I am just about to begin my doctorate in business. What I am looking to find out is whether there is an expectation by the community for business to be responsible for their externalising effects on the social, economic, and climatic environments in which they operate.

Some call it CSR, others Social Licence to operate, corporate citizenship, and a raft of other terms. My question is if this is actually a responsibility of the corporation and therefore could be mandated by law, or if it is just a moral and ethical expectation of society?

I would welcome all comments and opinions.

I don't think it should be mandated by law any more than i think the Government should force an individual to tithe to a church.

If good corprate citizenship is profitable, then i believe that companies will follow the market. But for an outside entitiy to determine what is the politically correct thing to do and try to force a corporate entity to do it if it doesn't support the bottom line is wrong.

Mike,
Do you see any situation where a minimum level should be enforced? For example, polluting a river, which affects fish life which affects the livelyhood of native families. Does the corporation have a responsibility to either not pollute or to compensate for the effects of the pollution? This scenario can apply to many situation economic,social and climatic. Is it when the externalities of a corporation costs a third party that has no control over it that the responsibility kicks in? I am not talking about the philanthropic giving of charity but the restitution for effects of business.

jnkirk

Unless the corporation owns the entire river and the land that borders it, they have no right to store there waste in it becasue it isn't their property. OBTW you can substitute the word individual or governent for the word corporation and the same applies IMO.

Those sorts of things are already covered by expansive environmental regulations, so in a way, society has already answered your question.

It's worth noting that it isn't just 'native' families who would be affected by a polluted river - anyone who requires a clean waterway would see ramifications. Farmers need clean water for irrigation, 'non-native' fishermen need unpolluted water for fish and urban/regional citizens might need clean drinking water.

Thanks Harry,
I mentioned the river as an example and never intended to think that only Native people would be affected. What I am really looking at is whether companies (individuals/governments) need to take some sort of responsibility for their externalities. In other words that they put something back for what they take out of the social, economic and natural environments in which they operate.

Hi, I know I'm a bit late to the party.

Interesting choice of words...

I think there is a distinction to be made between a corporation as a business entity and the people affiliated with the businesses and brands within that corporation.
The corporation as an entity has only one given objective, and that is to maximise profit.

There are many examples that fall into that category.
For example, it seems to me that tax minimisation schemes, for whichever reason, are totally socially acceptable.
A corporation will, without hesitation and more importantly, without any consideration for social implications, cut off an unprofitable branch, a production site, a sales office, engage in litigation with competitors or legislators to maximise profits.
In my view it has an obligation to do so, in order to fulfil its mandate.

A corporation is a theoretical construct and as such, does not have a concept or morals or ethics.

The individual businesses within a corporation however, might well be held to account by the public and local laws.

I think times are changing for companies that are attached to a single brand.

See for example, the negative coverage Apple received because of the working conditions for workers in Chinese manufacturing plants.
Or years ago, the trouble Nike got in, over sweat shops in the Philippines.

These are global brands. Damage to the brand name means less sales.

When people start to associate Apple with suicidal workers in China, it might hurt their turnover.
So these companies will act.
They will force their suppliers to improve conditions somewhat and do enough window dressing to make the story go away and try to present themselves as a good “corporate citizen”.

However the term corporate citizen deserves a whole lot of more thought.

Hi Kirk

You might want to continue and diversify your studies for a little while longer if your chosen expression of "is just a moral and ethical expectation of society..." does actually reflect your thinking.

There is no "just or only" moral or ethical view point.

Ethical considerations come on top and before all other suggestions, notions or sentiments.

Including the law and judicature.


And re organisations and so-called 'externalised effects', read up on the Tragedy of the Commons. There is no externalisation - whatever you start you have to finish. Whatever you take out you have to put back. We all live in shared space here. Of course they have a responsibility, the same as the rest of us.

Firstly thanks for responding, any discussion is good discussion.

My initial staement of Just an moral and ethical expectation of society was stated to illicit a reaction and discussion and seems to have worked.


My view is that a business/corporation as a legal entity should have the responsibility as well of the privileges of being able to be counted as an individual with regards to ownership etc.


"A corporation is a theoretical construct and as such, does not have a concept or morals or ethics."
Friedman stated in 1962 that the only responsibility of business was to make a profit for shareholders as long as they played by the rules of the game.

My research is going to be looking at what are the rules of the game and how have they changed in 50 years since 1962. My hope is that I will find that the social expectation will be the hypernorm required to show that corporation particularly in Australia do see CSR as a responsibility and that they are accountable for their use of the "Commons". I strongly believe that all users of resources be they social, financial, or natural should be held responsible for their use and the effects of their use. In saying that it is important that I do not allow my personal opinion to influence the data and that my research shows a true picture of where Australian business is at. I am hopeful that I will see good results as I believe on the whole most business are aware and endeavouring to do something about CSR but also that there is a huge amount of misinformation about what CSR is and how it operates in big business. A lot of work ahead and I appreciate all comments the good the bad and yes even the ugly.

Thanks

John

Hi John,

I just finished reading "Mine-Field" by Paul Cleary.
http://www.blackincbooks.com/books/mine-field

Unfortunately it re-enforces my view that a corporation has no concept of morals or ethics.
I fear you may find that Friedman's statement still holds true, with a tweak for the worse in regard to the "rules of the game".

A business, regardless of its size, has several sets of responsibilities. Living up to these responsibilities makes the business a good employer, a good investment and a good corporate citizen. In order to understand the many different aspects of running a business, you need to develop an appreciation of the responsibilities of any business.

Employees

The obligation to pay employees is dictated by contractual agreements and state employment laws. A corporate entity does carry the responsibility to train its employees adequately for their jobs. It is the responsibility of a company to make sure that the necessary resources are available to all employees so that everyone can perform the tasks they were hired for. A company should also have a well-defined corporate structure so that employees understand who to go to when issues arise.

Investors

A company is obliged to honor the investment agreements it extends to entities in the form of stocks, bonds or sales of shares. The company also has the responsibility to generate a profit for investors and keep them up-to-date on important company developments. The company may take input from investors on operations. There should be a way, either through an annual meeting or a proxy shareholder vote, for investors to vote on the operational decisions that the company makes. Investors should also have a say as to the details surrounding the sale of the company, including who can buy the company and the financial terms of the sale.


Vendors

A company must pay its vendors within the context of the payment terms outlined in all invoices. If the company is unable to pay its obligations to vendors, then the company must contact vendors and work out a satisfactory payment arrangement.

Customers

A company's responsibility to its customers includes manufacturing and distributing a quality product. There must be clear customer service options for customers that need to discuss product returns or get service on defective products. In order to create products that have value to its clients, a company needs to get input from customers on product updates and the features that should be included in new products. It is the responsibility of the company to create value for the customer with every offering. That value can be superior product quality, customer support, wide product availability or a combination of all these elements.