The Corporate Social Responsibility Argument

 

The Corporate Social Responsibility Argument

How companies act in their community will always be important to those who interact with them.  It is not hard to imagine that social responsibility is an important aspect of that interaction.  Even schools, such as Georgetown University, believe service is a big part of their education system (Georgetown University, 2011).  Corporate Social Responsibility includes actions that a company takes to demonstrate their products or services are helpful and not harmful to the environment and the larger community.  Two opposing viewpoints that exist towards this trend encourage businesses to either conduct business as usual or create a campaign that promotes their participation in the community.

Entine and Jennings believe that a company following the Corporate Social Responsibility trend does not indicate they are trustworthy.  They believe that determining the “soul of a company” (Jennings, 2012) involves a much deeper look than the messages promoted by the company.  They discuss how companies may be promoting their CSR programs now that it has become fashionable.  Their efforts might be minute in comparison to another organization that has just done the right thing for their community from the beginning.  Entine and Jennings caution people from getting caught up in the hype and to look carefully into the actions of the organization over time.  Entine and Jennings believe it is a choice of the organization whether or not they participate in CSR activities. 

Friedman believes that social involvement is required in order for businesses to be seen in a positive light.  The type of socially responsible actions he sites is conducting green practices, or those business practices that attempt to reduce the overall negative environmental impact. 

Freeman also believes that businesses must consider all of the stakeholders in all decisions (Jennings, 2012).  Traditionally stakeholders referred to those who held ownership interests in the company.   Freeman’s definition of stakeholders extends to all those who have interaction with the company, including the local community in which the business exists.  Freeman believes that companies have the opportunity to not only create jobs, goods and wealth but also activities within the society that strengthen the moral fabric of the community. 

While these viewpoints from these four authors differ, they do all believe that a company should operate in a way that benefits the community of which it is a part.  Entine and Jennings essentially believe that companies should not be judged positively or looked upon favorably simply because they host some charity event or donate money to a not-for-profit organization.  They believe that a company should be judged on their ability to demonstrate good character through their regular business interactions.  Friedman and Freeman believe that companies should engage in activities that are outside of their regular business practices that demonstrate they are a contributor to the betterment of the community.

 

References

Jennings, M. (2012). Business Ethics: Case Students and Selected Readings. OH: South WesternCengage Learning

Georgetown University. (2011). New, Transfer Students Participate in Annual Community Service Day. Retrieved from http://www.georgetown.edu/story/annual-community-service-day.html

 

Corporate Soul Exposed by Answering Questions

 

Entine and Jennings developed eight questions that attempt to expose the soul of a company.  They developed these questions because of the trend towards organizations promoting their Corporate Social Responsibility (CSR) agendas in the media.  While the promotion itself is not bad, it is the lack of a real responsibility to the communities and customers that Entine and Jennings fear.  Their fear does not come without merit either.  In a study done it was determined that even if a company had a CSR agenda in place it was unlikely to be followed if it was implemented after the business had already been in operation (Schmeltz, 2014).  A whole host of reasons go into what makes this a difficult feat but it all comes down to how the company truly prioritizes actions and decisions.  Entine and Jennings have created these eight questions that will enable any stakeholder to determine if a company is acting responsibly or just saying the responsible thing. 

 

Traditional measures of CSR include community involvement and green practices.  Companies will donate proceeds to charity events and organizations.  Often they will host galas to help raise funds for the organization.  All of these actions are usually done to show the public that an organization is deeply rooted in the soil of a community.  The company is simply a part of the larger community organism and therefore participates in those events that improve the “social” good.  Additionally companies tout their products as being environmentally friendly or “green”.  Companies do things like driving more fuel efficient vehicles, creating packaging from recycled products; test their products in a manner that is not harmful to others, etc.  While these items might truly improve the efficiency of the organization, it is still usually promoted as a benefit of working with that company.  Traditionally companies have been evaluated on these types of activities to determine their CSR engagement.

 

Entine and Jennings believe that company’s CSR engagement should be based on whether or not the company obeys the law, how it treats its employees and how the company reacts to making negative disclosures, among other things.  These questions help to answer the true soul of the company because it is more than a plan it is their actions.  These actions negatively or positively influence their community much more than a plan of action does.  Because these questions are about behavior it gives the stakeholders a much more realistic and holistic view of a company.

 

References

           Jennings, M. (2012). Business Ethics: Case Students and Selected Readings. OH: South-           WesternCengage Learning

Schmeltz, L. (2014). Identical or Just Compatible? The Utility of Corporate Identity Values in Communicating Corporate Social Responsibility. Journal Of Business Communication, 51(3), 234-258. doi:10.1177/2329488414525439

Fannie Mae Falls Short

 

Fannie Mae was instrumental in the recession of 2008 in the United States due to a variety of mishaps and deception.  Based on this model it would indicate the Fannie Mae could not be labeled an honest company because they fall short in many of the categories covered by these questions.  Let’s explore two of those questions.

When you look at the question “How do product claims match with reality?” there are many instances provided by Jennings (2012) that do not support claims with reality.  One such claim that was a mismatch was the packaging of subprime mortgage loans and then reselling them on the open market; it created a false sense of hope that these loans were somehow better because Fannie Mae backed those securities.  In reality Fannie Mae did not have the capital to back the $6 trillion so it put the entire country at risk if these, already bad borrowers, continued their behavior.  When these borrowers began to default on their loans it left the country in a very bad position because of the amount of money invested in these securities.  Fannie Mae was fully aware of the risks involved but painted the picture of risk as the “American Dream” of homeownership for everybody.  In reality Fannie Mae handed a ticking time bomb to the American people and ran away before it went off.

Another question which states, “How forthcoming is the company with information?” provides further proof that Fannie Mae was not an honest company.  Fannie Mae should be following the agreed upon standards in regards to accounting known as Generally Accepted Accounting Principles (GAAP).  Because their chief financial officer (CFO) used a different model that would show more stability in the market than what actually existed, it misled investors to believe that the company was in better shape than it was.  This false presentation based on, purposefully altered information is about as far away from “forthcoming” as a company can be.  This information was never shared with the public; it was not even shared with people inside of the company because the CFO knew it was wrong.

These two examples show just how big the gap is between Fannie Mae and the model built by Entine and Jennings to determine a company’s soul.  This company’s soul leaves much to be desired.         

References

Jennings, M. (2012). Business Ethics: Case Students and Selected Readings. OH: South-                            WesternCengage Learning