Introduction to Corporate Social Responsibility
Business ethics and corporate social responsibility have been hot topics for discussion since the 2001 Enron scandal. At that time, firms such as Enron and Arthur Anderson were found to have destroyed files and other information proving their involvement in what some would refer to as creative accounting practices. Many employees and other stakeholders in the organization were greatly impacted by this scandal. Employees lost their life savings, and the community lost a major job provider. Due to this and other scandals in the housing and financial markets, organizations have begun to examine their own corporate social responsibility practices.
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Definition
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Harvard University's John F. Kennedy School of Government defines corporate social responsibility as going "beyond philanthropy and compliance [to address] how companies manage their economic, social and environmental impacts, as well as their relationships in all key spheres of influence." These spheres include all stakeholders that may be impacted by the actions of an organization, including shareholders, employees, suppliers and the community.
Significance
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Corporate social responsibility is essential, as the actions of a company can have an impact on a variety of stakeholders. While leaders have a responsibility to make money for their shareholders, they do not have a right to do so at the expense of others. The practice of corporate social responsibility encourages organizational leaders to consider the effects that their decisions and the actions of their organization can have on all stakeholders involved. Rather than making decisions whose desired outcome is to simply make more money for shareholders, responsible corporate leaders attempt to balance the needs of all stakeholders.
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Dimensions
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The Tutor2U website identifies four key dimensions of corporate social responsibility. These include economic, legal, ethical and philanthropic aspects, which organizational leaders must consider and weigh. For example, a company's decision-makers have an economic responsibility to earn a profit for shareholders, but they also have a legal responsibility to comply with all applicable state and local laws and regulations. The practice of corporate social responsibility also typically includes some element of voluntary or philanthropic activity designed to promote goodwill toward the organization within the community.
Warning
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The practice of corporate social responsibility is a delicate balancing act. While it is essential for organizational leaders to practice corporate social responsibility, it is also vital that they remember their responsibility to earn money for the company. A corporation's owners are not the only people who depend on the survival of the company: Employees depend on the organization for their jobs, while suppliers depend on the company's survival to stay in business themselves. Even the community benefits from the existence of profitable businesses in their vicinity in the form of tax revenue.
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References
- University of Washington; Accounting Firms & Organizations; 2002
- Harvard Kennedy School of Government: The Initiative Defining Corporate Social Responsibility
- Value Based Management: Shareholder Value Perspective vs. Stakeholder Value Perspective
- Tutor2U; Corporate Social Responsibility -- Introduction
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