Understanding Corporate Social Responsibilitieseconomic school of thought

MONDAY, NOVEMBER 07, 2011 KAZEEM JAMES

As with democracy, so also is the dividend of social responsibilities by businesses and companies. In America
for instance, the companies and businesses running there gives lot of attention to their corporate social
responsibilities. Unlike most other countries, the citizens would have to beg to get their social privileges from
companies operating in their territory.
Same can be said about the Niger delta in Nigeria, the people suffered in agony because they were not getting
adequate social attention hence the agitation by the locals on the corporate social responsibilities expected.
The growing activities of industries and commercial organizations in Nigeria have brought with them many side
effects. Some of these consequences are positive while some are negative. The positive outcomes of
industrialization include a general increase in the standard of living and a rise in the provision of better quality
products and services and more job opportunities.
The negative outcomes or social costs of the growth in the industrial, manufacturing sector include the
pollution of the environment, the increasing powerlessness of the individual consumer in a society dominated
by big business organizations and corporate power, a rapid depletion of natural resources, etc. As a result of
the declining resources of government to satisfy all the needs of the populace and the growing resources of the
power of industry, the question has arisen as to what role the private sector should play in the society as a whole
and for specific social groups in particular.
There are two schools of thought on corporate social responsibility. They are:
(i)

The economic school of thought, and

(ii)

The civic school of thought.

The Economic School of Social Responsibility

The conceptual leader of the economic school of social responsibility is Milton Friedman (1962, 1970). Other
contributors are Levitt (1958, 1964), Hacker (1963) and Cox (1969). According to this school, a business firm is
an economic institution and it has no responsibility other than the economic especially because the
stockholders are interested only in maximum short term profit with minimum concern for the problems of the
physical and social environment.

For this reason, the primary, if not exclusive responsibility of the management of a business organization is to
earn maximum profits for the benefit of the shareholders. Accordingly, managers should ignore social
functions because they do not increase the profit of the company.
According to Friedman, there is one and only one social responsibility of business to use its resources and
engage in activities designed to increase its profit so long as it stays within the rule of the game, which is to say
engages in open and free competition without deception or fraud (2). According to him, a business
organization has no reason or justification to reduce returns to shareholders or reduce prices to customers or
lower wages to workers merely to satisfy a general social interest.
A second argument of this school is that since social matters are the concern of government, it is irresponsible
and outside the mandate of business executives to get involved in activities which do not concern them, which
are political or charity in nature. Thus, any deviation form the economic goal standard by an executive is not in
the best interests of his employer neither is it in the best interest of the society because business organizations
are not properly and legally constituted to perform non-economic roles. Business, according to this school,
serves the society best if it concentrates solely upon its economic function i.e if it pursues efficiency and profit.
A third argument of the economic school of social responsibility is that if a business firm attempts to solve
social problems, it will expose itself to criticisms, blackmail, and vandalism from various interest groups with
negative consequences for its ability to perform its primary economic responsibility. Besides, how is a company
to select the particular social contribution to make or social group to favour?.
Lastly, the economic school believes that the desire for profit and efficiency is irreconcilable with the pursuit of
social contribution hence the latter should be dropped from a companys agenda.
The Civic School Responsibility
This school of thought sees the role of a business organization in society ad extending beyond the narrow
motive for commercial profits. It sees a business organization as a mirror of social values and a force for
improving community and general welfare.
The civic school, which was pioneered by Oliver Sheldon (1923) had drawn support from leading writers like
Walton (1967, 1969), and Moore (1962) and from businessmen, politicians, and the general public. According t
this school, private companies especially the large ones, should incorporate the normative pattern and values of
society into their missions and operational objectives and should help, to prevent pollution, to build-hospitals
and schools and to solve social problems such as unemployment, inadequate social amenities, inequality, road
accidents, etc. This is because economic activities are so intimately related to every fact of society that business
must show intelligent and objective concern for the well being of all those that it affects instead of confining
itself to narrow industrial production and ignoring its functional social consequences or leaving them for

government alone to regulate or correct. Thus, non-economic (or civic) social responsibility is seen as a
functional imperative in the modern business world.
A major argument of the civic school is predicated on the concept of enlightened self interest. Thus, it is
believed that by assuming a wide range of non-economic responsibilities for improving the quality of life, a
business organization will retain its legitimacy or social acceptance. This will help it to achieve its primary
objectives and avoid undue interference in and the imposition of harsh external controls on the internal
operations of the company by the government or some other powerful public groups. It is further argued that
modern, large business organizations are so powerful and resourceful that their strength and resources must be
brought to bear on certain social problems if such problems are to be solved at all.
The corporate and sectional objectives of a company are likely to be determined by economic as well as social
factors so that on the whole management objectives and responsibilities will be combination of the social and
the economic and not exclusively one or the other.
Stakeholders or Corporate Claimants
A study of the way organizations handle their social responsibilities shows that there are some internal and
external interest groups or publics each of which has an interest in the existence of the organization and the
way it is run. The survival and prosperity of a company depend upon the behavior of these groups. Thus, when
setting objectives, it is important to bear in mind the interests of all those who are likely to be affected by the
way the company is operated.
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