Analysis of the arguments for and against corporate social r


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Analysis of the arguments for and against corporate social r

  2. 2. 2 PHONE NO: 080-37743134EMAIL:
  3. 3. 3 ABSTRACTFrom the point of view of neo-liberal economist such as Fiedman andHayek, the prime function of any business enterprises is to generateprofits, its central responsibility is to shareholders. The idea thatbusiness owners should also seek to perform social tasks is regardedas completely erroneous. Historical evidence suggests that not allbusiness leaders have been formed simply to perform a commercialrole in society. Numerous industrialists and entrepreneurs throughoutthe nineteenth century made significant contributions to their localcommunities. The early efforts of socially responsible businessleaders are well documented. This paper aims to build an existinghistorical analysis of business philanthropy and social involvement byanalyzing developments in post-war Britain. Three main historicaldevelopments are outlined. First, the early post-war years, depositthe formation of the welfare state, witnessed some notable efforts toengage business in society. These were mainly inspired by church-ledorganizations and Christian entrepreneurs. Second, the expansion ofthe corporate economy throughout the 1940s and 1950s placedincreasing constraints on the social aspiration of business. Finally,from the mid – 1970s onwards there grew a more general interest incorporate responsibility. This was consolidated in 1980s as part ofthe general redefinition of state functions in this period, the role ofbusiness in addressing social problems became more prominent.Such political and policy developments, it was argued, have made asignificant contribution towards enhancing the social role of business.Keywords: Social responsibility, private business, economicdevelopment, philanthropy, ethical practice, corporate responsibility.Paper type: Research Paper
  4. 4. 4 INTRODUCTION It is a known fact that government interference with marketmechanism, and control and regulation of the private businessbecome inevitable due to failure of the market system to fulfill theeconomic and social aspirations of the society, via optimum utilizationof resources, near-full, if not full, employment, equitable distributionof income and wealth, economic growth and stability. The greater thefailures of the market system in achieving these goals, the greaterthe need for government interference, control and regulation of theprivate business enterprises. Nevertheless, another factor that is attributed to the increasingrole of the government in the economic system is the failure ofprivate business to recognize, accept and fulfill, their socialresponsibilities. This implies that if business man fulfill their socialresponsibilities, the need for government interference with privatebusiness will be considerably reduced, if not eliminated. This workwants to look at the implications of social responsibility of business ineconomic growth of Nigeria.CONCEPT OF SOCIAL RESPONSIBILITY Social is an ethical ideology or theory that an entity, be it anorganization or individual has an obligation to act to benefit sociallyat large. Social responsibility is a duty every individuals ororganization has to perform so as to maintain a balance between theeconomy and the ecosystem. A trade-off always exists between economic development, in thematerial sense, and welfare of the society and environment. Socialresponsibility means sustaining the equilibrium between the two. It
  5. 5. 5pertains not only to business organizations but also to everyonewhose any action impacts the environment. This responsibility can be passive, by avoiding engaging insocially harmful acts, or active, by performing activities that directlyadvance social goals. Businesses can use ethical decision making to ensure theirbusinesses by making decisions that allow for government agenciesto minimize their involvement with the corporation. For instance, Kaliski, (2001) if a company is and follow theUnited Environmental Protection Agency (EPA) guidelines foremissions on dangerous pollutants and even goes on extra stop toget involved in the community and address those concern that thepublic might have, they would be less to have the EPA investigatethem for environmental concerns. A significant element of current thinking about privacy,however, stresses self-regulation “rather than market or governmentmechanisms for protecting personal information”. Swire, (1997) according to some experts, most rules andregulations are formed due to public outcry, which threatens profitmaximization and therefore the well-being of the shareholders, andthat if there is no outcry there often will be limited regulation.HISTORICAL DEVELOPMENT OF SOCIAL RESPONSIBILITIES Social responsibility dates back to the early days of capitalismwhen people like Titus Salt demonstrated that society should not beruled only by market forces. Many events have been influential inshaping the social responsibility agenda.
  6. 6. 6 In 1848, Yorkshire wool baron Titus Salt creates Saltaire, amodel community outside Bradford for his staff, where each homehas running water. In 1911, David Lloyd George introduces the National InsuranceAct; it requires businesses to make contributions to unemploymentand sickness insurance for all staff. In 1969, Ralph Nader founds the centre for responsible law inthe US to expose corporate abuses and lack of enforced regulation. In 1971, Anita Roddick opens the first body shop branch inBrighton. The company operates according to a strict ethical andenvironmental policy. In 1982, Business in the community is set up to forge linksbetween business, trade unions, government and communities. In 1992, sustainable development dominates the Rio UNconference on Environment and Environment and Development,addressing environmental damage and world poverty. In 1999, the Turnbull Report, recommends that companies’Boards should focus and manage the full range of risks includinghealth, safety, environment and reputation. In 2004, it was announced that from 2005 all listed companieswill have to provide an operating and financial reviewed with theirannual report, taking into account their social, environmental andeconomic impact. Social responsibility is a core value at Hess Corporation. Thecompany is committed to meeting the highest standards of corporatecitizenship by protecting the health and safety of employees,safeguarding the environment and creating long-lasting, positiveimpact in the communities where we do business.
  7. 7. 7 Hess endorses the universal declaration on Human Rights and isan active participant in three voluntary initiatives designed to protectthe environment, promote human rights, and encourage financialtransparency. The United States Global Compact, The VoluntaryPrinciples on Security and Human Rights and the ExtractiveIndustries Transparency initiative. Hess is honored to have ranked15th on corporate responsibility officers’ 10 best corporate citizens2009.REASONS SURROUNDING CORPORATE SOCIAL RESPONSIBLEEvery business enterprise or organization are faced with some socialresponsibilities to the environment and its inhabitant in differentdynamism. The following are some of the reasons surroundingcorporate social responsibility in Nigeria. 1. To promote the social welfare of the people: Promotion and provision of standard health, education and cultural services, a particular place generally owns by the citizenry some social responsibilities of providing health education and cultural services. This is because the organization enjoy natural resources of the community or society. 2. To protect the environment against social hazards or risks: In preventing environmental pollution, an establishment or business organization aims the responsibility to the general society to which it operate to ensure that it protect eh environment against some social risks or hazards like pollution or other industrial contamination of any source. In case of an organization that spill oil, it should take adequate and proper control of its wasted material to make some that it prevent environmental pollution to the society at large.
  8. 8. 8 3. Cooperating with the government in research and development: A business organization is a separate entity different from the owner by law. Therefore, the business owner have it as a responsibility to corporate and collaborate with the government in research and development of any sector of the economy. As technology changed so also the need to improve on the standard of well being of the people probably through product, invention, innovation and new product development. 4. Cooperating with the government in promoting social values: A business organization set up in an environment should help the government in promoting social values of the people like building of good hospital, good road, good network and pipe borne water for a better life standard of the people.THE ARGUMENTS IN FAVOUR OF SOCIAL RESPONSIBILITIES Fredman and Bavmol, two of the greatest economists of ourtime, are opposed to the view that businessmen have many socialresponsibilities to fulfill in the opinion of Friedman. The view thatcorporations and labour unions should accept social responsibilitiesshows a fundamental misconception of the character and nature of afree economy. He argues that in a free economy, there is one and only onesocial responsibility of business to use its resources and engage inactivities designed to increase its profits so long as it stays within therules of the game, which is to say, engage in open and freecompetition without deception of fraud. If businessmen do havesocial responsibility other than making maximum profit forstockholders how are they to know what it is.
  9. 9. 9 In his opinion, assigning any social responsibility to privateentrepreneur other than profit maximization is a fundamentalsubversive doctrine which undermines the very foundation of a freesociety. Baumol on the other hand is of the view that private businessshould not be asked to assume the responsibility of fulfilling thesocial and political goals of the society nor should they be expectedto allocate resources optimally for, in his opinion, a competitivesystem automatically rewards efficiency and punishes inefficiency,and where it fails, fiscal measures – taxes and subsidies may beadopted to correct the system and to encourage the business infavour of social goals.ARGUMENTS AGAINST SOCIAL RESPONSIBILITIES INECONOMIC DEVELOPMENT Some authors argue that even if it is accepted that businessmanhave social responsibility, it is extremely difficult to fix it. As NiallFitzerald has remarked, “corporate social responsibility is a hard-edged business decision” (Tol, 2007). Fixing corporate socialresponsibility is extremely difficult because:i. Social different personsii. It is not easy to fix social responsibility in practicable terms because there are no standard rules.iii. Private firms, even big corporations, do not have control over the market mechanism of resources allocation. In addition, the following arguments are put forward against assigning social responsibility to businessmen.i. Social responsibility is a matter of public policy, not a number of business policy.
  10. 10. 10ii. Businessmen do not have legal powers or social sanction to meddle with social welfare.iii. Businessmen do not have legal powers to prevent anti-social activities of others.iv. Managers are not empowered to spend money on social welfare beyond a limit.v. Expenditure on social welfare often lead to rise in Businessmen’s social responsibility will make them more powerful and will create conflict between the businessmen and the government.vii. As regards setting moral values corporations are not moral agents. Clearly, the views on whether businessmen have any socialresponsibility, are divergent and arguments against assigning socialresponsibility to businessmen are equally strong. The divergence ofviews however, should not mean that private business has no socialresponsibility. It is of course difficult to fire social responsibilities forthe businessmen and it would be unreasonable to expect thebusinessmen to give up their profit maximization motive in favour ofsocial interest. However, if one examines the argument, the socialresponsibilities of businessmen, one would find that they are moreemotive than logical, and are not very convincing. For example, lookat Friedman’s argument that assigning social responsibility to privatebusiness is contrary to the character and nature of a free economy.The validity of this argument is limited in many respects asmaintained below: First and foremost, Friedman would agree that if growth ofmonopolies and concentration of economic power shake the very
  11. 11. 11foundation of the free society, some social responsibility has to befixed with social sanction as regards the governments power tocontrol the monopoly powers, big business houses influence thepolitical decisions and, in a way to rule the country with their invisiblehands’ and therefore, the process is the other way round. Again, as regards to the argument that businessmen have thesole objective of profit maximization, some economists objectstrongly to profit being the sole objective of modem corporations. Intheir opinion, the profit maximization objective often leads to growthof monopoly and concentration of economic power, and it is wrong tosay that the state will take care of monopolies because largecorporations use their money power to bring into power thegovernment of their choice. How can such a government controlmonopolies in the real sense of the term. They believe that labour,management and public have a much more legitimate claim tocorporate returns than the stockholders who are merely the passivecertificate holders with little knowledge of business or commitment tobusiness. Equally, it may be unreasonable to expect businessmen toreplace their profit motive with economic welfare of the society, but itis not unreasonable to expect from businessmen to desist from theanti-social activities in which they often indulge e.g. fleecing theconsumer under conditions of scarcity, supplying adulterated,substandard and spurious goods (especially foodstuffs andmedicines), black marketing, exploitation of labour (paying themmuch lower ways than their productivity), not complying withefficient treatment laws, polluting air and water in the residentialarea posing risk to human survival, and so on.
  12. 12. 12PROBLEMS OF SOCIAL RESPONSIBILITIES IN NATIONALECONOMIC DEVELOPMENT In an independent assessment of Shell’s Oil Spill at Ogbodo,Rivers State, in June – July, 2001, Terisa Turner, a world renownedauthority on political economy of oil corporations, exposed the falsityof Shell’s Sabotage thesis. She declared; the claim of sabotage ispatently false. The oil companies have been claiming that the oilspills, the pipeline explosions were all caused by sabotage. But thereis no evidence to this so far. Since the WECD gave global currency to the concept ofsustainable development the international business sector hassystematically counted sustainable development. The first round of this incongruous courtship manipulated itselfin the business sector’s preference for sustainable economicdevelopment as the primary determinant of sustainable developmentby relating to environmental development as an after thought. Byenunciating corporate social responsibility, the international businesssector aspires to demonstrate the human face of business as itsstrategies to modify the citizens in countries of its operations. Notwithstanding, its “human face” of business policy, Shell hasnot been able to meaningfully address the environmental challengesof sustainable development like other corporations, Shell hasappropriated sustainable development without being able to avoid acollision with environmentalists and environmental imperative.PROSPECTS OF EFFECTIVE MANAGEMENT OF SOCIALRESPONSIBILITIESThe effective management of social responsibility by an organizationhas following prospect, amongst which are:
  13. 13. 131. It brings about reduction of crime: The concept of social responsibility ancore a duty of providing social benefit to the host community, if the organization that goes the business effectively comply with this duties, naturally people who would have attack them due to non-compliance will be drastically reduced therefore effective management of social responsibility brings about reduction of crime by the host community.2. Provision of employment in the rural area: The business organization through the principle of social responsibility and its management create and provide employment to the host community in which they operates. If the business organization did not or refused to comply with the provision of employment the host community can revolt against the business enterprise a case study of Niger Delta crisis.3. It is a source of development to the rural area (or the host community): The employment opportunities provides by the business organization to both the host community members and outsiders will in turn brings development to the community at large. Therefore effective management of social responsibilities bring about development to the host community.4. It helps to improve the social environment of the people: social responsibility of an organization if adheared to will help in improving the social environment of the people like provisions of some social amenities by the organization to the citizens.5. It leads to provision of jobs and achievement of a sustainable economic growth.6. It engenders a friendly society among the host communities and the organizations.
  14. 14. 14 7. It creates securities for the organization as the host community takes it upon itself to safeguard the assets of the firm. 8. It gives the firm, organization or business enterprise a favourable publicity. 9. It boost the productivity of the staff of the organization. CONCLUSION It is quite obvious to any observers that Niger Delta residing inthe areas of oil exploration been a significantly higher explosive toenvironmental risks than, say, residents of Kaduna who enjoy muchhigher benefit from the exploits of oil exploration without incurringany environmental risks arising from such exploration. Nevertheless, at the corporate level, the issue of socialresponsibility has two dimensions. Meeting social responsibility andaligning the working of the corporations with the general welfare ofthe society such as keeping social gain at per with private gains. Thecorporate sector seems to be fairly well aware of its socialresponsibilities as far as financial contributions towards social welfareactivities are concerned. The big corporate have made significantcontribution to the promotion of social welfare activities like buildingof school, colleges, charitable hospitals, and dispensaries, researchand technology institutes, creating species chairs for professors ofexcellence in the universities and so on. But when the issue isexamined in the overall social perspective, the working of thecorporate sector leaves much to be desired. The corporate sectorshows little or no concern for environment and water pollution andsafety for human life. Consider, for example, the tragic case of Bhopal gas leak andloss of human life. Exploitation of labour (paying wages less thantheir productivity), has become an accepted norm of the corporate
  15. 15. 15sector. A much more dangerous trend set in India for example is theuse of money power by big business houses to corrupt the politicians,political environment and bureaucracy for personal gains. India israted to be the second or third corrupt nation in the world. However, it is unfair to hold business houses alone responsiblefor the widespread corruption is the country. RECOMMENDATIONS Based on the above work the following recommendations areproffered.i. That government should set up a regulatory body to oversee the total compliance of private business to social responsibility.ii. Private business or organization should always try to uphold her responsibilities towards the shareholders, employers consumers, the government and the society as a whole.iii. Businessmen should be given legal power to prevent anti-social activities of others.iv. Businessmen’s social responsibility should be given power to settle conflict between the businessmen and the government.
  16. 16. 16 REFERENCESDavid, F.R. (1987) Fundamentals of Strategies Management McGraw-Hill Book Company Ltd, New YorkDavie, K. (1975), Business and Society, Environment and Responsibility 3rd Edition, McGraw-Hill Book Company Ltd, New YorkDrucker, P.F. (1963), “Management for Business Effective” Harvard Business Review, May – JuneDrucker, P.F (1974), Managing, Tasks, Responsibilities and Practices, Harper and Row Ltd, OnitshaEjiofor, P.N.O. (1989), Functions of Business Administration, Africana-Fap Publishers Ltd, OnitshaIfedi, U. (1991), Scope of Business Social Responsibility” Business Times, October, 14Luthans, F. (1982) Social Issues in Business Strategies and Public Policy Perspective Macmillan Publishing Company Ltd, New YorkOnuoha, B.C (1991), Fundamental of Business and Management in Nigeria, Unique Press Ltd, AbaOshaghemi, T.A (1985), Small Business Management in Nigeria, Longman Publishers Ltd, LagosUzoagu, W.O (1975) Social-Economic Responsibility of Multi-national Corporation” Business Quality Vol. 3 No. 2