Is Csr Profit Rather Than Ethics?

ETHICS AND GOVERNANCE

Topic 2: Is CSR primarily profit rather than ethics?

Nowadays, Corporate Social Responsibility, CSR has been on everyone’s mind. Most of the people argue about CSR whether it is based on either profit or ethics and they are being curious to know about the profit organizations and its CSR and how they use it ethically. This essay will be focusing on that argument of the evidence that CSR is basically about profit rather than ethics, based on the researchers. First of all, what is CSR? Corporate Social Responsibility, CSR, which is generally used and argued by our broad areas of society, businesses, and community. In particular, CSR covers the day-to-day decision-making process made by the company or the business which identify its stakeholder and their certainly needs and principles. It can be used more essentially to make more profits in an ethical way. In the late 90’s, the companies that operate the business in an unethical way got punished and rewarded to those who renovate their assurance to improve the world. In this 21st century, the society has become to assume about the profit organizations and their consequences: how their environment may have affected by their actions. There are different perspectives of CSR in every organization, such as classical view or shareholder view, contemporary view and stakeholder theory.

Milton Friedman (1970), one of the shareholder theory supporters, leads to the start of the debate whether CSR is profitable. In his article “the Social Responsibility of Business is to Increase Its Profits, he states that the increasing of the profits of the organizations is the main goal and one and only social responsibility of the business in the usage its resources ethically. Friedman argued that the actions that business executives operating in the society is spending the people’s money for general community concern by minimizing the stockholders’ returns and maximizing the prices or reducing the employees’ wages. Besides, the stockholders and the employees of the organization may spend their own money separately if they wanted to do so. Arthur Laffer argues that the negative connections amongst the stock value and CSR, further making the case that taking an interest in social effect programs take away from the benefit making capability of an organization (Laffer et. al,2011).

In the case of shareholder’s theory, we can see that the retailers' store chain, Wal-Mart acts in an approach to the best satisfaction for their shareholder while dissatisfying their stakeholder. Wal-Mart does not maximize their employees’ wages, on the other hand, they take the sum of money and give it back to their stockholders and shareholders such as clients and suppliers, in order to maintain the fiduciary responsibilities of their stockholders. Wal-Mart also keeps every individual who put resources into the organization happy, and they think that the results of the action are about ethics and the result of the Wal-Mart’s activities make the best quantity of good for the general population who are the essential stockholder. We can claim that Wal-Mart’s performance of profits does not prompt the best aggregate good for society in light of the fact that numerous small entrepreneurs and Wal-Mart workers need to default on some loans. This happens because the clients incline toward the lower costs offered by Wal-Mart to smaller convenience stores. Archie Carroll agreed with one of the Friedman’s argument. Carroll (1991) created CSR pyramid that contains four responsibilities for the managers, which are philanthropic, ethical, legal and economic responsibilities. Economic responsibility means that the responsibility of the organization is to produce goods and services for the society and sell them to make the profits. Dr. Aneel Karnani also agreed and supported Friedman in this particular case. Karnani argued that company executives don’t want to act against shareholder interest. On the off chance that they do as such, they are possible to substitute by the individuals who increase the shareholder interest. Therefore, he determines that, as the government has the ability to implement control. Accordingly, Friedman’s perspective is that the business of business is business, and CSR is fine, in so far as it provides emphatically to profits in the organization.

Ed Freeman’s (1984) stakeholder theory, underlines that the managers ought to meet not just the necessities of the stockholders, additionally those of an assortment of the stakeholders, whose sustenance is urgent for the presence of the firm. He believes the corporate profit is just a result of the organization’s action, not is an essential cause. From his perspective, Friedman’s thought implies that the organizations just concentrate on the shareholders and not the others additionally affected by the organization’s action, for example, the customers, the workers and the suppliers. But then, without them, the organization would go bankrupt. Freeman determines that the organization’s purpose is to encounter the necessities of the stakeholders, which is any individual who is influenced by the choices built by the organization; on the off the chance that this is done, they will make the profit. If there are opposing interests amongst the stakeholders, the organization must not select one over the other, but rather should discover a trade off, a third method which will fulfill both interests. Consequently, Freeman keeps up that CSR supports the development of the society since it begins the way to the community of potential outcomes. For example, IKEA, a global home furniture hypermarket, who concerned about the improvement of the CSR policies (Slavin, 2001). In 1998, IKEA participated in three main areas, external environments such as pollution and hazardous wastes, forestry management, and social working conditions. IKEA also joined with NGOs, WWF and Save the Children. Arthur Laffer researched into 28 organizations recognized by Business Ethics Magazine as a major aspect of the “100 Best Corporate Citizens” and followed every organization’s execution over the S&P 500 from the years 2000-2004. Laffer and his partners, Andrew Coors, and Wayne Winegarden, found that there is no huge positive relationship amongst the business profitability and CSR, giving proof that the organizations who take part in CSR present similar to that ones who don’t. Adam Smith (1776), states that a company’s “self-interest” as the fundamental to the prosperity and efficiency of the society in his Wealth of Nations. He also agrees with Friedman’s statement that an organization's nature is to increase profits. On the other hand, Smith argued to Friedman’s thesis that he also considers that the practicing wealth formation is the good route for the company but he mainly believes that the social interest also takes part in order to practice the profits. Smith talks about two principle thoughts in Wealth of Nation: “the invisible hand” and that truth that people and firms, seeking after their own self-interests deal the most advantage of the society, as Smith says, “enlightened self-interest” (Smith, 2003). Smith’s argument demonstrates that individual profit making does not really lead to the general societal advantage, as he mentioned in Wealth of Nations. Furthermore, organizations are compelled to adjust the issue some time later. By connecting back to the charity and justice, we can see that Smith made it clear and simple that charity is a case that is not perfect rights and also it is voluntary while justice comes from perfect rights that should be coercively compulsory. Due to this theory, Smith wanted to criticize the organizations which select useful causes over its stakeholders’ essential justice interests.