The Grey Chronicles

2009.October.9

Corporate Social Responsibility, A Myth? Postscript


After reading Lawrence Lessig’s Code: And Other Laws of Cyberspace, Version 2.0 (2006) and Joel Bakan’s The Corporation (2004), this series of post began with an exploratory essay on Corporate Social Responsibility [CSR]. Part II discussed the role of multinationals [MNCs] in society. Part III delved on the debate between hard law versus the voluntary nature of CSR. Additionally, Part IV describe some avenues which CSR could take in the future.

In this series, Corporate Social Responsibility [CSR], Corporate Citizenship [CC], Corporate Sustainability [CS], and Corporate Governance [CG] were used interchangeably. Certain researchers also offered alternative terms: Corporate Social Opportunities [CSO] (Linnik & Thorsen, 2008), Enlightened Self-Interest [ESI] (Jones, 2008), while others mentioned the antonym: Corporate Social Irresponsibility [CSI] (Bendell & Cohen, 2006; Cooper, 2007; Chatterji & Listokin, 2007; Kotchen & Moon, 2007; Jones, 2008; Hindery & Weeden, 2008; Petrache, 2009) or Corporate Social Relationship (Clark, 2008).

Steve Case, AOL founder, once said:

“Too many people still act as if the private sector and the social sector should operate on different axes, where one is all about making money and the other is all about serving society. A better approach is to integrate these missions with businesses that are «not-only-for-profit» and social service groups with their own earned income all contributing to positive, durable, significant social change.” (Wall Street Journal, 10 May 2005)

With globalization (Anderson & Cavanagh, 2000; De Grauwe and Camerman’s research (2002); Davis, Whitman & Zald, 2006; APO, 2006; Heyzer, 2008) and the most recent corporate scandals (Cooper, 2007; see also Petrache, 2009) leading to public disillusionment with the traditional role of business, Corporate Social Responsibility, not newly coined jargon (APO, 2006) and can be traced back to the days of the Industrial Revolution (de Castro, 2008), should be viewed as “a process and not as a destination,” (Azer, 2002); not as “a passing fad” yet seemingly “a murky concept” (Clark, 2008); neither as management initiatives nor negotiated agreements (Edwards, et. al., 2007); or simply hot air (Stern, 2009); or a rhetoric (Nwete, 2007); or a myth (Fonteneau, 2003). CSR can also appear as a convenient tool of capitalism (Azer, 2002; Aguilera, Rupp, Williams, & Ganapathi, 2009), yet social responsibility issues are “not a decisive factor for foreign investments” (Skjærseth, et.al., 2004).

“[T]he story of CSR still has a long way to go in the 21st century, so too the development of national, comparative, and international bodies of CSR related law and regulation still has some way yet to travel. At the same time, new corporate theories and insights are revealing that, even within orthodox shareholder based corporate regulatory systems, ‘the shareholder primacy model does not, as a matter of law, restrict the concerns of corporate managers to the financial interests of shareholders (short-term or otherwise)’, but rather ‘permits attention to be given to shareholders’ non-financial concerns (such as concerns for the social or environmental impact of their corporation’s activities) and, through the medium of the shareholders, … the interests of non-shareholders’.” (Horrigan, 2007: 122)

Recalling Nobel Laureate economist Milton Friedman, he insisted that “the business of business is business”. Its social responsibility is “to increase its profits”. Its exclusive obligation, called fiduciary duty, is to create wealth for their shareholders. Thus, there is an undeniable truth to Lessig’s statement (2006) regarding the limited liability for corporation, as well as Bakan’s (2004) view that CSR is thus “illegal — at least when it is genuine.”

In 2004, the International Standards Organization [ISO] started the process of establishing guidelines for social responsibility (APO, 2006). Peter Utting, Deputy Director and CSR Research Coordinator of United Nations Research Institute for Social Development (UNRISD), reports:

“[T]he emergence of new coalitions of interest groups and a new institutional complex … serve to deepen and spread the CSR agenda. Particularly relevant are the so-called international multi-stakeholder initiatives (such as ISO 14001, SA8000, GRI, ETI, FLA, FSC, the Global Compact and Global Framework Agreements). In addition to standard-setting, reporting, monitoring, auditing and certification, other institutional arrangements such as socially responsible investment [SRI], fair trade and public—private partnerships also reinforce the CSR dynamic.” (Utting, 2004: 47).

To this day, moreover, there is still debate on the essential and inclusive components of Corporate Social Responsibility or what is really the meaning of Corporate Social Responsibility. Even the debate on whether hard law mandated or voluntary-driven CSR. The latter brings to mind Andrew Young remarking on integrity in the workplace: “Nothing is illegal if a hundred businessmen decide to do it.” (Zelinski, 2007).

Peter Utting (2004: 48) reports that in the universe of firms or even just TNC affiliates, only a very small proportion are involved in some of the high-profile CSR initiatives. Accordingly, between 2002 to 2003, with 64,000 TNCs plus 870,000 affiliates, only 561,747 (or 60%) were ISO 9000 certified; 49,462 (or 5%) were ISO 14001 certified; 259 holders of SA 8000 certification, 328 are either using or «in accordance» with Global Reporting Initiative [GRI] guidelines and about 1,240 Global Compact participants. By 2005, GC participants swelled to 5,000.

Moreover, even the signature US reaction to loss of trust in the market—the 2002 Sarbanes—Oxley legislation to strengthen transparency, accountability and improved corporate governance—, remains unpopular with business in terms of its cost and the quality of auditing. Jem Bendell & Jonathan Cohen (2006) identified three import areas in solving this credibility riddle: the type of information self-declared by companies, the type of auditors involved, and information gathered from other sources.


Notes:

Anderson, Sarah, & Cavanagh, John (2000). The Rise of Corporate Global Power. Washington: Institute for Policy Studies, 04 December 2000. back to text.

Asian Productivity Organization [APO] (2006). Report of the APO Top Management Forum on Corporate Social Responsibility. Tokyo: Asian Productivity Organization, May 2006. p. 3—4. back to text.

Azer, Alizon (Jeffrey) (2002). The Ethics of Corporate Social Responsibility: Management Trend of the New Millennium?. Sheldon Chumir Foundation for Ethics in Leadership, June 2002. pp. 15—16. back to text.

Bakan, Joel (2004). The Corporation: The Pathological Pursuit of Profit and Power. Constable, 2004. p. 37. back to text.

Bendell, Jem & Cohen, Jonathan (2006). Trials and tribulations. World Review, April to June (Second Quarter) 2006. back to text.

Chatterji, Aaron & Listokin, Siona (2007). Corporate Social Irresponsibility. Democracyjournal.org, Winter 2007. pp. 52-63. back to text.

Clark, Timothy S. (2008). IROs and CSR: Making Sense of the Corporate Social Relationship, Investor Relations update. Vienna, VA: National Investor Relations Institute, June 2008. pp. 17-20. back to text.

Cooper, Seward Montgomery (2009). Corporate Governance in Developing Countries: Shortcomings, Challenges & Impact on Credit, Proceedings of 40th Annual Session of UNCITRAL Modern Law for Global Commerce, Vienna. 9-12 July 2007. Vienna: UNCITRAL. back to text.

Davis, Gerald F.; Whitman, Marina von Neumann & Zald, Mayer N.(2009). The Responsibility Paradox: Multinational Firms and Global Corporate Social Responsibility. University of Michigan, January 2006. p. 3, 37. back to text.

de Castro, Gregorio (2008). Corporate Social Responsibility and restructuring in the EU: A historical overview of recent developments, Governance, International Law & Corporate Social Responsibility. Geneva: International Labour Organization (International Institute for Labour Studies), 2008. pp. 129-127. back to text.

De Grauwe, Paul & Camerman, Filip (2002). How Big are the Big Multinational Companies?. Brussels: University of Leuven, January 2002. back to text.

Edwards, Tony; Paul Marginson, Paul Edwards, Anthony Ferner, & Olga Tregaskis (2007). Corporate social responsibility in multinational companies: Management initiatives or negotiated agreements?. Geneva: International Labour Organization (International Institute for Labour Studies), 2007. back to text.

Fonteneau, Gérard (2003). Corporate Social Responsibility: Envisioning its Social Implications. The Jus Semper Global Alliance/The Living Wages North and South, Inc., October 2003. p. 6. back to text.

Heyzer, Noeleen (2008). Corporate Social Responsibility in the Midst of Financial Turmoil, Proceedings of the 7th Asian Forum on Corporate Social Responsibility, Singapore, November 2008. United Nations Economic and Social Commission for Asia and the Pacific [UNESCAP]. back to text.

Hindery, Leo Jr. & Weeden, Curt (2008). Corporate Social Irresponsibility. Business Week, August 2008. back to text.

Horrigan, Bryan (2007). 21st Century Corporate Social Responsibility Trends — An Emerging Comparative Body of Law and Regulation on Corporate Responsibility, Governance, and Sustainability, Macquarie Journal of Business Law. Vol. 4. Place: Macquarie University, 2007. pp. 85-122. back to text.

Jones, Marc T. (2008). Disrobing the Emperor: Mainstream CSR Research and Corporate Hegemony. Hertfordshire, U.K.: Ashridge Business School and Maastricht School of Management, August 2008. p. 16. back to text.

Lessig, Lawrence (2006). Code: And Other Laws of Cyberspace, Version 2.0. New York: Basic Books, Perseus, 2006. pp. 11. back to text.

Linnik, Marianna & Thorsen, Sune Skadegaard (2008). ILO and CSR — minimum human rights standards for corporations, Governance, International Law & Corporate Social Responsibility. Geneva: International Labour Organization (International Institute for Labour Studies), 2008. pp. 105-127. back to text.

Nwete, Bede (2007). Corporate Social Responsibility and Transparency in the Development of Energy and Mining Projects in Emerging Markets; Is Soft Law the Answer?. German Law Journal, 08:04. April 2007. pp. 311-340. back to text.

Petrache, Ana-Maria (2009). The collapse of ENRON, a classic case of corporate social irresponsibility, Economia seria Management. 12: 2 (special). Romania: The Bucharest Academy of Economic Studies, 2009. pp. 51-57. Proceedings of The Ninth International Conference “Investments and Economic Recovery”, 22 — 23 May 2009. back to text.

Stern, Stefan (2009). The hot air of CSR. London: The Financial Times, 02 February 2009. back to text.

Skjærseth, Jon Birger; Kristian Tangen, Philip Swanson, Atle Christer Christiansen, Arild Moe, Leiv Lunde (2009). Limits to Corporate Social Responsibility: A comparative study of four major oil companies. Report 7/2004. Lysaker, Norway: Fridtjof Nansen Institute, 2004. p. 19. back to text.

Utting, Peter (2004). CSR and reporting for development, Disclosure of the Impact of Corporations on Society: Current Trends and Issues. New York and Geneva: United Nations Conference on Trade and Development [UNCTAD], August 2004. pp. 47—52. back to text.

Zelinski, Ernie J. (2007). 1001 Best Things Ever Said about WORK (and the Workplace). Alberta, Canada: VIP Books, 2007. p. 111. back to text.

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