Corporate Social Responsability

Corporate Social Responsability

1. ECONOMIC

   • ShareHolder Value Theory or Fiduciary Capitalism
     • OVERVIEW
       • This theory deals mainly with the relation of the maximization of the ulility of the shareholders.In a famous article published in the New York Times Magazine in 1970, Friedman repeated and completed this approach by saying: ‘the only one responsibility of business towards the society is the maximization of profits to the shareholders, within the legal framework and the ethical custom of the country’ (1970).
     • HISTORICAL BACKGROUND
       • In the 1960s and 1970s a big debate took place between Friedman and others who defended the business enterprise as being responsible only for making as much profit as possible, always in compliance with the law, and in contrast, scholars including Davis (1960, 1973), Walton (1967), and Andrews (1971) who argued that corporations had much power and power entails responsibility, therefore, corporations had responsibilities beyond the economic and legal.
         • Friedman was clear about his position and theory on the concept of social responsibility in the 60s, emphasizing that companies face problems such as the contamination of society. Theodor Levitt editor of Harvard Business commented that corporate welfare makes sense if you have good economic sense.
           • Today, it is commonly accepted that under certain conditions the satisfaction of social interests contributes to maximizing shareholder value and most large companies pay attention to CSR, particularly in considering the interests of people with a stake in the firm (stakeholders)
   • CONCEPTUAL BASES
     • Milton Friedman, in his New York Times Magazine article, made several references to values such as: ‘free society’, ‘free‐enterprise’, ‘private‐property system’, and, before stating that the only responsibility of business is to increase profits, he establishes as a condition: ‘In a free society...’ He comments that those who disseminate a business idea as simply profits preach pure socialism. The value theory of the shareholder contains several philosophical assumptions, these ideas came to the USA and largely served as an economic and commercial framework along with other ideas of Adam Smith
   • STRENGHTS AND WEAKNESS
     • Those who support shareholder theory usually emphasize the efficiency of this model for creating wealth. Managing and governing a company towards maximization of shareholder value is not only to enrich the shareholders, but also to achieve a better economic performance of the whole system. For Jensen (2000), two centuries of experience strongly support this thesis. The above‐mentioned conditions provide incentives for innovation, cutting costs and prices, producing products with economic added value, and having capital for future investments. In practice, shareholder maximization value frequently reflects short‐term profits, such as a reduction in personnel expenses, rather than long‐term profitability.

2. POLITICAL

   • Corporate Citizenship Theory
     • OVERVIEW
       • For decades, business leaders have been involved in all activity related to the welfare of society. To be a good corporate citizen is to be related to the philanthropic responsibility that is based on the fact that companies are involved in social activities not because the law asks them but for an ethical sense. However, since the 1990s and even earlier this concept has expanded from its traditional meaning, and the language of corporate citizenship (CC) has frequently been used as equivalent to CSR (Wood and Logsdon, 2002, and Matten et al., 2003, among others)
     • HISTORICAL BACKGROUND
       • The term ‘corporate citizenship’ was introduced in the 1980s into the business and society relationship mainly through practitioners (Altman and Vidaver‐Cohen, 2000; Windsor, 2001a). However, the idea of the firm as citizen had already been floated by several pioneers in the CSR field, including McGuire (1963) and Davis (1973).In the late 1980s, a respected scholar in the business and society field explained that ‘good (corporate) citizenship...as reflected in company assistance to community well‐being through its financial and non‐ monetary contribution was deemed for many years to be the quintessence of socially responsible business behavior’ (Epstein, 1989: 586).In the 1990s the concept of ‘corporate citizenship’ attracted positive business attention (e.g. Alperson, 1995; McIntosh et al., 1998).

3. SOCIAL INTEGRATION

   • Corporate Social Performance
     • This theory talks about all social responsibility that a company must take before any problematic situation in society. A company in addition to creating multiple benefits, must be aware of corporate behavior to produce less damage and more beneficial to their society. Companies have the power to serve society not only by creating goods or services but by creating a society free of harm.
       • According to Howard in his free on CSR comments on the social responsibility of entrepreneurs, in which at that time the presence of women was rare. Defines that social responsibility is a reasonable obligation for the employer because if you follow certain parameters attached to the right, the social aspects will improve. Sethi (1975) talks about three levels to follow: social obligation market limitation, social responsibility and social capacity.
         • For preston post (1975) introduced public responsibility that emphasizes the importance of the public process instead of the opinion of a single individual. Jones (1980), on the other hand, says that social responsibility is a process, not a result, generating controversy about what the definitive meaning is. Carroll who introduced the meaning of CSP made a synthesis about everything that carries social responsibility, in proposing a range of obligations that a company should be prone to give to society. In 1985 Wartick and Cochran extended the approach of Caroll, saying that social responsibility is subject to corporate participation. Another model is from Wood (1991) in which he emphasizes that this model companies become more interested in being part of organizations to determine a better corporate social behavior.
         • For preston post (1975) introduced public responsibility that emphasizes the importance of the public process instead of the opinion of a single individual. Jones (1980), on the other hand, says that social responsibility is a process, not a result, generating controversy about what the definitive meaning is. Carroll who introduced the meaning of CSP made a synthesis about everything that carries social responsibility, in proposing a range of obligations that a company should be prone to give to society. In 1985 Wartick and Cochran extended the approach of Caroll, saying that social responsibility is subject to corporate participation. Another model is from Wood (1991) in which he emphasizes that this model companies become more interested in being part of organizations to determine a better corporate social behavior.
       • HISTORICAL BACKGROUND
     • OVERVIEW
     • CONCEPTUAL BASES
       • The CSP model is probably the most representative of this theory. The principle of legitimacy of Davis (1973) talks about the ethics and social legitimacy that talks about the consequences that a company would have if a certain social responsibility is followed. He points out that the factors that give rise to social power are not only internal but also external. Davis affirms that the SR of the business men is born of social power, distinguishes two SC first the socio-economic responsibility and then the socio-human responsibility.
     • Strengths and Weaknesses
       • The CSP model is a synthesis of relevant developments on CSR up to the 1980s.More important is the weakness of the lack of integration between ethical normative aspects and business activity. Wood's institutional principle, which searches for legitimacy, does not advocate the moral motivation of respect (Swanson, 1995: 48) his theory only emphasizes the social control of business by paying attention to public responsibility

4. ETHICAL

   • Stakeholder Theory
     • OVERVIEW
       • Stakeholders are a group of benefiting or harming with corporate actions. From the perspective of CSR means that corporations have the obligation to form groups of society that are not shareholders, however not all agree with that. They stated that the question of social responsibility just doesn't come up if stakeholders are broadly defined to include suppliers, community, employees, customers, and financiers.
       • HISTORICAL BACKGROUND
         • The word ‘stakeholder’ was used for the first time in 1963 in an internal memorandum at the Stanford Research Institute, although the concept of constituencies of a company had existed before (Freeman, 1984; Preston and Sapienza, 1990). In 1983, Freeman and Reed contrasted the notions of ‘stockholder’ and ‘stakeholder’ in the context of corporate governance. In 1984, R. Edward Freeman published the landmark book Strategic Management: A Stakeholder Approach as a new conceptual framework for management. In 1995, Donaldson and Preston examined in depth the foundations of the normative stakeholder theory.
     • CONCEPTUAL BASES
       • The term ‘stakeholder’, closely related to ‘stockholder’, was meant by Freeman ‘to generalize the notion of stockholder as the only group to whom management needs to be responsible’ (1984: 31). ‘Stakeholder’ can be taken in two senses: in a narrow sense, the term stockholder includes those groups who are vital to the survival and success of the corporation . The stakeholder theory basically shares the same convictions as the shareholder theory regarding democracy and market economy principles
     • STRENGHTS AND WEAKNESS
       • First, this theory seems ethically superior to maximizing shareholder value because it takes into consideration stakeholder rights and their legitimate interests, and not only what is strictly required by law in manager—stakeholder relations.A second strength, is that the stakeholder theory superseded the conceptual vagueness of CSR by addressing concrete interests and practices and visualizing specific responsibilities to specific groups of people affected by business activity (Blair, 1995; Clarkson, 1995). As a third strength, it can be pointed out that this is not a mere ethical theory disconnected from business management, but a managerial theory related to business success.