The Concept of

Corporate Social
Responsibility
 CSR vs Business Ethics
• Social responsibility is easy to understand,
but the word ‘ethics’ causes much
confusion. A company policy must be
followed to benefit the community. This is
coined as the corporate social
responsibility. However, when one talks
about business ethics, it becomes a very
different thing, because ethics is based
on conscience.
 Businesses that do not have good
business ethics are penalized by the
law.
 Business ethics
• Business ethics is the study of appropriate business
policies and practices regarding potentially
controversial subjects including corporate
governance, insider trading, bribery, discrimination,
corporate social responsibility, and fiduciary
responsibilities. The law often guides business ethics,
but at other times business ethics provide a basic
guideline that businesses can choose to follow to
gain public approval.
 CSR
• Corporate social responsibility (CSR) is a self-
regulating business model that helps a
company be socially accountable—to itself,
its stakeholders, and the public. By
practicing corporate social responsibility,
also called corporate citizenship,
companies can be conscious of the kind of
impact they are having on all aspects of
society, including economic, social, and
environmental.
• To engage in CSR means that, in
the ordinary course of business, a
company is operating in ways that
enhance society and the
environment, instead of
contributing negatively to them.
“Do companies have a responsibility to donate to
charities or to give employees higher wages and
customers safer products?”

or

“Companies are obligated to maximize profits for their

shareholders or stockholders?”
 Milton Friedman
• An economist who has an extreme idea about CSR
• Basing himself on the assumption of private property
and free markets said that,

“the only Social responsibility of

a business is to increase its
profit”
 Shareholders
(owners)

Direct responsibility

Executives
(as the employees)
• According to Friedman’s theory on CSR, a
shareholder’s view,

a manager has no right to give money to social cause

when doing so will reduce shareholder’s profits
because money does not belong to the manager but
to the shareholders.
 Exercise of CSR by an
executive is:
• Unfair, because it constitutes taxation without
representation
• Undemocratic, because it invests governmental power
in a person who has no general mandate to govern
• Unwise, because there are no checks and balances in
the broad range of governmental power thereby turned
over to his discretion
• Violation of trust, because the executive is employed by
the owners as an agent serving the interest of his
principal
• Futile, both because the executive is unlikely to be able
to anticipate the social consequences of his actions
Friedman’s Critics
 Friedman’s theory Critics to his claims

Since the Executives are employees of the

Manager or executive is the corporation and so the executive is
employee of shareholders legally required to serve the interest of
the corporation-his true employer- not its
shareholders

Shareholders only own stock and this

Stockholders are “owners” of the
corporation and that the corporation is
their “property”
gives them few limited rights, such as :
-the right to elect the Board of
directors
-vote on major decisions
-Right to whatever remains after
bankruptcy

Executive’s core responsibility is to run In reality the executive probably has no

the corporation as stockholders want it to idea how stockholders want the
be run company to be run, and legally, anyway,
he is required to run the company in
ways that serve many other interest
besides those of stockholders
 ACTIVITY
• Each group will have a brainstorming on the perceived
social problems of our country on a national scope. Go
through the list below:
o Unemployment
o Violence and rising criminality
o Poverty
o Prevalent prostitution
o Increase in number of street children
o Lack of primary health care
o Pornography
o Denudation of forests
o Energy crisis
o Nuclear threat
o Insurgency
o Misinformation and misrepresentation in advertisements
o Drug abuse
o Spread of aids
o Graft and corruption
• You will agree on the ten major social problems
from the above list. rank them from highest to
lowest. Present in class.

• Questions should be answered during the

presentation
o Which government and private agencies and institutions are responsible
for solving or at least lessening the impact of the above social problems?
o List at least 5 Philippine companies that are helping solve or alleviate the
above social problems
o Have you ever had a chance to involve yourself in working out solutions to
some of the social issues and problems listed above? Discuss what you
did.