CSR : Pros & Cons

Case
• A chemical Plant dumped wastes in a landfill.
• Hazardous substances found their way into the underground
water table.
• The plant’s engineer were aware of the situation but did not
change the disposal method because their competitors did it in
same cheap way and no law explicitly forbade the practice.
• Plant supervisors told the Engineer that it was the
responsibility of the local Government to identify any
problem.
Arguments in Favour of CSR
1. Changing Public Needs & Expectations

• There are certain basic forces at work that

are changing social expectations for the long
run in the direction of greater social outputs
from business.

• Maslow need hierarchy theory : Basic

Physical and security needs are followed by
social needs.

• Move toward more social involvement in

order to be accepted and successful.
 2. Moral Obligation
• Responsible action are right for their own sake

• Humanist and Religious Philosophies puts human

interest first in priority.

• The economic need of business must remain secondary

because they are of a lower order.

• Business is a member of society in the same way that all

persons and other institutions are members.
 3. Limited Resources
• Business must act responsibly to protect
them and use them wisely.
 4. Better Social Enviornment
• Involvement by business should solve difficult
social problem creating a better quality of life.

• Eg. Improved equality of opportunity for equal

employment opportunity

• Multiplier effect : A better job may lead to a

better neighnourhood and more family stability
for an employee.
= Desirable Public goods
 5. Long Run Profit
• Being socially aware and responsible can
improve a firm’s ability to survive and
succeed.

Eg: Environment Measure, Atomic Plant

measures
6. Discouragement of Further Government Regulation

• Regulation tend to add economic costs

and restrict flexibility in decision making

• If business by its own socially responsible

behavior can discourage new government
restriction, it is accomplishing a public
good as well as its own private good.
 7. Balance of Responsibility with power
• Business affects the enviornment, consumers,
community conditions etc.

• An equal amount of responsibility is required to

match its power.

• Any other arrangement would invite irresponsible

behaviour that would reduce the public good.

• i.e. Responsibility is a necessary reciprocal of

power.
8. The Iron Law of Responsibility
In the long run , those who do not use power
in a way that society considers responsible
will tend to lose it.
 9. System Interdependence Requires Social Involvement

• Any internal act of business has some influence on

the external world.

• Business must show concern about their external

influences on the system.

• Eg. The petroleum refinery that makes candle wax

is so interwoven with society in terms of its social
effect that it must be concerned about the
enviornment, minority employment and a host of
other social issues
10. Business Contributed to Social Problem

• Business Contributed to many of Society’s

problem

• Therefore it is responsible for helping them

correct.

• Eg. Industrial Pollution

 11. Public Image
• It is easy to extend the public image
concept to various types of social actions.
12. Business has Useful Resources

• Business has substantial pool of

- competent managers
- Technical experts
- Financial Professionals

Business should share resources to solve

social problem.
 13. Prevention is Better than Curing

If business delays dealing with social

problems now, it may find itself constantly
occupied with putting out social fires so that
it has no time to accomplish its goal of
producing goods and services.
 Sum up points
- For Involvement
• Changing Public needs and expectations
• Moral Obligation
• Limited Resources
• Better Social Enviornment
• Long run profit
• Discouragement of further Government
Regulation
• Balance of Responsibility with power
Contd….
• System Interdependence requires social
Involvement
• Business Contributed to social problem
• Public Image
• Business has useful resources
• Prevention is better than curing
Arguments Against CSR
 1. Need for profit Maximization
- The business is most socially responsible when it
attends strictly to its economic interest and leaves
other activities to other institutions.

- The society needs the benefits that singular pursuit

of profit brings.

- Business function is economic not social

- Economic values should be the criteria used to

measure success.
 2. Divided Purposes and confused Expectations
• Diversion of executive energies and attention from the main
job of producing goods and services for society.

• It is a diversion society cannot afford.

• We are rejecting capitalism and moving toward some

unknown hybrid system for which we have no theory.

• It may turn out to be worse than the former capitalistic

approach
 3. Costs of Social Involvement

Many social proposals do not pay their own

way in an economic sense.
 4. Weakened International Balance of Payment

• If social programs add to business costs, generally they will

be added to the price of the product if possible.

• If Social actions reduce economic efficiency, then this lower

efficiency is likely to lead to higher costs and prices.

• If these firms compete in international markets with other

firms, then these firms will be at a competitive disadvantage.

• They will have fewer sales internationally, leading to a

weakened international balance of payments often is in poor
condition, this may further weaken it and lead to undesirable
consequences such as fewer jobs.
5. Business Has Enough Power

So society should not give it more

 6. Lack of Social Skills
• Business leaders activity are primarily economic

• Why choose a group that is poorly qualified to work with social problems

• Business leaders are selfish.

• They would not hesitate to take advantage of their neighbours whenever

money is the concern.

• People of this type are not to be trusted with programs that primarily
show concern for one’s neighbours.

• They are philosophically and emotionally unfit for the job according to
these critics.
 7. Corporate Inability to make Moral Choices

• Ethical concept applies to person not to

organization.

• CSR is merely a smoke screen or disguise used by

people with special interest or biases to push their
own points of view.

• The primary effort of society should be towards

helping individuals, not corporations, make moral
choices and act responsibly.
 Against Social Involvement
• Need for profit maximization
• Divided purposes and confused
expectations
• Costs of Social Involvement
• Weakened International Balance of power
• Lack of Social Skills
• Lack of Accountability
• Corporate Inability to make moral choices
Your Idea