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Corporate Social Responsibility
By: Prof. S. Ranjan Mohapatra *
(PRWEB) January 10, 2004
We can begin by recoginizing that all organizations exist in complex relationship with elements in their external environment. Against this action framework corporate social relationship (CSR) can be defined as, ÂÂan obligation of the organization to act in ways that serve both its own interests and the interest of its many external publicÂÂ.
In the west, when large industrial fortunes were accumulated in the 19th century, the unlimited pursuit of wealth came under attack form the Social Workers philanthropies and trade unions. Andrew Carnegie, then AmericaÂÂs wealthiest man made a case for wealth by giving a modern interpretation of ancient principle of TRUSTEESHIP. In an article ÂÂWealthÂÂ (1989), Carnegie argued, as no system can maintain. Complete equality and without private property, no advancement in civililsation is possible, hence capitalists received more than they sowed. Therefore, the rich owed it to society to return the surplus wealth, which was not their due, by using it for general upliftment and progress. The wealth after oneÂÂs moderate needs were met should be held in trust for society and used for the benefit of mankind as a whole. According to Carnegie, the Duty of a man with wealth was, ÂÂto set an example of modest living shunning display of extravaganceÂÂ, and to act as a ÂÂmere trustee and agent for his poor brethren, bringing to their service his superior wisdom, experience and ability to administerÂÂ.
In the Western world, organisations fulfill their social responsibilities in many ways. For example Helen Olson works at Save the Children-Federation. She has traveled to Honduras and to Dominican Republic in her capacity as financial adviser. Eric Grey works in a programme to train physically disabled high-school students at the Rusk Institute for Rehabilitation Medicine at New York University Medical Center. Marv Silvern works with ninth and tenth graders as an assistant director of the New York City Comprehensive Math and Science Program. Its objective is to train minority students in science and mathematics: prepare them for engineering studies. Norman Steele is an adjunct professor of international marketing at Branch Collage in New York. He is working on a plan for an executive MBA program and heads a program that places students in jobs related to their business studies.
The common element is that each of these people is an IBM employee working in the companyÂÂs ÂÂcommunity-serviceÂÂ program sponsored by IBM.
IBM spent $ 20 million in 1981 on this program, which ones employees to other institutions serving the public interest.
The typical loan is for one year and IBM pays the employeeÂÂs full salary.
The person on leave is guaranteed a job at the same level upon return.
What are the benefits, for which the companies support such expensive Social Service Leave Programmes? The persons involved in similar Programmes supported by XEROX CORPORATION better say the answers.
ÂÂI came back super-charged-up and proud of the company. I think it helped my careerÂÂ. Xerox Employee.
ÂÂThe hope and expectation is that we get back a better employee-on better equipped at problem solving and a lot of other thingsÂÂ ÂÂ Xerox Vice President.
ÂÂMore companies are going to have to be this, because you have to put something back into the communities; you canÂÂt just extract profits. And this is not bad for business eitherÂÂ. Xerox Manager.
Both IBM and Xerox can be considered as acting in socially responsible ways by making paid social service leaves available to their employees. I hope the Indian Corporate houses are reading this. Other examples are: Hueblein, the marketer of Smirnoff Vodka and Kentucky Fried Chicken (KFC), announced in 1982 that it would spend $ 180 + million over the next five years to create jobs and promote the black business community.
Mobil, the giant oil firm, regularly sponsors public-service advertisements in popular magazines. One subject is alcoholism. Along with an appeal to support the National Council on Alcoholism.
Remember that the obligation to act in a socially responsible fashion is not reserved for business alone. Every organization, public or private, has a basic responsibility to protect and enhance the public welfare. Labour unions, universities, hospitals, government agencies and others are no more exempted form social responsibility than are business firms such as General Foods, General Motors, Pepsi, HLL, ITC or Hero Honda. A common obligation to act in ethical and socially responsible ways is shared by all.
Areas of Social Responsibilities
There are major areas of social responsibility that apply to business firms and other types of organisations. These include ecology and environmental quality, consumerism, corporate giving, minorities and disadvantaged persons, labour relations, stockholder relations, and economic activities.
The table conveys a widening circle of corporate social responsibility that for a business firm, includes employees, shareholders, actual and potential customers, and eventually the general citizenry, or public at large.
Possible Areas of Corporate Social Responsibility
· Ecology & Environment
· Consumerism
· Community Needs
Use of business expertise on community problems
Assistance for urban slums and rural communities in an integrated manner or for specific activities like women and child health, education, Sanitation etc.
· Business Giving.
Support for artistic activities
Support for Education etc.
· Minorities and disadvantaged persons.
· Labour Relations.
Among these many areas of social responsibility, two specific points must be considered:
a) Relationship between social responsibility and business profit.
b) Social responsibility and managerial ethics.
Social Responsibility and Business Profit
ÂÂBusiness givingÂÂ, or corporate philanthropy in the public service, falls within the arena of social responsibility. The American Express case shows how a company can benefit from socially responsible acts, at the same time the public interest is served. The company used charitable giving as a marketing tool. It tied a creative marketing program to a local community need for outside assistance to the arts. From October 1 to November 30,1982, the American Express Company donated to the Atlanta Arts Alliance the following amounts based on consumer usage of Amex services in 15 surrounding countries.
· 5 Cents for each time an Amex charge card was used to travelerÂÂs check purchased.
· $ 2 for each time travel arrangements in an amount exceeding $ 500 was booked by Amex travel services.
Most typically you hear the bad side of corporate social responsibility (CSR) that is, you hear about the dumping of dangerous industrial waste, marketing of unsafe products, and over pricing. It is easy to develop the impression that the quest for profits is incompatible with public service and social responsibility. But there is no reason why profits and social responsibility canÂÂt go hand in had as seen above.
Social Responsibility and Managerial Ethics
It may be easy for managers to get so wrapped up in their organizationÂÂs pursuit of a social caused that personal ethics become compromised in the process. As per a recent survey in USA, 15 percent of respondents felt they had been coerced into volunteering. As the director of the National Committee for Responsive Philanthropy, a watchdog group, comments: ÂÂCompanies can apply the pressure more than anyone, since they have power over your job and future. It hardly makes sense for corporate social responsibility to be pursued at the expense of responsible and ethical action toward employees. Somewhere in between such conflicting forces, good managers will make the difference.
Levels of Social Responsibility
Organizations respond to their external social obligations respond to their external social obligations with varying degrees of commitment. Three levels or stages of socially responsible corporate behavior can be identified which are,
· Social obligation; corporate behavior at this level conforms only to legal requirements and competitive market pressures.
· Social responsibility corporate behavior at this level is congruent with prevailing norms, values and expectations of society.
· Social responsiveness; corporate behaviour at this level takes preventive action to avoid adverse social impacts from company activities and even anticipates or takes the lead in future movement beyond current expectations.
Implied in the framework is a desirable progression of corporate behaviour from social obligation on the extreme to social responsiveness at the other.
Arguments ÂÂForÂÂ Social Responsibility
Throughout our discussion so far runs an underlying theme that businesses and other organizations should act in socially responsive fashion. There are really two sides to this argument. Milton Friedman, widely recognized advocate of classic free-market economics, argues against social responsibility. He contends ÂÂfew trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possibleÂÂ. Paul Samuelson, another distinguished economist, disagrees. He states that ÂÂa large corporation these days not only may engage in social responsibility, it had damn well better try to do soÂÂ.
The Benefits Corporate Social Responsibility
Major arguments supporting the assumption of social responsibility by business include.
· Public expectations: Public opinion in support of business social involvement runs deep; productivity goals are expected to co-exist with quality-of-life goals.
· Long-run viability: If business fails to act, other groups will eventually step in to assume the responsibilities and the power that goes with them.
· Public image: Socially responsible behaviors improve the public image of business.
· Better environment: To the extent business can improve the environment, the environment will be more conductive to future business prosperity.
· An avoidance of government regulation: Government regulation of business is costly and restrictive; the more socially responsible business is, the less government regulation can be expected.
· Balance of responsibility and power: Because business has so much economics power, its sense of social responsibility should be equally large.
· Let business try other institutions have failed in handling many social problems; it makes sense to let business try to solve them.
· Business has the resources: There is a pool of expertise and capital in business that can be used in social service; it is logical to give it a try.
· Problems can become profits: If the innovative capability of business can be applied to social problems, many might be handled profitably in a traditional business sense.
· Prevention is better than cure: Any delays in addressing the social problems of today may magnify problems in the future.
· Stockholder interests: In almost all the respect, business can prosper and benefit from an improved environment, socially responsive behavior is in the best long-run interest of the shareholder.
After understanding the intricate relationships between CSR and the economic interests of a corporate entity, it can be said with conviction that a Socially Responsible Company does more good to its economic pursuits than the society. And the day is not far off, when Social Audits and Social Reporting will be mandatory.
(The Author is a management consultant and management trainer, who heads, VISION Consulting and VISION Foundation for Development Management.)
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