Corporate Social Responsibility: Corporations Can Never Be Moral Entities

The issue of corporate social responsibility (CSR) is one of the most discussed topics in the business world nowadays. This is due to the fact that the role of business in the development of society significantly increased. Many companies understood that it is impossible to create a successful business, functioning in a confined space. Therefore, the integration of the principles of corporate social responsibility in business development strategy becomes a feature of all leading companies. The question of whether the corporation can be moral entities and act as moral organizations is mixed. On this occasion, there are several opinions. The very nature of the business rejects obligation to society and underlines that Corporations exist to provide returns for shareholders. Milton Friedman and others believe that corporations are only responsible to their shareholders and the obligation to offer them a profit. They have not taken social responsibility to society as a whole, although they are obliged to obey the law. (Jeanne M. Logsdon, Donna J. Wood 2005) Others, especially scientists of religious and cultural traditions, prove that the goal of economy is serving human beings. (Robert Howell 2010) That is why all economic entities contain social obligations. In addition, CSR supporters point out that CSR considerably improves enduring corporate success because it lessens risks and offers a host many prospective benefits such as improved reputation of a brand and workers engagement. To answer the question whether corporations voluntarily apply ethical principles in business we are to study issues that touch upon ethical theories and CSR motives.

Among the first who raised the question of the social responsibility of business was a popular writer Carnegie. He formulated two basic principles of the social responsibility concept. The first is the principle of charity; the second is the principle of service. In the most general form, the concept of Corporate Social Responsibility is revealed as follows: business should not only care about profits and taxes, which are distributed by the state to solve social problems, but also share the responsibility for social injustice, economic inequality and environmental problems with the community, participate in social and economic adaptation of vulnerable people and in various programs of the environmental protection. (Anne Colby, Thomas Ehrlich 2011)

Then there was a wide range of approaches to the interpretation and evaluation of the concept of social responsible business. On the one hand, it is a theory of corporate altruism , which states that corporations are required to make a significant contribution to improve the quality of people’s lives, and on the other – the theory of corporate egotism (Martin Parker and Gordon Pearson 2005) , which states that the business is responsible only for the increase of income of its shareholders. Between these two extremes there are many intermediate theories. Among them, we are to underline the theory of socially responsible behavior, based on the desire to improve a business status through the implementation of the charitable and social programs (William H. Shaw, Vincent Barry 2012).

In the scientific literature, the concept of social responsibility of business is treated as voluntary contributions directly related to the core business of the company, and beyond a certain minimum statutory requirements, the development of society in the social, economic and environmental spheres. (Wayne Visser 2011) Some authors see it as responsibilities of business to act in accordance with the decisions that are more or less beyond the immediate economic interests of corporations. (Sandra Waddock 2004) Others consider social responsibility as urgent need for corporations and other associations to carry out in the framework of the existing economic system operations that would meet the interests and the needs of different social circles and organizations. ( Agenda Francis Weyzig 2008)

Firstly, moral problems of business life are varied and it is hardly possible to solve them on the basis of the positions of only one direction. In today’s multicultural society in contrast to the traditional culture, where only one ethical system dominated, there are different ethical evaluations of the same phenomena in business. Robert Howell underlines the multicultural theory and insists that ethical values are different depending on race, culture, education and so on. That is why it is hard to apply one universal ethical standard in business.

Traditional ethical theorists such as Aristotle and Kant primarily focus on human-human relations. Kant relied on the notion of duty. He pointed that “a practical reason – the conscience, directs our actions by maxims (situational motivation) and imperatives (generally valid rules).” (Robert Howell 2010). That can be applied to the necessity of corporations to draw attention to the issues of CSR, because of the duty. Here one more question appears: “Who sets and who is responsible for those regulations?” Robert Howell in “Choosing Ethical Theories…” refers to Schema who distinctly described standards and sets of special rules that should be applied in each corporation as professional rules. By means of these principles each organization can build its work based on primary moral concepts or principles.

However, some critics believe such companies as British American Tobacco (BAT) , the oil giant BP ( well- known for its prominent advertising campaigns in the environmental aspects of its activities ), and McDonald’s implement CSR programs to distract the public from the ethical issues involved in their core activities. They argue that some corporations start CSR programs for the commercial benefits they receive by increasing their reputation in the eyes of the public or the government. They believe that corporations that exist solely for the sake of profit maximization may not act in the interests of society as a whole (McKibben, Bill 2006).

Another problem is that companies, claiming that they adhere to the concept of CSR and sustainable development, at the same time participate in malicious business practices. For example, in the 1970s the Association of McDonald’s Corporation with the Ronald McDonald House was viewed as CSR and developed relationships. Recently, when the concept of CSR became more popular, the company stepped up its CSR programs related to personnel, the environment and other issues. (Robert Howell 2010) However, if to compare McDonald’s restaurants with the Morris & Steel ones one can fairly argue that workers of McDonald’s around the world have lower wages and working conditions and that if a person often eats in McDonald’s, his/her diet is high in fat and other substances , which greatly increases the risk of heart disease . Similarly, the company Royal Dutch Shell conducts widely reported CSR policies and was the first that used the system with the triple bottom line reporting, but this did not prevent a scandal in 2004 in respect of a false report on oil – an event which did serious damage to its reputation and led to charges of hypocrisy. Since then, the fund Shell Foundation took part in many charity projects around the world. Critics are concerned about hypocrisy and insincerity of corporations and generally believe that to create a socially responsible business it is better to conduct mandatory state and international regulation than to wait for voluntary measures.

Companies often start thinking about Corporate Social Responsibility under the following incentives:

1. Ethical consumerism

Ethical consumption growth in popularity over the past two decades may be associated with the expansion of CSR practices. With the growth of the world population mankind starts to face a growing pressure that relates to the fast limitation of natural resources required to meet rising consumer demand (Grace and Cohen 2010). In many developing countries, industrialization is expanding as a result of the development of technology and globalization. Consumers can learn more about the environmental and social aspects of their daily consumer decisions and begin to make decisions about buying associated with their environmental and ethical preferences.

2. Globalization and market forces

Corporations achieve growth in the course of globalization, but they face new challenges that limit their growth and potential profit. Government regulation, tariffs, environmental restrictions, and changing standards of exploitation of labor, are problems that can cost organizations millions of dollars. Some view ethical issues as simply a costly hindrance. Some companies use the technique of CSR as a strategic tactic to gain public support for their presence in global markets, helping them to maintain a competitive advantage by using their social contributions for the distribution of advertising on a subconscious level (Jeanne M. Logsdon, Donna J. Wood 2005).

3. Public awareness and education

The role of stakeholders in corporate work changes. Shareholders and investors by investing into social responsibility put pressure on corporations, urging them to behave responsibly. Non-governmental organizations also play an important role, using the power of the media and the Internet to improve their control and collective activism in corporate behavior. Through education and dialogue a role in ensuring community responsibility for their actions grows (William H. Shaw, Vincent Barry 2012).

4. Training in ethics

The introduction of ethics trainings in corporations, often in accordance with state requirements, is another motive associated with changes in behavior and culture of corporations. The purpose of this training is to help employees make ethical decisions when the answers are not clear. Tallberg believes that the inherent ability of a person is to cheat and manipulate. This requires studying the normative values ​​and rules of human behavior (Wayne Visser 2011).

The most direct benefit is reducing the likelihood of “dirty hands » (Grace and Cohen 2005), fines and damage of reputation in connection with the violation of laws and moral norms. Organizations also see secondary benefits in enhancing employee loyalty and pride in the organization. Companies are increasingly interested in the processes that will help demonstrate their policies and activities in the field of CSR.

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5. Legislation and regulation

Another motive for CSR is the role of independent mediators, particularly the government, to ensure the prevention of damage to the universal application of corporate social good, including people and the environment. Critics of CSR, such as Robert Reich, argue that the government should identify the social responsibility through legislation and regulation that will allow businesses to behave responsibly. Regulation questions associated with government raise several issues. Regulation alone cannot comprehensively cover every aspect of the corporation. This leads to burdensome legal processes relating to the interpretation and controversial gray areas. General Electric is an example of a corporation that failed to clean up the Hudson River after the emission of organic pollutants. The company continues to insist in the trial on the distribution of responsibilities. (Sandra Waddock 2004). The second question is the financial burden that regulation may impose on the national economy. Critics of CSR also point out that organizations pay taxes to the state in order to ensure there is no negative impact of their activities on society and the environment.

6. Crises and their impact

Most companies draw attention to the issues of CSR after some crisis that happens because of their ineffective management. One of such examples include toxic paints, used by a giant toy manufacturer Mattel, which required a recall of millions of toys around the world and forced the company to introduce new risk management processes and quality control. Another example: the company Magellan Metals in the West Australian town of Esperance suffered a major responsibility for the pollution, which led to the deaths of thousands of birds in this area. The company was forced to cease operations immediately and work with independent regulatory bodies for cleaning.

Conclusion

Ethical business standards are the subject of growing interest on the part of managers and consumers. Companies pay a lot of attention to ethical behavior in all aspects of the work in order to avoid negative publicity, loss of goodwill both within government and in business circles. For decision-making, appropriate ethical standards organizations create codes of ethics that set the values ​​and principles of conduct needed to guide decision-making. Nevertheless, the ethical vision of CSR can be described as vague and limited. Ethical business standards narrow the area of ​​ companies CSR by means of making them comply with certain rules, however, do not stimulate business actively, and voluntarily participate in solving the problems of society. Summing all abovementioned, we conclude that corporations can never be moral entities.