The Business Case for Csr

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The concept of Corporate Social Responsibility is a relatively new in the management field and there is no single definition of it since everyone’s interpretation of the term is different. “Corporate Social Responsibility means something, but not always the same thing to everybody.” (Votaw, 1972, p.25) and from my understanding of the concept, CSR to me is “The voluntary business activities within the boundary of law that contributes to the wider community for a more sustainable environment”. Since everyone has a unique interpretation of CSR, the range of relevant CSR practices across businesses has been quite diverse as there is no such thing as features of CSR (Marcel van Marrewijk, 2003). Rising environmental and social concerns in recent years have leaded a large number of managers to focus on the importance of the contemporary concept of corporate social responsibility. “91 percent of executives believe that corporate responsibility creates shareholder value, or that 80 percent say that non-financial indicators are essential to characterize future financial performance.” (Blowfield and Murray, 2008, p.131; Figures from Ethical Corporation and Nima Hunter Inc, 2003) Therefore they generally agree with Davis that “A better society produces a better environment for business” (1973, p.313). Many researchers have shown that CSR can bring competitive advantages to businesses and suggested that in the long- run it can generate positive business performances (Blowfield and Murray, 2008). If that is the case, why isn’t every business doing it? Although the number of supporters of the business case for CSR is large, but so do the opposite view. Hence in this essay, I will explore the arguments and evidences both for and against the business case for CSR to provide a more solid foundation for my thesis that “Corporate social responsibility contributes to businesses”.

The basis of the debate for CSR has been constructed by two famous academics, Milton Friedman and Henry Mintzberg. The former argued that businesses should consider the maximization of shareholders’ values as their main objective whereas the latter supported the business case for CSR.

Milton Friedman in 1970 erected the first significant argument against the implication of CSR. “The social responsibility for business is to increase its profits” (Friedman 1970). He argued that corporate executives do not have the right to spend the shareholders’ money as they are just an agent acting on behalf of the investors. In addition, managers were hired for their expertise in the particular business field, so they may not necessarily know how and what to focus on, regarding social responsibilities. Furthermore, he believed that CSR prevents the society in deciding the public interests as mangers have taken on their role when practicing the social responsibilities which they thought were appropriate (Friedman 1970). Therefore he viewed CSR as undemocratic.

An opposite view of the argument was from Henry Mintzberg who provided 3 main arguments for CSR (Mintzberg 1983). Firstly, it is an enlightened self-interest which the business itself might actually benefit from acting responsibly. The second argument, the Sound Investment Theory, was developed most completely and accurately by E. Bowman. The denial of the conflict of interests between corporate social responsibility and the investors has been raised as Bowman believed that the share price of a company is strongly influenced by its social behavior (1973). The third argument is Avoiding Interference. Businesses operating in the community receive pressures from different groups in the society, e.g. the political groups, regulators and NGOs. Therefore the emphasis on CSR is a possible way to avoid corporate governance from acting against them. As a summary of his argument, three cases for CSR can be applied: the Moral case, relating to enlightened self-interest; Rational case, to minimize the restrictions that society...
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