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  • Corporate Social Responsibility, CorporateMoral Responsibility, and Systems Thinking:Is There a Difference and the Differenceit Makes

    Patricia H. Werhane

    A volume on leadership would be seriously incomplete without a contribution oncorporate social responsibility (CSR). The essays on CSR in the present work offerinsights that are important in this new century of corporate corruption and moralchallenges. I shall take up the gauntlet by asking us to think more carefully aboutwhat we mean by the term, corporate social responsibility. There is today a vastand growing literature on CSR, illustrated most prominently by the new volume onCSR edited by Steve May, George Cheney and Juliet Roper published by OxfordUniversity Press (2007). But just what do we mean by CSR? Is it sometimes a figleaf to distract us from investigating corporate misconduct? Does the term serve asan umbrella term to cover a number of related corporate relationships and alliances?Or, is in fact the term referring to what I take to be the greatest challenge for compa-nies today: the moral responsibility to create economic, environmental, social andmoral value-addition in an age of distrust and disillusionment about business?

    The Fig Leaf

    Let us begin by tracing some early definitions of CSR. According to Davis andBlomstrom, two of the early thinkers in this field, [corporate] social responsibilityis the obligation of decision-makers to take actions which protect and improve thewelfare of society as a whole, along with their own interests. (Davis and Blom-strom, 1975, 23) A. B. Carroll, often cited in this regard, expands this definition.The social responsibility of business encompasses the economic, legal, ethicaland discretionary expectations that society has of organizations at a given point intime (Carroll, 1979, 500; see also Waddock, 2004, for a thorough summary of thisliterature).

    P.H. WerhaneDePaul University, The University of Virginia, Charlottesville, VA, USAe-mail:[email protected]

    c2007 Patricia H. Werhane. All rights reserved. An earlier version of this paper was publishedin Steven K. May, George Cheney and Juliet Roper (eds.), The Debate over Corporate SocialResponsibility (New York: Oxford University Press, 2007); used with permission.

    G. Flynn (ed.), Leadership and Business Ethics,C Springer Science+Business Media B.V. 2008

    269

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    The problems with the David/Blomstrom/Carroll early definitions1 are twofold.First, there is an almost exclusive focus on business/society relationships, neglectingcorporate relationships to their employees, customers, suppliers, and shareholderswho directly account for and depend on company success or failure. Second, giventhis definition, CSR has been sometimes misidentified with corporate discretionaryresponsibilities to the communities in which companies operate, e.g. philanthropy,charity, or community public relations. Companies who engage in such practicesaim to be considered socially responsible despite what they do commercially inthe marketplace. Enron, for example, was a large donor to the city of Houstonand to a number of religious institutions to which its executives belonged. Health-South and its CEO were, and perhaps still are, the largest donors to city projectsin Birmingham, Alabama. The Rigas family, founders of Adelphia Communication,gave millions of dollars to the city of Coudersport, Pennsylvania, its corporate head-quarters while borrowing money from Adelphia after it was publicly traded. Inevery instance, these gifts were discretionary and covered up or sidetracked what thesecompanies and their executives were doing: lying, cheating, and stealing from theirshareholders and, as a result in Enrons case, from employee pensions. Worse, theygave away what were allegedly corporate profits while running these companies badly.

    Two years ago, the parent company of United Airlines was in bankruptcy anddeclared its pension fund bankrupt as well, thus destroying promised pensions formany of its retired highly paid pilots and managers.2 During this period, United wasone of the largest corporate donors to the Lyric Opera in Chicago. I would argue thatthis kind of generosity is an illustration of CSI, corporate social irresponsibility.Companies do have responsibilities to the communities in which they operate justas ordinary citizens and residents do. But philanthropy and charity are discretionaryoptions, both for individuals and for corporations. A companys primary respon-sibilities are to their employees, customers, suppliers and shareholders and to thecommunities in which they operate. Their primary responsibilities to the latter haveto do with how they affect and are affected by those communities. So, for exam-ple, when a company is engaged in coal mining, it is responsible for the effectsof mining on that landscape, water, and air. United Airlines and the Lyric Operahave little impact on each other. When employees are being laid off and lose theirpensions it is the airlines responsibility, its primary moral responsibility, to addressand redress that set of problems first, because these are issues that have to do withits operations, management, and profitability, the reasons for its being an airline inthe first place. Thus, in the analysis and discussions of CSR, one must take care thatthe requirement focuses on what companies are morally obligated to do, not merelyon discretionary community gifts, particularly when they are used to distract fromthese former moral obligations.

    The Umbrella: CSR and/or CMR

    In the latest literature on CSR, most writers avoid a huge misnomer, that of limitingCSR to discretionary external relationships between companies and society. In thenew thinking, CSR has been expanded from the original Davis/Blomstrom/Carroll

  • Corporate Social Responsibility, Corporate Moral Responsibility, and Systems Thinking 271

    definitions to include the responsibility of a company for the totality of its im-pact . . . (Chandler, 2001 quoted in Stohl, Stohl, and Townsley, 2007, 34) includingcorporate governance, diversity, environmental and legal concerns, social perspec-tives, and global impact. The term CSR may encompass responsibilities to onesprimary stakeholders: employees, customers, suppliers and shareholders, as wellas to almost any other individual, institution, culture, or society to which a com-pany may affect or be affected by, obligations to the natural environment and theecosystem, relationships with the public sector, governments, and NGOs, and itsglobal impact, broadly construed. Thus, CSR turns into an umbrella term to coveralmost every possible obligation, concern, effect, or responsibility that an organi-zation might encounter including externalities resulting from corporate behavior orneglect of behavior.

    As part of the extensive coverage on CSR, CSR is often linked to or identifiedwith corporate moral responsibility (CMR). In the recent past, however, these two,CSR and CMR, have been somewhat distinguished from each other, in that theCSR focus is primarily on the relationships between business and society, whilethe former focuses primarily on shareholder and other more closely tied stakeholderrelationships, as the Davis/Blomstrom/Carroll quotations illustrate. Initially, CSRreferred to corporate community responsibilities, in the primarily external relation-ships between a company and society. Corporate moral responsibility, referred toobligations a firm has as a result of its existence, its primary aims and goals, thescope and nature of operations, and its various interactions with those who affect,and are affected by, the organization. Sometimes, moral responsibility has beeninterpreted primarily as fiduciary responsibilities to shareholders, the providers ofcapital to the firm (Friedman, 1970). More often, these obligations are formulatedas obligations a company should have to those whom it affects and who make adifference in the company: its primary stakeholders, one of which, of course, areits shareholders, as well as its employees and managers, customers, and suppliers:and secondarily its obligations to communities in which it operates. Note that theseare normative obligations they spell out what a company should do, how it shouldrespect its stakeholders who create value-addition, how it should not create harm tocommunities or to the environment, and how and in what ways it should, or is notobliged to, promote further social, economic and environmental well-being.

    There is nothing wrong with embracing CMR as part of CSR, so long as one isaware of these distinctions, and so long as one does not confuse descriptions of whatcompanies actually do with what companies should do, all things considered. Thefear of the conflation is twofold, however: the fear that by adapting a CSR stancewe will expect too much of corporations, or that in focusing primarily on CMR, wewill neglect societal effects and obligations. I shall say more about this.

    If companies have all the responsibilities spelled out above: to stakeholders, tothe environment, and to society, and I am not going to challenge that assumptionalthough I shall qualify it, I would suggest that these responsibilities are of severalvarieties. First, there are legal responsibilities as spelled out by the constitution andlaws of the countries in which companies operate. Most authors are careful notto confuse CSR with corporate legal obligations as prescribed by law. Secondly,there are fiduciary responsibilities to shareholders for a return on their investment,

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    to employees and suppliers for fair treatment and adequate remuneration, and to cus-tomers to deliver what they paid for. Interestingly, in many writings, fiduciary obli-gations to shareholders are sometimes weighed as less important than obligationsto other stakeho