Corporate Social Responsibility: Historical Context and Debate

This assignment analyzes the concept of Corporate Social Responsibility (CSR), beginning with Milton Friedman's argument that the sole responsibility of a business is to increase profits. It then explores the ongoing debate on whether corporations have responsibilities beyond profit maximization. The analysis examines the historical context of CSR, referencing figures like Archie Carroll and Adam Smith, and highlights the tension between private gain and public benefit. It discusses the attempts to connect CSR with financial performance (CFP) and the counterarguments that prioritize moral and pragmatic reasons for CSR. The assignment also touches upon the evolution of CSR, the challenges faced by contemporary advocates, and the broader implications for capitalism, referencing further reading materials to provide a comprehensive overview.

Corporate Social Responsibility
from SAGE Key Concepts series: Key Concepts in Critical Management Studies, by Mark
Tadajewski (2011)
Definition: The concept of corporate social responsibility emerges out of a series of ongoing
debates as to whether the corporation has additional responsibilities over and above the
responsibility to make a profit, or not.
The most (in)famous thing ever written about corporate social responsibility (CSR) came
from the pen of the Nobel Prize winning Chicago School economist Milton Friedman. In a
short article published in the New York Times Magazine, Friedman (1970) notoriously
argued, straightforwardly but nonetheless virulently, that the only social responsibility of
business is to increase its profits. That is to say, for Friedman, corporate representatives
should concern themselves with profit maximisation and nothing else.
Such a sentiment strikes us as almost apocryphal today. This is because today, it seems
that not a moment goes by where we do not hear of some corporation or other engaging in
some act of seeming benevolence or other. Indeed, social responsibility is something which
we have now largely come to expect of corporations, irrespective of whether this expectation
comes from our role as corporate critics, as commodity consumers or even as global
citizens. This is no mean feat, for sure. And yet, for Friedman, this was precisely the
problem: the very fact that corporate executives were taking socio-political matters into their
own hands was something which, for him, threatened the very foundations upon which free-
market societies are built (see also Friedman, 1962/2002).
So just what is it about CSR that Friedman is so opposed to? Simply put - CSR initiatives are
nothing other than a set of scenarios within which corporate executives take the capital
invested by the shareholder, who expects the highest possible return from his or her
investment, the budget of the customer, who expects the lowest possible prices, and the
income of the employee, who expects the highest possible wages, and wastes it upon
endeavours of his or her own misdirected fancy. In this sense, CSR can be understood as
identical to theft or, when it is used for the sake of window dressing, which he argued that it
routinely was, it can be understood as identical to fraud. In the pursuit of CSR, Friedman
argues that corporate representatives deviate from their obligations to shareholders,
customers, and employees alike. Instead of doing what they are contractually and morally
bound to do for each of these groups, they self-righteously pursue the ends of their own
private fancy in the name of public philanthropy. For Friedman this is of course something
which must be condemned, rather than condoned, hence the notorious statement with which
his work has become synonymous at least on the part of CSR advocates.
Friedman was not the first to argue against CSR along such lines, of course. But what his
work does offer, indeed what it continues to offer advocates of CSR, is a hurdle which simply
has to be negotiated in one way or another. In this regard, perhaps the most prominent way
of attempting to negotiate the hurdle that is Friedman today is to be found in the ongoing
attempt to connect CSR with financial performance. That is to say, today there exists an
ongoing debate to refute Friedman empirically through demonstrating that, in the end,
CSR should be undertaken by corporate representatives precisely because they will be
rewarded in the form of financial gain. The work of Orlitzky et al. (2003) offers one of the
most elaborate examples of such an argument, insisting, on the basis of an extensive
overview of the burgeoning academic literature devoted to the topic of the potential profit
worthiness of CSR endeavours, that there is a positive connection between ‘corporate social

performance’ (CSP) initiatives and ‘corporate financial performance’ (CFP), and
subsequently making an argument for CSR on the basis of this connection.
The work of Margolis and Walsh (2003), on the other hand, suggests that there is very weak
evidence for such an empirical link, claiming instead that, irrespective of the lack of empirical
evidence, CSR should nonetheless be pursued by corporate representatives for moral
(deontological) as well as pragmatic reasons (see also Margolis and Elfenbein, 2008).
According to Margolis, Walsh and Elfenbein, if CSR is to mean anything worthwhile, it has to
be undertaken for reasons beyond instrumentality, that is to say, with the serious underlying
intention of actually ‘doing good’, rather than with the conceited and concealed intention of
appearing to do good for the sake of making money. Many contemporary debates in and
around the question of CSR continue to oscillate around this series of concerns.
Nevertheless, whilst it is true to say that the contemporary argument for CSR is largely
prefigured by the ongoing debate over the extent to which CSR is compatible with CFP, it is
also true to say that these apparently antagonistic acronyms have not always been the
parameters within which the discussion over the relationship between private action and the
public good has been expressed. And it is here that a historical sensitivity toward the
question of CSR becomes crucial. Widely renowned CSR scholar Archie Carroll, for
example, regularly insists upon Arthur Bowen's work (1953) as an inaugural moment in the
evolution of the discussion of CSR, whilst historian Morrell Heald (1961), for his part, refers
the CSR origination expedition back further, to the 1920s. Others still refer us as far back as
Adam Smith. Prevalent within the work of all of these pre-Friedmanite figures, despite their
many obvious differences, is the maintenance of something inherently anti-Friedmanite: the
notion that whilst profit maximisation is a crucial indicator of corporate worth, it is not the only
barometer by which corporate action can be meaningfully measured. Even Adam Smith's
notorious invisible hand, far from being an unqualified argument for unmitigated self-
interested behaviour, is offered in the spirit of enlightened self-interest.
Friedman's dubious achievement, it seems, is to have narrowed the discussion of the public
worth of private activity down to the point where what was historically blurred has become
more recently sharpened. For Friedman, CSR threatens free-market societies precisely
because, in the place of actions undertaken for the sake of private gain (market-economic
activities), it smuggles in actions undertaken for the sake of public benefit (political actions).
CSR therefore blurs the distinction between two radically distinct forms of action (economic
and political), actions which must, he says, always be held apart. Elected governments do
politics, private actors do economics, and never the twain should meet: such is the nub of
Friedman's argument against CSR. Historically the line was never drawn so sharply. The
challenge for the contemporary advocate of CSR is one of moving the line more towards a
point at which the understanding of the private comes to incorporate the public more and
more. Largely thanks to Friedman, the argument for CSR has thus become an argument for
maximising profit with increasing recourse to publicly oriented initiatives.
It is still worth recalling that Friedman's argument is a particular observation concerning CSR
from the perspective of a wider advocacy of the capitalist mode of production as such. The
difficulty of maintaining such advocacy seems to have been put into sharp relief amidst the
wreckage of contemporary financial crises. In this regard, it is certainly worth suggesting that
future arguments both for and against CSR will go hand in hand with broader debates as to
the relative merits and demerits not just of CSR, but also of capitalism more generally. Time
will tell.
FURTHER READING

David Vogel's Market for Virtue (2005) steers an informative and intelligent course between
advocacy of and criticism of CSR scholarship. The voluminous literature on corporate social
performance and its connection to corporate financial performance is surveyed in the papers
by Orlitzky et al. (2003) and Margolis and Walsh (2003) respectively, whilst other prominent
figures within the contemporary debate concerning CSR include Andrew Crane, Archie
Carroll, Dirk Matten, Michael Porter, Diane Swanson and Donna Wood.
See also:Accountability,Business Ethics,Corporate Social
Reporting,Corporation,Environmentalism, Neoliberalism
REFERENCES
 Bowen, H.R.(1953) Social Responsibilities of the Businessman.Harper & Row New
York.
 Friedman, M.(1970) ‘The Social Responsibility of Business is to Increase its Profits’, New
York Times Magazine,13 Sept. Accessed online on 1Feb. 2007
at http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-
business.html.
 Friedman, M.(1962/2002) Capitalism and Freedom.University of Chicago
Press Chicago.
 Heald, M.(1961) ‘Business Thought in the Twenties: Social Responsibility’, American
Quarterly13(2): 126-39.
 Margolis, J.D.; Elfenbein, H.A.. (2008) ‘Doing Well by Doing Good? Don't Count On It’,
Harvard Business Review86(1): 19-20.
 Margolis, J.D.; Walsh, J.P. (2003) ‘Misery Loves Companies: Rethinking Social Initiatives
by Business’, Administrative Science Quarterly48(2): 268-305.
 Orlitzky, M; Schmidt, F; Rynes, S. (2003) ‘Corporate Social and Financial Performance: A
Meta-Analysis’, Organization Studies24(3): 403-41.
 Vogel, D.(2005) The Market for Virtue: The Potential and Limits of Corporate Social
Responsibility.Brookings Institute Press Washington.