The Attraction of Corporate Social Responsibility

In the early part of the century, garnished from the national railroad epoch (1), steel tycoon Andrew Carnegie’s philosophy was that the capitalism was a system that allowed great wealth to be individually amassed. In 1901 he was the richest man in the world and he felt that it was the responsibility of those that had to wealth to disperse it, as “stewards,” to the common man for social equity(2).During this time the government did not regulate businesses, and consequently there was a great deal of labor exploitation. The theory and actions of this early philanthropist eased some of that tension.

Seventy years after Carnegie gave away a record $350 million and forty years ago, author Milton Friedman made a statement about charitable giving from a corporate standpoint. In his article, “The Social Responsibility of Business is to Increase its Profits,” he elaborates about the purpose of a free-enterprise, private-property system is to “…make as much money as possible(3) [for the owner]. His conclusion is that the owner can then give the money as they wish, but the corporation legally cannot. Friedman implies that corporate managers that give are “schizophrenic...shortsighted...[And] suicidal,” which is why the article probably received so much attention. His view is however, in alignment with the ways that things are today, so why then do corporations give away a percentage of their profits?

Today’s businesses do have government stipulated regulations, and one example is the tax benefit for charitable giving. The government has determined that giving enhances the quality of life, such as cleaner, safer, better educated, and culturally enhanced communities. History has proven this to be the case as community attributes create a more profound sense of cultural identity. An individual that feels more included in a community is more committed to giving back, whether this is as an employee, parent, or other part of the community web, thus creating social cohesion and stability.

Another consideration for corporate giving is to enhance the reputation of a firm. The identity, or branding, can take years to build, but can diminish rapidly with at-fault perceptions. An example is the company McMillian-Bloedel that overnight lost 5% of stock value due to a major customer that canceled all orders due to environmental news of misconduct(4). It’s been shown by a national marketing company, the AMP Agency, that 83% of people will trust a company more if it has been socially and environmentally responsible(5). Other benefits of the actions of the corporate philanthropy are the creation of new business opportunities, employee loyalty, and preferential government and regulatory treatment(6).

Friedmans suggestion that corporate giving is comparable to business insanity is not an appropriate implication. Perhaps his views eased the minds of the prior investors who felt guilty for not giving just a little bit back to the system. The savvier stakeholder will be considering charity, but terming it as the more popular title of Corporate Social Responsibility (CSR). This implies that the end goal for corporations has risen above simply selling a product or service. CSR is evolving, not only as a driver of innovation, but to significantly improve a brand’s image externally by being centered on people, planet, and profits. This modern concept that fuses business with the concerns of society would have made Carnegie, an unpretentious man, proud.