Corporate Social Responsibility and Business Law

Topics: Corporate social responsibility, Corporation, Business ethics Pages: 37 (12062 words) Published: February 14, 2013
Our assigned topic deals with a phenomenon that has taken the corporate world by storm rather recently, particularly in Pakistan. It entails the dilemma that every corporation faces when they have to make decisions regarding the firm’s profitability and their corporation’s social responsibility. The term "corporate social responsibility" came into common use in the late 1960s and early 1970s after many multinational corporations formed the term stakeholder, meaning those on whom an organization's activities have an impact. It was used to describe corporate owners beyond shareholders.

The field of corporate social responsibility (CSR) has developed exponentially in the last decade. Nevertheless, there remains a lingering debate about the legitimacy and value of corporate reaction to CSR concerns. There are different views of the function of the firm in society and disagreement as to whether wealth maximization should be the sole goal of a corporation.

An escalating number of shareholders, analysts, regulators, activists, labor unions, employees, community organizations, and news media are asking companies to be accountable for an ever-changing set of CSR issues. There is rising demand for transparency and growing expectations that corporations measure, report, and continuously improve their social, environmental, and economic performance.

According to Business for Social Responsibility (BSR), corporate social responsibility is defined as “achieving commercial success in ways that honor ethical values and respect people, communities, and the natural environment.”

Each company is at variance in how it implements corporate social responsibility, if it does so at all. The differences depend on such factors as any particular company’s size, the particular industry involved, the firm’s business culture, stakeholder demands, and how historically progressive the company is in engaging CSR. Some companies focus on a single area, which is regarded as the most important for them or where they have the highest impact or vulnerability—human rights or the environment, for example—while there are others who endeavor to incorporate CSR in each and every one facet of their operations. For successful execution, it is fundamental that the CSR principles are part of the corporations’ values and strategic planning, and that the management and employees, both are committed to them. Furthermore, it is important that the CSR strategy is aligned with the company’s specific corporate objectives and core competencies.

As CSR comes into contact with many of the problems conventionally addressed by government, like human rights and community investing, there is strong censure that societal problems are best solved by freely elected government bodies as the resources of a corporation are poorly matched for addressing those social problems, and therefore, it is argued, they should not be misallocated.

According to Friedman (1970), in a free society, “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” The idea is that the state should address social problems, supported by the argument that an executive, by taking money and resources that would otherwise go to owners, employees, and costumers, and allocating them according to the will of the minority, and will fail to serve the interests of her or his principal. In this way, the executive imposes a tax and spends the proceeds for “social” purposes, which is insupportable, since she or he has neither the skills nor the jurisdiction to do so.

On the other hand, there are many demands by others for corporate adoption of the CSR principles. Although the government is chiefly responsible for addressing those issues, the contribution of private firms...
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