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Business Ethics: Corporate Social Responsibility

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  1. 0:05 Corporate Social Responsibility
  2. 0:27 Sustainability
  3. 1:31 Stakeholder Theory
  4. 2:24 Against Corporate Social…
  5. 3:30 For Corporate Social Responsibility
  6. 4:53 Lesson Summary
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Taught by

Jennifer Lombardo

Now that companies are concerned with society's welfare, corporate social responsibility is a controversial topic. In this lesson, learn the two theories of social responsibility and the arguments for and against the practice.

Corporate Social Responsibility

For many years, corporations were only concerned with making money. That was the ultimate goal. Now, companies are also concerned also about society's welfare. Corporate social responsibility is a business's concern for society's welfare. This means that marketing managers are interested in long-term corporate interests and also society's health.

Sustainability

A new philosophical trend in social responsibility is called sustainability. It is the thought that if a company helps society through their business as a main goal, then they will reap success. Companies can look to solve society's problems by creating a product or service to fulfill a need, and they will profit and help the world. Other examples of products made by companies that embrace this philosophy would be makeup creams made from ingredients that are imported from developing companies to help their country's growth. Another example would be ice cream maker, Ben & Jerry's, who pride themselves in supporting charities. Ben & Jerry's have been donating a full 7.5% of pretax profits to different charitable institutions.

Sustainability's forward thinking revolves around creating new products that, in the long run, will create improvement over time for society's ills. A current example would be a backpack designed with solar panels to charge electronic devices or 100% biodegradable, recycled, cardboard coffins.

Stakeholder Theory

Another way that companies can embrace social responsibility is through a different approach called stakeholder theory. This theory's central focus is that social responsibility is really giving attention to every stakeholder in the entire company whether it be the employees, customers, owners, suppliers, management or the community.

The following is how each stakeholder would view social responsibility from their company. It is a more widespread approach and far reaching. Employees want to have a good, secure job and excellent wages, while management wants happy workers and profits. Customers expect excellent customer service and high quality products while the community wants a corporation to pay their taxes, offer their citizens good wages and help support the environment by not polluting. Suppliers want their business to remain plentiful, and owners, of course, want a financial return or an excellent profit.

Arguments Against Corporate Social Responsibility

The most common reason against social responsibility is that critics feel the main purpose of a corporation is to just make a profit for their stakeholders. Nonprofits should be the only institutions concerned about society, not for-profit businesses. Critics state that for most companies to participate in a socially responsible way, they need to spend more of their firm's money and, in the end, are costing their shareholders a profit. For example, if a company is going to import ingredients from a developing nation instead of using a well-known source, then the added cost of importing will drive down a company's total profits.

Another argument against social responsibility is that companies are around to produce products and services and do not have the knowledge to actually help society effectively.

Lastly, the added expense of social responsibility could make an American company less competitive globally and, in the end, be run out of business. If a company is giving money away, such as Ben & Jerry's, then the lesser profits could hurt their expansion or even make them lose out to a company that does not donate profits.

Arguments for Social Responsibility

There are many strong arguments for companies adopting a social responsibility philosophy. The most basic argument is that it's just the right thing for companies to do. Companies should care about society and help improve it for all of their stakeholders. Many of society's problems, such as pollution, poor wages and damaged cities, have occurred because of companies, so it is their responsibility to fix them.

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