There are several business concepts of Corporate Social Responsibility (CSR), Baron reflects on two. The first is Milton Friedman’s Profit Maximization. Friedman’s views are based on the basic economic principle that the role of business within society is to “generate well-being through economic efficiencies” and efficiencies are created when markets are competitive. Building on his views of the role of business, Friedman’s formation of CSR is “to conduct business in accordance with the owner’s desires, which generally will be to make as much money as possible while conforming to the basic rules of society.” Friedman is very clear in asserting that profit maximization is the priority and that calls or attempts to broaden the objectives of businesses to other than profit maximization “will weaken the free enterprise system and the well-being that flows from it.” (Baron, 2010, P 622)
In contrast with Friedman’s perspective is the “Statement on Corporate Responsibility”, issued in 1981 by a task force of the Business Roundtable. The Roundtable was created to “examine public issues that affect the economy and develop positions which seek to reflect sound economic and social principles.” The statement released reflects the views of a stakeholder and states that business is “to serve the public interest as well as private profit”. The belief is that by giving “consideration to balancing the legitimate claims of all its constituents, a corporation will best serve the interest of the shareholder”. The Roundtable identifies seven stakeholders: customers, employees, financiers, suppliers, communities, society at large, and shareholders. The Roundtable wants all sides to be heard but does not want stakeholders making managerial decisions. While the Roundtable wants to consider all stakeholder concerns, it also understands that it is impossible to “assure that all will be satisfied because of the potential for competing agendas. (Baron, 2010, P 629)
In Friedman’s view, the role of government is to “impose taxes, determine expenditures, interpret law and mediate disputes.” When “social cost” creates market imperfections, then the role of government is to identify and protect entitlements. Government may use “market-like mechanisms”, such as cap and trade systems, to counter high transaction cost, but those types of functions should be reserved for government and held in check by a system of checks and balances. For Friedman, requests for increased scope of CSR means that the “expenditure in question” was not agreed upon by the majority and so not enacted by legislation. In simpler terms, calls for expanded CSR, is an undemocratic process. (Baron, 2010, P 623)
The role of the individual in CSR is a simple one and is at the roots of CSR. Because a corporation is comprised of individuals, those individuals create the socially responsible culture. Both individual and corporate social responsibility is voluntary; it is about going above and beyond what is mandated by legal responsibility. Therefore, the individual must not only behave in ethically and socially responsible ways, but, as a stakeholder, he must also advocate for corporate social responsibility.
About the Author
Jerry Landers is the Vice President of Business Development for Aspire Indiana. While the beliefs and opinions expressed in this blog are solely those of Mr. Landers you can learn more about community mental health and how it intersects with business and media at http://www.facebook.com/AspireIndiana
Baron, D. (2010), Business and Its Environment (6th ed). Upper Saddle River, NJ: Prentice Hall. P. 619-641