What is Corporate Social
Responsibility ( C S R ) ?
T
raditionally, it was believed that the
responsibility of the management was to
maximize profits for their shareholders. This
view, still shared by monetarists holds that
the goal of any corporation is to follow the
laws and legislation of the country where it operates,
and then should maximize the profits. This principle,
advocated in the shareholder value, holds that the
management has the responsibility to earn money for the
shareholders and then let them decide what to do with
it. This way, the responsibilities of the management are
reduced to economic and legal responsibilities. This view
is considered a classical view towards social responsibility.
The “shareholder value” considers the shareholders as the
only stakeholders. The main purpose of the shareholder
value is to concentrate on making profit and maximizing
wealth for shareholders. To do so, the shareholder value
rejects using resources in assets for other stakeholders,
as this could minimize the profitability of the company, as
this expenditure could represent a cost that has an indirect
impact on the consumer, who is forced to pay higher prices
for the same asset. This idea led to a concentration on
making constant profits for shareholders, even by making
short-term gains.
But the new trend is the socioeconomic view advocated in
the stakeholder value. This concept holds that companies
have a moral responsibility to the larger society. This
concept is best expressed in the CSR (corporate social
responsibility). CSR is a business concept that is based
on stakeholder value. It means instead of concentrating
on short-term gains dictated by a shareholder value
system, it concentrates on taking the interests of different
stakeholders or interest groups into consideration. Thus,
CSR is a concept or even a business model requiring
companies to have a radical change in strategy. This
strategy is best expressed in the way that there is more to a
company than return on investment and profit maximization
as all companies are also part of a bigger community. It
means that every company consists of a community of
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people operating in a social and natural environment and
therefore, companies should consider their environmental
and social impacts. From a strategic point of view, this
attitude makes perfect sense as we all operate in different
systems and all our actions will have reactions.
Looking at the integration of social responsibilities into
companies’ policies, corporations do not have only
economic and legal responsibilities but they should also
have ethical and philanthropic responsibilities to this
calculation. This approach could lead to tensions and
trade-offs as different interest groups might have different
expectations and interests. This strategy of the integration
of social responsibilities is called CSR. CSR encompasses the
economic, legal, ethical, and discretionary (philanthropic)
expectations that society has of organizations. The main
challenge is to balance these different responsibilities.
For example, the economic responsibility to shareholders
requires a careful trade-off between establishing short-
term and long-term profitability. In the short run, any
expenses on ethical and philanthropic responsibilities
will appear to conflict with the economic responsibilities
towards shareholders. But in the long run, concentrating
on the needs of other stakeholders will result in long-range
advantages for the company. To achieve this goal and
practice stakeholder value, the concept of CSR (corporate
social responsibility) was created.
Traditionally, the general assumption used to be that
resources spent for ethical and philanthropic purposes
might reduce profitability. But lately it has been assumed
that social activity can create economic profits and
therefore companies should try to establish such a
favorable position. There are arguments for the integration
of social responsibility in the company’s policies. These
include meeting public expectations, having a better public
image and discouraging further governmental regulation.
There are also arguments against the integration of social
responsibility in company’s policies. These comprise the
violation of profit maximization principle, lack of skills to
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