To what extent does Corporate Social Responsibility beneficial to a company’s performance? Hot debates were arose everywhere in the society about the extent of Corporate Social Responsibility (CSR). Mallen Baker (2004) states that CSR is about how companies manage the business processes to produce an overall positive impact on society. Supporters of CSR claim that Businesses and Corporations are not only about making money especially for big business. They should show social responsibility, moral standard and city spirits to the community.
They should give something back to the society. Critics argue that Businesses are owned by their shareholders – money spent on CSR by managers is theft of the rightful property of the owners by laisser-faire (1980). The debates have been arose for several years. People seems to have reached a consensus that CSR may be necessary but to what extent it is essential for the performance of the company. Balances should be struck between the social responsibility and the profits enjoyed by the owners and the shareholders of the company.
This essay aims to discuss the extent to which CSR is beneficial to a company’s performance. An in-depth analysis about the extent would be made in the following essay. First and foremost, the reason why big business should not only making money is that only aiming at making money but focuses a little on CSR may harm the society as a whole and also may indirectly affect the performance of the company. Provided that some corporations regard making money as its major target, it may use their means to achieve its target, including the ways which may pose a threat to the general public.
For the sake of maximizing profit, the directors may be willing to increase their revenue at the expense of others’ welfare. The crisis of the mini-bonds of Lehman Brothers is an example showing how only targeting at making money may harm the society and the company’s performance. Finally, the Lehman Brothers is closed down entirely. Actually, the agents of the large banks in Hong Kong including HSBC, Bank of China and Standard Chartered Bank deceived their customers by telling them that those mini-bonds were products with low risk, concealing the fact that these structural products had a relatively high risk.
What these agents considered may be the money they could make, rather than the fact that many of their customers needed this sum of money to maintain their living. In consequence, some of the retired elderly lost their principal, being enmeshed in a state of depression. Businesses need “a license to operate” and they need public acceptance. To secure and maintain these, they must abide by laws and regulations governing their operations, and they must conduct their work in a manner that fosters public trust.
When this public trust is violated, whether deliberately through negligence or unintentionally, companies often lose their capacity to thrive or even survive. (Gloria Jumamil – Mercado, March 2007). After this incident, the reputation of these commercial banks is declining. Less people believe in the agents of these commercial banks who are selling the market products. So, people tend to invest less money on these products. And the company’s performance is indirectly affected by this incident. From the aforementioned parts, it is known that business should show some extent of CSR to the society.
But a balance should be struck between the extent of CSR and the profits enjoyed by the owners and the shareholders of the company. The extent of CSR is actually depends on different companies. It is because different company have different company size. For big business, they may use a large sum of money in CSR but not affecting much of the profits enjoyed by the shareholders as this is only a small proportion in comparison to the company’s total assets. But for small business, the same proportion of money, it may not be the same amount of money in CSR as much as the large corporation.
Husted and de Jesus Salazar (2006) found that it is wiser for the firm to act strategically than to be coerced into making investments, and that by making investments strategically they could do more than simply following altruistic motivations. It is the same in CSR. Furthermore, the extent of CSR of a company may also depends on the nature of the company. If the company is selling products that are harmful to humans and environment, such as cigarette companies, wine-selling company, they should show a greater extent of CSR to the society. Three empirical studies deal with the effect of harmful products in relation to consumers.
The first study claims that both product harm and target group vulnerability, affect the perceived level of company ethics. (Terije I. Vaaland and Morten Heide, Kjell Gronhaug, Jan 2007). So, these types of company should show greater CSR to the society. But for companies that are for the good sake of the society, they can put less efforts of CSR to the society, such as companies selling organic food, solar cars. McDonald’s is selling junk food for the public which is harmful to the humans. Eating too much oil used in cooking French Fries may cause cancer.
So, it put a lot of money to establish the McDonald’s House for the children who have got cancer. It subsidise these children and support them through organizing activities in this house for them. Also, IKEA company has cut a myriad of trees in order to make their furniture selling to the customers. This has caused a lot of damages to the environment. So, they put a lot of efforts in CSR to the society. They establish a programme that a customer buys for 10 dollars products then IKEA will donate 1 dollar to the charity for every 10 dollars. The idea that firms’ activities may have negative consequences is nothing new.
The fact that companies need to take environmental considerations has for long been realized and reflected in rules and laws. (Terije I. Vaaland and Morten Heide, Kjell Gronhaug, Jan 2007) So, the extent of CSR to the society should depend on the nature of the company. Last but under no circumstances least, Corporate Social Responsibility may be necessary to a company’s performance. But the extent of it is depending on several factors such as size, nature of the companies. Most importantly, Balances should be struck between the social responsibility and the profits enjoyed by the owners and the shareholders of the company.