Philosophy 223

Corporate Social Responsibility: Some

Background
A common assumption: corporations dont have
any responsibilities.
Officers of corporations do, but they are
narrowly defined according to perceived
interests of the owners.
What becomes clear ultimately is that the view
does not deny that the agents of corporations
have moral obligations, just that they are very
specific (primarily fiduciary).

Corporations Dont Have

Responsibilities?
Corporations are legal fictions.
Dont have the capacities necessary for
responsibilities.
Knowledge and will.

What about the fact that corporations are

frequently held criminally and civilly liable?
Also, corporations are increasingly granted the
rights of individual citizens (First National Bank
of Boston v. Bellotti).

If There is Responsibility it Must be That

of the Officers
Only people with the appropriate
capacities.
But to whom are they responsible? The
owners.
What is the nature of that
responsibility?
To satisfy the will of the owners.

Utilitarian Defense of Classical Model

The market guarantees maximization of
good (usually characterized as
satisfaction).
Managers have a responsibility to conform
closely with market expectations (maximize
satisfaction).
Evidence is expressed preferences of
consumers and owners.

Criticisms of the Utilitarian Defense

Part I
There are a range of instances in which the
pursuit of profits does not maximize
satisfaction.
Market Failures
Externalities (Pollution, resource depletion).
Public Goods (Air, water, fisheries)-no pricing mechanism.
Prisoners Dilemma (cooperation more optimal than
competition).

Complexity of markets and the contexts in

which they function make it unlikely that a
single-minded focus on profit will guarantee
good outcomes.

Criticisms of the Utilitarian Defense

Part II
Of course, there may be mechanisms that could be
developed to meet the sort of objections just
noted.
Property values an economic measure of air quality
preferences.

However, there are more difficult conceptual

problems.
First-Generation Problem: markets are reactive, not
proactive.
Satisfaction does not equal happiness. Its not always good
to get what you want.

Private Property Defense of

Classical Model
Corporations are the property of their
owners.
Officers of corporations are responsible to
the desires of the owners.
The primary desire of the owners of the
corporation is profit maximization.

Criticisms of the Private Property

Defense
Right to property is not absolute.
Constrained by: rights of others; zoning; eminent
domain.

Corporate Property Rights are different

from personal property.
Stockholder of a corporation have limited
liability for actions of their corporations.
They have no direct rights of access/control.

Stakeholder Theory
The current focus of much of the thinking
about corporate social responsibility is
Stakeholder Theory.
Adherents of the theory argue that all
stakeholders in a corporation have a
fundamental right to respect, and thus that
corporate officers have a responsibility to
treat them as ends rather than as means to
ends.

Who is a Stakeholder?
Narrow Definition
Any individual or group vital to the survival and
success of the corporation.

Wide Definition
Any individual or group whose interests
can effect or are affected by the
corporation.
Examples?

Defense of Stakeholder Theory

Most defenses of Stakeholder Theory
begin with the recognition that
Stakeholders are conceptually related
to stockholders.
Justification then focuses on the
reach and number of relevant
normative concerns.
Differences between stockholders and
employees?

Criticisms of Stakeholder Theory

A common criticism of Stakeholder theory
emerges from the classical model.
Stakeholder theory inadequately addresses
stockholder rights and property rights.

Another criticism focuses on practical

issues.
Who are the stakeholders? How do they count?
How should managers take them into account in
their decisions?

"Social Responsibility of Business"

Milton Friedman was a Nobel Prize winning
economist. He won for his work in the fields
of consumption analysis, monetary theory
and for his demonstration of the complexity
of stabilization policy.
He was more famous, though, for his social
policy work, of which the piece we read is
perhaps the most infamous example.

CSR?
Friedman pulls no punches in this essay. His
opening salvo insists that all talk of CSR is
incomprehensible and declares that the
business people who suggest that business
has obligations beyond profit are advocating
"socialism.
A less impassioned gaze reveals that
Friedman is offering a version of a private
property critique of CSR.

Where is the Responsibility?

According to Friedman, if we are to make
sense of the discussion of claims concerning the
responsibility of business, we need to
determine the nature of the responsibility.
Friedman first asserts that the corporation
itself is a legal fiction, and if there is
responsibility it must be that of the executive
officers.
To whom are they responsible? Why the
owners, of course. What is the nature of that
responsibility? To satisfy the will of the owners.

What do owners want?

One may ask: "Why does this preclude an
analysis of business that includes social
responsibility?" Friedman pins his answer to a
conception of such responsibility as necessarily
antagonistic to the will of the owners (52).
On the basis of this antagonism, Friedman
equates a decision motivated by social
responsibility with taxation. This in turn
explains why Friedman thinks that CSR is
equivalent to socialism (53).

A very thin sort of responsibility.

What becomes clear ultimately is that
Friedman is not denying that business has
some moral obligations, just that it has
particular the ones typically articulated
under the banner of CSR.
He does however insist (without arguing for
it) that corporate officers have a
responsibility to play fair and play by the
rules (existing laws and regulations).

Managing For Stakeholders

Freeman sets out to question the conventional
wisdom that the primary or only responsibility held
by corporate managers is to the stockholders.
His aim is not to deny this particular responsibility,
only to widen it to include all "stakeholders" in
corporate practices.
Freeman insists that all stakeholders are due a
fundamental respect by corporate officers, that is,
they have a right to be treated as an end in
themselves, and not merely as a means to some
specific corporate end.

The Changing World

He supports this claim by referring to
changing legal standards, which have
increasingly recognized the claims and
interests of customers, labor, and
communities against those of corporations.
He also argues that recognizing stakeholder
rights also makes economic sense,
especially in light of problems like the
"tragedy of the commons" which have
increased government oversight of
corporations, lessening their ability to make
their own economic decisions.

Freemans Stakeholder Theory

Freeman then goes on to articulate the specifics of the
stakeholder theory, focusing on the narrow definition of
the stakeholder (those groups vital to the survival of the
corporation), though he holds out the possibility of a
theory that would encompass a broader notion of
stakeholder (any group/individual who can affect or be
affected by a corporation).
Essentially, the stakeholder theory he offers is just an
expansion of the traditional shareholder theory. Of
course, the range of individuals involved in the theory is
much broader (see diagram on p. 61).
Where the stakeholder theory significantly diverges
from shareholder theory is in the reach and number of
relevant normative concerns.

Two Key Assumptions

The Integration Thesis: Most business
decisions have some ethical content, or
implicit ethical view. Most have ethical
decisions, business content, or an implicit
view about business.
The Responsibility Principle: Most people,
most of the time, want to, actually do, and
should accept responsibility for the defects
of their actions on others.

Practical Implications
Stakeholder interests should be
regarded as joint.
Stakeholder interests may be
prioritized by different companies in
different ways.
Businesses must have a clearly
defined purpose.

Theoretical Foundations
The argument from consequences: Results in economic,
social, and environmental benefits.
The argument from rights: Helps to ensure that
property rights and human rights are protected.
The argument from character: Helps ensure that
virtues, such as efficiency, fairness, respect, and
integrity are enacted by managers.
The Pragmatists argument: Because we want humane
social institutions, businesses should be regarded as a
social practice governed by the norms common to all
social practices.