CORPORATE STAKEHOLDER RESPONSIBILTY

CSR: A Corporate Responsibilty?

The CSR debate i.e. whether CSR is the responsibility of firms or the stakeholders assumes
by convention that firms have a responsibility to pursue goals other than profit. This
suggests that the CSR community expects too much of firms – that firms react to change
better than they initiate change. It means that if society expects firms to be more socially
responsible, then the firms’ stakeholders have an equal responsibility to demand this
behavior. Stakeholders must demonstrate that they will support such behavior, thus
providing the impetus for firms to respond. Firms are bound to produce products keeping
CSR in mind i.e. products which are supported by their stakeholders. Otherwise, they will
soon go out of business

Friedman vs Handy
Two important articles frame the CSR debate. The first article, titled “The Social
Responsibility of Business is to Increase Its Profits” was written by Nobel Prize winning
economist Milton Friedman. Friedman argues that profit, as a result of the firm’s actions, is
an end in itself and that a firm doesn’t need to give any additional justification for existing.
Value for society is maximized when a firm focuses entirely on pursuing its self- interest by
seeking to increase its profits.
The second article, titled “What’s a Business For?” was written by renowned management
author and commentator Charles Handy who argues profit is merely a means to achieve a
larger end. The purpose of a business is not to make a profit. It is to make a profit so that
the business can do something more or better. That something becomes the real
justification of that business. It should not remain in existence just because it is profitable,
but because it is fulfilling a need that society as whole values.
On the surface, these two perspectives seem irreconcilable. However, a deeper
understanding of their arguments suggests that as far as it is in the firm’s interest to create
value for its stakeholders, it should do so. Not only Handy, but Friedman also recognizes this
by noting that the profit maximization pursuit must conform to the basic laws and ethics of
the society.

CSR: A Stakeholder Responsibility?

Stakeholder responsibility refers to the responsibility of stakeholders to hold firms
accountable for their actions. The primary purpose of a business is to create value for its
stakeholders. But it is the stakeholders who define those values. For the market system to
work properly, stakeholders need to translate these values into action that punishes firms
that fail to meet their criteria and rewards that exceed it.
The underlying idea is that firms do not define our societal values, rather they reflect them.
Firms are very good at providing us with what we actually want rather than what we say we
want. Stakeholders are obliged to help design the society in which they want to live and
work.

Fast Food Co. Scenario

The question “Who’s responsibility is CSR?” challenges stakeholders collectively to demand
the behavior they want to see from businesses. While it’s easy to demand better behavior,
how far are the stakeholders willing to go to evoke that behavior? We can understand this
with the example of fast food brands like Mc Donald’s, who pay low wages to their
employees. For McD to be forced to pay the arbitrary wage of $15/hour would basically
mean its own demise since all of its competitors pay much less. For this to change,
stakeholders need to act – either the govt. should raise the minimum wages, the employees
should refuse to work at this wage rate or the consumers should stop eating at McD.

Mainstream CSR vs New CSR

CSR is often discussed in terms of understanding how stakeholders react to firm actions.
This doctrine assumes the firm and its stakeholders to be independent actors. But this idea
is now outdated because managers, employees and even the top management in a firm are
all its stakeholders and the firm can’t be thought of as a separate entity. This new CSR
concept sees the firm and its stakeholders as integrated actors and puts forward the idea
that firm’s actions are an aggregated effect of all its stakeholders’ actions.

Transparent Stakeholders
For companies do be able to respond to their stakeholders' needs, it is essential that those
stakeholders convey their concerns clearly and act in ways that are consistent with those
beliefs. Otherwise, firms are left to try to interpret the mixed messages they are currently
receiving, where people say they want one thing but reward something else.

It is important to understand that being socially responsible is not a set of abstract

standards but is defined by the values of the firm's collective set of stakeholders. In other
words, for a firm to be socially responsible means doing what society wants the firm to do.

Within this view of CSR, if society wants to destroy the planet, then firms are being socially
responsible if they give society what it wants. ... The definition of what is and what is not
socially responsible is not fixed but is changing all the time and up to stakeholders to
determine. If we want firms to act in a certain way, therefore, we must demonstrate the will
needed to bring that behavior about.

Educated Stakeholders
A growing awareness of the importance of corporate social responsibility (CSR) is important
from a business perspective as well as a societal perspective. If the market rewards CSR-
sensitive companies and punishes those who do not, then business leaders will be
incentivized to integrate CSR policies into their operations.

Engaged stakeholders
The result of stakeholders that care, are more informed, are transparent, and are better
educated is that they are more fully engaged with their society. An essential aspect of this
engagement is a belief in something larger than the self.
CSR should be central to a firm's strategic planning and implemented throughout
operations. A commonsense view of stakeholder interests suggests an equal investment in
deciding what behavior is responsible and seeking to encourage more of that behavior by
ensuring it is rewarded.
CSR is not only a corporate responsibility; it is also a stakeholder responsibility.

The responsibilities of each of a firm's stakeholders are