their
employers (board of directors) and should conduct business in accordance with their
desires, which is generally to make as much profit as possible while obeying the basic
rules of society. (Law and associated ethical customs).

Exception: Friedman argues that if the aim of the corporation is not to make a profit e.g.
a hospital. Then and only then is the business exec obliged to ensure the business behaves
in an ethical manner.

Business Executives

The primary responsibility of a business exec is to the individuals that own an

organisation.

The business exec is of course a person and he may want to behave responsibly.
Friedman calls these social responsibilities. In this respect he is acting as a principle
not an agent and he should be spending his own money, time and energy on these
social responsibilities and not that of his employers. These are his own social
responsibilities not the businesses.

Friedman argues that stockholders or customers should spend their own money if they
wish to support any social responsibilities not the business.

In essence Friedman states that a business exec should not undertake corporate
responsibility unless it benefits the business in one way or another.

Friedman believes that a corporate responsibility simply should and does not exist.

Carroll, A.B (1979)

However this viewpoint is contradicted by Carroll, A. B. (1979).

Carroll believes that businesses have four different types of responsibilities namely
economic, legal, ethical and discretionary.

Economic: Carroll claims the biggest responsibility businesses have is economic in

nature. A business has the responsibility to produce goods and services that society
wants and sell them at a profit.

Legal responsibilities: society expects business to carry out its economic

responsibilities within the legal framework set out by the law of a country.

Ethical: although the first 2 contained ethical norms there are additional behaviours
and activities not codified in law. Ethical responsibilities are not well defined and are
among the most difficult to deal with. These are the societal expectations of
businesses that may go above legal requirements.

Discretionary responsibilities: these responsibilities are left to individual judgement

and choice. Society expects businesses to assume social roles over and above those

described so far. These responsibilities are purely voluntary and are only guided by a
businesss choice to get involved in such responsibilities.

These four categories describe the societal expected responsibilities of a corporation.

Each responsibility is part of the four dimensional model.

Carroll also arranges these responsibilities in a pyramid from most important to least
important from economic to discretionary.

Benefits of CSR
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Friedman argues that it is acceptable for an executive to behave socially responsibly

on behalf of the business if it benefits the business in one way or another.

Corporate responsibility can help to attract desirable employees and reduce wage
bill. Corporate responsibility is often tax deductible and so Friedman claims that it
can be more worthwhile for a corporation to make a charitable donation then if the
stockholders of the corporation made the contribution themselves as the contribution
would otherwise have gone on corporation taxes.

Friedman states these corporate responsible donations can generation good-will is a

by-product.

Freidman states that corporate responsibility is a window dressing practice as the

actions of a business exec should always be of benefit to the employer/ stockholder.

Corporate responsibilities help a business to curb the view that the pursuit of profits is
a wicked and immoral practice.

Sustainability: CSR will allow for the future sustainability of our future without
compromising the ability of future generations to meet their own needs
(Brundtland Commission)