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Outline the key criticism of CSR and how they differ across different political and economic spectrum
Abstract:

The field of corporate social responsibility (CSR) has now been embraced globally by all the modern entities of the globe. Advocates of the field argue that corporations that are perceived by society as being socially responsible are likely to derive enormous benefits from being so. They argue that most stakeholders whether primary or secondary, internal or external, local or national offer their support of the actions of these socially responsible corporations. Most would agree that corporate responsibility is an excellent idea, but from where did the ideology of CSR originate? An examination of the literature has given no conclusive evidence as to whether CSR is a capitalists or socialists doctrine; in fact the literature is silent in this respect. However, after examining the activities that stem from the ideology and considering the presence of the word social in its very name one may conclude that CSR is a socialist doctrine. If CSR is indeed a socialist doctrine, why are corporate entities in modren free capitalist economies preaching and practicing it? Why are multinational corporations from these capitalists states now following the ideology throughout the world? Indeed, it is generally believed that socialist ideologies are inconsistent with capitalists ideologies. These are some of the issues that this study will explore in depth in order to establish the origins of CSR practiced by capitalist corporations and by certain socialist and communist states in the 21st century.

Peter Utting (2005) notes that an increasing number of transnational corporations (TNCs) and large domestic companies, supported by business and industry associations, are adopting a variety of socalled voluntary CSR initiatives and the same includes codes of conduct, measures to improve environmental management systems and occupational health and safety, company triple bottom line reporting on financial, social, and environmental aspects; participation in certification and labeling schemes, dialogue with stakeholders and partnerships with NGOs and UN agencies; and increased support for community development projects and programmers. The revival of CSR is reflected also in its recent prominence in public debate. Carroll and Buchholtz (2003) argue that the social responsibility of a business organization is four fold and can be expressed either as a pyramid or in terms of an equation. When expressed as an equation, it is the sum total of four different responsibilities, which are Economic responsibility (ECR) (which is to make a profit), Legal responsibility (LGR) (to obey the law), Ethical responsibility (ETR) (to do what is right, fair and just at all times) and Philanthropic responsibility (PHR) (to be a good corporate citizen). CSR had been much debated areas for the last two decades, different regimes of the world perceive the concept according to their societal norms, cultural notion and other related aspects. Capitalism and democracy can successfully coexist in the long run only if the economic actors become mature enough to police themselves in the way they conduct business, in exchange for freedom of market and reduced regulation. In a democracy the people entrust a government to defend their individual freedom & rights and their interests as a society or nation, and to preserve a social order in a long term perspective. Capitalism is based on the inalienable right to ownership and profit, and on the principle of a free market. Conflict between capitalism and democracy occur when the exercise of freedom jeopardizes the rights and interests of the people and the interests of society at large. In the past 30 years, many economists and management theorists have pushed the concept of freedom of enterprise and free market to a point where any intervention of the state or attempt to regulate the economic, social or environmental field is qualified as socialism. At the same time the world has seen more and larger frauds, scandals, crisis, and yoyo bubbles than ever, all in the name of free markets including wars for democracy-, far from bringing the equilibriumexpected. Capitalism and free markets are not to blame here, but rather the behavior of economic actors. A free market does not confer the right to do anything at any cost, regardless of the impacts on people, societies or the generations to come. It cant be a free ride to grab everything you can as fast as you can. In a democracy, freedom comes with duties and responsibilities. What is true at the individual level is also true for corporate economic actors. For democracy and its social contract to survive in a free market, the economic actors, whether individuals or corporations, must assume their social role i.e. the role in the society and take their part of duties and responsibilities. The counterpart of a free market and absence of regulation is the adoption of self imposed rules and principles for the conduct of business as an actor of society, and the accountability thereof.

In a capitalist society, quantifying the end results of any given activity by corporate managers matters a great deal; this was so even before CSR became a prominent ideology around the globe. Firms are accountable to a long list of stakeholders to whom any poor performance would need to be justified, particularly those stakeholders who are providers of capital, employees, NGOs, the state, etc. Before CSR rose to prominence in Western capitalist states, the successes or failures of corporate entities were measured on the basis of their bottom line results and the social costs of those successes were indifferently passed on to societies. As long as share prices continue to rise on stock exchanges, dividends paid to shareholders continue to increase annually and the amount of corporate taxes paid to the state also continues to increase, all was perceived to be well. However, Friedman (1962) argues that engaging in CSR activities is not one of the roles that shareholders envisaged that their managers would carry out on their behalf.

Managerial involvement in CSR- activities is likely to waste cash resources and consequently breach the fiduciary obligations that these managers have to their shareholders (Friedman, 1962). This was purely an old capitalist approach to managing an enterprise, which ignored the interests that several other stakeholders have in what corporations do in society. This was perhaps what Coelho et al. (2003) had in mind when they argued that the fiduciary duty to firms owners is the bedrock of capitalism, and capitalism will wither without it. Corporate social responsibility has changed this idea. Shareholders are voluntarily requesting that their companies behave responsibly. Society friendly actions taken by corporate entities in capitalist societies demonstrate responsibility and are considered good for business. Many of these corporations have identified the e normous benefits which would result from being socially responsible, and are now formulating what Lantos (2001) refers to as Strategic CSR: activities undertaken by a firm to accomplish its strategic business goals. These are good deeds that are believed to be good for business as well as society. Corporations often present their long-term investments in building stakeholder values as an exercise of social responsibility. For Friedman some, if not all, of these actions are nothing more than hypocritical window-dressing. He realizes in the prevailing climate of opinion, with its widespread aversion to capitalism, profits, and the soulless corporation and so on, this is one way for a corporation to generate goodwill as a by-product of expenditures that are entirely justified in its own self-interest. America and European nations exhibit capitalist views of CSR. In these regimes CSR initiatives are being done through corporations which utterly being controlled and induced through market forces. We have also observed few of the business failures and scandals which nonetheless pertain to these capitalist countries, and the failure of few of the big names like Enron and Lehmans brothers in business sector poses a question that up to what degree corporations should be given freedom? As far as implementation of CSR in capitalist countries are concerned few obstacles still experienced and among these Non availability of clear CSR guidelines is the foremost, it has been observed that no strict statutory guidelines or policy directives been set/in place relating to CSR. The scale of CSR initiatives of companies only depend upon their business size. The second most important reason of CSR initiative evasion is directors fiduciary duty; as they required acting like agents and only performing those activities which result in maximization of shareholders value. Their agency role prohibits them in spending for common good. In democratic and developing countries like India CSR has gone beyond merely charity and donations and is approaching in a more organized fashion. However due to the following factors the pace of CSR implementation is slow. 1) Lack of awareness of general public In CSR activities; There is a lack of interest of the general public in participating and contributing to CSR activities of companies. This is because of the fact that there exists little or no knowledge about CSR. 2) Narrow perception towards CSR Initiatives; NGOs and Government agencies usually possess a narrow outlook towards the CSR initiatives of companies, often defining CSR initiatives more as donor-driven. As a result, companies find it hard to decide whether they should participate in such activities at all in medium and long run. 3) In the absence of regulatory framework regarding csr implementation companies got choice whether to follow or just to ignore csr requisites. At the core of CSR, however, is the "socialist view that political mechanisms, not market mechanisms, are the appropriate way to determine the allocation of scarce resources to alternative uses."(Milton Friedman, 1970) This detracts from efficiency and wastes resources, and may even reduce the provision of the social goods championed by CSR advocates. When people prosper because companies operate efficiently and enjoy economic freedom, they have more time, talent, and resources to help the less fortunateand will do so much more efficiently than government can. The best way corporations can help people anywhere, and especially in developing countries, is to go about their business, trading and investing and creating the sustainable jobs that improve livelihoods. Totalitarianism on the other hand is generally defined to be total state control of all part of society, with the state being (in turn) controlled by a single individual, single family, or very small group of individuals. Absolute Monarchies generally fall into this category, but not most other types of limited

monarchy. Most scholars exclude Communism as being automatically totalitarian, though there is a strong overlap in practice. Dictatorships, by their very nature, are Totalitarian. The drivers for CSR in Totalitarian regimes a political system where the state holds total authority over the society and seeks to control all aspects of public and private life wherever necessary CSR practices are usually hovers around environmental and employees perspective. CSR practices in socialist countries like China are very sluggish as compared to capitalist societies and this might be due to culturally, politically and geographically dependent circumstances. China is developing its own culture of CSR, belatedly but with similarities to other geographical areas. At the same time we are witnessing a form of unfair competition promoted by public authorities those appeals to consumer nationalism and national industry interests. The result is a tightening of the CSR net around large foreign multinationals and the establishment of a new non-tariff trade barrier called CSR. However, global supply chains have had the greatest influence in spreading the concept of CSR in China. Chinese suppliers have been forced to meet certain social and environmental standards in order to do business with foreign multinationals, either voluntary codes that the multinationals themselves have created (for example, Wal-Marts, Nike Code of Conduct) or external standards such as the SA8000, the Apparel Certification Program, Worldwide Responsible Apparel Production, or ISO 14001. The corporation in the context of the social provisioning process; that is, the business enterprise exists, survives, and grows relying on and because of other actors in society; therefore, corporate actions are social in their nature. Irresponsible or unaccountable corporate actions would danger the survival of corporations as well as the entire society because the continuous provision of needy goods and services produced by corporations is the basis of the social provisioning process. CSR is supposed to be win-win. The companies make profits and society benefits. But who really wins? If there is a benefit to society, which in many cases is doubtful, is this outweighed by losses to society in other areas of the company's operation and by gains the corporation is able to make as a result? CSR has ulterior motives. One study showed that over 80% of corporate CSR decision-makers were very confident in the ability of good CSR practice to deliver branding and employee benefits. To take the example of simple corporate philanthropy, when corporations make donations to charity they are giving away their shareholders money, which they can only do if they see potential profit in it. This may be because they want to improve their image by associating themselves with a cause, to exploit a cheap vehicle for advertising, or to counter the claims of pressure groups, but there is always an underlying financial motive, so the company benefits more than the charity. It is observed that CSR diverts attention from real issues, helping corporations to: avoid regulation, gain legitimacy and access to markets and decision makers, and shift the ground towards privatization of public functions. CSR enables business to pose ineffective market-based solutions to social and environmental crises, deflecting blame or problems caused by corporate operations onto the consumer and protecting their interests while hampering efforts to find just and sustainable solutions. One of the most controversial issues that is debated amongst both neoliberal and neo-Keynesian commentators is whether CSR is a cost or a benefit to the corporate bottom line. While some neoliberal economists remain staunchly sceptical, others are more uncertain. Bryan Husted (2003) argues that researchers have not examined the cost implications associated with the different forms of CSR activities. Eveline van de Velde et al (2005) set out to investigate the interaction between sustainability and financial performance and concluded that high sustainability-rated portfolios have performed better than low-rated portfolios, but not to a significant extent. Other mainstream economists, including both neoliberals and neo- Keynesians, are more inclined to see CSR as a positive contributor to corporate value. Amalric and Hauser (2005) enquire under which circumstances a company may increase its value through the development and implementation of corporate responsibility activities. They argue that, under various conditions of imperfect competition, firms can increase their value with corporate responsibility activities. In a 2005 article in Global Finance, Fittipaldi (2005) argues that the evidence is piling up that corporate responsibility pays. He claims that

studies are increasingly indicating that companies may already be reaping some rewards. One such study by Germanys Oekom Research, an independent sustainability rating agency, correlates sustainability with financial performance. The study indicates shares of companies with good sustainability records perform better than those of their less socially responsible competitors. Rushton (2002) similarly argues that there is evidence to show that corporate social responsibility pays; e.g. the Dow Jones sustainability group index outperformed the Dow Jones index by 36% over the past threeyear period. One of the key strategies advocated by more progressive advocates of CSR is the promotion of socially responsible investment (SRI). Invariably advocates argue that SRI companies are likely to be at least as profitable as others. Here again, however, there is contradictory research about the claims. For example, Sparkes and Cowton (2004) review the development of socially responsible investment (SRI) over recent years and argue that not only has SRI grown significantly, it has also matured. On the other hand, a more sceptical attitude is taken by Haigh and Hazelton (2004). The only conclusion that really can be drawn from this debate at present is that the issue remains unresolved. A contentious issue that is frequently raised in the literature is the argument that current directors duties and legal requirements constrain the extent to which corporations are able to engage in CSR or philanthropic activities without running the risk of breaching their legal responsibilities to the corporation and/or to their shareholders. This concern is not only raised by corporations themselves as a rationale for not adopting CSR but is also frequently expressed by advocates as a constraint that must be removed if CSR is to be widely adopted. Few of the arguments pertaining to directors duties include that as CSR activities are costly which hampers profits and their foremost duty is to make business profitable. The funds which might have been invested in wealth generation process somewhat curtailed if CSR activities are being followed. A great deal of business, academic and government literature on CSR simply takes it for granted that CSR strategies of all varieties will be voluntary. Any form of business regulation is of course anathema to the neoliberal approach. Nevertheless, this is an issue that neoliberal commentators are forced to debate since pressures continually arise for government regulation to either support or replace voluntary CSR measures adopted by corporations. A major theme of much of the CSR discourse emanating from the business community is the argument that regulating CSR is either undesirable or dangerous. Similarly, amongst those who write from a liberal or neo-Keynesian ideological perspective, there is generally a taken-for-granted assumption that CSR initiatives will be voluntary. On the other hand, within the neo- Keynesian commentators ranks there are those who question whether voluntary CSR programs and activities by corporations are sufficient to ensure that the benefits of CSR are achieved or whether government regulation of corporate behavior is necessary. For example, Marta de la Cuesta Gonzlez and Carmen Valor Martinez (2004) raise the questions: should CSR be approached only on a voluntary basis or should it be complemented with a compulsory regulatory framework; and what type of government intervention is more effective in fostering CSR among companies? After reviewing the debate between proponents of the voluntary case and the obligatory case for CSR, and critically analyzing current international government-led initiatives to foster CSR among companies, they argue for a more proactive government position in CSR related issues. Hertz (2004) argues that governments need both to improve civil and market regulation of corporations, and also to strengthen corporate law. While civil or market based forms of regulation have had some effect in moderating anti-social corporate behavior. Kolk and van Tulder (2002) critically examine the effectiveness of voluntary corporate codes of conduct by a study of child labour codes developed by six international garment companies. Overall, the research shows that corporate codes are important.

Jem Bendell (2004) notes that a key divide has emerged amongst activists around CSR between those who regard corporate power as a problem, and those who either accept it or consider it as an opportunity, if engaged appropriately. The latter are said to be involved in corporate responsibility, and the former involved in seeking corporate accountability (Hamann et al. 2003; Richter 2001). The plethora of CSR awards given out to companies reveals an appalling fact some companies whose very existence is considered to be socially irresponsible are being recognized for performing some socially responsible acts never mind that the socially irresponsible behaviors substantially overwhelm the few socially responsible acts. Case in point: British American Tobacco, which was attacked after it won a United Nations Environment Program / Sustainability reporting award for its annual social report. Critics were quick to point out that winning a CSR award may well be a tool to deflect some criticisms against a socially irresponsible outlook of selling products that cause so much known damage to health. Besides the current financial crisis is a direct result of so called socially responsible corporations, the number of sub-prime loans offered to risky borrowers increased more than 15 times since 1998. Essentially, the banks got greedy and compromised good banking practices of credit risk assessment. The crisis is the inevitable consequence of irresponsible corporations. This is linked to the shorttermism of shareholder value driven public companies current financial crisis represents a systemic failure of shareholder-driven, free market capitalism.

Conclusion
Delivering a profit is a social responsibility of any business enterprise; both opponents and advocates of CSR agree with this view. In the past, this responsibility was wrongly ascribed to include only capitalism when in fact, an enterprise which fails to deliver a profit to its owners is in effect failing to meet one of its social responsibilities. This study argues that any enterprise which adequately meets this and other social and environmental responsibilities to society would be successful and survive even during a global financial downturn. The indication is that if all businesses, whether large or small, new or old, met all the responsibilities encompassed in CSR, these businesses would deliver higher profits and stakeholders around the world would derive enormous benefits from these actions. It is argued that there is a pressing and persistent need for a critical investigation of the potential and limitations of CSR initiatives in developing countries. There exists at present a rather one-sided view of CSR that emphasizes profit-making, winwin situations and consensus outcomes in multi stakeholder arrangements. This ignores more sensitive questions around the actual impacts of CSR initiatives, the roles of power, class and gender in mediating such interventions, and the need to go beyond one size fits all approaches towards a contextualized understanding of what CSR can and does mean for poor and marginalized groups in the globe. Social development funding and social security for the people can never be a charity or business. These are the rights of the people and the responsibilities of the state. They should never be left to be determined by market forces. Particularly by fulfilling this responsibility, the state gets a legitimacy and authority to ask the people to comply with the laws and policies. If it is denying fulfilling these responsibilities, it will also lose this authority

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