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Engagement in exploring corporate social responsibility, in our opinion, seems to be justified for three reasons:
- he meaning behind the term corporate social responsibility is not quiet clear, and there are no clear concepts of how to determine responsibility or measure the results.
- Changes in the basic conditions require new management concepts.
- The question of whether and how economics should look more closely into corporate ethics is not a new one, but still remains to be answered.
Quite frequently, in discussions about Corporate Social Responsibility (CSR) the following three areas are mentioned separately:
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Efficient use of scarce resources to provide products and services that meet consumer preferences, combined with gaining profits and ensuring the well-being of the corporation in the long term. |
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Producing goods and providing services by using scarce resources efficiently means considering and preserving in the long run the ecological balance of natural resources |
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Production of goods and provision of services that meet customers’ preferences can in the long run only be effected when the expectations of society are met regarding protection of human rights, fair working conditions, location-specific contributions and transparent company behaviour.
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There are differing opinions as to whether corporations today meet all three areas of responsibility and how far the responsibility should go in the individual areas.
Taking on a critical stance on the economic theory is not new. For instance, already Arrow (1974, p. 21) pointed out that the price system as mechanism to co-ordinate economic decisions, in particular in case of asymmetric distribution of information, may lead to “profound difficulties”. Sen (1987) agues, that the separation of ethics and economics has resulted in massive problems and reductions not only within the economy, but also regarding the development of the ethic theory. After all, these two critics are the winners of the Nobel Prize for Economics in 1972 and 1998, respectively.
On the other hand there is the opinion that business administration is based on solid ethical foundations (cf. Albach 2005). Although the occurrence of unethical behaviour is not excluded, it is, however, up to the individual states to create relevant regulatory framework to contain or correct such behaviour (cf. Albach 2006). Those opposing this view, point to the dwindling power of national states in an era of globalisation and demand more “global governance” on the part of multinational corporations. However, what is missing is an answer to the question of how corporations which were not elected democratically should be legitimised and controlled through a regulatory function, and what concrete values and norms should be the basis for e.g. distribution decisions.
In principle, CSR is undisputed when so-called win-win situations could be proved directly. In this case, acting socially responsible simply means good management. It becomes problematic once proof for such situation cannot be provided and the behaviour of corporations seems to violate the interest of individual stakeholders (e.g. shareholders). For according to Milton Friedman (1978) it is unethical, too, when managers withhold the decision of the charitable use of their dividends from the owners. This situation, in turn, does not pose a problem in owner-corporations.
For many years, the Institute of Management has devoted part of its research activities to the relation between corporate leadership and control, the so-called Corporate Governance”. We are convinced that corporations can only succeed in the long-run when they act socially responsible. Corporate Social Responsibility, therefore, means good management, which in turn can only be achieved through good corporate governance. Consequently, CSR is an integral part of Business Administration
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