Corporate Social Responsibility (CSR) is a strategy used by businesses and other institutions that have evolved to the point where they can benefit society. The more successful a corporation is, the more responsibility it bears for upholding standards of ethical behavior. First and foremost, firms are accountable to their shareholders and stakeholders. This may be the provision of information, racial and gender equity, non-discrimination on social grounds, etc. The second is the philanthropic responsibility of contributing to society. Third, the company can take care of the environment and raise environmental standards.
In CSR theory, there are two points of view on who the business is primarily responsible to – to shareholders or to stakeholders. Milton Friedman believed that it was important to maximize profits because shareholders mattered more to the company (Jahn and Rolf 41). Edward Freeman and other stakeholder theorists believe that the only way to bring profit to the shareholder is to pay attention to stakeholders’ needs and pains (Jahn and Rolf 45). Therefore, in modern business, responsibility to stakeholders has become more important in the decision-making process.
The nature of corporations is that they are dependent on their shareholders and stakeholders. At the same time, that is, they are forced to maneuver between the need to make a profit at any cost and to benefit their customers. Large firms are changing the rules of the game in the free market and causing damage to the environment and society. This imposes on them a certain social responsibility to other people. The implications of a company’s ethical responsibilities can be various – economic, social, ecological, philanthropic, etc. Today’s stakeholders are increasingly demanding ethical behavior from corporations, even at the cost of forgoing additional profits. However, it is hard to praise or blame corporations morally while understanding their shareholder vs. stakeholder conflict.
There are various approaches to implementing CSR – normative, instrumental, and descriptive. Regulatory responsibility involves legitimizing corporate behavior for each member of the company, which is not practical (Perrault and Kelly 240). The instrumental approach assumes that the long-term maximization of social welfare leads to economic benefits (Perrault and Kelly 240). Descriptive CSR emphasizes the implementation of various social initiatives and projects that are not directly related to corporate goals (Perrault and Kelly 241). All these approaches can be combined and used simultaneously to varying degrees, improving corporate performance.
In drawing up a CSR strategy, corporations can rely situationally on the main ethical theories – deontology, utilitarianism, rights, and virtues. Deontological theory obliges each person to observe ethical standards in front of other people, although it does not provide a logical or rational explanation for the duties of a person (Dathe et al. 96). Utilitarianism considers the most ethical choices to be those that benefit the greatest number of people (Dathe et al. 97). The disadvantage of the utilitarian theory is that one can only find out after the fact whether a given a choice has brought the greatest benefit. In rights-based ethical theories, rights take precedence, and compliance with them is always ethically correct (Dathe et al. 99). The ethical theory of virtue evaluates a person’s reputation, not just their act (Dathe et al. 100). The disadvantage of this theory is that it can be based on a previously established moral character, despite the fact that a person has changed.
Works Cited
Jahn, Johannes, and Rolf Brühl. “How Friedman’s view on individual freedom relates to stakeholder theory and social contract theory.” Journal of Business Ethics 153.1 (2018): 41-52.
Perrault, Elise, and Kelly Shaver. “A stakeholders’ attributions approach to integrating normative, descriptive, and instrumental corporate social responsibility.” Business and Society Review 126.3 (2021): 239-261.
Dathe, Tracy, et al. “Ethical Theories.” Corporate Social Responsibility (CSR), Sustainability and Environmental Social Governance (ESG). Springer, Cham, 2022. 95-106.