The Boundaries of Strategic Corporate Social Responsibility

Geoffrey P. Lantos Professor of Business Administration Box D-55 Stonehill College North Easton, MA 02357

June 2001

Phone: 508.565.1205 Fax: 508.565.1444 E-mail: glantos@stonehill.edu

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The Boundaries of Strategic Corporate Social Responsibility

Keywords Corporate social responsibility (CSR), Roles of business, Stakeholder theory, Ethical CSR, Responsibilities and duties, Altruistic CSR, Strategic CSR,

Abstract Reviews the development of the corporate social responsibility (CSR) concept and its four components: economic, legal, ethical, and altruistic duties. Discusses different perspectives on the proper role of business in society, from profit making to community service provider. Suggests that much of the confusion and controversy over CSR stem from a failure to distinguish its ethical, altruistic, and strategic forms of CSR. On the basis of a thorough examination of the arguments for and against altruistic CSR, concurs with Milton Friedman that altruistic CSR is not a legitimate role of business. Proposes that ethical CSR, grounded in the concept of ethical duties and responsibilities, is mandatory. Concludes that strategic CSR is good for business and society. Advises that marketing take a lead role in strategic CSR activities. Notes difficulties in CSR practice and offers suggestions for marketers in planning for strategic CSR and academic researchers in further clarifying the boundaries of strategic CSR.

Introduction It is no news that today’s business organizations are expected to exhibit ethical behavior and moral management. However, over the past half century the bar has been steadily raised. Now, not only are firms expected to be virtuous, they are being called to practice “social responsibility” or “corporate citizenship”(Carroll 2000, p. 187), accepting some accountability for societal welfare. Marketers, as boundary spanners responsible for the enterprise’s dealings with various publics, have a primary interest in and should take a major role in defining and implementing their firm’s social responsibility efforts. Unfortunately, too frequently marketers still focus solely on their products and markets while neglecting the social impact of their activities (Flores, 2001). Perhaps this is because the concept of corporate social responsibility (CSR) is a fuzzy one with unclear boundaries and debatable legitimacy. The purpose of this paper is to clarify the CSR concept by offering

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an historical perspective on CSR, reviewing the different viewpoints on the role of business in society, and distinguishing three types of CSR: ethical, altruistic, and strategic, thereby establishing parameters for its practice. I argue that for any organization ethical CSR (avoiding societal harms) is obligatory, for a publicly-held business altruistic CSR (doing good works at possible expense to stockholders) is not legitimate, and that companies should limit their philanthropy to strategic CSR (good works that are also good for the business). I conclude with suggestions for marketers and others responsible for strategic CSR as well as for further research. The legitimacy of CSR relates to a set of fundamental and crucial questions: Why do corporations exist? Should enterprises also be concerned with their social performance as well as economic results? If so, what does it mean to be “socially responsible”? Should economic performance be sacrificed for social performance? To whom do businesses owe “responsibilities” (a.k.a. “duties” or “obligations)? What kinds of activities and programs should CSR include? To what extent should social responsibility activities consume the company’s precious resources? How can we measure social performance and thereby know when companies have fulfilled their societal obligations? What are the interests of consumer marketers in CSR efforts? This paper will offer suggestions for answering these questions based on a synthesis and analysis of the literature, while recognizing that empirical research is needed for definitive answers to many. .

History of corporate social responsibility (CSR) Society’s rising expectations for business The notion that business has duties to society is firmly entrenched, although in the past several decades there has been a revolution in the way people view the relationship between business and society. Archie Carroll (1979) and other researchers believe that we should judge corporations not just on their economic success but also on non-economic criteria. Carroll (1979) proposed a popular four-part definition of CSR, suggesting that corporations have four responsibilities or “four faces” (Carroll, 2000, p. p. 187) to fulfill to be good corporate citizens: economic, legal, ethical, and philanthropic (which I call “altruistic” or “humanitarian” CSR). I believe that much of the uncertainty about the legitimacy and domain of CSR stems from failure to distinguish the ethical and philanthropic dimensions as well as from the misguided

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notion that it is somehow objectionable for business to prosper from good works (what I call “strategic CSR”). Economic responsibilities. Ever since the industrial revolution, we have depended on business as a major economic institution for producing want-satisfying goods and services; providing jobs and fair pay for workers; seeking raw materials supplies; discovering new resources, technological improvements, and products; paying taxes for public needs; generating the investment capital necessary for economic growth; all while earning a profit for the owners and serving as an investment opportunity. Previously, if a firm did all of this while obeying the law, it was praised. Eighteenth-century Scottish philosopher Adam Smith, in The Wealth of Nations, provided us with a framework for modern business and its relationship to society. Smith proposed that capitalism, by encouraging the pursuit of gain and efficiency, works to create greater wealth than any other economic system, and maximizes liberty by allowing individuals freedom of choice in employment, purchases, and investments, thereby benefiting the common good. Endeavoring to beat one’s rivals, and toiling to produce better work to earn the next promotion, if done ethically, will result in high personal development and therefore excellent use of one’s time and talents and the firm’s treasury (Johnson, 1990). The manager’s role is to act as a fiduciary or trustee to a principal, the owners or shareholders, being their steward in effectively and efficiently managing the organization’s assets. Economic responsibility, then, is to be profitable for principals by delivering a good quality product at a fair price is due to customers. Novak (1996) more fully delineated a set of seven economic responsibilities. These are to: (1) satisfy customers with goods and services of real value, (2) earn a fair return on the funds entrusted to the corporation by its investors, (3) create new wealth, which can accrue to nonprofit institutions which own shares of publicly-held companies and help lift the poor out of poverty as their wages rise, (4) create (and, I would add, maintain) new jobs, (5) defeat envy though generating upward mobility and giving people the sense that their economic conditions can improve, (6) promote innovation, and (7) diversify the economic interests of citizens so as to prevent the tyranny of the majority. I call these duties economic CSR. Societal expectations in this realm have appeared to hold steady over the years. Legal responsibilities. Legal duties entail complying with the law and playing by the rules of the game. Laws regulating business conduct are passed because society does not always trust business to do what is

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right. However, laws have certain shortcomings to ensure responsible behavior: they are of limited scope (they can’t cover every possible contingency); merely provide a floor or moral minimum for business conduct; are reactive, telling us what ought not to be done, rather than proactive, telling us what ought to be done; and might be followed involuntarily out of fear of punishment rather than voluntarily out of internal moral conviction. Ethical responsibilities. Ethical duties overcome the limitations of legal duties. They entail being moral, doing what is right, just, and fair; respecting peoples’’ moral rights; and avoiding harm or social injury as well as preventing harm caused by others (Smith and Quelch, 1993). Ethical responsibilities those policies, institutions, decisions, or practices that are either expected (positive duties) or prohibited (negative duties) by members of society, although they are not necessarily codified into law (Carroll, 2001). They derive their source of authority from religious convictions, moral traditions, humane principles, and human rights commitments (Novak, 1996). Today, virtually all members of the business system agree, at least in theory (although, unfortunately, often not in practice) with this third set of “social responsibilities.” I call ethical duties ethical CSR. Prior to the 1960s, business ethics was not a major concern of businesspeople. Rather, it was left to theologians to discuss issues of fair wages, unfair labor practices, and the morality of capitalism. The Protestant work ethic taught people to work hard and be successful—this was the essence of business’ social responsibility. Beginning in the 1960s ethical issues in business were raised on an unprecedented scale. There was a heightened realization that repressive labor practices could be found at even some of the most admired corporations, unsafe products were being sold, the business system was taking a toll on the natural environment, society was not succeeding in elevating those most economically deprived, bribery was occurring on an international scale, and morality was being compromised in the pursuit of money and power. Liberal consumerist media portrayed business as evil, implying that almost any business activity is morally reprehensible. Consequently, we heard consumer outcries against insensitive and immoral business practices. As a reaction to the negative publicity, by the mid-1970s, the concept of raising corporate America’s consciousness was in vogue in both corporate boardrooms and college classrooms. The idea was that enterprises should not single-mindedly pursue profit without regard to morality.

al. Henry Ford II identified this when he spoke at the Harvard Business School as far back as 1969: “The terms of the contract between industry and society are changing…Now we are being asked to serve a wider range of human values and to accept an obligation to members of the public with whom we have no commercial transactions” (Chewning et. Also important is how wealth generation affects non-economic aspects of society. Andrew Carnegie devised a classic twofold statement of corporate social responsibility based on religious thinking. Unlike yesteryear. but also to so-called "stakeholders" (a. and voluntary giving—is where most of the controversy over the legitimacy of CSR lies. such as the welfare of employees. customers. Over the past half century. as well as other outside groups and the natural environment. 1990. who suggested that certain religious principles could be applied to business activities. Business was said to have stewardship responsibilities not just to shareholders. Altruistic responsibilities. and other members of the business system. there was a concern for the macro-level outcome of business decisions in ways that went beyond the loyal agent's argument that a manager's duty is solely to loyally serve the employer by contributing to profit maximization. However. since the 1970s. but also of society’s economic resources. was the stewardship principle. First. Carroll’s discretionary or philanthropic responsibility—“giving back” time and money in the forms of voluntary service. 207).a. Thus. Now. by the 1920’s community needs outgrew the wealth of even the most generous wealthy individuals.5 Thus. with the result that some people expected business organizations to contribute their resources to charities aiding the unfortunate. Second. society’s expectations of business ethics have been climbing. CSR actually has its roots in the thinking of early twentieth century theologians and religious thinkers. holding their property in trust for the benefit of society as a whole. For example. a biblical doctrine that requires businesses and wealthy individuals to see themselves as stewards or caretakers. productivity alone is no longer considered sufficient to morally justify a business organization. it was suggested that stewardship of the corporation’s resources somehow be melded with a view of stewardship of society’s resources to more broadly serve society. p. not just of shareholders’ financial resources. voluntary association. . but also by its social contributions.k. business increasingly has been judged not just by its economic and its moral performance. which required more fortunate individuals to assist less fortunate members of society. was the charity principle.

educational system. which today underlies the CSR concept. and the natural environment. Thus. 1983). (Anshen. the notion of an implied corporate social contract was conceived by social and economic theorists. Given the sometimes-adverse effects of business decision-making on society as well as corporate reliance upon society. Originally. When corporations make business decisions they have both short. subject to the constraints of the law. During the latter half of twentieth century there arose the idea of the corporate social contract. competitors. and antiapartheid supporters. the local community in which the enterprise operates. The social contract theory of business is widely held today by both business ethicists and business decision-makers (Bowie. Several groups were responsible for this heightened social consciousness. distributors.6 constituencies or publics) . 1988). Business’ social responsibility was to maximize profits. should join with other social structures like the family. Social progress and quality-of-life advancement were assumed to be a by-product of economic growth. and continued through the 1960s and 1970s. this social contract focused solely on economic responsibilities. and religious institutions. notably employees. suppliers. the general public. as a social institution. customers. including the feminist movement and those advocating for the mentally and physically challenged. 1983). The corporate social contract concerns a firm’s indirect societal obligations and resembles the “social contract” between citizens and government traditionally discussed by philosophers who identified the reciprocal obligations of citizen and state. to help enhance life and meet needs (Chewning . This contract spells out society’s expectations of business as well as (although much less discussed) business’ expectations of society. The idea that corporations as organizations have “social responsibility” and obligations tying them to a wider society became popular in the 1950s. for native people. such as environmentalists . when American businesses rapidly gained in size and power (Davis.and long-term effects on many sectors of society. Much of the public embraced the concerns of these groups because unfortunate events brought the realization that some special-interest groups were worth listening to. This new social contract postulated that social progress should weigh equally in the balance with economic progress. and for minorities. consumer advocates. it was suggested that business. Private business had no accountability for the general conditions of life or the specific conditions in local communities.

however. the modern corporation should be considered as a public institution. 1983. Additionally. social. so that it can be held to a higher legal and moral accountability than the traditional business enterprise. In any case. due to the growing recognition that governments had failed to solve many social problems as well as the diminished scope of governments (Smith. Moreover.7 et. al. assist in solving social problems (Bowie. Also. corporations pay their fair share of taxes to cover the cost of using of these resources. However. the social contract is a rather vague concept. as it is not written in one place. 1996). Whereas in Adam Smith’s model. and so they should not have responsibilities beyond those of other taxpayers (Lippke. rather than a private organization. According to social contract thinking. each enjoying a set of rights and having reciprocal responsibilities. the modern corporation is characterized by professional managers who make decisions on behalf of the stockholder owners. due to 1 However. for most of the period since 1960. 1993). Some even say that. social responsibility proponents argue that corporations must be held to higher standards of social responsibility than mere individuals (Miller and Ahrens. Al. 1990). The corporate social contract holds that business and society are equal partners. social contract theorists feel these resources should have some use beyond producing more brands of household cleaners for consumers and wealth for stockholders. 1983. 2001). Lippke. Davis. out of a duty of gratitude. a private enterprise and how that might vary with the size of the enterprise Concern about CSR prevailed through the “kinder and gentler” 1990s. changes as society changes (Chewning et. finances. and so the corporation should. Corporate taxes are supposedly not sufficient to pay for these resources. 1996). 1995). Therefore. disposable incomes and leisure time have been sufficiently high to allow the public to focus on issues beyond earning a living. 1993). property was owned by individuals who directly decided how it was to be used. 1996). because of its size and special legal status. and labor power on a scale that no adequate accounting of their duties should ignore (Lippke. and political power (Bowie. multinational corporations control a tremendous amount of economic and productive resources. 1 Moreover. such as technology. and these decisions affect tens of thousands of citizens (Miller and Ahrens. corporations need the resources of society if they are to survive and thrive. a creature of the state. the enterprise’s responsibilities should be commensurate with its economic. some observers suggest that. and does not specify to what extent the corporation should be considered a public vs. like citizens. . 1990). varies from one region to another.

and leads in the direction of positive contributions to human betterment. no matter how immediately profitable. On the other hand. and more sensitive to the shortcomings of business exposed by wide-ranging investigative reporters.co. I shall argue that genuine philanthropy. 142). 243). which have allowed virtually "live" coverage of worldwide problems. 1998.html. 1/24/01). Interest in doing good for society regardless of its impact on the bottom line is what I call altruistic or humanitarian CSR. p. . philanthropic CSR used as a marketing tool to enhance the firm’s image—what I call strategic CSR—is legitimate since it helps achieve the firm’s financial obligations. balancing carefully conflicting responsibilities to various stakeholders. variously as the latter may be defined” (Kenneth R.uk/news/call18. quoted in Hartman. p. then. CSR has been variously defined as: • “An organization’s obligation to maximize its positive impact and minimize its negative effects in being a contributing member to society. http://www. and so businesses should weigh the social consequences of their activities. • “The intelligent and objective concern for the welfare of society that restrains individual and corporate behavior from ultimately destructive activities. with concern for society’s long-run needs and wants. 2001. rather than that which is public relations driven. Andrews. the large American corporation is inherently a social institution as well as economic enterprise. Defining Corporate Social Responsibility According to proponents of CSR.literaticlub. the thinking of the North American public has become less inner directed and parochial. is not proper for corporate responsibilities to practice. These obligations go beyond legal requirements and the company’s duties to its shareholders. Fulfillment of these obligations is intended to minimize any harm and maximize the long-run beneficial impact of the firm on society” (Bloom and Gundlach. CSR means being a good steward of society’s economic and human resources (Journal of Consumer Marketing call for papers for special issue on social responsibility for consumer marketing practice. • “The obligations of the firm to its stakeholders—people and groups who can affect or a who are affected by corporate policies and practices.8 advances in satellite communications.

family-friendly leave programs. Consumer pressures include withholding price increases to cover rising costs. This suggests a dual bottom line with economic criteria and noneconomic criteria. Conflicting pressures for CSR Social responsibility is a balancing act: business must balance economic performance. p. firing and promotion. italics in the original). (McWilliams and Siegel. many companies have multiple objectives. tying pay to performance. Note the focus on both minimizing harms (ethical CSR) and promoting benefits for society (altruistic CSR if the firm does not reciprocally benefit and strategic CSR if management plans for the firm to profit too). investing in pollutionabatement equipment. giving financial assistance to minority neighborhoods. The mandate is clear: “Decades of studying business’ corporate social performance…lead one to conclude that corporate citizenship is real—it is expected of business by the public. Today. at Ben & Jerry's employees are evaluated on both financial contribution and social contribution to the community. In fact. In the 21st century the public demands that businesses make social issues a part of their strategies. a zero-layoff policy. and stock ownership by employees. especially institutional shareholders. providing special training and jobs for the hard-core unemployed. 2001). . 187. and the balance must be achieved among various stakeholders. optimizing the positive effects and minimizing the negative effects of its actions on society. managers continually meet demands from various stakeholder groups to devote resources to CSR. even including some stockholders. and making executives available to serve without compensation on public boards or other non-business assignments. Community and environmental pressures encompass ensuring that the business’ operations do not threaten the safety of the local community. contributing to charitable and not-for-profit organizations. ethical performance. CSR entails the obligation stemming from the implicit "social contract" between business and society for firms to be responsive to society's long-run needs and wants. For instance. and social performance. and greater amounts of consumer information.9 In summary. including provisions for worker health and safety as well as nondiscrimination in hiring. 2000. production of safe products. and it is manifested by many excellent companies” (Carroll. Such pressures come from constituencies enumerated above. Examples of employee pressures include recognition of certain employee rights in the workplace.

there is the competing pressure for improved financial performance from institutional investors. They may define their mission and goals of their organization as they wish. as a loyal agent of his or her employer or stockholders. In the middle are people who simply want corporate 2 A philosophy of altruistic CSR for a privately held firm is a subject for a follow-up article in this journal. at the same time. notably mutual and pension fund managers. not-for-profit. those pushing for better social performance. no one takes issue with the well-known fact that Tom’s of Maine engages in many practices that voluntarily restrict profit in order to promote the general welfare. they are not subject to the market for corporate control. where ownership is divided from management. At one end are those who say business only has an economic responsibility to make a profit while obeying the law (the pure profit-making view or economic CSR). The wealth of many American households is now closely tied to the stock market. and so corporate managers are under the gun by both individual and institutional investors to do whatever it takes to increase the stock price (Boatright. Although there are different types of corporations with differing perspectives. For instance. whom they believe have primacy above all other stakeholders. Popular perspectives on business’ role in society Figure 1 shows a spectrum of opinions regarding the appropriate role of business in society. believing that such efforts clash with profit maximization and the interests of shareholders. closely held. 199). control. who have a fiduciary duty to their investors to earn a maximum return on investment. and responsibility.10 Yet.2 The controversy over CSR arises when publicly held companies undertake “socially responsible” activities that might restrict profits. The owners of an unincorporated business are accountable only to one another regarding their business performance. this paper will take the perspective of the publicly held corporation since the debate over CSR generally rages in companies held by many individual and institutional investors. Some managers disdain demands for CSR. We should note that such a dilemma does not exist to a great extent within privately-owned businesses (sole proprietorship or partnership) since there is no issue of economic agency where the manager. . such as family. has a duty to maximize profits for them. This leads to the push and pull of forces arguing for strict profit maximization vs. and public.

while avoiding social involvement. obey the law. Archie Carroll Community service view/corporate social performance perspective—altruistic CSR: Business must use its vast resources for social good. Author Albert Carr Position on Business’ Role in Society Pure profit-making view—economic CSR: Business has lower standards of ethics than society and no social responsibility other than obedience to the law. R. 2001). especially regarding potential harms to stakeholders (the socially aware view or ethical CSR). A moderate and relatively recent view which now dominates thinking in financial economics and public law—the contactual theory of the firm—holds that a company’s assets are provided by many groups in addition to shareholders. and so the company arises from the property rights and right of contract of every corporate constituency. not just stockholders (Boatright. improving the environment. Another way of envisioning the spectrum is that at one end is property rights theory—the corporation is viewed as the private property of its stockholders. Edward Freeman Socially aware view—ethical CSR: Business should be sensitive to potential harms of its actions on various stakeholder groups. and be ethical. such as employees.11 management to be more sensitive to the societal impact of their decisions. and the like. such as by providing employment opportunities for everyone. At the other end of the spectrum are those who want to see corporations actively involved in programs which can ameliorate various social ills. 2000). while at the other end—the social institution theory—the firm is considered a public institution sanctioned by the state for some social good (Boatright. Spectrum of viewpoints on the role of business in society . and promoting worldwide justice. 1993). Milton Friedman Constrained profit-making view—economic CSR: Business should maximize shareholder wealth. At one end of the spectrum the basic concern is with economic values such as productivity and efficiency. customers. At the other end of the spectrum the primary concern is societal welfare even at the expense of profits (Miller and Ahrens. even if it costs the shareholders money (the community service view or altruistic CSR). suppliers. Figure 1.

a Dr. Carr’s only standard of social responsibility above economics was obedience to the law. He argued that business has the impersonal nature of an isolated game. and values on the job can produce schizophrenia and multiple personalities. almost all commentators agree that business as a game is a bad metaphor. preferences. Jekyll and Mr. Nothing that we spend so much time and energy on can be separate from the rest of our lives (Johnson. he viewed businesspeople as having a lower set of moral standards than those in the rest of society have. business is an integral part of society. 1990). Those who don't play by the "rules of the game" will not be very successful in business. and there are other involuntary players. business competition is not always voluntary. or business and pleasure. Contrary to the pure profit-maximizing view.. the lower business ethics standards permit things like misstatement and concealment of pertinent facts during negotiations. Carr subscribed to the all-too-common fallacy that the morality of one's business life should be compartmentalized from the morality of the rest of his or her life. Also. 1996). However. Whereas games are isolated from the rest of our lives. One’s duties to the employer as a loyal agent override her other moral obligations. there is nothing special about business that somehow sets it apart from our ordinary ethical obligations.e. the dichotomy between one’s business life and personal life is nonexistent. However. To ignore this and to encourage us to develop a different and sometimes contradictory set of priorities. like poker. Hyde phenomenon (Sikula. deception. Businesspeople are not professionals with a different set of moral standards.” i.12 The pure profit-maximizing view The most extreme position on economic CSR was taken by Albert Carr (1996) in his classic Harvard Business Review article “Is Business Bluffing Ethical?” Carr said that the sole purpose of business is to turn out a product at a profit. although Adam Smith was . Thus. The constrained profit-maximizing view The best-known argument for a purely profit-based position on CSR was laid out by neoclassical economist Milton Friedman of the conservative Chicago School of Economics. the firm’s various stakeholders. in which anything goes within the accepted rules of the game (legally set by the government and the courts). One cannot partition life into work and personal. “bluffing. automobile companies' neglect of car safety—in short. lying about one’s age on a resume. Due to the prevalence of competition and negotiation. viz.

even if this causes hardship to employees. 86). Friedman too advocated just economic values. and so his conception of economic CSR goes further than Carr’s to includes a fairly extensive range of moral duties to other stakeholders: maintaining open and free competition. In marketing. Friedman recognized legal and ethical responsibilities for business. groups. p. in turn.. engages in open and free competition without deception and fraud. no-holds-barred business environment. can influence the organization’s well being. Whereas Friedman said that the primary stakeholder of concern in business . and institutions. good faith. and so on)” (Levitt.” said that the only social responsibility of business beyond seeking material gain is “to obey the elementary canons of everyday face-to-face civility (honesty.13 probably the first to espouse this perspective (Hartman.e. He felt that solving social problems is part of the role of government and social agencies. abiding by the rule of law. Outlined in Friedman’s 1960 tome Capitalism and Freedom as well as in his seminal 1970 article “The Social Responsibility of Business Is to Increase It Profits” (1996). business schools. which. not the role of business. The socially aware view and the stakeholder model of CSR What Friedman ignored was that a businessperson's decisions in the ethical and social responsibility realms could affect many different people. Friedman advised corporate managers to avoid interjecting personal values into matters such as environmental concerns or community interests if shareholder wealth is threatened. 2000). 1998). act subject to the constraints of the law and morality. which he felt to lie beyond the company’s mandate to maximize shareholder value while acting legally. "[In] a free economy…there is one and only one social responsibility of business—to use its resources and to engage in activities designed to increase its profit so long as it stays within the rules of the game. Theodore Levitt (1983). Like Carr. not social values. for instance. even earlier in his 1958 Harvard Business Review article “The Dangers of Social Responsibility. and (unlike Carr) honestly." (p. 245) i. Likewise. and exemplifying fair play within the rules of the game (Boatright. 1983. This is important to note since many of his disciples as well as his critics claim that he advocated a bare-knuckled. Corporate managers. Friedman’s “custodian-of-wealth model” asserted that. ethically. and the financial community embraced this dictum. and to this day some still do. Thus. which is to say. “buyer beware” is the tocsin. the responsible manager will close or relocate plants whenever he can improve the profitability of his operations by so doing. avoiding deception and fraud.

In other words.14 decision making is the stockholders/owners. technological. such as peers. 17). groups. and decisions. Social contract theorists observe that business decisions often impact large numbers of individuals. 2001). How many stakeholder groups and individuals there are depends on whom you ask. such as economic.and long-term interests of other parties into account too. like stockholders. we need to go beyond profit maximization to trusteeship. 1996). political. First. the social system.. However. these other stakeholders also make investments in enterprises: employees invest their time and intellectual capital. p. media and sociocultural forces. family. plus society at large. as well as (2) any individual or group who is vital to the survival and success of the enterprise (Freeman. (they have a stake in outcome of the company’s decisions). which consists of institutions and forces. The final level of stakeholder is significant others of business decision makers. al. legal. including the entire business system. and the financial community (stockholders. 2001. In fact. friends. natural. The second level of stakeholders is the corporation’s microenvironment/operating/task environment— its immediate environment. stakeholders. is the systemic/macroenvironmental/general environment level—larger societal factors. bondholders. The stakeholder model is a reaction to Friedman’s shareholder paradigm where no entity other than shareholders has a claim on the business. customers. whereby management sees itself as responsible for achieving balance among all stakeholders' interests (Goodpaster.e. subordinates and other employees. policies. Stakeholders include: (1) any individuals or groups affected by the organization's actions. especially in avoiding harm to any groups or rectifying any injuries caused. subscribers to the idea of a corporate social contract take the short. customers invest their trust and repeated business. or institutions. and so on” (Graves et. stakeholders can be envisioned as existing at four levels. etc. and labor unions. 1996). “These duties exist because. and technology dimensions (Rae and Wong. the local community. communities provide infrastructure and education for future employees as well as tax support. market. A third level of stakeholders is found within the business organization. and creditors). notably superiors. i. Stakeholder theory explains that there is more than just a relationship between an agent who has fiduciary responsibility to a principal—there are also third parties to whom the corporation owes morally significant nonfiduciary obligations. today’s corporate mission statements often pay homage to contribution to society in addition to the traditional product. plus competitors. . consisting of exchange relationship partners (such as suppliers and distributors). or the multifiduciary stakeholder concept.

e. Distinctions needed: ethical CSR vs. Some would say that CSR is most noble when it fulfills alleged altruistic responsibilities. and neighborhoods.. there are increasing pressures and rising expectations for such altruistic CSR because there has been a decline in the social institutions that have traditionally tied communities together. 2001). strategic CSR To decide on the parameters and legitimacy of CSR for a publicly held enterprise. even if the business might not benefit from this. legal. and strategic CSR. religious organizations. optional) and purpose (for stakeholders’ good. Although the threefold classification of CSR I propose does not explicitly appear in the literature. Ethical CSR entails a “negative injunction” to avoid and correct activities that injure others (Simon et. families. and ethical obligations are mandatory. 1996). there appear to be three mutually exclusive types of CSR based on their nature (required vs. chronic unemployment. altruistic CSR vs. 2001) since corporations are not causally responsible for the deficient conditions they are attempting to rectify. it is optional in that it is not expected with the same degree of moral force (Carroll. involves contributing to the common good at the possible. 87). to its responsibilities to avoid harms or social injuries. viz. i. problems such as drugs. etc.15 The Community Service View This most-developed version of CSR demands that corporations help alleviate “public welfare deficiencies. the firm’s good. altruistic CSR.e. philanthropic) CSR. This includes actions that morality doesn’t mandate but which are beneficial for the firm’s .. philanthropic responsibility is desired by society. Altruistic (humanitarian. Humanitarian CSR has firms go beyond preventing or rectifying harms they have done (ethical CSR) to assuming liability for public welfare deficiencies that they have not caused. (Brenkert. 1983. we need to draw distinctions between three different types of CSR a business can practice.” i. crime. There is nothing especially commendable about this level of fulfillment of “social responsibilities” since it is what is ordinarily expected in the realm of morality. Ethical CSR is morally mandatory and goes beyond fulfilling a firm’s economic and legal obligations. along with higher mobility. underfunded educational institutions. or even definite expense of the business. al. poverty. However. and so it many people believe that it is business’ obligation to help fill the void (Carroll. probable. Whereas the economic. illiteracy. p. or both): ethical CSR.

16 constituencies although not necessarily for the company. they should be minimized where feasible. I shall conclude that altruistic CSR. 1983. However. it makes more efficient use of resources and therefore benefits society as a whole. 1990. whether they profess to or not. mental. admirable since it creates a win-win situation in which both the corporation and one or more stakeholder groups benefit. Any organization not adhering to its ethical responsibilities would be acting as a morally irresponsible agent. however.e. Ethical edicts must be adhered to even at the firm’s expense in terms of possible foregone profits since by definition. spiritual.e. Ethical CSR The nature of ethical CSR Ethical CSR involves fulfilling the firm’s ethical duties. this would seem sound. As in all social responsibility decisions. when a company decides to close or relocate a plant because the product is no longer selling or the source of raw materials has changed.. economic. Strategic CSR—the fulfillment of a firm’s “social welfare responsibilities”—is. This is “social responsibility” in the sense that a corporation is morally responsible to any individuals or groups where it might inflict actual or potential injury (physical. lies outside of the firm’s proper scope of activities. . For example. p. there are tradeoffs. i.” i. Even when the two parties to a transaction aren't harmed others parties (stakeholders) might be. 1993). Miller and Ahrens. I shall focus primarily on the nature and problems of strategic CSR. Although harms cannot always be avoided. This is the pursuit of “affirmative duties. Managers of a corporation do not have an obligation to maximize profits for shareholders without regard to the means used. Sometimes actions need to be taken because they are right. and emotional) from a particular course of action. like Friedman. the affirmative pursuit of some good” (Simon et. Goodpaster. ethics deals with moral standards that override self-interest. al. 1996. not because they are profitable (Chewning et.. While the shift might cause temporary difficulties for some employees and their community. 87). 1993). al. although appearing noble and virtuous. It is probably for this reason that altruistic CSR is probably relatively rare (Smith and Quelch. which I believe most firms practice instead of humanitarian CSR. it is the socially responsible thing to do so long as injuries to workers are minimized as much as reasonably possible via means such as advance notification and severance pay.

which focuses on why altruistic CSR is wrong and strategic CSR is right. 1994. suggesting its mandatory nature. it would seem that owners of long-distance phones are doing the morally correct thing by not charging for emergency 911 calls. which looms large in the ethics literature. global communications and media. Here. and empirical evidence reveal that in the long run “good ethics is good business. For instance.3 Here.17 and with ethical CSR it is often between short-run profitability and moral actions. money spent on product safety or pollution control might reduce shareholder profits. we all know that several well-known firms came under fire for running or letting their suppliers manage “sweatshops” in overseas manufacturing facilities in order to cut costs. I now survey the moral concept of responsibility. responsibility has been described as “the cornerstone of ethics” (Solomon. moral behavior builds trust and enhances the firm’s reputation. I shall restrict the discussion of ethical CSR to that of ethical responsibilities. . 1994). suppliers. experience. 114). corporations are said to have special moral obligations to their various stakeholders outside of the organization. especially with today’s instantaneous. employees.” First. not to mention earning the public’s goodwill. anecdotal evidence. the parameters for ethical responsibilities are beyond the scope of this paper. Clearly. However. the boundaries of ethical CSR are not clear. which attracts customers. but the alternative is to unethically threaten the welfare of others in society (Boatright. In fact. So as to determine the nature of corporate duties to these constituencies. For instance. As another example. I shall restrict the discussion to that of duties and responsibilities. ethical actions minimize the cost of fines and litigation. and distributors. The terms duty and obligations are used synonymously with responsibility. In the context of ethical CSR. The nature of ethical duties and responsibilities In order to better distinguish ethical CSR and altruistic CSR. Second. it is helpful to understand both ordinary language and philosophers give the term 3 In a forthcoming paper on the boundaries of ethical CSR for this journal I shall argue that a proper understanding of the various ethical theories actually results in a narrower range of mandatory ethical responsibilities and a wider range of optional strategic social responsibilities than many people believe. otherwise we would not have so many interesting ethics discussions in corporate boardrooms and college classrooms. p. However. The term suggests both accountability and usually a position of trust and authority (Solomon. not to mention the bad publicity that unethical actions often attract. 2000).

there is a capability usage—someone has the ability to accomplish something. 1994). Second. not just among members of a business but also among members of society (Solomon. accountants are responsible for the independence and objectivity of their judgments and must report the financial misconduct of clients. 2001). or that the ad agency is responsible for the decline in brand awareness because their ads are not memorable. or declaring that a marketing manager is not responsible for the death of a brand in the marketplace since she had no control over the heavy competition which contributed to the product’s demise. Therefore. Capability responsibility is a major argument for humanitarian CSR—the enterprise has the resources to solve societal ills and therefore should do so. For instance. with Ford officials blaming the tires and Bridgestone/Firestone representatives blaming Ford for dangerous trucks and giving bad advice about tire pressure. causal responsibility means that someone caused something to happen and is therefore morally responsible or accountable for its consequences. is role-related responsibility—the duties or proper behavior that go along with a given role or particular position within a social group or society (Solomon. Third. . For example. with both sides losing consumer trust in the process (Kiley. often causal responsibility is shared. recently Bridgestone/Firestone and Ford fought very publicly about who was responsible for at least 174 deaths and 700 injuries resulting from vehicles crashing after losing tire tread. Examples would be an individual assuming responsibility for the success of a project since it falls within her area of expertise. First. 1992).18 “responsibility” three usages (Goodpaster and Matthews. given its poor planning. buck-passing does occur. causal responsibility is most closely tied to ethical CSR—the organization is responsible for correcting harm it has done or preventing possible damage it could cause. Should cigarette and gun manufacturers be held liable for who buys their products and how they are used. Consequently. jury verdicts in recent years have held manufacturers responsible for injurious effects of their products. journalists are duty-bound to print fair and accurate accounts of newsworthy items. or is that the responsibility of the retailer. and marketers are obliged to serve and satisfy their customers. Shaw and Barry. 1994). It can at times be controversial where the boundaries for causal responsibility lie. For example. or perhaps (in the case of minors) of parents? In fact. For instance. A person who shirks his role-related responsibilities is also violating standards of ethical CSR. we could say that management is responsible for the failure of the business. 2001.

How does one resolve the conflicts inherent in serving these two masters? To answer this question we must know whether the proper or legitimate role of a business organization is merely economic or also social. It is this type of conflict that proponents of altruistic CSR set managers up for. or the boss who must keep employees loyal while criticizing them for poor performance. Those who suggest that a corporation is not a private entity but rather is a public institution that interacts with and affects many stakeholders advocate the social role.19 A complication is sometimes caused by role conflict—a given role sometimes has irreconcilable conflicting duties. Consider the salesperson who is expected to help maximize the company’s profits while simultaneously maximizing the customer’s well being or engage in prospecting while also building customer relationships. . pitting the shareholders against society’s welfare.

these special social responsibilities include provision of nondiscriminatory access to professional services. in many cases. diligence and avoidance of negligence. the social contract model of business can be used also to justify the social duties of business as an institution. 1990). we also need to investigate the societal role of professionals. we need to distinguish general duties from special duties.20 In addition to the proper role of business as an institution.e. access to massive resources. Managers and professionals are said to have special duties due to their privileged position within society. and obedience to professional codes of conduct (e. Given that the American Marketing Association has recently established professional credentialing. service to clients in a fiduciary manner.” i... it is often claimed that professionals have these special duties because society has granted them various privileges. General duties or civic responsibilities are widely accepted ethical requirements for how people should treat one another in a civilized society. and. . the American Marketing Association Code of Ethics) (Cottell and Perlin. "Do no harm (ethical CSR) and "If possible. In the study of professional ethics. these privileges carry with them various special duties or social responsibilities—society expects professionals to conduct themselves in a way that will yield some benefits to society beyond economic and legal duties. suggesting that rendering service to society should be a high priority in the professions. fairness in setting fees. In other words. as well as of professionals as individuals within those institutions.g. high incomes. Thus. such special duties will likely become increasingly important to marketers. selfregulation and licensing. as business managers are generally considered professionals in their fields. Special duties are situational—we are required to do something given our circumstances. professionalism carries with it an extra burden of accountability—the special duty of "professional reciprocity. do good "(altruistic CSR). including meaningful work experiences. prestige. the social obligation to act in ways which benefit society. maintenance of professional competence. work autonomy. In turn. to moral and quality-of-life obligations. Specifically. They are a kind of cement to the implied social contract that people in society all have with one another. In order to do this. A quick review of the codes of conduct in the professions would confirm the important role attached to the notion of social service in professional life. Examples include. high social status. preservation and protection of the values of the profession. Every such code itemizes the social aspects of professional work.

crime. . even at possible personal or organizational sacrifice. p.” only alleged “social obligations” (DeGeorge. there is no guarantee that the business will immediately gain when tomorrow’s workers are better educated. furthering some social good. drug and alcohol problems. Or. lack of sufficient funding for educational institutions. as they could work for other area organizations or even move away (Singer. poverty. such as urban blight. there is no certainty that they will be productive employees or even end up working for that organization. with altruistic CSR this is not the motive (although the firm could conceivably benefit as a byproduct). chronic unemployment. and other social ills within a community or society. goes beyond ethics to somehow making the world a better place by helping to solve social problems. illiteracy. procedures. and it involves linking core corporate competencies to societal and community needs. Humanitarian CSR is Carroll’s “fourth face” of CSR— philanthropic responsibilities—to be a “good corporate citizen” by “giving back” to society. there is no causal responsibility. 525). as we have just seen. The business has no “moral obligations. Humanitarian CSR is based on capability responsibility—the company has the resources to be able to do social good. where it is believed that the money put into good works will yield a return on investment for the business. In some peoples’ thinking it is also founded on role-related responsibility—companies and their professionals are participants in the social contract. inadequate moneys for the arts. if a firm provides job training for the hardcore unemployed. It demands that corporations help alleviate “public welfare deficiencies” (Brenkert. some firms can free ride off the efforts and expenditures of other companies. regardless of whether the firm will financially reap what it has spiritually sown. 2000). However. and actions intended to enhance society’s welfare and improve the quality of life. p. then. Unlike strategic CSR.21 Altruistic CSR The nature of altruistic CSR The terms altruistic or humanitarian CSR I have coined to suggest genuine optional caring. 168). Indeed. 1996. if a firm adopts an inner-city school and pours resources into it. For instance. Altruistic CSR. 1990. policies. Humanitarian CSR includes all philosophies.

and distributing food to the needy. companies increasingly strive to align charitable giving with the hearts of workers and customers. all of which contain some truth but none of which. etc. funding cultural programs. some Stride Rite employees tutor inner-city students two hours a week). instructors. community service programs. In the realm of community service programs. Endowing universities doing research in the firm’s field is another common example of charitable giving. providing job training for the hardcore unemployed. builds a strong case for the practice. There are a number of arguments for altruistic CSR. and tutors to public schools. including mentoring students. with a rep force that is 98% women. Quality-of-life issues include rebuilding inner cities. employee voluntarism. environmentally friendly policies. (e. and providing educational videos. and the inability of local governments to keep pace with the demand for services. The Body Shop requires employees to do a certain amount of community service on company time. helping renovate parks. sponsoring cleanup programs. fighting illicit drug traffic. 5% of an employee's work time can be donated to community outreach at the regular pay rate. The most basic justification for humanitarian CSR is the social contract argument previously discussed.. For instance. gay rights groups.g. Regarding charitable giving. Employee volunteerism programs grew in the 1990s. raises money for breast cancer research. offering seminars to high school students on how to effectively seek employment. LensCrafters donates eye exams and glasses to the needy. Avon. Reasons for involving employees included increased employee mobility. a poor section of Boston. and various quality-of-life efforts. such as antinuclear campaigns. and Ben & Jerry's gives 5% of pretax profits to politically correct causes that its founders believe in. painting low-income houses. Stride Rite opened the first corporate on-site day care center in 1971 at the company's factory in Roxbury. “Business is a major social institution that should bear the same kinds of citizenship costs for society that an individual . individually or collectively. at Tom's of Maine. executive loan programs. creating a desire to quickly get to know one’s coworkers and community. For instance.22 In the past decade or two we increasingly have seen such activities as charitable contributions. supporting minority business ventures. establishing manufacturing plants in ghetto areas. and the nation's first on-site fitness center for employees. The debate over altruistic CSR The case for altruistic CSR.

First. Second. helps those who are less fortunate. this only argues for ethical behavior. training. participates in the civic life of the community. 1999). And. so too are businesses required to take into consideration all parties that they will affect. it is a different story when we are talking about corporations whose stockholders might not be particularly well-to-do and who are counting on the funds for needs such as their retirement or college for their youngsters. It is said that just as you and I have an obligation to take into consideration all of the parties that we directly and significantly affect. advertisers must take special care when designing advertisements aimed at youth audiences. not as corporate humanitarian ambassadors. A rebuttal to this is that when a corporation views itself as acting only with its stockholders’ financial interests in mind. stock market pressures often result in the achievement of short-term financial interests at the expense of long-term financial and societal welfare.” However. However. and so forth. businesspeople have the same obligation to tell the truth in their advertisements that you and I do when we are talking with strangers who stop by at a garage or a yard sale. . 95).” It is true that society provides businesspeople with resources such as an education. p. corporations are formed for limited economic ends that do not include good works and social welfare. they can best do this as private individuals. It is true that a “socially responsible” individual is one who takes active part in the community. the argument doesn’t extend to humanitarian CSR—mandating doing good works—because the analogy between people as individuals and business organizations as institutions breaks down when we discuss providing for social welfare . whereas human beings are multifaceted individuals with diverse interests. It is the individual and institutional stockholders’ funds that are being expended. For example. and other nurture.23 citizen bears” (Davis. Especially executives from less privileged backgrounds who got help from others in pulling themselves up by their bootstraps are justified in feeling the need to “give back. while it is true that in American culture individuals with wealth are expected to share it with those less fortunate (Trevino and Nelson. not those of some amorphous creature known as “The Corporation. he idea of you and I doing good works in our role as compassionate persons as an analogy for an enterprise to also do good work as a compassionate corporate creature is fallacious. In the moral realm this is true. This is an argument for ethical CSR—avoiding harms or social injuries However. just as you have to take special care when you are dealing with children that come by your garage sale. 1983. However.

1996). Also."). and abuse of rights (Novak.24 which should not be sacrificed for ill-gotten financial gain. there is a false dichotomy in saying that only either business or government (neither of whose proper role is charity) can solve social problems. However. humanitarian CSR is favored over government welfare in that the aid is voluntarily. altruistic CSR forces stockholders to sacrifice part of their income so managers can be “generous” with shareholders’ funds. they might rise because of the favorable publicity and goodwill. enhanced employee morale leading to higher productivity. We also have private individuals (many of whom are businesspeople) and the collective efforts of these individuals through charitable and social service organizations. Being socially responsible does not necessarily mean profits will fall—indeed. which Robin-Hood style rob from the rich to give to the poor. They say corporate philanthropy is a preferable substitute for government welfare. business and government are obliged to address and rectify problems of social concern ("Power begets responsibility. bloated government programs is not a good idea. nor altruistic CSR. which historically has led to excessive power. Granted. and not-for-profit organizations.. . taking money out of the cash registers and paychecks of businesspeople to pay for inefficient. corruption. Moreover. or at least is necessary in the face of deficient public welfare.S. A final and purely pragmatic argument for humanitarian CSR is enlightened capitalism. indeed. 1996). this means we are discussing strategic CSR. However. wasteful. as the two most powerful institutions in the U. and less government intervention. is partially due to corporate opposition to higher taxes (Benkert. if business prospers. whereas state contributions come via the inefficiency and plodding pace of government bureaucracy and legislators through faceless bureaucrats. foundations. not acts of charity. which. just as government welfare coerces taxpayers to hand over a generous portion of their income to “compassionate” legislators. tyranny. more personally and perhaps more efficiently bestowed. Another point made by champions of humanitarian CSR is that. 2001). The public is apparently transferring its expectations for solving social problems from failed “Great Society” government programs to business (Carroll. centralized.

recognizing the full personal and social costs of that production. The case against altruistic CSR. The “invisible hand” model was reasonably descriptive in an agrarian economy characterized by commodities. the competence of businesses to effectively contribute to societal welfare. especially prices. Today. it is more beneficial for companies to continue expanding rather than giving money away to charity and good works (Donaldson 1993). and the possibility that philanthropic giving will put the company at a competitive disadvantage. corporations. p. and the goods and services are distributed so effectively by competitive markets. Adam Smith’s "invisible hand" argument says that by giving the public a product it wants at a reasonable price. together the others build a strong position against altruistic CSR.” the uncertainty over whether business has an obligation to “give back. 1992. employees will benefit through higher wages (and. Some still view the enterprise as having a purely economic role. The maximum economic benefits for society will be produced. from an economic viewpoint. There is no foundation for the firm acting out of purely benevolent motives. Thus.25 In short. the microeconomic theory of Pareto Optimality says that free-market forces ensure that maximum social benefits will be achieved at minimum social costs when each company tries to maximize profits. in some cases. While the latter two arguments are flawed.” the undue influence which companies might gain over society through their largesse. the assumption of Pareto Optimality breaks down if we do not have perfect competition. where no market participants can control or influence the marketplace. I will now examine criticisms concerned with what the proper role of a business organization is. However. Similarly. enabling it to employ more people and contribute to the community in the form of taxes. A set of philosophic objections concerns the proper roles of government. through stock ownership/profit sharing). “modern corporations bear about as much resemblance to Smith’s self-sufficient farmers and craftspersons as today’s military complex bears to the Continental militia” (Shaw and Barry. all of the pro-altruistic CSR arguments really only hold for ethical CSR or strategic CSR. the difficulty of deciding what is meant by “socially responsible. . Society's scarce resources are used so efficiently by producing firms. If a company makes a profit. businesses unconsciously transfers the profit motive into consumer welfare. However. and the company will grow. 216). that it would be impossible to make any single person better off without making some other person(s) worse off. and individuals in society.

since several ways of increasing profits actually hurt society. and if they are absorbed by the firm and factored into the prices that companies pay—that is. and even the unintended societal impact of advertising (Pollay. economists argue. profit is an incomplete measure of social performance and therefore a nonaccurate measure for resource allocation (Rivoli. companies have an incentive to stop polluting. "environmentally friendly" products reduce pollutants and waste so that pollution costs are not borne by and charged against the profits of other companies. unintended side effects of business activities that result in costs to society that are not reflected in the company’s cost structure and are not considered by the neoclassical economic model. such as deceptive advertising. and price fixing. towns. bribery. 2000. companies need to go beyond maximizing profits and consider whether their actions are serving society by avoiding unreasonable harms. these are costs of production. and entities. if they are internalized—then. the costs of pollution control are often not internalized but passed on to workers. instead of being able to use air and water as free resources. Since the industrial revolution. consumers. This ignores controversial or “socially undesirable” products like recreational drugs. a business causing air or water pollution should dispose of waste in an environmentally safe (albeit more expensive) way or pay for the damage the waste does downstream. Note that the problem of externalities falls outside the realm of altruistic CSR. In economic theory. either voluntarily ( ethical CSR) or via government regulation. Then the price of this firm’s widgets will reflect their true social cost. 344). tax evasion. When externalities are present. Internalizing the externalities voluntarily might also be practicing strategic CSR in that such companies keep government out of their decision making (Boatright. However. For instance. companies have attempted to internalize the benefits and externalize the costs of their actions where feasible (Freeman. Forced to pay the true cost of pollution. . In imperfect markets. 2001). and the public as spillover effects or externalities because government fails to perform its role to police such activities. job-related accidents. One reason is externalities—deleterious. Thus. injuries to customers by defective products.26 successful companies can be less than fully efficient and less than entirely satisfy consumer wants. 1986). p. Examples of such unintended consequences of business activity include pollution. Thus. the market itself takes care of the problem. the problem of damage must be addressed directly in business decision making. Another difficulty with the economic argument is that it assumes that producing whatever the buying public wants is good. 1996).

since here we are discussing what is morally good or bad. 2000). and to punish evildoers. Nobody but a diehard libertarian would advocate giving customers whatever their hearts desire. there is redistribution of income violates the 8th Commandment against theft (Ahlseen. But. etc. governmental redistribution of income. Friedman (19960 and Levitt (1983) seem to believe that it is government’s obligation to provide for all kinds of individual and community needs.” Although this suggests that government is responsible for holding companies accountable for the harms they create (Trevino and Nelson. Our Founding Fathers understood that the right to “pursue happiness” meant that others could not infringe on our right to obtain these things. and pornography. The question is. 2000). Unfortunately. One other systemic problem with unbridled free markets is the sometimes exclusion of minorities and the poor. In fact. or business for that matter. to voluntarily provide funds for societal needs. either through our own means or with the help of others. not altruism. the proper. The right to education.S. which Friedman’s adherents feel government should implement as an alternative to corporate benevolance (Boatright. receive inadequate income to participate in many product markets and consequently cannot maximize their own satisfactions in any meaningful way. Wal-Mart refuses to carry CDs with lyrics or cover art it finds offensive (and in the process probably actually satisfies a customer group larger than teenagers—their parents). discrimination against the needs of segments that are too uneconomic or small to serve. 2000). not that the government. It is observed that these groups. health care. civil government should not provide for welfare. Nowhere in Scripture or the Constitution is there a call for progressive taxation and forced. must provide them to us (at taxpayers’ or stockholders’ coerced expense) (Ahlseen. 1999). It is the duty of individual citizens. not to provide all kinds of “public services” and “free lunches. Constitution is to preserve peace and order. we are considering ethics. promote justice and enforce the law. such compulsory In effect. the market does not always correct such abuses. means we have the right to obtain these.27 liquor targeted toward children and alcoholics. who should provide for their needs? This again raises the question of the relative roles of business. For example. However. . because they lack ownership of any of the factors of production beyond their unskilled labor. sometimes collectively through dedicated organizations. and private individuals in promoting the general good. handguns. government. limited role of government as found in both the Bible (especially Romans 13:1-7) and the U.

and even on occasion eliminate important aspects of public life (Brenkert. 1996). Once you add social goals to the demands of serving customers. We should not expect corporations to do what they are neither competent nor organized to do…” (p. or lower the wages (price of labor) of your workers. Devotion of corporate resources to social causes is contrary to an implied contract with investors to maximize their profits and is. not part of their proper economic role in the business system (Friedman. transform.” we would still end up with unelected businesspeople substituting their judgment of what constitutes the social good for consumers' beliefs or the views of elected policymaking officials. Friedman. DeGeorge (1990) warns: “There is great danger in expecting corporations to take upon themselves the production of public welfare. your business suffers and stockholders starve. an improper corporate function. because they already have enormous power and are not answerable for its use to the general public. Since these arguments concern harms. 74). 1996). thereby taxing them. Alternatively. not business. the “Adam Smith’s invisible hand doesn’t work” arguments. Corporate responsibility for public welfare threatens to reduce. Executives become unelected civil servants with the power to tax some group(s). ). p. Politicians are elected by the public and are expected to have the common good as their end. (Benkert. 1995). It should be the role of individuals. In effect. In the case of provision of welfare. 1996. while meritorious. 1996). 1996). you must raise the price to your consumers. to provide for such needs since for business to go beyond profit maximization would not be in shareholders' best interests and would constitute social engineering. .28 To conclude this discussion on the economic role of business. The corporation is not a welfare agency. they are relevant to ethical CSR and should be taken seriously by managers who would like to replace the hand of government with “the hand of management” (Goodpaster and Matthews. and corporations become government agencies. you are taxing the owners via deliberations that do not include their representation ("taxation without representation") and spending these taxes on social causes. are actually irrelevant to altruistic CSR. There does not appear to be any instances of a corporation deciding which causes to support and to what extent by polling its stockholders (Bowie. 1982. 171). and making a profit for stockholders. but is rather an economic association with specific and limited responsibilities (Novak. 1996 Although polling stockholders on proposed CSR initiatives might help solve the problem of “taxation without representation. in the process taxing them (Friedman. tantamount to stealing stockholders’ money. employing workers. individuals and charities provide a better option to government and business. in effect.

the unpopular “healthy” McLean Deluxe burger (made from seaweed extract!). public hearings. DeGeorge. and sunshine laws (Brenkert. 2001).. although it many political conservatives argue that state welfare also tends to keep its recipients dependent. 2001)." as President George W." (Shaw and Barry.29 Another cited problem with business assuming the (illegitimate) welfare role of government and the (legitimate) welfare role of individuals is that those needing welfare assistance tend to be the powerless. teaching him to fish).e." and accused the company of clogging American arteries and hyping high blood pressure. but only of individuals. 1992) i. 1990). they lack the moral and social expertise and authority to make noneconomic decisions for improving society (Freeman. 1996. with the result often being unintended consequences of managers’ well-intentioned actions. Nonetheless. and otherwise helping people to help themselves (giving a man a fish vs. often working collectively. this gives rivals the opportunity to jump in and fill the void. The kind of help provided by these groups is on a "small and human scale. which keep food hot. labeled the McFare "junk food. McDonald's treated the customer who has no health problems as the exception rather than the rule. The end of the matter is that altruistic social responsibility is neither in the proper domain of business nor of government. Corporate responsibility for their well being tends to perpetuate their dependency since there is no formal relationship between the enterprise and the aid recipients. at least with the welfare state there are safeguards and guarantees not imposed on corporations. No one consulted the customer about tasteless fries with less salt. Fortunately. representation. this . the market is usually able to correct such mistakes when customers are the victims—if one business does not meet consumer needs very well. However. educating children. A second major area of concern about the properness of altruistic CSR is competence—it is objected that corporate executives are "inept custodians. For instance. However. Bush remarked during his graduation speech at Notre Dame (Colson. this argument would seem to be more applicable to CSR in the form of outright grants and gifts rather than CSR involving training workers. such as voting. Consequently. in the mid-1990s McDonald's responded to pressures from a small but very vocal group of noncustomer environmentalists who protested the waste of disposable containers. 1990). Very few businesspeople have special qualifications in defining and acting in the public interest. and hence the division between the powerless and the powerful continues (Brenkert. and abandoning foam containers.

and so on. At the conservative end of the spectrum is the evangelical Christian Timothy Plan fund.” and fighting for “gay rights. The question is. hence. supporting “faithbased initiatives. while others might view them as ethical CSR to right past social injustice in treatment of minority groups. For instance. as it is becoming . liberals and conservatives have very different viewpoints on issues such as the value of recycling. “Whose agenda and values should be followed?” For instance. it appears that most are unwilling to take the time and effort to do so.” providing “safe sex” education to teens.30 problem of managerial ineptness in the social realm is not necessarily subject to market forces when the recipients of “aid” are outside of the firm’s business arena. ridding the Internet of “smut. Funds with a liberal worldview (e. there is little consensus on what other screens are appropriate. companies would be wise to avoid controversial causes. Although. affirmative action programs might be seen as some as altruistic CSR to promote diversity in the workplace and. in that case optimizing the bottom line underlies all decisions. walking a fine line between conservative and liberal critics of philanthropic giving. 1983).” Therefore. the Calvert and Domini groups) tend to shun environmentally insensitive companies. alcohol. although drawing the line between ethical CSR and altruistic CSR is at times difficult— what some view as affirmative duties might be seen by others as correction of social injury (Simon et. although as we shall see. before or after taxes) or an absolute amount. the general welfare. al. There are also so many debatable issues beyond what constitutes a worthy cause. or employers of child labor. they can investigate for them selves. whether it should be a certain percent of corporate income (and if so. if individuals are concerned about their corporations investing in the “wrong” causes. Such questions are virtually impossible to answer to everyone’s satisfaction for altruistic CSR and are even difficult for strategic CSR.g. Whether the issue is altruistic or strategic CSR. It is generally easier to enjoin and correct an ethical wrong than it is to prescribe affirmatively what is good for society. firearms producers. which boycotts companies that provide health benefits to the partners of gay employees and firms that profit from pornography and abortion. nuclear power generators. such as how much money should be given. Opponents of altruistic CSR also suggest that individual initiatives are preferable to managerial actions regarding philanthropy because what exactly is "socially responsible” becomes debatable in a pluralistic society. and gambling. while most “socially responsible” mutual funds filter out companies involved in tobacco.

this argues for ethical CSR but not philanthropic CSR since. 2001).31 increasingly difficult to avoid offending at least one important constituency (Carroll. The final two objections to humanitarian CSR seem to have little basis in fact. right-tolifers noisily stood outside the stores cutting up their credit cards. U. West gave funds to the Boy Scouts of America and was beat up by gay-rights activists because the Scouts fought for their right as a private association to exclude openly homosexual leaders. Upon withdrawing support from the Boy Scouts. environmentalists. and community citizens. However. what this viewpoint overlooks is the previously-discussed notion of special duties. employees (increasingly so with stock options and profit sharing).S. 2001). CSR advocates suggest that businesses have a special obligation to do more than the rest of us. One concerns the undue influence over society it might grant business. Another argument against philanthropic CSR is that the notion of “returning” something to the community and "giving back" to society for the firm’s good fortune is fallacious. But recall tat this line of reasoning is only valid regarding ethical CSR. U. Even “safe” groups with broad public support can at times become controversial. 2000). As an economically and socially powerful institution. stockholders can contribute to causes of their choosing out of their own pockets. it is because you and I have exactly the same obligations. West upset conservative religious groups (Carroll. as private citizens. such as when some local United Way chapters withheld funds from the Boy Scouts over the homosexual issue and rose out of favor with many conservatives. Another argument against philanthropic CSR is that shareholders are also consumers. When the retailer then contributed to right-to-life groups in an effort to appease them. Dayton Hudson incurred the wrath of the pro-choicers. and so stockholders are affected when corporations fail to act responsibly (Boatright. If businesses have obligations to do something for society. A wellpublicized example was when retailer Dayton Hudson made a contribution to Planned Parenthood. as do professionals as privileged members of society. Companies should support causes that will be favorably received by their targeted constituencies. perhaps business does have special obligations. However.S. Theodore Levitt argued that corporate responsibility for . not social CSR. Critics reply that the obligations of business extend no further than the obligations all human beings have to each other. to do special things for society or to solve society's problems. In a similar dilemma.

which then leads to higher productivity. the fear that corporate CSR will result in a radical re-division of power in society seems to be unfounded. In fact. and probably usually. the objection here to is strategic CSR. Alternatively. This will supposedly happen because if business starts doing the “government’s job” (Bowie. it is alleged. Another objection is that humanitarian CSR will put the firm at a competitive disadvantage since social action entails costs that competitors need not bear (Smith. 1998).g. Or. 1983). many of whom are individuals counting on the returns to meet future needs) does not benefit in the process.. neither business nor government are monolithic institutions at present. not altruistic CSR. For example. there does not seem to be any evidence of this happening since Friedman first warned of it over thirty years ago. this might or might not be the case as there are possible publicity and goodwill that can accrue to the enterprise from CSR. Moreover. again.32 welfare threatens to reduce pluralism and to create a monolithic society (Levitt.-government problem in that altruistic CSR could supposedly create demands for public participation in corporate management or governance (e. election of managerial social servants through a political process). good works are just a publicity stunt or a public relations ploy. There is no doubt that companies practicing social responsibility often. . business will be granted an excessive concentration of power which would threaten the pluralistic division of powers among our various social institutions. Goodpaster. 1996). seats by members of each stakeholder group on the board of directors. Companies usually become good corporate citizens because it makes good business sense. 1996. "giving back" to the local community might make it easier to attract desirable employees. However. This relates back to the roles-of business-vs. threatening the private role of the corporation (Friedman. thereby threatening our democratic freedoms (Smith. 1998). However. with Big Government and Big Business merging into one powerful group at the sacrifice of our democratic institutions. However. in which case it is strategic CSR. 1995) the government will take over business. Somehow the critics find CSR worthy only when business (stockholders. skeptics say that often. In short. and it is doubtful that they ever will be. volunteerism can lead to higher employee morale. have ulterior motives. and the basis for a philosophical objection to business killing two birds with one proverbial stone (doing well while doing good) is unclear.

While participating in these might give the appearance of corporate caring and thereby generate some goodwill.. 2001). that such efforts are merely appealing to an already materialistic society. such as ego gratification and pleasure (Cornwell et. educational materials for the public schools that include a religious message would violate the constitutional separation of church and state. when such strategic CSR efforts cross the ethical line. where there is separation of ownership and managerial control. a conflict between the interests of managers and shareholders where managers use CSR as a means to further their own personal agendas at the expense of shareholders (McWilliams and Siegel. An example from strategic CSR is corporate sponsorships of sporting events. managers will be tempted to be poor stewards of corporate resources and consume excessive perquisites. p. nepotism. i. 1996).g. and accepting "gifts"). As a vast literature in economics. For instance. the arts. and such.” although it can just as easily be said that this is already occurring through traditional marketing activities such as advertising and retailing (Shaw and Barry. This is “philanthropy aligned with profit motives” (Quester and Thompson. . Grayer but still ethically dubious is liberally sprinkling such materials with the corporate logo or slogan (Brenkert. 2001). 2001.. With strategic CSR. then the critics have a point. golden parachutes. corporations “give back” to their constituencies because they believe it to be in their best financial interests to do so. Many such CSR efforts are said to foster the “materialization of society. Stakeholders outside the stockholder group are viewed as means to the ends of maximizing shareholder wealth (Goodpaster. Friedman (1996) believed that CSR activities are indicative of an agency problem arising from separation of ownership and control. feathering their own nest at the expense of stockholders (e.33 Nonetheless. 1996). al. 2001)— social goals might be profitable in the long run since market forces provide financial incentives for perceived socially responsible behavior. 1992) or. Thus. 200) is done to accomplish strategic business goals—good deeds are believed to be good for business as well as for society. one explanation for some humanitarian CSR activity might lie in “ego” or agency costs.e. finance. more likely. Strategic CSR Strategic CSR or “strategic philanthropy” (Carroll. and accounting demonstrates. the major motivation might be the non-pecuniary benefits which managers enjoy from participating in such events.

and Ford gave away one million such seats. However. and Carroll (2001) expects it to grow in the years ahead. p. it usually ultimately results in long-long-gain. 1996). “We view corporate social responsibility as an asset [emphasis added] we continue to nurture and grow. and so on. These long-term benefits might not immediately show up on a firm’s financial statements. I would argue that this is certainly preferable to politicians “bringing home the bacon” (theft of other citizens’ bacon) in order to curry voter favor and loyalty. Expenditures on strategic CSR activities should properly be viewed as investments in a “Goodwill Bank” (Vaughn. why is it that philanthropic behavior of wealthy . at best. Ford spent millions of dollars on an advertising campaign to convince parents that most 4-to 8-year-old children should ride in booster seats. Cynics carp that strategic CSR is self-serving and somehow impoverishes the notion of citizenship (Brenkert. or renovating the local park if. The idea is that while being socially responsible (and ethical. 199) which yields financial returns (McWilliams and Siegel. 2000). as a result. asking government regulators to stay at bay. And. 1996). Also. we might find a corporation practicing strategic CSR by providing charitable good deeds such as providing shelter for the destitute. corporate generosity can grow the size of the economic pie and thereby contribute to generating new wealth. government regulators. Leatherdale. 1999. recommending it to others. 12). 2001. p. For instance.34 Such strategic philanthropy grew popular beginning around the mid-1980s (Jones. chairman and CEO of The St. as is true of economic outcomes of many marketing activities. Unlike government largesse. Thus. 2001). Paul Companies. it will benefit our company and its shareholders” (Business Ethics. building a museum. such as marketing research and image-building advertising. those helped will feel grateful and indebted to that organization. 1997). a zero-sum game. which raise children in auto seats so that adult seat belts fit better. As Douglas W. The goodwill generated among customers. In the long-term. a company is wise to make deposits in this bank of goodwill in order to make withdrawals when it comes under fire. some of those not directly helped will still look more favorably on the firm and thereby turn their loyalties toward it (Brenkert. said. Providing for good works from the corporate coffer is therefore compatible with Friedman’s neoclassical economic view so long as the firm reaps indirect financial benefits (Boatright. too) often entails short-run sacrifice and even pain. and will reciprocate in various ways by giving it their business. It’s a critical part of how we do business and balances the needs of all our constituents. Also. and consumer advocates from such efforts might likely justify the investment. which is.

These are to: (1) communicate frequently and fully with investors. Ben & Jerry’s. all but the obligation to respect the law seem to be optional altruism that nonetheless can potentially profit the firm. and Tom’s of Maine (Boatright. I would add. and other constituencies in order to gain their support. Smith. The problems with Novak’s (1996) other three responsibilities are that it would appear to be difficult to directly link them to the firm’s welfare. 2001). 2001).35 individuals is usually very publicly recognized. to help the stockholders while aiding other stakeholders. shareholders. suggesting that all are ultimately necessary for the survival of business as an institution. now the federal government encourages such publicity via the Ron Brown Award for leadership. The wisdom of strategic CSR is seen in the fact that some of the most successful corporations are also among the most socially responsible. and rivals could also hitchhike off a company’s efforts. Nonetheless. hence productivity. While he views these as moral responsibilities. which goes to companies whose programs improve the well-being of employees or enhance the communities in which they live and work (Jones. 2000. 151) by accepting some responsibility for the television programs (and. many consumers are eager to do business with businesses they believe are ethical and have a social conscience (Rae and Wong. other media environments) in which they advertise. it is perhaps because of the cynics that most companies say they shun publicity for fear of making their efforts appear insincere (Jones. teamwork. 1997). Three of Novak’s extra-legal social responsibilities would appear to directly benefit a business. 1996). with some of the most prominent examples being the Body Shop. customers. This should help enhance the organization’s reputation. employees. whereas if corporations are generous we view this as somehow tainted? There is nothing morally objectionable to doing well while doing good. 145). and yet we do not claim that their behavior is less worthy. (2) establish within the firm a sense of community and respect for the dignity of persons. Yet. and. With all of the media attention focused on corrupt business ethics over the past two decades. and (3) protect the “moral ecology” (p. Types of strategic CSR Novak (1996) makes a strong case for his seven “responsibilities outside business” (p. and denigration of either business or religion. fulfillment. violence. which should foster motivation. avoiding shows laced with sex. The first of .

An indirect benefit of this. although this these studies . Novak urges businesses to encourage employees to volunteer for civic activities and to be good citizens in the local community. Thus. caring for the environment and the elderly. This responsibility includes welfare activities such as contributing to not-for-profit institutions and charities. meeting the needs of marginalized groups such as the homeless and the poor. Unresolved issues with strategic CSR One unsettled difficulty lies in ethically and strategically balancing the tradeoffs among stakeholder groups. while customers would prefer that more money be spent on improved products or that prices be lowered. hence. is less government involvement in these affairs. since the survival of business depends on the survival of free institutions. he does not offer clear guidelines on how to achieve this. The second indirectly advantageous social responsibility is to uphold social justice. retirees. the least likely to earn the firm any financial return. Although Freeman (2001) argues for the need for balance in serving the various constituencies. If businesses practice these two responsibilities through simple exhortation and encouragement. in my view. For instance. research studies have found that short-term profits sometimes increase and at other times decrease when executives include social objectives. Another issue is that the empirical evidence on the effectiveness of strategic CSR as a good investment is equivocal—it is not clear whether socially responsible corporations outperform or underperform other companies (McWilliams and Siegel. businesses should encourage their employees. Novak believes. Especially industry giants can serve as an example and create a standard for others to follow. 1999). 2001. Although in any given case it is difficult to quantify the returns to social responsibility. Some research shows that companies that practice social responsibility prosper in the long run. they would seem to be low-cost efforts that should not detract from their bottom line. Trevino and Nelson. This is the duty to contribute to making the surrounding society a better place by taking a leadership role in that society. and so on.36 these indirectly beneficial social duties is to protect liberty’s political roots. Thus. and shareholders to participate in politics. it should be practiced only when it can be clearly demonstrated to yield a return on investment. The third indirectly beneficial responsibility however is potentially expensive and. employees want higher wages and benefits. since for its welfare and survival business depends on its members being active in civil society. outside of its goodwill value.

not causal. Then. One researcher even found a curvilinear relationship. and better relations with managers and co-workers as a result of the hotline. p. Although he was apparently motivated by humanitarian considerations. it is also possible to go overboard regarding strategic CSR—as is true of all marketing expenditures. p. Domini& 4 This is not to suggest that Feurstein did this with strategic considerations in mind. and filling no landfills. reputation. But we’re not able to quantify [italics added] the gain in managers’ time” (Daviss. “We’ve documented increases in productivity. research and development. Ray Anderson built Interface Inc. and popular opinion (Miller and Ahrens. 1999). there is the well-known case of the Malden Mills factory in Lowell. such as the value of employee morale. Massachusetts that burned to the ground during the 1995 Christmas season. 1993).37 are neither conclusive nor exhaustive. For instance. just as it is possible to overspend on computers. with the human resources director explaining. the research evidence is correlational. 4 Harder evidence of the pecuniary benefits of CSR can also be found. Lydenberg. releasing no pollutants.. anecdotal evidence of CSR’s effectiveness. and other investments. recycling everything possible. when positive correlations were found. 2001. The result: productivity in the new facility rose by 25% and quality defects dropped by two-thirds (Daviss. p. returns for the Domini 400 Social Index. owner Aaron Feuerstein continued to pay workers’ salaries and benefits until a new plant was built. “socially responsible” businesses monitored by the investment advisory firm Kinder. When Marriott set up a 24-hour multilingual hotline whom employees with personal problems could call for help. 2001. 2000. This suggests that. nor do they clarify causality (Business Ethics. with moderately socially responsible firms being more profitable than very high CSR and very low CSR organizations (Singer. 195). 209). there is apparently an optimal level of spending on strategic CSR. There is plenty of soft. it was not clear whether social responsibility led to increased financial performance or whether better economic results yielded surplus funds corporations could devote to social performance (Trevino and Nelson. 2001).208). a group of 400 publicly traded.. Thus. morale. his good deeds prospered him in the long-run. corporate image. a billion-dollar international carpet manufacturer by becoming the world’s first environmentally sustainable manufacturing enterprise. A problem in assessing the effectiveness of CSR efforts is that factors contributing to profits in this arena are often qualitative and hence difficult to measure and quantify. public relations. Nonetheless. . Marriott’s turnover was cut to 35% compared to an industry average of 100%. advertising. Nonetheless. For instance. goodwill.

returns to strategic CSR should rise. (Carroll. 2001).g. seldom . p. p. the trend will likely be toward funding only those good works expected to financially benefit companies (Carroll. 2001). The New Economics Foundation). it seems reasonable to suppose that these publics also have responsibilities to the business. The future of strategic CSR Due to belt tightening and increased pressure for accountability for expenditures. Social audits are either conducted internally by company personnel or externally by ethics consultants.. The Iron Law of Responsibility will continue: “In the long run. consistently beat those for the Standard & Poor’s 500 (Daviss. or a Board of Directors audit committee. and the stakeholder model mandates that each stakeholder has reciprocal duties with others. while business ethicists frequently discuss the unjust treatment of employees during plant closings. Like corporate ethics codes. since both the corporation and its constituencies can affect the other in terms of rights and responsibilities. 2001.38 Co. Recall that the corporate social contract should spell out society’s expectations of business as well as business’ expectations of society. What these duties entail has hardly been discussed. in view of rising public expectations for corporate good works. Reciprocal Stakeholder Responsibilities One last consideration for strategic CSR planners is the notion of reciprocal stakeholder responsibilities. More companies are conducting such audits to rate their social and environmental performance. they will increasingly be used as public relations tools. 209). We might also find social audits becoming almost as common as financial audits. 2001). For example. Social responsibility is rightly thought of as a shared duty. we must be able to determine the parameters for the reciprocal duties of corporate stakeholders to the organization. Other quantitative research also attests to the business performance gains from CSR (Daviss. 344). Shareholders and special interest activists will place greater pressure on businesses to be audited by these entities. If management has certain duties to its constituencies. Bowie (1995) suggests that if we are to have a truly comprehensive theory of CSR.. social auditing organizations (e. Freeman (2001) notes that the “stakes” in the stakeholder model are reciprocal. those who do not use power in a manner which society considers responsible will tend to lose it” (Boatright. 2000. Nevertheless.

They create. parts. people who do not contact companies about advertising they find offensive or misleading. is a collective responsibility. Marketers have an opportunity to take a leadership role. who have the duty to evaluate corporations in which they invest not only in terms of financial security and expected return but also vis a vis their ethical and social performance. In fact. People who use electricity are responsible for the smoke that comes out of the stacks of the generating plants” (quoted in Solomon. For instance. “the people responsible for pollution are consumers. and even consumers themselves. another group with social responsibility is stockholders. encouraging other stakeholders to take social responsibility too. to be divided among all stakeholders. outside partners and vendors such as suppliers of materials. retailer. Marketers are especially interested in the consumer’s responsibilities. or at least not denigrate it. 259). 1995). as well as marketers. not producers. and customers who turn a blind eye when they learn of businesses which engage in any kind of illegal or unethical practices. government agencies. or Better Business Bureau. the media and other marketing communications carriers. 1994). it would seem that the environmentalists. However. and services. p. environmentally friendly products which cost a bit more or cause consumer inconvenience (such as Downy fabric softener in concentrated form which requires less packaging but which also is less convenient because it must be mixed with water) have not been big sellers. Besides consumers. Friedman suggested. but not the manufacturer. as do “ethical investors. Similarly. including. perhaps employees have a duty to speak favorably about a company (Freeman 2001). demand for pollution.” Even if one’s knowledge of . retailers. then. Social responsibility for marketing activities. as it were. wholesalers. marketing research firms and other information vendors. Yet. Other consumer examples of social irresponsibility include buyers who complain about poor-quality products to their friends. should share some of the burden of educating the public about the importance of adopting such products. In this case. it is often possible for consumers to refuse to support polluting businesses or be willing to pay more for pollution control.39 do they criticize employees who leave a corporation on short notice to take a better job (Bowie. rarely mentioned in discussions of CSR (Solomon. and other distributors. customers have an obligation to support socially responsible firms rather than socially irresponsible or socially indifferent businesses. consumer protection champions. advertising agencies and other marketing communications creators.

1994). including marketing VPs. president. As the business function most closely related to satisfying and communicating with most of the organization’s constituencies. marketing should take a leadership role in responsibility for CSR. and other facilitators such as transportation agencies and the media. and demonstrating devotion to these values and visions by actions (not just words). CFO.and vice-president-level executives. suppliers of services such as advertising agencies and marketing research agencies. This consumer marketing social responsibility (CMSR) is marketing’s duty to society to advance life. effectiveness. and the general welfare of consumers through value-creating marketing activities that increase the efficiency. . rewarding every attempt to advance these values and visions. top-management commitment to strategic CSR is key—commitment is signaled by chief executives (CEO. CIO. Others who share collective responsibility include competitors. who can also refuse to do business with socially irresponsible or indifferent businesses. Suggestions for Managers and Researchers Managerial implications Senior management leadership for strategic CSR is vital. who should recommend that their partners do business in a socially responsible manner or else refuse to deal with them. including chief marketing officers. encouraging groups and teams to invent and innovate new CSR ideas that conform to these values and visions. that is usually sufficient to let one know what he or she is supporting (Solomon. Therefore. who can blow the whistle on others in their industry who they think are being socially irresponsible. etc. It is their behavior that serves as a model and message-sender to all. One of the most important factors in the literature on corporate cultures is the influence of leaders within the organization. liberty.). and making everyone feel like a winner in these efforts.40 the business is limited to news reports or reading the quarterly or annual report. listening to everyone's ideas. Leaders of corporations should discover and communicate a few simple shared values and visions that form a common ground upon which all ethical and strategic CSR activities can stand. COO. and enjoyment of economic life while benefiting the firm. proclaiming them continuously. and affirmation by the board of directors .

following Simon et.. suggests several criteria for establishing groups to target.41 These values and visions and the business’ commitment to strategic CSR should be embodied in a corporate credo—a succinct statement of the organization's philosophy of business and core values (e. and must be made clear in some sort of a public forum. 1993) In most cases customers and employees are the two groups whose welfare seems to be most closely linked to the business and therefore whose needs and wants should generally be given primacy.) and ethical and social responsibilities to its stakeholders. These are groups: (1) with an urgent need. Socially responsible marketing boils down to providing consumers with products of genuine value which will enhance their physical or psychological well-being. considering the relative importance of each stakeholder group to the company. and (4) for which the likelihood is high that the need will not be met unless a corporation acts (called the “last resort” criterion). Targets for strategic CSR. not just public relations fluff stuff to look good in employees' and the public's eyes. I will also briefly examine government and special interest groups as frequent targets of strategic CSR. respect for people. “To train twenty povertylevel adults to perform such-and-such by the end of the fiscal year. including expected benefits to both stakeholders and the firm (e. The balancing act among stakeholder groups is always a tricky one. Mission and vision statements can be used to make the values and firm’s commitment to CSR clear among the company’s many external constituencies as well as to motivate employees with a vision worth getting up out of bed for in the morning. etc. the last resort criterion is less useful (Smith and Quelch. and to achieve awareness of twenty per cent in the community regarding our involvement in this activity”).g.” strategic CSR must be targeted to receptive publics.g. pricing them at a level that yields a fair return to the firm but which is . continuous improvement. al’s (1983) criteria for determining ethical responsibility. Measurable and achievable goals should be set in each of the CSR activities. Because of the danger of assuming someone else will act or not acting because one assumes the need is not strong since no one else is acting. socially responsible. These should be sincere. focus on the customer. Companies can use strategic CSR to boost consumer patronage and loyalty and worker morale and loyalty.. Boatright (2000). and solutions to resolving tradeoffs must usually be found on a case-by-case basis. To minimize the problem of pluralism regarding what is. (2) in close proximity to a corporation (3) a corporation is capable of responding to effectively. Marketers have a noble calling—to serve and satisfy consumers’ legitimate needs. in fact.

a survey by the Public Relations Society of America revealed that one of the industry’s ten hottest trends was social issues marketing—celebrating a company’s commitment to public issues as well as to its products and customers (Carroll. Also common is giving to local community endeavors. which involves linking consumer purchases of a firm’s products with fundraising for worthwhile causes or charitable organizations. service. Cause-related marketing. A 1994 study by Walker Research and Analysis found that 88% of consumers claimed they were much or somewhat more likely to buy from a firm which is socially responsible and a good corporate citizen if quality. and promoting them with honesty and in a wholesome environment (Dunkerton. while 92% said they would be much or somewhat less likely to buy from a company that lacks social responsibility (Smith. 2000). 1997). 2001). Very common areas of activity here are sponsorship of the arts and marketing-driven sponsorships (Quester and Thompson. notably through “leveraging” these activities via marketing communications such as publicity and advertising. Stodder. By 1992. 2001).42 also done with integrity. Clearly. For instance. It is effective because of consumers’ growing social consciousness. marketers have an important role to play in strategic CSR designed to enhance customer goodwill and provide a way of differentiating the company and its products (McWilliams. 1999). 2001. p. although abuses have somewhat curtailed that practice. . 1990). Case studies suggest that cause-related marketing is effective in boosting brand loyalty and preventing the onset of commodity status for a brand (Dupree. consumers now buy products as an expression of their own social consciousness. such as being pesticide free and nonpolluting. consequently. and price are all comparable to those of competitors. Surveys that are periodically reported in the press attest to the fact that consumer responsiveness is a mandate for CSR. 155). 1990). distributing products effectively and efficiently (Chewning et. has grown exponentially over the past few decades. During the 1990’s. the retailer Target boldly proclaims in their advertising campaigns that they contribute large percentages of their profits back into their communities. 2001. A 1997 Cone/Roper survey revealed that 76% of consumers claimed they would switch brands or stores that seem concerned about the community (Jones. many companies practiced “green marketing” for the goodwill they imagined they would get from touting a brand’s social attributes. al.

" Thus. 2001. “This is not a marketing effort.” (Garcia. and with stronger community ties. 2001). 8B). Employees should be evaluated on not just financial criteria. most efforts to help employees will yield business benefits. p. nor money. 2001). "Our assets go down the elevator every evening. workplace amenities such as recreational facilities and on-site childcare. Thus. 1997). 2001). 2001. Consumers also tend to think. and productivity (McWilliams and Siegel. For instance. manpower. Efforts here can include “progressive” labor relations policies. social attributes such as “environmentally friendly” or a “caring company” can serve as signals of product quality. financial security. the marketing value was clear: it gave the bank an opportunity to tap into the rapidly growing Hispanic market. Texas police to offer bank accounts to undocumented workers who are often targets of violent robberies because they must carry cash. In return. “Those are pretty good folks. An organization's greatest resource is people. Employees should see their peers who have modeled ethical and socially responsible behavior .” the ban’s regional president admitted (Garcia. Wells Fargo Bank teamed with Austin. workplace safety. I ought to give them a chance” (Harvey. Marketers know the importance of internal marketing. more reliable and. not property. The consumer psychology is that companies that actively support CSR are honest. The rate of return on human capital can be higher than the rate of return on physical or technological capital. One-third of large companies now have a formal policy whereby they pay workers or give them release time to do community volunteer work. morale. though we’d hope that people far and wide discover and use the program. Employees are a second vital target of strategic CSR efforts. businesses expect to be rewarded with increased worker loyalty. flextime and job sharing. 8B).43 Opportunities are limited only by the marketer’s creative imagination. which lessens their propensity to move elsewhere for a different job and also aids recruitment (Jones. An old adage in the advertising industry is. p. hence. but also on ethical and social responsibility criteria. Studies have confirmed what managers have suspected: workers who do volunteer work for something they find meaningful return to their job more motivated and fulfilled. produce high-quality products (McWilliams and Siegel. Although the bank’s regional president said they were doing this because “It is just the right thing to do. especially to front-line employees: if they are happy. they will more likely work to satisfy customers. and matching employee contributions to charity.

such as via personal presentations and testifying at congressional hearings. even if there was a short-term cost to the bottom line (so long as there is believed to be a long-run return to the firm’s value). 1996). it can help their cause to tell the jury about employee volunteer work for. and other corporate communications the causes they support and provide a breakout of the costs and benefits of their various CSR efforts. and letter writing. (Smith. 1996). if a firm is sued for. For instance. Legislators and regulators are another important public for strategic CSR. annual reports. Also. if favoritism is sought. They need to state in their investment prospectuses. minority literacy programs (Jones. Additionally. management can poll stockholders to determine their preferences for areas of strategic CSR the company should get involved in or to get them to specifically approve the company’s CSR activities when they cast their annual proxy vote for the election 5 . Strategic CSR might also be done with a view to minimizing government regulation. and releasing research results.5 Strategic CSR can also be used to keep at bay public-interest (special-interest) groups—non-profit organizations that have been founded to promote a cause perceived (at least by their members) to be in the “public interest.” These groups are important constituencies since they can bring pressure to bear via direct lobbying of government officials. racial discrimination. Strategic considerations. it is in a company’s best interests to target those individuals or organizations which promote the firm’s own values and agenda (Brenkert. organizing boycotts. say. in the real estate industry. 1997). This will give potential and current investors “informed consent” in deciding to purchase shares (Rae and Wong. 2001). if these outfits are viewed as good community citizens. whereas it would be objectionable to support colleges whose professors denounce the free enterprise system. such as demonstrations. thus. companies need to clearly communicate with their various constituencies. zoning decisions are more likely to be favorable and faster. it might be financially beneficial to donate to universities doing basic research in an organization’s field. For example. As Novak (1996) suggests. this would violate canons of fairness and hence ethics. picketing.44 recognized and rewarded. builders and developers routinely need zoning clearances in order to conduct their businesses. . Thus. including stockholders. say. Of course. trying to alter public opinion through activities which will garner public relations.

it is complex to directly correlate the effort expended with financial performance measures such as sales and profits. We should discover if there are the general limits that should be set on spending on these activities. corporate reputation is slow to build and a function of many variables). and it has also been borrowed in recent years by marketing scholars. We should determine how certain stakeholder groups should be weighted in importance for targeting these efforts. Suggestions for future research A fuller theory of strategic CSR should be developed. . 2001). If stockholders derive nonpecuniary benefits from CSR. a full delineation of strategic CSR efforts. We also need a theory of how to balance the tradeoffs inherent in serving the various corporate constituencies. As is true for measuring the effectiveness of advertising and other marketing communications. In practice. stakeholder theory as it now exists does not prioritize among stakeholder groups (Freeman. since. so long as the marginal contribution margin exceeds the marginal cost of strategic CSR. For each stakeholder group we need to learn which types of CSR activities yield the highest payback. marketers will need to use surrogates for sales and profits as a indicators of CSR’s value to the firm. ESA originated in and is now widely accepted in the finance and economics disciplines. and the roles of marketers as well as other functional area involvement is required. as is true for most marketing communications. these should somehow be weighed in the balance too. ESA examines the impact of a single event (or series of events) on the value of a business. In marketing.45 of the board and other issues (Bowie. 1995). Although I have drawn some general boundaries on appropriate CSR efforts. especially in view of their added societal benefits. While I suggest customers and employees are most critical. given the multiplicity of factors causing business performance and in view of the lagged effects of many CSR efforts (e. such as enhanced trust and reputation. 2001) is a useful academic research methodology which can help provide some answers. In theory. The event study analysis (ESA) technique (Miyazaki and Morgan. more companies should consider reallocating funds from traditional marketing communications activities to strategic CSR.g. Nonetheless. including reciprocal stakeholder responsibilities. Determining the amount to spend on strategic CSR is admittedly difficult. CSR activities should be undertaken.. this is impossible to do. more details on the appropriate boundaries of each of these areas.

Conclusion . Because this method would substitute communications measures of the effectiveness of CSR for the financial measures of event study analysis. it can more cleanly be associated with changes in marketing strategies than can communication variables. such as an announcement concerning a change in present and future marketing strategies of a company. The impact of the announcement is gauged by comparing the amount of change in the stock price around the event date with the predicted change in stock price based on inspecting the past relationship between the stock and the market from time series data (Cornwell et. brandextensions. al. sponsorship effectiveness has been studied using a before-after (pretest-posttest)-with-control-group design. it can be supplemented with field experimental research that demonstrates cause-and-effect relationships. ESA entails measuring how a given event. For instance. influences movement in a company’s stock price. in which “before” and “after” measures of attitudes toward sponsors and sponsorships were taken.) (Cornwell et.. celebrity endorsements (Miyazaki and Morgan. 2001). new advertising agencyclient relationships (Knowles. Pruitt. Since ESA data is only correlational.g. and Rangan. Miyazaki and Morgan. 2001). slogan changes. and so changes in information valued by the market should lead to significant changes in stock prices. 2001). 2001. Al. The idea underling ESA is that stock markets are generally efficient in that stock prices correctly and rapidly incorporate all publicly available information. I recommend that researchers use both ESA and field experience simultaneously in order to achieve convergent validity. The advantages of using stock price changes as a measure of CSR effectiveness are that this measure is free of some of the biases of more subjective metrics such as communication measures (e. image. and it is directly tied to shareholder interests since CRM activities that move the stock price significantly upward are defensible from the shareholders’ perspective.46 ESA has been used to investigate the influence on the firm’s value of new-product announcements. and special event sponsorship (Cornwell. with information perceived to signal future earnings increases (decreases) leading to a stock price increase (decrease). 1997). awareness. 2001). Mather. etc. and Van Ness. comparing control and treatment groups (Quester and Thompson. attitude. 2001).

Given the ultimate responsibility of a corporation to its stockholders. whose benefit to the company is uncertain and even irrelevant. they may do them on their own time and with their own dollar. While difficult issues remain. in view of the public’s rising expectations for CSR. and from society’s perspective. such as balancing conflicting stakeholder interests and measuring returns to strategic CSR. which financially benefits the business through serving society in extra-economic ways.” Altruistic CSR. lies outside the scope of business responsibility. If the future academic research recommended above is undertaken. the task should become easier. . ethical CSR. is the mandatory minimal level of social responsibility an enterprise owes its constituencies. should be applauded. marketers should press ahead. as the corporation’s key need satisfiers and corporate communicators. should be in the vanguard of strategic CSR efforts. strategic CSR.. If managers wish to do good works of questionable return to the firm.47 The jury is in—CSR is increasingly expected and can be rewarding for both societal stakeholders and the firm. is justifiable.e. i. and as marketers do their own proprietary research. not condemned as “self-serving. Marketers. Ethical responsibilities.

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