1.

0_Ethical_Issue
The infusion of Corporate Social Responsibility (CSR) into the conventional business models
is omnipresent in successful companies. Nevertheless, many argue that CSR is an issue as it
causes conflict of interest between stakeholders. For example, instead of fulfilling
shareholders’ interests to maximise profits by producing sugary beverages and salty snacks
preferred by consumers, PepsiCo insisted to reduce sugar, salt and fat in its products to curb
health issues on people, which puts its profitability at risk (Nooyi & Govindarajan, 2020). It
shows that shareholders’ interests need to be sacrificed to meet human sustainability of the
society. Furthermore, in Walmart v. Dukes, Walmart was caught using child labour in its
Bangladesh factories. Although monthly wages of less than $50 to each child had led to
enormous costs-saving to Walmart, many criticised that child labour violates human rights as
it tends to hinder children’s development and cause physical and psychological damage
(Torres et al., 2012). However, if Walmart stops hiring child labour, it will fail to maximise
profit to perform the fiduciary duties to their shareholders. Therefore, it shows the conflict
between protecting human rights and safeguarding shareholders’ interests in the decision to
perform CSR. In short, CSR is an ethical issue because it cannot fulfil all stakeholders’
interest at the same time.

2.0_Impacts on_Stakeholders
According Stakeholder Theory, Freeman, et al(2010) asserts that corporations should
maximise value of all stakeholders without trade-offs.

2.1_Shareholders
Shareholders may argue that companies have contributed to the society by paying
huge amount of taxes to the government (Aupperle et al., 1985). However, studies
show that CSR improves the profitability as it creates competitive advantage as
customers will be impressed by companies that involve in CSR (Kang, Lee & Huh,
2010). Thus, it strengthens companies’ brand image and reputation which eventually
improve profitability by attracting more customers, capital and trading partners
(Tsoutsoura, 2004). For instance, an egg producer in China, DQY Ecological which
initiated the sustainable business development had increased sales by $6.1million
from 2002 to 2006, even making profits during SARS. DQY’s vice-president claimed
that CSR has strengthened its reputation which maximised DQY’s profitability by
attracting foreign investments and building strong customers loyalty (Gray, 2009).
Nevertheless, shareholders may suffer from losses as CSR is imperfect. For example,
to discourage animal abuse, McDonald’s had announced the purchase of $1million
cage-free eggs monthly since 2011. However, the Technomic Consumer Data shows
only 17% of consumers are spend more on cage-free eggs while over 68% of people
are uninterested in this change (Tristano, 2016). In short, CSR may reduce
shareholders’ wealth as not all CSR activities are profitable to corporations.

2.2_Consumers
 Companies with CSR involvement provide various consumer satisfactions due to the
product differentiation (Luo & Bhattacharya, 2006). Firstly, CSR affects the
consumers’ perceptions that CSR-related products are of higher quality and reliability.
For example, free-range meat is obtained from animals that are not injected with
hormones or antibiotics and being treated in more humane methods. Therefore,
consumers can fulfil a higher satisfaction when consuming free-range meat products
served in restaurants as they are perceived as higher quality meat (McWilliams &
Siegel, 2000). Furthermore, consumers who pay for CSR-related products and
services may feel that they are doing good deeds. For example, consumers with pro-
environmental attitudes may have their own self-concepts of being environmentally
responsible. Thus, supporting environmental-friendly products enhances consumers’
desired self-concepts which make them feel good about contributing to the
environment (Pickett-Baker and Ozaki ,2008). Although people may be unconcerned
about the society welfare, they may still believe that supporting CSR-related products
and services will eventually lead to positive outcomes, thus resulting in consumer’s
satisfactions (Kim & Choi, 2005).

2.3_Society
Society is the main beneficial stakeholder of corporations when incorporating CSR. It
eases government’s burden in promoting a healthier society as the societal issues
cannot be eliminated due to limited governmental resources (Porter & Kramer, 2006).
For example, PNC has provided educational supports to poor children by voluntarily
teaching to children and donating educational materials. It provides children the
developments of intelligence in facing their future lives (PNC, 2018). Furthermore,
CSR promotes environmental sustainability. For instance, Ambuja initiated the plan to
reduce water usage by reutilising its wastewater during manufacturing process
(Ambuja Cement, n.d.). Such CSR is necessary to conserve natural resources for the
future generations which have higher demands on natural resources due to
exponential population growth. Moreover, CSR promotes social sustainability. For
example, Coca-Cola has reduced sugar in 25 drinks since 2015 as it concerns on the
deteriorating health issues especially diabetes (CocaCola Australia, 2019). In short,
CSR’s contributions to the society are undoubtedly critical to the formation of better
society.

3.0_Debate on_CSR
Some argue that CSR are ethical as there is no conflict of interests while others think that it is
unethical due to conflict of interests between stakeholders.

3.1_CSR_Builds Reputation
Based on Ethical Egoism, performing CSR is ethical. According to Godfrey (2005),
corporations’ ethical judgement or philanthropic action will build corporate reputation
as corporations will gain public trusts and appraisals. By building corporate
reputation, brand images of corporations can be formed and enhanced, thus
strengthening customer loyalty as the public tends to perceive these products and
services are of higher quality (Hur, Kim & Woo, 2013). Furthermore, CSR acts as a
protection against public perceptions of negative information. For instance, in a pilot
test, the majority did not care about the negative news on corporations that involve in
CSR (Cho & Kim, 2012). It shows that negative rumours about corporations may be
less convincing to the public due to the strong corporate reputation formed using CSR
(Lange, Lee & Dai, 2011). Thus, it minimises the unnecessary damages inflicting on
corporations through CSR. In short, corporations are ethical in performing CSR
assuming that it is the best way to optimise their own interests by building reputation
to enhance brand images and protect the corporations from negative information
(Shaw & Barry, 2016).
However, CSR in corporations which lead to moral licensing is unethical
based on Kantian Theory. Moral licensing is a cognitive bias which allows
corporations to act immorally without sacrificing their self-images (Simbrunner &
Schlegelmilch, 2017). For instance, the Body Shop gained reputation for its
biodegradable beauty products and actions against animal testing. Ironically, with
moral licensing obtained from banning animal testing, Body Shop had started to use
L’Oreal’s ingredients which had been tested on animals due to corporate interests
(Hope, 2017). According to Kant, Body Shop should not treat the public who trusted
on it as a mean to meet its own interests. Instead, it should stop using any ingredient
being involved in animal testing and treat the public who trusted it as an end by
continue producing natural products. Furthermore, as asserted by Kant, the action of
using ingredients from animal testing lacks the moral worth as it involves the self-
interest of the corporation which is inconsistent to its sense of duty of providing
natural products (Shaw & Barry, 2016). Therefore, based on Kantian Theory, the
involvement of CSR in corporations is unethical due to moral licensing.

3.2_CSR Benefits the Society

It is apparent that CSR benefits the society by executing philanthropic activities and
decisions and sacrificing corporations’ resources. Based on utilitarianism, application
of CSR in corporations is ethical as maximum happiness is generated by optimising
society welfare (Shaw & Barry, 2016). For example, Ben & Jerry’s (B&J) started
donating 7.5% of pre-tax profits to a charity foundation which supported the
underserved groups, immigrant rights, and American Indians in Vermont since 1985
(Ben & Jerry, 2014). Since diminishing marginal utility of money states that less
happiness is gained as one’s income is increasing, B&J would obtain less happiness if
they were to utilise the 7.5% profits for its own as compared to contributing the
money to poor communities (Shaw & Barry, 2016). Furthermore, it can be explained
that money being injected to the society tends to gain more happiness than that to an
individual or a corporation as more people are benefited in the society (Renouard,
2011). Hence, B&J’s contributions to the poor by sacrificing its profit will maximise
the total amount of happiness which matches Mill’s belief on equal income
distribution bringing the maximum happiness.
Nevertheless, based on Rawls’ Theory, CSR is unethical as corporations may
not serve the least advantaged groups. Corporations may perceive that contributions to
the society will ease burdens in society. In fact, they often misallocate their
contributions which causes the least advantaged groups to be neglected due to the lack
of understanding of society. For example, General Electric (GE) provided
scholarships up to $7million to universities students instead of utilising it to help the
homeless who may be the least advantaged community in the society (Cision PR
Newswire, 2019). According to Rawls, people in the original position are reluctant to
gamble with their futures. They will support rules that bring benefits to the most
unfortunate group in case they were to be in this group. Therefore, people would
suggest allocating more resources on the least advantaged group like the homeless as
it maximins benefits in the society because they care more about escaping from the
most disastrous result when their future social status are undetermined (Shaw &
Barry, 2016). Furthermore, Rawl criticised on utilitarianism that the complete
interchange between pleasures and pains is morally problematic as one’s justice
should not be bargained even with social interests (Shaw & Barry, 2016). Applying
this criticism, CSR can be immoral when it sacrifices some shareholders’ happiness to
support the society to increase total happiness.

3.3_CSR_increases profit
CSR has been widely used in business strategies such as product differentiations,
marketing strategies, costs cutting to boost profits so that corporations could fulfil all
stakeholders’ interests. For instance, by cutting packaging materials to reduce total
delivery millage, Walmart had solved both issues of excess packaging and greenhouse
gases while increasing profits of $200million (Porter & Kramer, 2011). Therefore, it
eliminates the conflict of interests between shareholders and society. Besides,
corporations found that removal of employees’ health coverages costs them more due
to diminished employee productivity. For example, through encouraging employees
to quit smoking and executing wellness programs, Johnson & Johnson (J&J) has
saved $250million on health care expenses (Porter & Kramer, 2011). As Rand
believes that mankind is selfish by nature, it rationalises the selfish intentions and
actions to be ethical. Although CSR results in societal benefits, egoism still lies on
corporations’ intention to increase profits through CSR (Shaw & Barry, 2016).
Therefore, J&J’s wellness program is ethical as it satisfies self-interest of increasing
profits by improving employees’ productivity.
However, CSR is unethical because it lacks moral purity. Moral purity claims
that one’s action can only be praised when it is morally worthy whereby there is no
motive of self-interest (Dubbink & Liedekerke, 2019). It supports the exclusion
theory that shows negative relationship between self-interest and morality. For
example, J&J’s ultimate intention of executing wellness programs to save costs and
boost profitability shows the failure of achieving moral purity (Porter & Kramer,
2011). Even with the slightest inclusion of self-interest in J&J’s CSR will ruin its
moral purity as the intention to make profit will dilute the morality of doing CSR,
which causes CSR to be immoral. In Kantian Theory, J&J’s CSR violates the
principle of only treating people as ends (Sham & Barry, 2016). Instead of executing
wellness programs with the intention to improve employees’ health conditions, J&J
has used this strategy to utilise its employees’ productivity to eventually increase the
corporations’ profitability. Therefore, corporations are unethical when using people as
means to increase profits.
4.1_Argument For CSR is unethical
4.1.1_Friedman’s Views on CSR
In Friedman’s perspective, maximising profits is the only social responsibility of corporations
without violating laws and acting deception or fraud (Friedman, 1970). CSR may seem to
increase profit, but it usually fails to fulfil Friedman’s view of maximising profits to meet
corporations’ social responsibility. Results found by McWilliams and Siegel (2000) have
shown that CSR activities will not gain profit when expanding CSR programs as the marginal
revenues equal the marginal costs of doing CSR. Kolstad (2007) also supported that CSR can
only increase profitability in the initial phase but will not increase profitability or even make
losses if CSR is further expanded as costs of CSR tend to outweigh its corporate benefits.
Therefore, CSR will fail to meet its social responsibility of maximising profits. Furthermore,
incorporation of CSR will lead to inefficiency due to the dilution of focus on corporations’
core operations. The misallocation of labour resources in either core departments or CSR
department increases the departmental burdens and causes inefficiencies (Kolstad, 2007).
Hence, corporations should refrain from executing CSR and focus on their respective core
operations to maximise profits. In short, CSR is redundant while corporations should
prioritise profit maximisation when considering all stakeholders’ interests.

4.1.2_Libertarianism
Based on libertarianism, an action is fair when it allows human to live as they please
without interfering others (Shaw & Barry, 2016). Hence, CSR can be unjust when
coercion is exerted on certain shareholders who refuse to contribute to other
stakeholders at their own expenses. It is almost impossible to convince all
shareholders to willingly support CSR because profit maximisation is the only
purpose of investments. For example, in Loveheim v. Iroquois Brands, only a
minority of shareholders are willing to incorporate CSR (Uson, 2015). If the
corporation insists to conduct CSR activities, it will be unjust to the rest as it
interferes shareholders’ property rights of not contributing to other stakeholders.
Moreover, the rationalisation of perception of highly profitable corporations should
contribute to the society to maximise total happiness in utilitarianism is considered
absurd in libertarianism principles. For instance, India’s Companies Act 2013
mandated the allocation of 2% of companies’ net profit on CSR activities yearly (Lin,
2019). In Lockean rights, neither profitable nor non-profitable corporations have
moral obligations to serve the society as it violates the shareholders’ property rights
(Sham & Barry, 2016). Libertarianism is supported by Friedman that managers are
infringing shareholder’s property rights by ‘stealing’ from the corporations when
incorporating CSR without shareholders consents (Schwartz & Saiia, 2012).
Therefore, corporations should reject CSR as it is unjust due to the violation of
shareholders’ property rights.

4.2_Argument Against CSR is Ethical

4.2.1_Ethical Egoism’s Limitations
CSR may seem ethical as it maximises one’s self-interest based on egoism theory. It
rationalises that CSR used by corporations are merely self-interest driven because it
believes all actions are selfishly motivated and purely unselfish actions do not exist
(Sham & Barry, 2016). However, there are exceptions where people are acting not for
self-interest. For example, Mahatma Gandhi fought against racial oppression and
protested British Salt Act which prohibited Indians from selling salts and imposed
hefty tax on it (Gomes, 2020). This example rejects egoism principles by proving the
selfless side of humanity (Shaw & Barry, 2016). Therefore, CSR is unethical if
corporations use it to increase profit as not everyone acts selfishly. Furthermore,
egoism is too subjective to be a moral standard as they tend to relate all actions to
self-interest regardless of the circumstances (Shaw & Barry, 2016). For instance,
defenders of ethical egoism may assume B&J’s charity donations as means to obtain
protection on unethical activities although the donations are only for society welfare
without expecting self-interests (Ben & Jerry, 2014). Therefore, ethical egoism is
inapplicable to defend CSR to be ethical.

4.2.2_Utilitarianism’s_Limitations
Although CSR may seem ethical as it maximises total happiness, there are limitations
on claiming that CSR is ethical when applying utilitarianism. Firstly, no one can
assure that implementation of CSR will lead to maximisation of total happiness as the
consequences are mere predictions which are uncertain (Sham & Barry, 2016). For
example, Johnson & Johnson’s anti-smoking campaign may cost them higher if they
fail to encourage their employees to quit smoking (Porter & Kramer, 2011). In this
case, CSR will fail to maximise total happiness as the consequences of CSR are
negative. The unpredictability of consequences of CSR cannot prove CSR to be
ethical when applying utilitarianism. Furthermore, as utilitarianism allows the greatest
amount of happiness to be achieved at the expense of people’s happiness, CSR may
be unfair to the parties that either willingly or unwillingly sacrifice their happiness
(Shaw & Barry, 2016). For instance, B&J’s charity donations require shareholders to
sacrifice 7.5% of profits for society welfare (Ben and Jerry, 2014). Pro-utilitarianism
may defend that providing help to more people in need is ethical due to higher
satisfaction. However, people have ignored the returns that shareholders are supposed
to earn by risking their investments. In short, CSR is unethical when applying
utilitarianism.

(2750 words)
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Finally, the prevention-based strategy is directed to inactive publics who

are low in both issue involvement and awareness. This strategy is composed of
preventive efforts to make negative issues less salient or less important among the
public. One of the tactics for this prevention-based strategy is making reputation
enhancement efforts such as conducting socially-valued activities, including protect-
ing the environment, involvement in community issues, donating to non-profit
organizations, or supporting local schools.
Finally, the prevention-based strategy is directed to inactive publics who
are low in both issue involvement and awareness. This strategy is composed of
preventive efforts to make negative issues less salient or less important among the
public. One of the tactics for this prevention-based strategy is making reputation
enhancement efforts such as conducting socially-valued activities, including protect-
ing the environment, involvement in community issues, donating to non-profit
organizations, or supporting local schools.