WHAT IS CORPORATE RESPONSIBILITY?

What Is Corporate Responsibility?

What Is Corporate Responsibility?

Many of the world's largest businesses rival nationstates, religions, and even nature itself as agents of change. Multinational corporations have become the primary force shaping human material well-being. They determine our collective values and shape our shared experience; they create our future. Fifty-one of the world's hundred largest economies are businesses. For example, Wal-Mart Stores, number one on Fortune magazine's list of the five hundred largest U.S. corporations in 2002, had sales just short of $220 billion. The combined gross national products of New Zealand, Greece, Costa Rica, and Cuba was $212 billion that same year. To put it another way, “One hundred and sixty-one countries have smaller annual revenues than Wal-Mart does” (Derber 1998, 3). Since there are approximately 190 nation-states in the world at present, that means Wal-Mart has greater revenues than all but some 29 nations. The spread of globalization and the daily influence of business on the lives of billions of people make businesses a social as well as an economic force.

Until the late 1980s the prevailing model of modern corporate behavior was to maximize profits for stockholders. Milton Friedman (b. 1912) the Nobel Prize-winning economist and author of Capitalism and Freedom (1962) legitimized the stockholdercentered view of business. According to Friedman, “Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible” (Friedman 1962, 133). The book still serves as the theoretical defense of the unregulated free market system.

Corporate social responsibility, or CSR, has been adopted as a formal policy goal by many advanced society governments and businesses. A flavor of its meaning can be gained by looking, especially at some of the governmental Web sites. For instance, CSR has been defined formally by the British government in the following general terms: It is the business contribution to collective sustainable development goals, concerning how business takes account of its economic, social, and environmental impacts in the way it operates—maximizing the benefits and minimizing the downsides. More broadly, there is the issue of why business should bother. After all, as neoclassical economists have long argued, business owes abstractions such as “society” nothing—shareholders are the owners of business and it is the organization's obligation to do everything legal and legitimate to advance shareholder value, not to squander it on well-meaning but irrelevant CSR projects. On the other hand, the stakeholder model of the firm would insist that shareholders are but one set of stakeholders; that there are plenty of other significant stakeholders, including customers; nongovernmental organizations (NGOs); communities and civil society more generally; as well as activist groups claiming to articulate the interests of the environment, animals, or other mute stakeholders. Looked at in this broader way, the question becomes one of temporality: If businesses serve only shareholder value interests in the short term and do so in such a way as to jeopardize other ...