Do firms practice social responsibility or better management? Essay

Do firms practice social responsibility or better management?
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Introduction
In 1970, Milton Friedman published a short provocative essay that challenged the ethical obligations that advocates of CSR were placing on large corporations. Milton expressed his thoughts at a time when the idea of corporate social responsibility was gaining momentum and went on to have a significant effect because it was published in a mainstream publication. Milton identified business entities as mere tools of increasing the wealth of shareholders and placed the burden of addressing social and environmental issues on the government. However, advocates of CSR argue that business corporations, especially multinational organizations, must actively address social issues because their operations contribute to the existence of such issues. Despite some businesses taking CSR seriously, others have completely dismissed the idea while the integration of CSR into others has not made them to be more socially and environmentally responsible. This paper addresses the issue of corporate social responsibility by examining the definition of CSR, the exact non-economic responsibilities of companies, the integration of CSR into business operations, and whether activities that seem to promote CSR actually address social problems or are just new investment opportunities.
What is Corporate Social Responsibility?
As a business concept, CSR is not easy to define because various people and institutions have different perspectives on what it entails and those perspectives keep on changing. Nevertheless, businesses around the world are expected to only engage in activities that increase profit while also benefiting society and the environment. As a result, businesses, especially multinational corporations, are not just perceived to be business entities but rather social institutions that are considered critical in addressing various social problems. In the United States and Canada, corporate social responsibility is mostly related to the power of managers and the impact of their decisions. This perspective aligns with the definition of CSR in the 1950s when it was conceptualized in terms of the social responsibility of managers rather than business entities. In the 1960s, managers were more scrutinized when scholars “argued that socially responsible business practices led to long-term benefits for businesses and that managers need to keep in mind the impact their businesses have on society” (Birch, 2017, P. 49).
However, the notion that managers should use their influence to turn business corporations into socially responsible entities came under attack when Friedman’s article ‘The Social Responsibility of Business Is to Increase Its Profits’ was published. Friedman’s thoughts dismissed the power of managers and presented shareholders as predominant forces in business entities. The idea of managers working to solely increase the wealth of shareholders as presented by Friedman is similar to the era of managerial capitalism where businesses became vertically integrated, horizontally diversified, and run by salaried managers. Under managerial capitalism, there was a clear distinction between managers and owners/shareholders and the former explicitly worked for the latter.
Friedman’s article led to the development of new ideas and concepts, including the stakeholder theory which indicates that managers are primarily responsible to the stockholders who entrusted them with their money for the explicit purpose of increasing their profits. This implies that any attempt or actual use of a company’s funds to engage in charity or socially responsible activities is a breach of a manager’s fiduciary duties. Although the growth of CSR as a significant topic in business has influenced other entities to increase their social initiatives, it has not stopped other businesses from undertaking environmentally and socially damaging activities. Similarly, there is no universally accepted definition of CSR because since the publication of Friedman’s article, “academic debates on CSR have ended up as one response after another to Friedman’s argument” (Birch, 2017, P. 49).
Non-economic responsibility of businesses
In the 1970s, firms undertook social activities that reflected the interests of their managers, executives, and wealthy businessmen and women who supported them. This led to some scholars arguing that the preferences of managers and philanthropists “have an increasing influence on what social problems (e.g. disease) are deemed important and how they should be tackled” (Birch, 2017, P. 51). However, in the 2000s, the emergence of organized groups started dictating the type of social responsibilities that corporate will fulfil. For instance, in 2006, the American Family Association and other religious groups advised their members to boycott Walmart’s products because the company was supporting gay rights. The company caved in and was left without a socially responsible position. Based on the above scenarios, it is clear that businesses either undertake social and environmental activities based on the preferences of their managers or are bullied into doing so by customers and organized groups. This confusion implies that any discussion related to the responsibility of firms is an ethical discussion that addresses what exactly are businesses responsible for? And what are they not responsible for?
Although the above questions are critical, the major issue is whether business corporations undertake socially responsible activities willingly or they are forced to do so by governm...