Policy of corporate social responsibility

The adoption by an organisation of a policy of corporate social responsibility no more than a form of enlightened self-interest? Business is increasingly becoming a target for ethical concern. This is evident from the way that consumers act in response to some companies' actions. For example, when it became apparent that Nike was employing cheap labour in 'sweatshop' style factories to produce goods.

One way for organisations to tackle this concern is through adopting an ethical approach to the way they treat both their workforce and external body's. There are two opposing theories on the issue of social corporate responsibility and role of business in society. Firstly, there is the economist or classical view, which believes that management's only social responsibility is to maximize profit. One supporter of this opinion is Friedman, who argues that managers or directors who are in charge of the business have no right to give away shareholders money by spending it on 'social good' because it adds to the cost of doing business. (Kobbins & Coulter, 1996).

In addition he says that these costs are actually passed on to consumers through higher prices and smaller profits causing a lower dividend. This is true to a certain extent and is more applicable to public companies than those owned by managers and not responsible to shareholders. In the case of public companies though, they have a wider stakeholder responsibility. Stakeholders include shareholders, customers, employees, communities and others affected by corporate behaviours.

Stakeholder theory suggests that it is possible to improve decision making by identifying and considering all individuals or groups who have some significant personal stake or interest in the organisation (Boddy, 2002) Traditionally, the view that Friedman takes is the one taken on by management, but there is clear evidence from the growth of ethical unit trusts (Boddy, 2002) that some investors choose to invest on an ethical basis. This reflects the fact that they value social responsibility over their own wealth.

An emphasising point on this matter is that "just as society depends on business organisations for goods and services, so business depends on society. It cannot operate without inputs from society in the form of employees, capital and physical resources." (Boddy 2002) So why not give something back? The way in which businesses operate inevitably has an effect on society, some of which can be negative. The concept of corporate social responsibility (CSR) provides a way for organisations to give something back to the society on which they have effect. There are many different definitions of what CSR actually is however most definitions include voluntary management and reporting of environmental, social and financial performance in a manner that meets or exceeds ethical, legal, commercial and stakeholder expectations. (Ethical Corporation, 2002-3)

The view that CSR is a form of enlightened self-interest falls under the socio-economic opinion on the subject. This is the second opinion on the role of business in society. The socio-economic view believes that management's social responsibility goes beyond making profits to include protecting and improving society's welfare. (Kobbins & Coulter, 2002) This position is based on the belief that society's expectations of business have changed; public opinion now supports businesses pursuing economic and social goals.

This is because they are now more aware of reasons why businesses should take action. For example, the damage a chemical company may inflict on its surrounding community by manufacturing chemicals in the form of waste products in surrounding waters. The socially responsible way of dealing with this would be for the company to ensure cleanliness standards are met. It is the reasons and circumstances under which businesses decide to undertake policies of CSR that can be questioned. Corporations are subject to multiple pressures to operate in socially responsible fashion, some of which come from government requirements or general expectations of social legitimacy (Cochran et al, 1999).

As far as legislation goes in the United Kingdom, a private members bill on Corporate Social Responsibility was introduced in June 2002 outlining provisions for CSR reporting, requirements for companies to consult interested parties on major projects, increased directors duties and liabilities and penalties for non-compliance (Freshfields Bruckhaus Deringer, 2003), but no actual laws or regulations have been passed.

Although in June 2001, the European commission published a green paper 'Promoting a European Framework for Corporate Social Responsibility', which aimed to launch a European Union (EU) debate on the concept of CSR, and identify a framework for the promotion of CSR within the union and internationally. This was then followed by a white paper in July 2002, 'Corporate Social Responsibility: Business contribution to sustainable development' but still no actual regulations were installed, the paper states that CSR should remain a voluntary principle. (Freshfields Bruckhaus Deringer, 2003).

This shows that governments are concerned but still do not see it as their responsibility to take action. They seem to be of the opinion that if organisations choose to be socially responsible they have provided some guidelines but ultimately it is the organisations decision. Saying that though, in the years to come the problem will be that much worse if nothing is done so the government may then impose strict regulations that businesses will have to comply with. If they have done nothing previously, the cost to the company to meet these regulations may be too big for them to cope with. Therefore by having a CSR policy, companies could just be pre-empting government actions.