A Historical Perspective and emerging theories of CSR
The historical evolution of the CSR can be classified into different periods (Johnson, 2010). There is the earlier period in the CSR evolution followed by the development of unique trends in the 1970s. The 1970s trends are followed by the shifts that existed during the 1990s (Matten and Moon, 2005). The below figure shows the historical timeline and different stages in the history of CSR as a paradigm in management and business theory:
Figure 1: History of Corporate Social Responsibility, Source: Johnson (2010), “A Critical Examination of Firestone’s Operations in Liberia: A Case Study Approach”, AuthorHouse, USA.
The Early Classical Period
CSR was looked as a product of the industrialization process at that time. With the development of big companies in 1870s the tasks of these companies increasingly affected other society domains. From 1900 through 1920, extra legislation based on business social responsibilities was passed under the banner of the collection of advocated social reforms in the upcoming era.
The Immediate Post war Period
The debate over the social responsibility of business had achieved impetus succeeding World War II. By this time corporate philanthropy had already become part of normal social fabric and business life. Two principles formed the foundations for contemporary views on CSR. These were the principle of stewardship and charity.
Trends during the 1970s
During 1970s, the texture of the war based on CSR altered to some degree. The focus in the war shifted from corporate responsibility to the corporate responsiveness concept. This new focus on responsiveness altered the emphasis from what organizations could do to survive to what organizations could do to better the world through sustainability.
Shifts during the 1990s
In the 1990s, the concept of CSR emerged as the outcome of new forms of stakeholder engagement and social regulation, increased demands of stakeholder and governmental regulation for reporting and CSR. Critics and Scholars improved their analysis to include arguments based on the sustainability, business ethics, corporate social performance, green marketing, stakeholder theory and citizenship theory
Emerging theories of CSR
The stakeholder theory of CSR
Since 1990s’ the stakeholder theory has become famous as a direct alternative and challenge to the shareholder value theory (Freeman 1984). It argues that the number of stakeholder pressure groups has developed widely since the 1960s’ and the stakeholder forces impact on business must not be underestimated. Ethical and pragmatic as it ought to be business success assume vast interests of stakeholders than the shareholders interest alone. The stakeholder theory emphasizes special social rather than any others unrelated to the corporation. Thus CSR is denoted as a company stakeholder responsibility.
Business ethics theory of CSR
The business ethics theory is based on wider social obligation and the moral duty that business has towards society (Bigg, 2004). This theory justifies CSR on 3 varied but interrelated ethical grounds:
Changing and emerging social responsiveness and social expectations to particular social problems.
Eternal or intrinsic ethical values always inspired by Kantian ethics and denoted as some normative and universal principles like social justice, fairness and human rights
Corporate citizenship i.e. corporation as a better citizen in a society to contribute to social well being.
The business ethics theory views CSR more as philanthropic and ethical responsibilities rather than legal and economic responsibilities. CSR initiates where legal obligation declines.
The shareholder value theory of CSR
The shareholder value theory a perspective denoted by the Nobel Laureate Milton Friedman (1970) argues that only social responsibility of business is to develop its profits while following legal norms. Neoclassical economists like Hayek assert that the function of business is doing business that contributes to society and economy and its function must not be confused with other social functions performed by not for profit organizations and governments. Otherwise it is not the most effective way of allocating resources in a free market. Economists like agency theorists believe that the corporation owners are its managers and stakeholders as agents have fiduciary duty to serve the shareholders interest rather than any others.
Although maximizing the profit of shareholder is justified as the most significant or only corporate responsibility, corporate social obligations are regarded often as strategic instrument for corporate competitive benefit and more profit gain.