Corporate social responsibility

Milton Friedman states that the social responsibility of companies is to make as much money for stockholders as possible. There are a number of problems with this deceptively simple definition. Companies are part of society and their business decisions have unavoidable social consequences. The role of companies is to provide society with goods and services legally, efficiently and profitably. In fulfilling their primary purpose, they can choose to undertake such social activities as they believe are in their corporate interest and have the support, for publicly-quoted companies, of their shareholders. Such activities are not necessarily at the expense of shareholders, for whom corporate reputation is an asset. The issue of corporate social responsibility has moved up the economic and political agenda internationally, through concern over corporate power linked to globalisation, examples of corporate malpractice and the impact of economic activity on the environment. In addition, UK pension funds have to disclose their social, ethical and environmental policies in relation to investment, which in turn requires quoted companies to report on their activities in the social, ethical and environmental fields. The paper outlines the nature of some of these activities. Outsourcing and its effects on employment are current issues for developed countries, leading on to a discussion of corporate responsibility in relation to employment. Because the social and commercial consequences of business decisions are intertwined, companies need to clarify their policies on social responsibility and to manage them accordingly, taking account of external pressures to the degree to which they can be said to represent the interests of society as a whole. The manner in which companies discharge their responsibilities towards society affects their public reputation and their ability to recruit and retainable and committed employees.