Order Description
Research paper: explanatory or argumentative, the topic of your choice (about business).
6 pages + work cited
Answer
Title: The Fallacy of Corporate Social Responsibility in Business
Corporate social responsibility (CSR) contradicts the goal of profit maximization in business contexts. The core objective of a business is to increase its profits. The core objective of CSR is to encourage business owners to do good by giving back to the community. A business can only give back to the community if it is willing to sacrifice its potential for maximum profitability. This essentially means that businesses that engage in CSR activities fail to live up to the idea of business simply because they seem to be abandoning the quest for profitability in preference for the fulfillment of social responsibilities.
ORDER NOW
Those who promote the idea of CSR argue that businesses that fail to contribute to community development are unlikely to survive in the long run. This is because they cannot continue operating in the context of a poverty-stricken society where people have no access to basic amenities. For example, by contributing to security initiatives at the community level, businesses can greatly contribute to the enhancement of the security situation in their own premises. In other words, it is assumed that businesses should take the responsibility of uplifting the living standards of local people as a way of laying the foundation for a better business environment in the future. The aim of this paper is to present an argument to demonstrate that CSR should not be made into a component of business because it contradicts the underlying objective of a business to maximize profits.
Today, the idea that businesses should participate in the process of addressing social problems has become dominant (Campbell 931). This idea is flawed because it proposes a solution that cannot lead to a permanent resolution to various ills affecting society. No business is going to be fully committed to the welfare of society unless it ceases to be a business enterprise (Vogel 28). Businesses will only engage in a socially beneficial undertaking up to the point where such engagement brings about sufficient positive publicity. Such publicity is often much sought-after because it can easily be translated into sales growth, new contracts from local governments, global recognition, and employee retention. In such situations, the underlying problems normally remain unresolved. In the meantime, such efforts create a false impression among local people, who mistakenly believe that something is, at last, being done to address their problems. More importantly, such an illusion prevents stakeholders who are genuinely committed to public interest from setting up programs that can bring about real social transformation.
It is true that companies can increase profits by engaging in CSR. However, it cannot achieve both feats equally well. At some point, businesses tend to neglect CSR activities to reach their annual targets in terms of profitability. This means that public interest cannot be served well if businesses are allowed to engage in CSR. Similarly, the goal of maximum profitability cannot be attained if businesses engage in CSR. Although it is true that CSR lays the foundation for future business growth, it is not possible to quantify the business gains that might be achieved in the future because of the CSR efforts that are being undertaken today. Some of the social responsibility activities that are in the best interest of the community are long-term projects whose real impact for business may not be experienced in one generation.
Most business managers may not be concerned about the performance of the business in the coming generations (Bondy 308). Rather, they are interested in short-term and medium-term performance because it influences their remuneration and job security. For instance, managers who fail to reach their targets in terms of financial performance are likely to be reprimanded through a lack of bonuses, pay increase, and promotion. Such managers are unlikely to be patient enough to see their CSR projects come to fruition. In many cases, these managers continue contributing to CSR activities only on the condition that these activities translate into direct and immediate benefits for the business during the current year.
Today, many large companies persistently indicate that they are not in business merely to make profits; they are also interested in contributing to a more wide-reaching social objective. This is not true. It is a public relations gimmick because the very foundation of these companies rests on profits and not the public interest. Although these companies may even go to the point of producing more fuel-efficient cars or healthier foods, they only do this to the extent that their efforts contribute to their targeted profit margins. In other words, these companies will always turn a blind eye to a public-interest issue until an opportunity arises for the issue to be exploited for profitability.
The illusion of CSR can best be solved by aligning private profits with public interests. Whenever this goal is attained, the need for CSR does not arise. Businesses may lack the commitment to the goal of aligning profits with public interests because of preoccupation with their business activities. This creates a scenario where they are pursuing one objective (profits) at the expense of the other (public interests). This explains the importance of government regulation. Governments are in a position to pursue the goal of aligning these competing objectives through various mechanisms such as laws, regulations, and incentives.
In many cases, businesses are willing to do anything to boost profits (Carroll and Shabana 89). In such circumstances, social welfare easily stands in the way of profits. Once this situation emerges, it is impossible for CSR efforts to be effective since managers are not likely to engage in activities that are against the interests of shareholders. By coming in as an arbiter, the government can use the regulatory mechanisms at its disposal to create an environment in which social welfare is enhanced whenever companies pursue the highest levels of profitability. For instance, the government might impose taxes on the companies’ profits and then channel these profits to social welfare. In such a case, the need for CSR no longer arises.
ORDER NOW
Moreover, the values of CSR are in contradiction to those of corporate governance. In corporate governance, there is a very high expectation for business managers to always act in the best interest of shareholders. Managers who fail to act in this way face the risk of being sacked. This explains why many managers have devised the tactic of talking too much about social responsibility and doing little or nothing about it. Such managers understand that by sacrificing profits to promote the public interest, they will be deemed to have imposed tax on their shareholders’ returns. Moreover, they will have made an arbitrary decision on how these profits should be spent, thereby contravening the rules of corporate governance. Good corporate governance demands that decisions on the allocation of funds to public interest projects should be made by elected public officials. Therefore, businesses that arbitrarily allocate their monies to such projects are in essence attempting to usurp the role of these officials.
Although businesses should not be allowed to pursue maximum profitability without taking into consideration the social consequences of their activities, CSR is not an ideal avenue through which to align profits with public interests. It is a fallacy to assume that businesses with the act in the best interest of the public as well as that of shareholders, yet these are competing interests. Moreover, despite the best intentions of business managers, their decisions to initiate CSR projects are likely to be met with resistance from shareholders, who might accuse the manager of contravening the requirements of corporate governance by abandoning their fiduciary responsibility.
According to Valor, the best way to appeal to both business and public interests is through regulation by the government (202). The government comprises of elected officials, who can engage in activities aimed at promoting social welfare without being accused of contravening the dictates of corporate governance. These officials are not responsible for bringing about any returns to shareholders. Similarly, these officials need not look up to the best intentions of any business manager while in the pursuit of a balance between public good and private profits.
Unfortunately, governments have been found to have their share of problems in the form of corruption, lack of funds, and lack of technical know-how. Many large companies continue to take advantage of these weaknesses to influence the formulation of regulatory practices by the government. Consequently, the resulting regulatory policies end up putting public welfare in jeopardy. In countries where the problem of inefficiency on the part of government agencies has become endemic, the civil society and lobby groups tend to raise alarm with a view to put pressure on government agencies to act in the best interest of the public. Moreover, there are many situations where industry groups have resorted to self-regulation as a way of promoting public image.
Rather than focusing on CSR, business managers, founders, and shareholders should endeavor to abide by the government’s regulatory efforts. At the same time, they should contribute to advocacy and self-regulation by civil society and industry associations respectively. However, caution should be taken in regards to self-regulation because it faces the same risk that has already befallen CSR in the sense that business operators are unlikely to pursue public interests at the expense of shareholder interests. Nevertheless, many companies are likely to prefer self-regulation especially it reduces the cost of complying with the government policies. In this regard, companies may opt to self-regulate as a cost-cutting mechanism. In the meantime, the views of regulatory agencies and non-profit organizations should be accorded a lot of attention during this self-regulation process because they are less likely to be based on vested business interests. This is a better way of achieving the goals of sustainability and environmental protection than CSR.
In conclusion, the idea that CSR can enable businesses to achieve social welfare goals and at the same time maximize profits is fallacious. This is because of the competing interests of shareholders and the public. Businesses that endeavor to channel funds towards public-interest projects do so at the expense of private profits being sought by shareholders. Moreover, business managers are employed to safeguard the best interests of shareholders through the realization of optimal profitability. In fact, failure to stick by this fiduciary responsibility is tantamount to flouting the rules of corporate governance. Therefore, in conclusion, businesses should leave the task of safeguarding public interests to government regulators and civil society. Their efforts as far as social responsibilities are concerned should be restricted to self-regulation and compliance as a cost-cutting measure.
Works Cited
Bondy, Krista. “The Paradox of Power in CSR: A Case Study on Implementation”. Journal of Business Ethics, 82.2 (2008): 307-323.
Campbell, John. “Institutional Analysis and the Paradox of Corporate Social Responsibility”. American Behavioral Scientist, 49.7 (2006): 925-938.
Carroll, Archie. and Shabana, Kareem. “The Business Case for Corporate Social Responsibility: A Review of Concepts, Research, and Practice”. International Journal of Management Reviews, 12.1 (2010): 85–105.
Valor, Carmen. “Corporate Social Responsibility and Corporate Citizenship: Towards Corporate Accountability”. Business and Society Review, 110.2, (2005): 191–212.
Vogel, David. “Is There a Market for Virtue? The Business Case for Corporate Social Responsibility”. California Management Review, 47.4 (2005): 19-45.
