Down With CSR! Up With Business Ethics!

Some people use the term “corporate social responsibility” when they want to talk about “business ethics.”

That’s a mistake.

CSR is a particular thesis, or perhaps more properly a movement, within the larger topic of business ethics. Business ethics asks, quite generally, how businesses ought to behave. CSR is — roughly — the thesis that business ought to take into consideration the interests of society at large in their decision making.

Another way of putting the CSR idea is that, from a CSR point of view, it makes perfect sense to admit that a business:

  • makes a useful product or provides a useful service;
  • provides employment;
  • provides an investment opportunity for investors;
  • follows scrupulously all laws and regulations to which it is subject; and
  • pays its taxes….

…and then to ask of that business, “Yes, but what do you contribute to society? How does society as a whole figure in your daily decision-making?”

Three quick criticisms of CSR:

1) Misunderstands capitalism: The central tenet of CSR — namely that the best way for business to contribute socially is through good works — is faulty, and implies a misunderstanding of the basic wealth-and-welfare generating function of markets. Businesses contribute by producing things we want; they facilitate voluntary exchanges of goods and services that, when conducted honestly, leave all concerned better off. (Ask yourself: when did Bill Gates start contributing to society? Was it in 1994, when he founded the Bill & Melinda Gates Foundation? Or was it in, say, 1975, when Gates founded the firm — Microsoft — that would help put the power of computers in of millions of offices and homes? I’m no fan of Microsoft or its products, but to think that Gates’ contribution began with the founding of his admittedly wonderful foundation is just silly.)

2) Smokescreen: when companies are cooking the books, or flouting environmental laws, who cares what CSR activities they’re engaging in? OK, I’m exaggerating. Of course good works are good works. But it’s not at all clear that they make up for other transgressions. We should stay focused. When business leaders start bragging about their CSR activities, we should smile politely, and then enquire how their companies are doing in terms of honest advertising, corporate governance and regulatory compliance.

3) Waste of Public / Activist / Media Attention. In the face of corporate scandals and economic instability, what we ought to be asking of business executives is that they focus on doing their job honestly and diligently. In any given week, millions of dollars are being spent on academic and industry conferences, round-tables, and dinners to talk about the importance of CSR. In any given week, newspaper stories are being drafted about which companies are doing well, or badly, in their CSR efforts. And in any given week, activists are staging protests, writing letters, and educating the public about the failures of companies to be “socially responsible.” What would happen, I wonder, if all of that money and effort were redirected to the simple idea of getting more people, in more businesses, to behave more consistently according to basic rules of honesty and integrity?

14 comments so far

  1. Anonymous on

    Bravo, well stated! My biggest objection to the push behind CSR is who determines what a good work is? Think of all the money generated in the state of Utah that was spent in California to support discriminatory legislation against gay and lesbian citizens. How many corporate checks were written to a non-profit agency that was created for the purpose?That is what can go wrong with CSR.

  2. Heberto X. Peterson R. on

    I totally agree with the view of more business ethics than CRS. Companies should find a way of “legitimate” them self’s with in society. What is the “valued added” to these concrete society? CRS can be an approach but with many distractions in the same path. Business ethics implied conscience, CRS not necessarily.

  3. François Guillon on

    At last! Why is it that major society stakeholders like consumers’ organizations hardly trust companies’ ethics? A fundamental remark is about semantics: The word “Ethics” is crucial for societal stakeholders as, in the contrary, it is not a business word. Strangely enough, it is commonly used in academic business journals titles and papers, but companies are shy with it and they prefer to communicate with well-rounded business words, i.e. “Corporate”, “Social” and “Responsibility” to name their moral oriented policies. Instead society would certainly understand and accept, even prefer that these companies raise ethical issues, comprehensible to people, while using the common language and the long heritage of philosophical doctrines associated with it. Thank you Chris!

  4. Anonymous on

    Chris Macdonald’s distinction between CSR and business ethics is both important and innovative. I am adjunct teacher of undergraduate courses under both titles at Eckerd College in St. Petersburg, Florida, but have never so succinctly and clearly differentiated between them. Thanks!Another example: Both B of A and Citibank have long put out flashy reports on their CSR achievements such as community development and the hiring and promotion of minorities. As more details emerge of the mortgage meltdown and bank acquisitions that occurred this last fall, it now appears that the top management of both banks and their investment firm acquisitions did not pass some serious tests of ethical behavior.Tony Branch, Ph. D.St. Petersburg, FL

  5. Cristian on

    Chris, I made a similar comment on my blog for Romanian readers. My view is that what Europe tends to call “corporate social responsibility” is in fact only a fraction of Ethics and Compliance Management (or Ethics Management — what you call Business Ethics and I regard as being operationalized Business Ethics — for those hating the conjunction between Ethics and Compliance). And Ethics and Compliance, on its turn, should be seen as part of Corporate Governance. This way, I think, we can see the roles of each section not as separate from the mission of the organization, from the architectural structure, but as the most intimate management model.There is also another argument that works in my favor. First, the partisans of CSR (especially in Europe) say that an ethical management team feel what their responsibility is and for this reason we should talk about the responsibility, i.e., the social responsibility of the company. Second, companies do have a responsibility towards society/community their work in, so, the organization should be social responsible and show responsiveness. If you take this point of view as your starting point, it is understandable why you will miss the point of organizational/corporate responsibility.Let me explain this. The arguments of the CSR partisans do not make a distinction between various forms of responsibility of an organization. There are legal responsibility, moral responsibility (as in “I am morally responsible for the fact that someone else is the cause for this polluted river”), ethical responsibility (as in “I am responsible for my immoral acts – mistreatments of employees, discrimination etc.), compliance responsibility (professional responsibility towards other professional, towards the field I work in – given in professional standards), product quality responsibility and so on. All these are different. But if I am responsible for what I (as organization) do in general it does not follow that I am social responsible (as in moral responsible). Another issues is represented by the nature of the responsibility. If legal responsibility is necessary binding, the ethical / moral responsibility is only optional. I may feel a moral responsibility for what happened, as well as I might not feel that responsibility. Their argument that organizations/corporations (MUST) have a social responsibility because they presumably have an ethical responsibility is naive and illogical.I try to teach this distinction all the participants at the Ethics and Compliance Officer training program (the European training program): is my post:

  6. Chris MacDonald on

    Thanks, all of you, for the comments.François, I agree that business is (often) averse to the word “ethics,” for no particularly good reason. Many of them associate that word with scandals, I guess.I once had an industry association tell me, “Yes, we’d LOVE to have you come to talk to us about ethics. That would be great. Our members would really appreciate and benefit from that. Can we just not call it ‘ethics,’ though? Our members don’t like that word.”Chris.

  7. Charles A. Weinstein on

    Chris,I’ve been silently following you for some time, and appreciate your cogent comments. I think we ethicists have, to some degree, made our own bed when it comes to business people’s perceptions with respect to the term, “ethics.” We have focused almost exclusively on constraining bad behavior, rather than encouraging actions that are not merely acceptable, but are excellent, morally and otherwise. CSR is being touted by a fair number of knuckleheads, but at least it is an effort to focus on what organizations ought to do, in ways that transcend mere compliance with narrow standards of conduct. If CSR motivates moral reflection and good actions, we ought not be too quick to dismiss the concepts behind the term, or the wisdom that would otherwise be obscured by the inevitable knuckleheads.Again, thank you for your consistently excellent commentary.

  8. Mallen Baker on

    ChrisLike many who criticise the concept of CSR, you first redefine it in such as way as to make it more open to your criticisms. CSR is not defined by ‘good works’ that are extra and incidental to how the business makes money.The expectations on business have changed that businesses now need to create wealth successfully whilst:– tackling their own impact on climate change and other environmental impacts– ensuring that they do not benefit from forced, slave or child labour– treating their own employees with respect and avoiding discrimination or abuseThese aspects are all about accepting that the positives – employment, tax, wealth creation – come at a cost and the aim should be to achieve the benefits whilst reducing the cost, and operating like corporate citizens who recognise that they have a stake in the overall health of society. As we are now seeing, companies cannot operate as islands of prosperity amidst seas of deprivation.So your three criticisms are misplaced, because they take for their power the belief that CSR is about charity and projects, not about business. That doesn’t mean that some companies can’t talk big whilst not paying attention to fundamentals – but that’s not a phenomenon unique to CSR.Most people I know see business ethics – the honesty and integrity of how people behave – and CSR – the obligation of the company to manage itself to have a positive impact on society – as complementary not in conflict.

  9. Ben on

    I think this debate says more about the semantics and structures of CSR as an evolving discipline. Terms are used and defined in the interests of individual organisations, with few standard definitions available. It wouldn’t be a surprise to me to see all of this kind of activity repackaged as “sustainability” in the near future – with brands that endorse and support ethical behaviour (at a corporate and invidual level) rising to the top of our current CSR indices, as well as launching more ethical products, etc.

  10. Chris MacDonald on

    Mallen:Thanks for your comment.It’s entirely possible that I’ve mischaracterized CSR. But in my own defense, I have to say that if that’s so, it’s at least partly because CSR is so ill-defined by those that defend it.Donations and volunteerism are, in fact, a significant (and maybe even defining) part of CSR for many who advocate it, and indeed on the part of many companies that try to implement it.On your own definition, CSR requires companies to:– tackling their own environmental impact – ensuring they do not benefit from forced, slave or child labour– treat their own employees with respect and avoid discrimination or abuseThe third is plain old good business ethics. The first and second are at least partly controversial (slavery is always bad; child labour isn’t always). The first and second also imply a significant degree of voluntarism, if you’re talking about moves beyond what law requires.In the end: CSR needs to clarify what it is.Regards,Chris.

  11. […] part, Foster is echoing something I said a couple of months ago, when I wrote this blog entry: Down With CSR! Up With Business Ethics! I offered 3 arguments against “Corporate Social Responsibility” and in favour of […]

  12. […] of the topic “business ethics,” as defined above, means that other, related ideas like Corporate Social Responsibility (CSR) and corporate citizenship and sustainability are in fact sub-topics within the broader topic of […]

  13. […] RELATED: Chris MacDonald’s discussion of CSR as a smokescreen in his Business Ethics Blog post, “Down With CSR! Up With Business Ethics!” […]

  14. […] This does far more good than image-boosting CSR activities. As business ethicist Chris MacDonald explains, businesses contribute to society by making useful products or providing useful services, providing […]

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