Global Trends and Ethics

C10GT

Should companies subscribe to codes of corporate social

responsibility? Support your response with reference to ethical
theory. You may illustrate your case with examples from real life of
companies which do (or do not) have codes of Corporate Social
Responsibility.

13/03/2018

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The following paper aims to answer the question of whether companies should subscribe to
codes of corporate social responsibility. In order to determine a delicate position that deemed
to be appropriate, the paper engages in a critical debate, containing a great proliferation of
theories, approaches and terminologies based on literature surrounding the concept of
corporate social responsibility among firms. In doing so, the paper addresses the evolution of
corporate social responsibility for a solid understanding of the concept, along with emerged
themes and models associated with it, such as corporate social performance (CSP). Then an
analysis of institutional, organisation and individual levels is conducted in order to reach a
reasonable position in relation to firms’ employment of codes of CSR. This discussion is
supported with examples from different industries, with special reference to ethical theory.
The researched literature was carried out through the lens of Heriot-Watt Discovery platform
and Google Scholar. Keyword searched included terms such as: corporate social
responsibility, ethical theory, stakeholders’ management, society and business, morality, and
firms’ instrumental and normative motives.

The concept of corporate social responsibility (CSR) has a diverse and long history. Its
concerns have grown significantly since the second half of the 20 century (Bowen, 1953;
Davis, 1960; Dodd; 1932; Frederick, 1960). On a wide range of issues, CSR not only become
a central area of prominence in the business press and among political figures (Buhr and
Grafstrom, 2004) but a body of academic literature has also emerged around it (Margolis and
Walsh, 2003; Garriga and Melé, 2004; Campbell, 2007). It is important to trace the evolution
of CSR as a definitional construct and as a concept, and come to appreciate what it has meant
in the past and still represents (Carroll, 1991). Such a quest is primary to provide a solid
foundation to reasonably assess the possibility of exercising such a concept by firms. There is
an abundance of corporate social responsibility definitions, which are, according to Dahlsrud
(2008), consistently referring to five dimensions, including: environmental, social, economic,
stakeholder and voluntariness dimensions. Perhaps well-known is Carroll’s (1999) literature
review of CSR in academic literature, dating the first formal literature of the 1950s and then
move one toward the 1960s, 1970s to 1990s. Bowen’s (1953) work marked the beginnings of
the modern period of literature on CSR, which was referred to more often as social
responsibility (SR). He proceeded from the idea that the largest businesses were dominant
centers of decision making and power and those actions touched citizen’s lives at various
degrees. His thoughts on CSR are orientated to businessmen at that time who have the
obligations to pursue policies and actions that are desirable and in line with objectives and

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value of our society. In line with Bowen ideas on firm’s social concerns, Davis (1960)
developed the concept in attempts to formalise and accurately refer to what CSR implies.
Davis (1960) set his definition of social responsibility by stating that “…decisions and actions
taken for reasons at least partially beyond the firm’s direct economic and technical interest’’
(Davis, 1960, P.70). This indicates that that certain socially responsible business decisions can
be clarified by having a chance to bring economic gain to the firm, while paying it back for its
socially responsible outlook. Another major contributor to the significant growth of social
responsibility during the 1960s was Joseph W. McGuire. He asserted that corporations have
not only economic and legal obligations but also certain responsibilities to society which goes
beyond these common obligations. McGuire (1963) elaborated more in these obligations to
cover various areas such as participation in welfare of the community, in its employee’s
satisfaction, an interest in politics and in the whole social world at large. Walton (1967)
addressed many facets of CSR to include an essential ingredient of the corporation’s social
responsibilities, which is a degree of voluntarism. This is associated with the acceptance of
costs involved that may have a direct impact on economic returns. Johnson’s (1971) advanced
the concept by emphasising on the importance of managerial balance in terms of multiplicity
of interests. This means that socially responsible firm focuses not only on striving for larger
profits for its stockholders, but also consider and appreciate local communities, employees
and what constitutes the nation overall. Another significant scholars on CSR are Manne and
Wallich (1972). They emphasised on the element of volunteerism by saying that business
expenditures may have multiple rather single motives. It is complex to distinguish between
that which is in response to social norms and that which is ‘’purely voluntary’’. Furthermore,
Manne and Wallich (1972) introduced three basic elements to exercise corporate social
responsibility, involving: the setting of objectives, the decision whether to pursue given
objective and then the financing of these objectives. In the 1990s, the corporate social
responsibility concept transitioned notably to alternative themes such as business ethics
theory, stakeholder theory and corporate citizenship, and CSP. The notion of corporate social
performance model was introduced by Carroll (1970) under which CSR may be
comprehensively subsumed. This covers three-dimensional aspects, including: integration of
responsibility, responsiveness and social issues. Wartick and Cochran (1985) formulated these
into a framework of principles, processes and policies. Carroll (1991) proposed a model
consisted of four responsibilities as consecutive layers within a pyramid. The economic
responsibilities as the base upon all others rest, and then built upward through legal, ethical
and philanthropic categories (Carroll, 1991, p.42). This implies that CSR firm should

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endeavour to make a profit and obey the law while being ethical and good corporate citizen. It
should be noted that businesses should not meet these levels in sequential fashion but that
each is to be met at all times for ‘true’ social responsibility. The corporate social
responsiveness is presented as the action stage of CSR, as in how firms actively respond to
social concerns. Firms could employ various philosophies and strategies of social
responsiveness. These are: reactive, accommodative and proactive (Carroll, 1991). The social
issues category or policies as referred by Wartick and Cochran (1985) are delineated into
three concrete areas, including: social policies, social programmes and social impacts. These
three dimensions of Carroll CSP model were reformulated by Wood (1991) into much more
comprehensive and explicit model to become observed as the principles of CSR, the process
of social responsiveness and the outcomes of corporate behaviour.

Given a historical evolution of corporate social responsibility concept on the basis of decade-
by-decade, and acknowledging the notion of corporate social performance model, which
outlines the responsibilities expected, strategies to be implemented in return, and possible
outcomes of such a corporate behaviour. It is about time to critically discuss the diverse views
about firms’ employment of CSR, with a consultation of ethical theories in order to arrive to a
logical destination. The question of whether firms should subscribe to codes of corporate
social responsibility is far more complex than simply answering by yes or no. this is due to
various contrasting factors, theories and assumptions involved. Since the CSR literature is
highly fragmented (Waddock, 2004), and firms have a unique legal status structure and
typically regarded as ‘artificial persons’ in the eyes of the law due to having certain rights and
responsibilities in relation to various groups as noted by Crane and Matten (2016), the
following debate will integrate institutional, organisational and individual level of analysis for
a comprehensive determination. Institutional and organisational concentrates on instrumental
motives, and theories related to institutional theory, and resource-based view of the firm. On
other hand, individual level of analysis typically draw upon psychological theories and focus
on normative motives (Aguinis and Glavas, 2012). This debate occupies a pluralism ethical
stand of position, which accepts different backgrounds and moral convictions while at the
same time suggesting that a consensus can be reached based on basic rules and principles.
Before a firm decides to perform the codes of CSR, there are key aspects that should be
closely examined. This includes the outcomes resulted from such a practice, the degree of
influence of the key factors that could or force a decision of entering the domain of corporate
social responsibilities, and to what extend they meet the moral judgement. At an institutional

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level, there are various reasons why firms feel they must/should to engage in CSR.
Stakeholders’ pressures serve as an important catalysts for firms to engage in CSR and pursue
associated type of initiatives (Stevens et al, 2005). These coming specifically coming from
consumers influence through product purchasing and evaluation (Sen and Bhattacharya,
2001), community (Marquis et al, 2007) and the media through public statements (Davidson
and Worrell, 1988). The mains motives behind stakeholders’ pressure can be due to
instrumental, relational or moral reasons as noted by Aguilera et al (2007). Additionally,
institutional forces including standards and certification (Christmann and Taylor, 2006) also
impact the likelihood of implementing CSR actions. However, these forces can lead to
symbolic practices to comply with minimum requirements instead of a true CSR actions. On
other hand, there are institutional-level outcomes of CSR that can be obtained as result of the
predictors mentioned. These include improvement in a firm’s reputation (Waddock and
Graves, 1997), positive product and firm evaluations by consumers (Sen and Bhattacharya,
2001), and high degree of loyalty (Maignan et al, 1999). Such outcome implies that firms
should adopt the concept of corporate social responsibilities. An example of negative
reputation and firm evaluation is oil giant ExxonMobil experience of international consumer
boycott during 2000s Crane and Matten (2016). This resulted in associating the firm with
“world’s no.1 climate criminal”, along with an organised campaign to avoid purchasing its
goods. At an organisational level, firms’ instrumental motivation and normative reasons form
a fundamental base for firms CSR engagement (Aguinis and Glavas, 2012). This can be seen
through the thought of having CSR is beneficial for business in terms of competitiveness
(Bansal and Roth, 2000), and the pursuit of higher morals (Aguilera et al, 2007). Additionally,
firm’s structural aspects are also influential on CSR actions. This by integrating the CSR pride
within firm’s values and mission (Bansal, 2003), and having an organisational structure that
tend to be open towards relationships with society. On other hand, organisational level
outcomes are divided into CSR and financial outcomes and non-financial outcomes. Orlitzky
et al (2003) concluded that a positive relationship between CSR and financial performance
occurs. Furthermore, non-financial outcomes include acquiring better competitive advantage,
perceived quality of management (Waddock and Graves, 1997), and improved demographic
diversity in relation to ethnic minorities and woman (Johnson and Greening, 1999). Given the
possible favourable outcomes generated from motives highlighted in the lights of
organisational level, it is therefore a strong signal of encouragement for firms to be socially
responsible. At an individual level, there are different psychological related behaviour that
motivates individuals working in a firm to engage in CSR policies and actions. This is

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essentially associated with commitment from supervisors (Muller and Kolk, 2010), and
extended to cover its antecedents, involving congruence of individual values with
organisational values as part of decision making (Bansal, 2003). Additionally, Aguilera et al
(2007) stated that employee psychological needs drive engagement in CSR by developing
interest in improving self-esteem and self-actualisation. On other hand, individual level
outcomes are represented in employee psychological attachment to the organisation. This
sense of belonging results in employee engagement, increased organisational identification
and better employee relations (Glavas and Piderit, 2009). These CSR benefits generated from
an individual perspective is another area that supports the assertion that firms are suggested to
exercise the codes of social responsibility, especially for the businesses who prioritise human
assets and appreciate the value of their employees. Xerox, the printing giant offers programs
supporting social concerns. Their involvement community program involves directly
employees. Since 1974, more than half a million employees contributed in this program. As a
result, Xerox earned not only community recognition but also employees’ commitment. The
analysis of the three levels in relation to the reasons and diverse positive outcomes
demonstrate why it is advantageous for the companies to subscribe to code of social corporate
responsibility.

In arguing against CSR, Friedman (1970) asserts that commitment to CSR is a conflict
between interests of managers and shareholders. He argues that managers are engaged in CSR
policies and actions for personal interest such a way to further their own career and political
agenda though the expense of shareholders. This is believed to be consistent with agency
theory. These are reasons of self-interest, and not CSR at all. He stated also that resources are
devoted for one specific reason, which is to increase firm profitability. This conflicting
interest could be dependent to an extent on ethical position of decision makers. In regards to
ethical theory, when managers decides to respond positively to stakeholders’ interest in CSR,
by devoting resources to promote CSR, the questions of morality arises. Based on
consequentialist theories, as long as the outcome of subscribing to corporate social
responsibilities is desirable by responding to different social concerns of different interest
groups, the action is morally right even though a manager may have profit as a main reason
in first place. Egoism as well as utilitarianism can be used in this context. On other hand, if
the manager has intention of profit arises from a pure genuine social actions then the action is
morally right, not because of the consequences they produce. This is strongly linked to ethics
of duties, and rights and justice.

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Given the debate discussed above, it is deemed to be appropriate for firms to subscribe to
codes of social responsibility. This decision is determined based on proven positive outcomes
generated across the three levels, and due to increased degree of stakeholders’ pressure to
influence firm’s engagement to CSR, especially among consumers, community and media.
However, firms are advised to examine closely the mediators and moderators of CSR-
Outcomes relationships, as these provides mechanisms and conditions under which CSR
initiatives may influence the required or expected outcomes.

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