Introduction

Daft (2003) in discussing social responsibility states that:

“Corporate social responsibility is the obligation of organization management to
make decisions and take actions that will enhance the welfare and interests of
society as well as the organization” (p.146). Do managers have a responsibility to
their stakeholders? Certainly, for the owners of the business have invested their
capital in the firm. Do managers have a responsibility, a social responsibility, to
their employees and the community? Many oppose corporate social
responsibility? They believe that business should stick strictly to making profit
and leave social matters to other groups in society. Some economists fear that
the pursuit of social goals by business will lower firms’ economic efficiency,
thereby depriving society of important goods and services. Others are skeptical
about trusting business with social improvements; they prefer governmental
initiative and programs. The Nobel Prize economist Milton Friedman declared
that: There is only one social responsibility of business – to use its resources and
engage in activities designed to increase its profits so long as it stays within the
rules of he game, which is to say, engages in open and free competition without
deception or fraud”. Nevertheless, the author opposes this view, as he believes
that this issue can no longer be ignored in the context of an ethical approach to
doing business and will construct and argument that will support business ethics
and corporate social responsibility.

The Hand of Management

Bartol and Martin (1991) in discussing corporate social responsibility states that:
“The hand of management perspective states that corporations and their
managers are expected to act in ways that improve the welfare of society as a
whole as well as advance corporate economic interest” (p.104). Three major
arguments are typically advanced in favour of social corporate responsibility. The
Anti-freeloader argument holds that since businesses benefit from a better
society, they should bear part of the costs of improving it by actively working to
bring some solutions to the problems. The Capacity argument states that the

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private sector, because of its considerable economic resources, must make up
for recent government cutback in social programmes. The Enlightened Self-
Interest argument hold that businesses exist as society’s pleasure and that, for
their own legitimacy and survival businesses should meet the expectation of the
public regard social responsibility. Otherwise, they are likely to eventually suffer
financially and go out of business. This argument is related to the iron law of
responsibility, which states that in the long run, he who do not use power in a
manner society considers responsibly will tend to lose it, generally, society’s
expectations appear to be expanding regarding the social responsibility of
business firms.

Enhanced brand image and reputation

A good reputation is often very hard to build, yet can be destroyed in a day. So
much of a company’s reputation results from ‘trust’ by shareholders. A strong
reputation in environmental and social responsibility can help a company build
this trust. However, it needs to result from real practices and policies and integrity
towards the company’s responsibilities. Shareholders are not stupid and can see
through non-sense. In crowded marketplaces companies strive for a unique
selling proposition which can separate them from the competition in the minds of
consumers. Corporate social responsibility can play a role in building customer
loyalty based on distinctive ethical values. Several major brands, such as The Co-
orporative and The Body Shop are built on ethical values. Business service
organisations can benefit too from building a reputation for integrity and best
practice.

Discourages Government Regulation

One of the most appealing arguments for business supports is that voluntary
social acts may bead off an increased amount of government regulation and
taxation. By taking substantive voluntary steps they can persuade governments
and the wider public that they are taking current issues like health and safety,
diversity or the environment seriously and so avoid intervention. Those operating

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away from their home country can make sure they stay welcomed by being good
corporate citizens with respect to labour standards and its impact on the
environment.

Promotes Long-Term Profits for Business.

At times, corporate social responsibility by business produces long-run business
profits. A New Jersey judge ruled in Barlow et al. v A.P. Smith Manufacturing that
a corporate donation to Princeton University was an investment by the firm, thus
an allowable business expense. The rational was that a corporate gift to a
school, thought costly in the present might in time provide a flow of talented
graduates to work for the company. The court ruled that top executives must take
a long-range view of the matter and exercise enlightened leadership and
direction when it comes to using company funds for socially responsible
programmes. A similar example was seen in the classic Johnson & Johnson
Tylenol incident. In the 1980’s, the firm absorbed millions of dollars in short-term
costs by recalling all of its extra strength capsules. Johnson & Johnson took this
radical action to ensure the safety of its consumers after the product was linked
to several consumers’ deaths from cyanide poisoning even though the company
production processes were never found defective. Customers rewarded Johnson
& Johnson’s responsible actions by continuing to buy its products, and in the long
run the company once again became profitable.

A 1997 DePaul University study found that companies with a defined corporate
commitment to ethical principles do better financially (based on annual
sales/revenues) than companies that don't. A look at the Enron collapse issue
surely justifies this University’s findings when contrasted with the Johnson and
Johnson issue above. The Enron last social and environmental report is rather
light on the kind of measures that are increasingly being demanded. There is a
lot of narrative, and a whole range of things that are at the early stages. The
company was to take a comprehensive review of its stakeholders. The company
was gearing up to address human rights and other issues. It did include a

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number of figures on environmental performance, and on health and safety
records. Those who were critics suggested that the company has always been a
poor corporate citizen, and that those who have been seduced by its community
and environmental programs have been duped.

Response to Changing Stakeholders’ Demands.

Social expectations have increased dramatically over the past decade; demands
for a cleaner environment, safe products, fairness in the workplace, privacy
protection, and similar social issues and concerns have placed business in social
spotlight. The public, now more than ever, expects higher levels of social
performance from business. Moreover, groups representing society’s point of
view are better organized, funded, and able to state their case in the media and
in the legislature. Businesses clearly are challenged to more quickly and
accurately respond to these changes demand made by their stakeholders.
Addressing economic performance is no longer enough since many investors link
economic performance to social issues.

After product quality and customer service, socially responsible activities are the
most important factors the public take into account when judging a company. In
addition, a high percentage of customers consider a company's commitment to
social responsibility important when deciding on purchasing its products or
services. This is the highest translation of opinion into purchasing decisions of
any country measured in Europe. Social responsibility is considered important to
seven in ten consumers across Europe. Furthermore, over half would
recommend a company to friends or family based on its social and ethical
reputation.

Some people argue that in the long run, attention to social concerns does benefit
the business on the bottom line. If a business works to provide a less stressful

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work environment for its employees, they may demonstrate less absenteeism
and more overall motivation toward the job. If a business focuses on community
issues, it may be able to attract skilled workers to move to the community. If a
business addresses important social issues customers may view it more
favourably. The arguments here can be compelling. In fact, one service found
that over three quarter of its respondents preferred to buy form business that
support worthy causes. (Justin Martin 1994). The key here is that business does
derive benefits by addressing social issues.
Conclusion
The social responsibility and environmental movements will place even stricter
demands on companies in the future. Some companies resist these movements,
budging only when forced by legislation or consumers outcries. More forward-
looking companies, however, readily accept their responsibilities to the world
around them. They view social responsible actions as an opportunity to do well
by doing good to profit by serving the best long run interest of their customers
and communities. Some companies such as Ben and Jerry’s, Saturn, The Body
Shop, and others are practicing caring capitalisation and distinguishing
themselves by being more civic minded and caring. They are building social
responsibility and action into their company by value and mission statements.
E.g., Ben and Jerry’s mission statement challenges all employees, from top
management to ice cream scoopers in each store, to include concern for
individual and community welfare in their day-to-day decisions.