Corporate social responsibility (CSR) is when a corporation exceeds statutory business standards (Johnson and Scholes 2008). CSR policies are relevant because they state what a company intends to achieve, in addition, to its statutory obligations. A corporation has to comply with legal standards such as employment contracts. However, a company can exceed those principles if it chooses to pay a ‘living wage’ rather than the minimum wage (Bloomer 2014).
Introduction to the Critical Discussion
The discussion will examine a traditional criticism of corporate social responsibility through the work of Friedman. This is a view which proponents of CSR will need to refute. The essay will then discuss how social and environmental responsibility can be reconciled, with profitability, using the work of Porter. The example of Hewlett Packard is discussed at length. This is because its policies emphasise how a multi-national company can achieve both environmental and social responsibility together with corporate profitability. The work of Handy is then considered. This argues that companies should have corporate objectives which are broader than just profitability and consider the purpose of the business.
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Friedman’s View of Corporate Social Responsibility
Friedman’s view is a non-interventionist or laissez-faire vision of commerce. In his view business should aim to earn money while complying with “the basic rules of the society” such as paying taxes (Friedman 1970:1). It assumes that consumers are sovereign and are able to significantly influence corporate decision-making. This view of commercial organisations underplays the significance of consumer market failure. It is assumed that consumers can take their business elsewhere as Friedman believed that consumers can transfer their business to other producers (Friedman 1970). However, this is not possible if the consumer is unable to pay for another competitor firm’s products. This is the case if a consumer were unable to pay for the safety features, offered by a car manufacturer such as Volvo, as discussed below. To summarise, socially responsible polices, can be seen as unrealistic if consumers are unwilling to pay for them. Friedman argued that socially responsible business policies, such as promoting equality, can harm company performance. For example, Ben and Jerry’s adopted a payment scheme where the highest paid employee could only earn “no more than five times the income of the lowest paid firm employee” (Barney and Hesterly 2010:7). This payment scheme made it difficult to recruit senior managerial talent to make sure that the company grew and remained profitable (Barney and Hesterly 2010).
A More Progressive View of Corporate Social Responsibility
There is an increasingly an expectation that companies will contribute to society to a greater extent than when Friedman was writing in the early 1970’s. Companies operate in a social environment as well as an economic environment (Grant 2008).