The Background On Corporate Social Responsibility Management Essay

The Background On Corporate neighborly line of line Management EssayThis culture entrust ask once more(prenominal) thanst the classic mess of Milton Friedman on Corporate loving office (CSR). First of all it is indwelling to familiarize with the concept of CSR, this includes background information on the topic, than discuss the version of CSR oer the years and the reasons for the changes. Than delineate the concept as it is seen instantaneously. Additionally to familiarise with the literature used, 2 sources used in this psychoanalyze were evaluated under origins, determine and limitations.Later the weigh go away introduce the main motive of the field of view on the CSR, which give be recognised into two phonations. First get going leave alone analyse the traditional bewitch of Milton Friedman and separate economists and try to queue come forward if the main state of the compevery is to maximise cabbage. The second part will talk ab proscribed t he traditional perspective of the CSR which is opposing the neoclassical view.In conclusion I will try to deliberate Milton Friedmans theatrical mapping of neoliberal position on CSR.Background on Corporate Social ResponsibilityThe concept of fond state was traced back to the ancient sentences. The initial gunpoint of the CSR development happened thousand years BC w here springities introduced dissimilar rules and regulations where the acetifyers were severely punished for being c atomic number 18 slight and injured slightly unrivalled during their work. Or In Ancient Rome senators grumbled about the failure of straines to nominate adequate taxes to fund their military campaigns.(History of Corporate Social Responsibility and Sustainability) During the industrial rotation the concept grew to a whole refreshed level and the significance of stage employment in corporation started to sum up expvirtuosontially. By the 1920s the youthful stage began that kindly resp onsibility was non seen as an ethic but became a whole new concept, however the magnitude of the concept was undervalued. As dean of Harvard Business School Wallace B. Donham Business has non learned how to handle these changes, nor does it agnize the magnitude of its responsibilities for the future of civilisation.(History of Corporate Social Responsibility and Sustainability)The ideology of somatic tender responsibility (CSR) has emerged as a response to pressure from the task side of growing leftist sentiment and the trade union exertion in the last third of the XIX century. Incurred if the institutions of civil familiarity demanded from businesses providing tender guarantees to the workers and to ensure protection of their labour and the decline of trade unions in the middle XX century for business proclaimers updated the task of preserving and maintaining the loyalty of demand of subordinates, which again forced them to turn to CSR. It was then that the concept ha s conk out firmly launch in the theory and pr figureice of corporate g all overnance in the U.S. so far the effect of globalization can non be under estimated as it played a significant intent in CSR, which forced companies to look for more inventive ways of positioning information in a crowded world. Thus, CSR was the take of deep transformation of relations of private business and society in a post-industrial economy.DefinitionSearching for the most precise translation in the least amount of text, the definition by Lord Holme and Richard Watts in The innovation Business Council for Sustainable Development in its popularation Making best Business Sense (Baker 2004) they defined Corporate Social Responsibility asthe continuing commitment by business to behave ethically and play to sparing development while improving the quality of life of the hands and their families as well as of the local community and society at large (Baker 2004)In essence CSR is a concept that refl ects the companys voluntary determination to participate in the improvement.An important remark to make before defining CSR is that it is a in truth broad topic with no clear-cut definition this creates a lot of incertitude. In narrate to reduce some uncertainty it is essential to divide CSR into two antithetic parts and look at it in a more detailed manner. First part that will be looked at is the internal CSR, which is limited by the scope of the company, it deals with affable policies of the employees. The second part is the external CSR, which is liable for the outside framework and wherefore deals with a much broader spectrum than the internal, as it takes into the account all the tender and purlieual factors, in some cases it helps eliminate the failures of the authorities in the brotherly sphere, unsteady a significant sh ar of burden to the corporations.Additionally thither atomic number 18 different principles of the CSR that will be mentioned later in the fil l including transp arnce this deals with humansity and the reliability of the company, significance deals with the scale and the effectiveness of the policies and prevention of conflicts among some an separate(prenominal)wise parties.Evaluation of SourcesIn order to examine the two sides in more depth sources with different views and opinions were used. For a more critical evaluation two have gots have different perspectives on the case of CSR which helps the study answer the head from different viewpoints.First book, The Debate over Corporate Social Responsibility, by Steve May, George Cheney, and Juliet Roper answers the question in a theoretical and applicative perspectives on Corporate Social Responsibility. The books value lies in the fact that this book is found primary on facts and is independent from views, which is perfect for this study. An different important locution to mention is the relevance of the book to the current situation in business as it was publishe d 5 years ago which is relatively recent.The cooperate book Corporate Responsibility and Financial murder The Paradox of Social Costby Moses L. Pava and Joshua Krausz. This book is very(prenominal) different from the first one as it focuses more on the effectance of the company base on CSR. It contains empirical studies on the correlational statistics between the CSR and slaying that will be used further in the study. The limitation of this book is that it was published in the 1995 and the concept of CSR changed since then.IntroductionCurrently the concept of Corporate Social Responsibility is a subject of debate and criticism. Defenders argue that it has a solid business case, and corporations receive legion(predicate) an(prenominal) benefits because they work for a broader and more hanker-term than their own miserable-term gain momentary. Critics argue that complaisant responsibility moves away from the unplumbed stinting section of businesses, and distracts the comp any form its main goal.Thus, there are two main approaches to the study of corporate brotherly responsibility. On one hand we have the notion of M. Friedman, who relies on formal rationality. On the other hand, we have representatives of the second approach, the liber idea of CSR. The exploreers are relying on objective research. They realize that the social responsibility of business is complex and cannot be reduced to the bleak economic inte respite of profit maximization.In analysing both views this study will find out to what extend does Milton Friedmans traditional view of the CSR increase monetary network of the company.Before we elaborate on these two opposite approaches to the study of corporate responsibility, it should be noted that the leaders and managers of to daylights companies are increasingly sensitive of the positive impact of socially obligated behaviour to achieve not solo strategic but to a fault fiscal goals of the business.Milton Friedmans view on Res ponsibility of CorporationsNobel Prize winner, a supporter of the policy of monetarist Milton Friedman in his book Capitalism and Freedom published in 1962there is one and lonesome(prenominal) one social responsibility of business-to use it resources and engage in activities designed to increase its profits so long as it stays at heart the rules of the game, which is to say, engages in open and free competition without deception or fraud..Similarly,the social responsibility oflaborleadersistoservetheinterestsofthemembersoftheirunions.Itisthe social responsibilityoftherestofustoestablishaframeworkoflawsuch thatan privateinpursuinghisowninterestis,toquoteAdam smithagain,ledby aninvisiblehandtopromoteanendwhichwasnopartofhisintention (Friedman Friedman, 1982, p. 133)The essence of this line of credit is that the direction of the profits for social goals reduces the volume of profit, which violates the principle of profit maximization, which is fundamental to the business. none tha t in the short term deductions from profits related realization of a social responsibility goal in business does reduce profits.Additionally if, for prototype the price of a companys products would be reduced, this would really cheer the consumers who can buy more for lower price thus increase purchasing power it will have the same effect on the shareholders if the value of dividends grow. in that respectfore, installation of superfluous environmental equipment, of course, is a positive impact on the environment and the society however who will have to pay for this? Eventually, the consumers as the improvements will increase the cost of production and consequently, the prices of undecomposeds and services, reducing the purchasing power of the consumer.Milton Friedman plunk for his arguments with a number of arguments. For shell he used the concept of relative usefulness in order to argument the fact that social programs should not be utilise by the managers as they do not have the comparative return and the know-how in that field, instead they should be engaged in increase profits for the company. Friedmans argument was based on one of the most important classical economists David Richardo who argued that the flow of goods should not be interrupted by the political science and should flow freely across the country and the boarders and accordingly will be most efficient.In the book by Friedman makes a strong argument stating that corporate responsibility was initialised by leftists and socialists and any sign in enjoin the business in socially responsible direction will be seen as destruction of capitalist economy because evidentlythemanagerwhoreducesprofitforsocial ends such as reducing pollution orhiringmembersofdisadvantagedgroupstakesoverthe functions of government becauseheisineffectimposingtaxesanddecidinghowto choke the proceeds. Thecorporateexecutivethusbecomesacivilservant,apublicemployee.The resultisthusfull blown socialism, the rejec tion of the market mechanisms in favourofpolitical mechanism (Aune, 2007, p. 212)Moreover Friedmans financial statement analyst criteria characterises companies investments in the social field as inferior investments (Aune, 2007, p. 212) over ascribable to thatFriedman increased his allure in the 1975, after the decline of support in Keynesian economics and increase in Milton Friedmans monetarist movement in the field of inflation and unemployment. This modify his position in the battle against CSR. And increased support from other economists including Henderson who backed Friedman on his arguments against CSR and based on his principles wanted to implement Friedmans idea to the new globalized economy. In addition umteen organizations were created in order to oppose the traditional idea of CSR. Here are some examples of the organizations mentioned preceding(prenominal) Competitive opening move Institute or the Free Enterprise Action Fund. These organizations based on Friedm ans arguments try to prove that CSR is a smokescreen for socialists and collectivist theme. (Aune, 2007, p. 208) which was a very strong argument after the Cold War bringing up the idea of Soviet Collectivisation policies.As mentioned before, Friedman was not the only embolden of the neoliberal view on CSR. Also people care J. Roberts argue that the corporation is an idea, an imaginary, without substance or sensibility and hence incapable of anything akin responsibility. Instead, corporate responsibility will always depend upon people using their frail and vital sentience and following the path that this assigns. (Christensen, 2007, p. 449)Or Greider states that business should be making money otherwise they will be less efficient if they will engage in CSR and take societys interest into consideration. Not only because of the opportunity cost of investing that money into something more paid but overly because they are no specialized in the sector and therefore will waste th e resources due to inefficiency. elevatemore presents Hawleys study in 1991 where he conducted a survey from 22 business textbooks to find out what is goal of the corporation his finds came to a cat valium conclusion that Thetypical frontCorporateFinancecoursebeginswiththeinstructorposingthefollowingquestiontothestudentsWhatistheprimaryobjectiveoffinancialmanagersandthecorporation?Theanswer,ofcourse,is that corporate managers should seektomaximizethewealthofownersby maximize the price of the shares. That any government or corporate interference with the lifelike workings of the market prevents resources from flowing to their most valued uses. Governmentintervention, beyond punishing fraud, introduces unnecessary frictionintothenaturalandsmooth workingsofthemarket. (Pava Krausz, 1995, p. 17)In summary the first part of the study presents the main arguments of the neoclassical view on the Corporate Social Responsibility and on how the corporations should operate in order to be pr osperous. First of all Milton Friedman argued that the only thing that should be of concern to the corporation and its managers are the profits. His arguments were based on the fact that the managers were employ by the shareholders to maximize profits and not to take over governments role and act like civil servants. In essence everyone has their own role in the society and everyone should do their role as best as possible as they are most efficient in doing that role and when someone from society tries to do the role that they are not designed to do than the denial of capital market mechanism occurs and what Friedman refers to this as is leftism and socialism. Further in the essay in order to validate the arguments presented by Friedman, other economists like J. Richards argued his notion on corporations as being an idea and therefore not able to have responsibilities. Moreover Greiders and Hawleys counter CSR arguments were included in order to show the full scope of arguments ag ainst CSR.Limitations of Milton Friedmans ArgumentsThere are many a(prenominal) critics of the neoclassical view on CSR and Friedmans arguments. Number one is that Friedmans arguments are very subjective and are based on assumptions without any scientific facts or evidence that back his argumentation. This is a crowing disadvantage for his side as the lack of information and evidence that would act like a book binding and lace his position acts against him. As a result questions like does CSR really reduce the performance of the corporation? arise.Moreover, according to Friedman if corporations with money do not invest into the improvement of society and its employees, than who will? The main disagreement here between the two sides is that Friedman refuses to admit the fact that the economy, society, environment and the government are all interlinked between each other specially in the globalised economy, and you cannot view economy on its own without considering the other 3 fa ctors. Friedman and many other economists tend to use of various economic theoretical models in order to illustrate their theories, however the models that apply to the economy usually do not apply to the real world as they tend to ignore many other factors like the government. In consequence he sees economy unaffectionate from the society.Friedman stated that the corporation is doing well as long as they are conducting their business legally and are operating at profit increase level. The author in the book makes a very strong argument against Friedmans position as he states that his account on CSR in 1970 does not take the changing preferences of consumers and shareholders into account. What if the company is operating legally and maximizing profits indirectly with an enemy state during wartime? For example number of biggest U.S. Companies traded with Iran, North Korea, Sudan and Libya, due to the sanctions set by the Government they exported the goods to Dubai that were further re-exported the goods to Iran, North Korea, Sudan and Libya. (Aune, 2007, p. 215)Michael Scherer conducted a research on a number of US companies, he found out that for example That the Canadian GE works on four new hydroelectric power generators at the Kurun River dam that will benefit the Iranian oil sector. Additionally they provide the Iranian oil sector with the modish equipment including pipelines, compressors and turbines. However the trade is not done directly, as they have an Italian company called Nuovo Pignone that acts like a middle man. Or another example one of the largest oilfield companies Halliburtons subsidy helped building in one of the largest fertilizer plants stuffy Iraq. They also provide Iranian National Oil Co. with $226 million boring equipment, the chief executive officer of Halliburton Richard Cheney also stated that U.S. the sanctions against Iran and Libya hurt business and failed to stop terrorism. There are number of other examples of the worlds l argest companies including ConocoPhillips or ExxonMobil that at the end of the day trade with the Axis of Evil (Aune, 2007, p. 215)According to Friedman and his idea of corporate capitalism as it should be all the companies that were listed above in the example are doing nothing wrong, as at the end of the day they first, maximizing profits for the shareholders and second, they are doing nothing illegal. (Aune, 2007, p. 216) therefrom, according to Friedman all that matters is profit maximization, even over consumer interest and the public. Friedmans logic is irrational as we have seen from the example some profit-maximizing actions might threaten the security of the society which is far more important than the prosperity than any corporation.Summarizing the limitations of Milton Friedmans with globalisation developing the role of corporations changed since the time Friedman was studying economics, now with globalization it is far more integrated into the society and both of them h ave to work together in order to prosper as a whole, because a business will never be successful if the employers are unhappy and vice versa. Moreover, as specified above Friedmans arguments are based on assumptions and as in James Aune states the opponents of CSR should argue for their assumptions as well as their conclusions (Aune, 2007, p. 216)Or his assumption that Market capitalism working by managers of corporations doing their role of satisfying the shareholders by creating profits. However at the same time he discounts the fact that social justice as an essential part of the utility many consumers or shareholders may proclivity to maximize (Aune, 2007, p. 213), again assuming that all shareholders do not handle to maximize utility but instead want to make profits. tralatitious View of Corporate Social ResponsibilityExpectedly not everyone agrees with the views of M. Friedman on CSR among scientists, and entrepreneurs. In recent years, the social responsibility of business is seen as social advantage of the company. This idea was first suggested a professor at Harvard Business School, author of the theory of competitive advantage by Michael Porter in his obligate in the Harvard Business Review New issue of humanity the macrocosm of value in 1999Porter points out that social programs are now used mainly by companies as a form of public relations or promotional purposes. For example, the tobacco digging Philip Morris (USA) in 1999, has washed-out $ 75 million to various donations, and then spent another $ ascorbic acid million on their advertising campaign.However, there is another way in the implementation of socially responsible business companies can also strengthen their competitive position by improving the quality of the business environment in the places where their activities are unfolding. As noted by M. Porter, using philanthropy as a competitive advantage of the company allows you to link social and economic goals and improve the long-t erm prospects of its development.Corporate Social Responsibility and PerformanceFriedman argues in his essay that companies are better off when they are maximize their profits, however this is not always the case.The image of a socially responsible company an investment in its business reputation. In fact, all other things being equal, people are more willing to go to work in a socially responsible than a socially irresponsible company, will buy its products, services, or actions. Suppliers and business partners will also be more interested in cooperation with the firm, which has a high reputation. Thus, in the long term, when various groups, ensure the correct behaviour of the company, it is likely to increase its income.As written before, economy is interlinked not only with the society but also with the government and the fact that companies that behave in a socially responsible economic manner, not only improves the society, but also has some other benefits, such as, participa tion in the implementation of government orders.Additionally, due to growing environmental and social problems CSR will always be a big topic, therefore more and more enforced regulations will be implemented like for example production standards or service quality or pollution quota, companies that are more socially responsible will therefore be prepared and would not need radical structural changes like the companies that did not engage in socially responsibility.Finally, company that is socially responsible towards its employees will benefit from the favourable working climate and higher motivation that will further increase efficiency and output of the company. Moreover many texts argue that companies, especially large MNC have the financial resources to be more socially responsible. However in my opinion this argument is flawed as the availability of the financial resources does not necessary indicate the incentive to drop down them.Finally an example where CSR and Performance are positively correlated is in an article on Corporate Social Responsibility (Todd, Kristin, Baylor Business Review) Hollender CEO of Seventh Generation who was voted the best Social CEO of the year negotiation about transparency of the companies as the main stepping-stone towards social responsibility, he says that greater transparency is just the first step towards taking greater responsibility for the future that all of us are creating and Whatstrueoftransparencyis similarlytrueofSeventhGenerationsefforttonotonlysucceedinthemarketplaceandcontributetosociety,buttoinfluenceotherstocontributeaswell,hewrites.Itsachallenging,sometimesevenbewilderingodysseythatteststhespiritandwillofeachandeveryoneofus. (Todd, 2009)There are limitations with defining CSR and there is no specific line that can be drawn to separate socially responsible and non-socially responsible companies, and the extent to how socially responsible the companies are. Therefore it is very difficult to see the effect of CSR on the performance on the company. Table 2.1 (CorporateSocialResponsibilityandTraditionalFinancialPerformance stockyof21EmpiricalStudiesPrincipalFindings) (Pava Krausz, 1995, p. 21) below, however, tries to demonstrate the effect of CSR on the financial performance. A study of 21 companies was conducted to see the correlation, if there is any, between CSR and financial performance.TABLE2.1 commissionofAssociation1993Results*Ullmann(1985)PositiveAssociation128NegativeAssociation11NoAssociation84Totals2113From the following the main observation that is visible is that from the 21 one studies conducted more than half, 12 studies showed a positive association between CSR and financial performance, only 1 showed a negative association and 8 showed no correlation between the two. From this table we can conclude that CSR Firms do not perform worse than non-CSR this already goes again Milton Friedmans theory that firms maximizing profits would do better than firms engaged in CSR. As he argues that any action that benefits the company cannot be socially responsible.However we have a different view from a professor of University of California in his article CSR Doesnt Pay, he looks at we have previously discussed in the essay, the correlation between CSR and performance of the corporation. He writes that ThegoodnewsisthatfirmswithsuperiorCSRperformancehavenotperformedanyworsethantheirlessvirtuouscompetitors.Butthedisappointingnewsisthat uncompletehavetheydoneanybetter.Formostfirms,mostofthetime,CSRislargelyirrelevanttotheirfinancialperformance. VogelgivesStarbucksasanexample.Starbucksprovidesanexampleofthelimited magnificenceofCSRtofinancialperformance,hewrites.ThefirmenjoysastrongCSRreputationduetoitsgenerouslaborpoliciesanditscommitmenttoimprovetheearningsandenvironmentalpracticesofcoffeegrowersindevelopingcountries.Yet,sincethebeginningof2008,itsshareshaverecentlydeclinednearly50percent. (Todd, 2009),To modelthatthebusinessenvironmenthasfundamentallychangedand thatweareenteringanewworldinwhichCSRhasbecomecriticaltothesuccessofallorevenmostfirmsismisinformed.Themarkethasmanyvirtues,butreconcilingcorporategoalsandpublicpurposesisunfortunatelynotamongthem. (Todd, 2009)What Vogel says in this example is that CSR is completely irrelevant with the performance of the company and has no effect on the stock performance.Finally Vogel states that there is no karma in business and that good things will not happen to those who do good Managersshouldtrytoactmoreresponsibly.Buttheyshouldnotexpectthemarkettonecessarilyrewardthem-orpunishtheirlessresponsiblecompetitors. (Todd, 2009)Summarizing the part performance and CSR, first the study talked about the positive aspects of the CSR and how it could help the corporations improve. Second part presented a study that demonstrated that companies involved in CSR do not do worse than companies that maximize profits. Finally the third part shows Vogels interpretations of CSR in terms of financial performance and that showed us that there is no correspondence with between the two. (Todd, 2009) endpointSocial changes in society are successful when they consciously and responsibly involved the most significant force. Interaction of political, social and economic subjects, based on the principles of social partnership, ensures stable and gradual development of the state. With the increasing importance of non-financial factors of sustainable development, such as social stability, environmental safety, updated theoretical and practical aspects of social responsibility.Relevance of research associated with the processes of globalization, reinforcing the role of large companies in the economic development. Nation-states are gradually yielding to pressure multinational corporations and economic independence, and social policy. Counter this trend is to be co-ordinated action, ensuring the achievement of indicators of social responsibility, which be with global standards and principles of sustainab le development.Market globalization, the transformation of the national in the world, identifies the need for an economic entity of innovation in engineering, technology, labor and perplexity, based on the use and industry of science and best practices. At the center of all these phenomena is the intellectual capital the quality of the labor force and motivation. The lack of comprehensive scientific developments in the field of modern management, social technologies complicates the interaction of domestic enterprises, government and society. In the implementation of socially responsible policy, the role of corporate governance, ensuring the achievement of social, economic and environmental goals of the enterprise. Science-based decision management problems can provide an enabling social and psychological conditions of the enterprise, to influence the development of relations with stakeholders in a by the bye manner to prevent social tensions, without violating the principles of economic efficiency.Social responsibility is also manifested in the implementation of commitments made at the level of functional units of the organization, especially top management. Develop procedures for social policy, social programs, the performance criteria must comply with the rules and principles of public law. One way of forming objective information about the social impact of the company is to evaluate the effectiveness of non-financial risks, including social. Actual development of common approaches to assessing the effectiveness of the implementation of socially responsible policies. Evaluation of the quality management affects the position of the company in the financial markets, maintaining a conflict-existence of society, sustainable development.(CSR)Vogelsays,ToassumethatthebusinessenvironmenthasfundamentallychangedandthatweareenteringanewworldinwhichCSRhasbecomecriticaltothesuccessofallorevenmostfirmsismisinformed.