Corporate Social Responsibility: Milton Friedman vs. Archie Carroll

 

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„Corporate Social Responsibility: Milton Friedman vs. Archie Carroll


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Contents


1.Introduction

2.The main idea of CSR

2.1History of CSR

2.2Types of CSR

3.Profitability of CSR

3.1Friedmans Approach

3.2Carrolls Approach to CSR

3.3Measuring of CRS

3.4Determining factors for CSR

4.Discussion

4.1Position

4.2Justification

5.Conclusion

6.References


1.Introduction


Relevance of this subject is that modern life constantly dictates new rules of the game. Today the future of the companies in many respects if not generally is defined by quality of corporate governance which is considered as one of effective ways of increase of investment appeal of the companies and, as a result, improvement of investment climate in the country.it is necessary to understand as corporate governance? Whether means it system of the obligatory rules governing the relations in sphere of action of the companies, or corporate governance implies imperious and administrative activity of individuals, including representatives of top management and shareholders? And whether the concepts "corporate governance" and "management of corporation" are equivalent?the one hand, corporate governance includes procedures of realization of the rights of shareholders, obligations of board of directors and responsibility of his members for made decisions, level of remuneration of top management of the company, an order of disclosure of information and system of financial control, on the other hand - it means activity of the state regulators and other authorized bodies and the organizations, directed on a regulation of the specified sphere of the relations, with the third is an activity of rating agencies which, appropriating certain estimates, form idea of the investor of investment appeal of the company.in essence corporate governance is a process of search of balance between interests of shareholders and management in particular and interests of separate groups of persons and the companies as a whole by realization by participants of the market of a certain system of ethical and procedural standards of the behavior accepted in business community.of uniform approach to understanding of corporate governance in many respects is explained by dynamism of the specified sphere. Still corporate governance in many respects coordinated with voluntary observance by the companies issuers of ethical standards and customs of a business conduct, however, gradually there is a transition from a voluntary order to compulsory, the state role in a regulation of separate aspects of corporate life amplifies and extends. Thus there is a need in Corporate Social Responsibility.the last some years among politicians and in a business environment the concept "corporate social responsibility" (is actively used further - CSR), develops business community of CSR strategy, creates departments of realization of the last, in the countries of Europe open the whole scientific research institutes on studying of this phenomenon. But, despite it, in the academic environment still there is no uniform understanding that there is a corporate social responsibility, what its sources as well as who governs the relations arising in connection with the new sphere of the human relations. And what CSR is?

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2. The main idea of CSR

in details considering CSR, in the beginning we will define what does it means. Corporate social responsibility (CSR, also called corporate responsibility, responsible business and corporate social opportunities) - is the concept according to which the organizations consider interests of society, conferring on itself responsibility for influence of their activity on customers, suppliers, workers, shareholders, local communities and other interested parties of the public sphere. This obligation is beyond the obligation established by the law to observe the legislation and assumes that the organizations voluntary take additional measures for improvement of quality of life of workers and their families, and also local community and society as a whole.of CSR is a subject of numerous disputes and criticism. Defenders claim that there is a strong economic justification of CSR, and corporations get numerous advantages of that work for wider and long prospect, than own momentary short-term profit. Critics argue that CSR takes away aside from a fundamental economic role of business; one claim that it no other than reality embellishment; others say that it is attempt to change a government role as the controller of powerful multinational corporations.


2.1 History of CSR

term CSR traces the roots back in the 50th years of the XX century when the American scientist H. Bowen for the first time mentioned this perspective in the book "Social Responsibility of the Businessman", having noted need of inclusion of a number of social problems to the sphere of responsibility of business. Further intensive economic development of the countries, growth of influence of business as a whole, significantly increased interest to a question of responsibility of business, its place and a role in social and economic life of society.a broad sense is an influence of business on society. The organizations which operate in the field of corporate social responsibility, define this concept differently. At the beginning of the formation as social responsibility understood only policy of relationship with workers, timely payment of a salary, payment of taxes.the early seventies the largest companies of the USA and the developed West European countries realized the social responsibility, having decided to develop uniform values in relationship with employees and enterprise environment. Now there is a set of treatments of the concept "corporate social responsibility.to the most widespread, CSR - is the concept within which the companies on a voluntary basis integrate social and ecological policy into business activities and their relationship with all circle of the organizations connected with the company and people.this definition, it should be noted that CSR includes:

·responsibility of the company in relationship with partners;

·responsibility concerning consumers;

·responsibility concerning the employees;

·ecological responsibility of the company;

·responsibility of the company before the society


2.2 Types of CSR

also should be noted that complexity in definition of CSR results from a multi-levelness of a basic component of the term - responsibility. The general meaning of the word "responsibility" - is a duty to be responsible for acts and actions, and also their consequences. As responsibility also understand consequences for the subject in case of violation of the established requirements by it. Proceeding from the last approach, for character of sanctions, responsibility can be parted on legal, material, moral etc. In the majority of modern approaches of CSR refer to ethical category and consider as moral responsibility which in turn means a conscious and voluntary choice of the subject of this responsibility. Despite a set of distinctions in concept CSR definitions, these principles are put in the majority of them.has to include two types of responsibility: obligatory and voluntary. Voluntary responsibility assumes participation of the organization in any socially significant projects which are not concerning directly the sphere of its action and not having relations to results of its influence on ecological and social sphere. Obligatory responsibility means need of the organization to be responsible before society for consequences of the decisions and acts. In relation to social side in CSR it is also possible to allocate two levels: internal responsibility and external responsibility.is possible to refer responsibility of the organization to internal CSR in the sphere of the labor and social labor relations. Labor relations - the relations between the employer and the employee, resulted a consent between them about performance of a certain work by the last, recorded in the employment contract. The social labor relations - the relations between the worker and the employer, aimed at quality providing labor life. Proceeding from these definitions, obligatory internal responsibility is connected with observance of the labor law, organization human development through personnel training, medical insurance etc. It is possible to refer care to voluntary internal responsibility about psycho-physiological health of the employees, expressed in forming of the harmonious relations in collective, assistance in permission of the internal conflicts, granting additional opportunities for maintenance of a good physical form by employees etc.CSR is the responsibility resulting activity of the organization, having consequences for surrounding environment. It is possible to refer need of the organization to be responsible before society for quality of goods delivered by them and services to obligatory external responsibility; the harm done to surrounding environment by action / inaction of the organization; results of influence on political, economic, social spheres (in this case means, attempts of creation of monopolies, arrangement of corporations, creation of the laws lobbying interests of minority) etc. It is necessary to refer to voluntary external responsibility taken by the organization of a duty for participation in charity, sponsorship, actions for protection of the surrounding environment, the organizations not relating directly to activity, support of the population in crisis and emergency situations.of such corporate social responsibility are not simply charitable business. Social responsibility has motives: for example, development of own personal allows not only to avoid turnover of staff, but also to involve the best experts in the market. Such actions as lead to a work gain in productivity in the companies, improvement of image of the company, to reputation growth. Also important aspect is publicizing of activity of the company in mass media. CRS gives stability and stability of development of the company in long-term prospect that is very important. As it is impossible to forget that possibility of attraction of the investment capital for the social and responsible companies is higher, than for other companies and as the tax concessions. Well and the most important motivation, this preservation of social stability in society as a whole.

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3. Profitability of CSR

corporate social responsibility company

After more deeply studying of value of CSR, there is a question about the rationality in expenditure of resources. Also there is a big deal with question about profitability of CSR. Upon corporate social responsibility is a voluntary contribution of business to society development in the social, economic and ecological spheres, connected directly with primary activity of the company and beyond the minimum defined by the law.Bowen in the book claims that the idea of social responsibility is applicable to business as the social purposes in business practice can bring social and economic benefits to society. But on the other hand, those who in is aimed only at receiving profit, consider that business should not spend money for non-core activity. Others consider that "to live in society and to be free from society it is impossible" that it is social investments.corporate social responsibility positively affects image of the company that is important for PR. In the modern world the social position, social projects have the increasing impact on reputation of the organization. Besides, in the conditions of the competition the role plays not only favorable image, but also idea of benefit.the one hand CSR a key to success of the company, to its prosperity and as it is the help to the staff of corporation and investment of capital in social programs. But on the other hand it not the expenses necessary to business and sponsorships of projects which not making any profit. So where is truth? For this reason there is no ambiguity and there are several approaches for CSR.


3.1 Friedmans Approach

I already stated earlier, CSR in essence very difficult system and has a set of approaches. So for example in 2011 The European Commission gives the following definition of CSR: "Corporate social responsibility, in essence, is the concept which reflects the voluntary decision of the companies to participate in improvement of society and environment protection".definition of CSR offers the UN, in the Development program where it is understood as influence of business on society. The UN suggests to note three CSR levels where the first and second levels are connected with performance of duties before the state and society in the form of timely payment of taxes, salaries, the organization of new workplaces and improvement of quality of life of staff of the organization. The third level assumes participation of the organizations in charity.reason of a choice of such alternative approach is obvious. Economists, representatives of the largest business and other structures which are directly related to formation of economic trends of the modern world became the main participants of discussion and formation of the main definitions. Opportunity independently to form the share in social responsibility is favorable to them. Voluntariness also can mean and lack of CSR as that if the head of the organization considers such policy impossible or even the harmful organization. Now in the world in the economic sphere other approach assuming maximizing profit by a main goal of activity of the organization was approved qualitatively.relations to CSR problem sometimes are opposite. The Nobel Prize laureate in the field of economy Milton Friedman categorically insisted: "There is only one and only one social responsibility of the business world - to use the resources and to be engaged in the activity directed on increase in profit in open free competition without deception and fraud".

"A little that can threaten so to bases of our free society as a consent of leaders of corporations to assume other social responsibility, except that which consists in earning money for the shareholders", - Milton Friedman noted. his opinion, social responsibility can be reduced to receiving by the profit company. For the modern company it is enough that its activity was coordinated with the general principles of environment protection, health and the safety, all other social programs only will lead to excessive expenses.position of corporate egoism is shared not only by the Nobel winner economist, but also by the marketing specialist Theodore Levitt. For the first time market forces in discussion of a subject of social responsibility of business mentioned Levitt. He wrote that one (main) responsibility of business - aspiration to material benefit, and another - following to elementary canons of daily civilized communication, such as honesty, integrity etc. But in the same time the development of schools, hospitals and social services, Levitt criticized as the concept which broad application conducts to death of capitalism, threat to business and the market as a whole.


3.2 Carrolls Approach to CSR

integrated approach was developed by scientists, L. Preston, J. Post, A. Carroll. Top integrated approach is treatment of A. Carroll who gave the definition of CSR in the future.Carroll, Corporate Social Responsibility is understood "as compliance of activity of the organization economic, to the legal and discretionary (philanthropic) expectations shown by society the organizations during this period of time"bit later Carroll specified the definition as follows: "CSR represents multilevel responsibility which can be presented in type of a pyramid. Professing CSR firm has to seek to get profit, to execute laws, to be ethic, and also to be the good corporate citizen"


Figure 1 Carrolls Pyramide Source: Nalband A. & Kelabi, S. (2014), p.236.

is necessary to distinguish approach of A. Carroll and M. Schwartz who offered system approach to CSR from many researchers of this phenomenon. CSR, from the point of view of A. Carroll, is public expectations in relation to the concrete organization in four various spheres: economic, legal, ethical and philanthropic.in the basis of a pyramid of Carroll economic responsibility means a direct obligation of the organization in the market as the producer of goods and services to satisfy any needs of consumers and, thus, to take and the profit.responsibility means need of law-abidingness of business in the conditions of market economy, compliance of activity of the company to those expectations of society which are recorded in rules of law. Ethical responsibility demands from business practice of the organization of compliance to those expectations of society which aren't stipulated in rules of law, but are based on existing norms of morals.or discretionary responsibility induces firm to the charitable actions directed on assistance to needing, including at implementation of social programs.A. Carroll, developing the complex concept, offered the CSR model which included three measurements:

·corporate social responsibility - possible levels: economic, legal, ethical, discretionary;

·corporate social susceptibility - the range of changes from jet to the pro-active: jet, defensive, adaptive and pro-active;

·relevant public problems - environmental protection, safety product, discrimination, safety of workplaces, interaction with shareholders and so on.Carroll's Pyramid with M. Schwartz's support was transformed to the three-side model where as the main types of responsibility, were allocated economic, legal and ethical. In an ideal any organization has to combine all three spheres, the CSR real level of concrete firm depends on variations of these combinations.approach disproves possibility of treatment of responsibility only as categories of morals as includes the questions which are not assuming existence of consent/disagreement of concrete firm and voluntariness of participation in them, and assumes at least two levels - obligatory and voluntary responsibility.development of idea of multidimensional CSR, continued with the model which were developed by S. Wartick and P. Cochran, where they put emphasis on the corporate social performance (CSP). Thus they leaned on Carroll's three-dimensional model, but to Carroll's each measurement they gave they own names: principles, process and policy.social activity represents fundamental interrelation between the principles of social responsibility, process of a social susceptibility and the policy directed on the solution of public problems.

3.3 Measuring of CRS

. Wood offered the following model of measuring of the CSR:

.Principles of social responsibility

.Processes of a social responsiveness

.Results of corporate behavior:of CSR:

·Institutional principle of legitimacy: society provides to business legitimacy and allocates it with the power. In long-term prospect this power is lost by those who, from the point of view of society, doesn't use it responsibly.

·Organizational principle of public responsibility: the organizations in business are responsible for those results which belong to areas of their interaction with society.

·Individual principle of freedom of an administrative choice: managers are moral agents. In each area of corporate social responsibility they are obliged to use a freedom of choice available for them for achievement social responsible results.of a corporate social susceptibility:

·Assessment of the environment of business.

·Management of interested parties (stakeholders).

·Management of problems.of corporate behavior:

·Impact on society.

·Social programs.

·Social policy.



3.4Determining factors for CSR

volume and nature of advantages of CSR for the organization can differ depending on character of the enterprise and difficult gives in to quantitative measurement though there is the extensive literature convincing business to take not only financial measures (for example, Demings "Fourteen points, the Balanced system of indicators" ). However business cannot be guided by short-term financial results of activity when developing the strategy of CSR. Definition of CSR used in the organization can differ from accurate definition "impacts on interested parties",used by many defenders, and often includes charitable and voluntary actions. The CSR function can be created in department of the stuff, development of business or in department of organization public relations, or can be transferred to separate division, or in certain cases - directly to board of directors. Some companies can use similar CSR of value without accurately certain team or the program.the heart of the correct and profitable work of corporation, social programs lie generally. Activities of corporate governance and types of social programs it is possible to divide into the following:

·The administrative/social budget - the financial means allocated by the company for implementation of own social programs.

·The corporate code - this formal statement of values and the principles of business relations of the companies, and sometimes and her suppliers and business partner. To contain in the code the declared minimum standards and them to observe the guarantee of the companies and as to demand observance of these standards from the suppliers, contractors, subcontractors and licensees. The code is not the law therefore is obligatory only for those who undertook to observe them.

·Mission of socially responsible company - is officially formulated position of the company concerning the social policy.

·Priorities of social policy of the company - it is the main directions of realization of social programs of the company recorded in a documentary type.

·Social programs - activities voluntary carried out by the company for conservation, personnel development, work creating favorable conditions, support of local community, charity and conscientious business practice. Thus the main criterion is compliance of programs to the purposes and to strategy of development of business

·Social activity of the company is expressed in carrying out various social programs both internal, and an external orientation. Distinctive features of programs of social activity are voluntariness of their carrying out, system character and coherence with mission and strategy of development of the company.


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4. Discussion


.1 Position

if to speak about corporation profit, it is possible to be sure that CSR application only positively influences the income? Probably that there are also negative sides of social responsibility, and after reading Bakers article we can find them as:

·Violation of the principle of maximizing arrived. The direction of part of resources on social needs reduces influence of the principle of maximizing profit. The enterprise behaves in the greatest measure socially responsibly, concentrating only on economic interests and leaving social problems to public institutions and services, to charitable institutes and educational organizations.

·Expenses on a social involvement. The funds allocated for social needs, are expenses for the enterprise. Eventually, these expenses are transferred to consumers in the form of rise in prices. Besides, the firms participating in competitive fight in the international markets with firms of other countries which do not incur costs of social needs, appear in adverse situation in the competition.

·Insufficient level of the reporting to general public. As managing directors do not elect, they are not accountable to general public. The market system well controls economic indicators of the enterprises and badly their social involvement. Until society will not develop an order of the direct reporting to it the enterprises, the last will not participate in social actions for which they do not consider themselves responsible.as the main thing, questions of protection of surrounding environment have to become one of priorities and obligations of corporations as the damage from consequences of activity of corporations is difficult renewable. It is possible to carry to the most known ecological disasters of the last time:

·1994 - leakage of toxic gases at plant on production of pesticides of the Union Carbide company in Bhopal (India) as a result of which more than 22 000 people;

·2010 - explosion on the oil Deepwater Horizon platform located in the Gulf of Mexico and operated by the BP company. About 25 000 tons of oil poured out to the open ocean. Pollution of the area of a surface of the water of the Gulf of Mexico made 1543 thousand sq.km. The damage is caused to more than 400 animal species of the water area of the Gulf of Mexico, 8 national parks, 25 reserves. Implicit, but dangerous result became - emergence on a water surface of the microfilm reflecting an ultraviolet and stirring air circulation.

·2011 - a fire on the Fukushima plant-1 constructed and operated by the Tokyo energy company, the entailed pollution of an ecosystem by radio nuclides with the consequences postponed in time.

·2011 - 350 tons of oil poured out at coast of New Zealand from the tanker which has run aground.the description of such accidents it is possible to add and simply irresponsible behavior of large corporations, so we can take one of the largest Russian corporation, Norilsk Nickel MMC which blows gas in to the atmosphere that made for 2009 of 979 thousand tons of sulfur which is 25% of all Russian industrial emissions. Besides sulfur, it is also established nickel, copper, cobalt, arsenic to get to the atmosphere.extent of influence and impact on an ecosystem and society as a whole assumes high degree of responsibility for made decisions the management of the organizations and has to exclude especially voluntary approach to CSRnot all unfortunately resort to corporate social responsibility because of the good purposes. So for example Some critics believe that the CSR programs are realized by such companies as British American Tobacco (BAT), the oil giant of BP (well-known the noticeable advertising campaigns in the field of ecological aspects of the activity) and McDonalds, for public attention derivation from the ethical questions connected with their primary activity. They claim that some corporations begin the CSR programs for the sake of commercial advantages which they will get thanks to increase of the reputation in the opinion of the public or the government.


4.2 Justification

organization is the open system which is actively interacting with environment. It exists in society, thanks to society, using the resources belonging to society that in turn demands forming of the harmonious relations between part which the organization, and whole is. Corporate social responsibility can become that principle of existence of the organizations which shall be able to remove contradictions between modern economy and morals, business and the person."Making Good Business Sense" report, Lord Richard Holm and Phil Watts, uses the following definition for CSR:

"Corporate social responsibility is a constant commitment of business to run business on bases of ethics and to make the contribution to economic development, at the same time improving quality of life of the workers and their families, as well as societies as a whole".paper of the European Union defines corporate responsibility as "the concept within which the companies on a voluntary basis integrate social and ecological policy into business of operation and their relationship with all circle, the organizations connected with the company and people". Such approach is accepted by the majority of the countries of the European Union.we can see, for today there is no uniform approach to definition of corporate social responsibility. However all presented points of view are uniform in one: corporate social responsibility is responsibility of the company before all people and the organizations which it faces in the course of activity, and before society as a whole. And researchers include all associations of businessmen here:

·responsibility of the company in relationship with partners,

·responsibility concerning consumers,

·responsible policy concerning workers,

·ecological responsibility,

·responsibility of the company before society as a whole


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5. Conclusion


Summing up the results, there is a wish to allocate especially prospects of development of model of social partnership. Soon, obviously, it is necessary to expect improvement of structure of system of the tripartite social and labor relations - workers, employers; contents of interaction of subjects of social partnership; development of existing functions and their distribution out of limits of the sphere of labor relations.is a process of social partnership though slowly, but develops that, undoubtedly, has a positive effect. In the international understanding corporate social responsibility of CSR is treated as a voluntary contribution of business to society development in the social, economic and ecological spheres, connected directly with primary activity of the company and beyond the minimum defined by the law.significant questions stand long ago in public attention center therefore the companies try to behave in process of forces well, without stepping on sick callosities to public opinion. Social, charity of the company can be the additional positive characteristic at relationship with the government and financial institutions, with partners, promotes setting of new communications.

In the right of each company and corporation on the to treat approach of corporate responsibility. After all there are some approaches to this phenomenon and not all of them are positive to corporate social responsibility. But nevertheless it is necessary to understand that in modern society where there is a huge number of mass information and a mussel, the social help, sponsor's support, deliveries of grants will always go on the benefit not only to society, but as also to the companies.is important as that social activity is a form of preservation of a reputation and glory for descendants.


6.References


1.Baker, M. (23 May 2008): Arguments against Corporate Social Responsibility Business Respect magazine. <#"justify">Readings

·Brand Strategy (2007): 10 key things to know about CSR London

·Bowen, H. R. (1953): Social Responsibilities of Businessman New York

·Corporate Social Responsibility: <#"justify">Selbstständigkeitserklärung

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Universität Siegenzum Thema „Corporate Social Responsibility: Milton Friedman vs. Archie Carroll

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