Corporate social responsibility and American business during a recession.

• Author: Baglione, Stephen L.

1. QUESTIONS STUDIED

   Do recessionary economic conditions influence the ability and willingness of American corporations to continue to practice social responsibility? Is there a linkage between the corporation's responsibility to maximize shareholder wealth and the implementation of socially responsible programs, which recognize that the corporation is a part of society and consequently has obligations to take positive actions that improve that societal environment? Can we expect that recessionary economic times will result in corporations re-assessing their commitment to socially responsible actions and programs?

2. INTRODUCTION

   In the mid-1950s, a Standard Oil of New Jersey shareholder sued because the corporation gave money to a college (Summer, 2005). The reason: The Corporation is giving away other people's money, namely, stockholders. Now, corporate philanthropy is almost universally accepted in major corporations because of "enlightened self-interest"; corporate success is predicated on societal success (Summer, 2005). Ninety percent of Fortune 500 companies have Corporate Social Responsibility (CSR) initiatives (Kotler and Lee, 2004).

   Americans as consumers and workers are influenced by corporate philanthropy. A recent national study found 77 and 66 percent of people, respectively, consider a company's commitment to social issues when deciding where to work and invest (Cone, 2007). Eighty-seven percent of respondents want a company to support issues based on the most social/environmental benefits. Eight-five percent of respondents "would consider switching to another company's products or services because of a company's negative corporate responsibility practices" (p. 19). A Harris Poll found 16 percent of respondents said a company's reputation for social responsibility strongly influenced their purchase decisions (Fielding, 2007).

   CSR is the belief "that modern businesses have responsibilities to society that extend beyond their obligations to the stockholders or investors in the firm" (Visser et al., 2007 p. 122) and includes philanthropic and charitable contributions, employee volunteerism, support of non-profit organizations, and other attempts to foster improved relationships with various stakeholder groups (p. 125). Some expand CSR to "nature, as finality in itself, has the capacity to impose ethical norms upon man" (Bazin, 2008, p. 641). For example, Target last year donated 5 percent of its income or more than $3 million weekly, and it saves 110 million kilowatts of energy by reducing after-hours store lighting (Target.com, 2009). IBM will send 500 employees in groups of eight to 10 throughout the world to solve economic and social problems (Hamm, 2009). McDonalds reduced waste by 30 percent by changing its food wrappers (Porter and Kramer, 2006). IBM assists retiring workers transition to non-profits (Damast, 2008).

   2.1 Corporate Social Responsibility Philosophies

   Nobel Prize-winning economist Milton Friedman argued that, "there is one and only one social responsibility of business--use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game" (Friedman, 1962, p. 133), anything else weakens the corporation competitively; he later said many corporations "cloak" self interest through social responsibility (Wilson Quarterly, 2006). For example, American Express spent more money promoting its fight against hunger than fighting hunger (Baghi et al., 2008). Robert Reich (2007), Secretary of Labor under President Clinton, believes Friedman's statement applies to the current era of supercapitalism, where "the corporation as a whole must, for competitive reasons, resist doing anything that hurts--and will place a very low priority on anything that doesn't help--the bottom line (p. 169). When CSR and profit collide, the quest for profit "undoubtedly wins over principles" (Doane, 2005, [p.sub.2]4). Even when voluntarily adopted, many see only token support by sycophant corporations trying to enhance their image (Berhout, 2005). Corporations obsequiously pay homage to CSR (The Economist, 2005).

   Still others argue that corporations striving for "long-term relations with employees, suppliers and customers" are improving society because our standard of living grows, not merely the wealth of stockholders (The Economist, 2005, p 11); thereby increasing tomorrow's customers (Berkhout, 2005; Hopkins, 2003). This is an idea Henry Ford espoused almost a century ago by paying workers fairly and treating them well, so they could purchase his automobiles. Symbiosis exists between a healthy society and a corporation. All corporations need a productive workforce, and "education, health care, and equal opportunity are essential to a productive workforce" (Porter...