Essay speaks about what corporate social responsibility is and the benefits of making it a mandatory requirement for businesses

1. Essay Topic
(F) Government should mandate organizations to be socially responsible and punish those
that do not comply. Discuss
Corporate Social Responsibility has recently become a strongly debated topic. What is the
business of the business? Should businesses attempt to solve societal ills? Or should
businesses merely aim to maximise shareholders’ wealth? Corporate social responsibility
(CSR) as defined by the Commission of the European Communities (2006) is a concept
whereby companies integrate social and environmental concerns in their business operations
and in their interactions with their stakeholders on a voluntary basis. “Corporate social
responsibility can also be described as firms engaging in voluntary social efforts that
transcend legal regulations” (McWillams & Siegel, 2001). These social voluntary efforts
include charitable giving, environmental activism and community service. Corporate social
responsibility is not only about philanthropic or charitable work. It is about something much
more fundamental. It deals with how firms take responsibility for their actions in the world at
large. Surprisingly, CSR was rejected by many business leaders when the idea was first
proposed. However, CSR has now become a central facet of modern corporations. “CSR has
been transformed from an irrelevant and often frowned-upon idea to one of the most orthodox
and widely accepted concepts in the business world during the last twenty years or so” (Lee,
2008, p53). Should the Jamaican government mandate organizations to be socially
responsible and punish those who do not comply? Or should the decision to be socially
responsible be left up to the discretion of businesses?
Firstly, the rise of the modern corporations created and continues to create many social
problems therefore, the corporate world should assume responsibility for addressing these

2. problems (Advagem 2016). Companies responsibilities should not be limited to just making
profit and obeying the law, they should attempt to alleviate or solve social problems.
According to the Stakeholder theory, corporations should consider the effects of their actions
upon the customers, suppliers, general public, employees and others who have a stake or
interest in the corporation (Jensen, 2002). Another theory related to CSR is the legitimacy
theory which relies upon the notion that there is a “social contract” between an organization
and the society in which it operates (Deegan & Unerman, 2011). In an attempt to ensure their
continuing existence corporations, try to legitimize their actions by engaging in CSR to get
the approval of society. This theory in effect states that firms have the resources and should
engage in social ventures. It also implies that larger firms have a greater responsibility than
smaller firms. Companies have the potential to not only fulfil their economic role in society
but also play a major environmental and societal role.
Secondly, businesses have large amount of power in society; an equally large amount of
responsibility is required to balance it. When power is significantly greater than
responsibility, the imbalance encourages irresponsible behavior that works against the public
good. It is important to realize that corporations are powerful institutions that affect many
facets of society. Corporations are created to pursue commercial purposes but their processes
have a very public impact. Companies affect a lot of lives through their actions. It is very
critical that they behave in a responsible manner. Responsible businesses make a worthwhile
contribution to society. The decision and activities of these firms can positively impact on
the use of natural resources and the quality of lives of people. Business entities have an
ethical obligation to be socially responsible. They should be socially responsible because it is
right for their own sakes.
Detractors may argue that corporate social responsibility dilutes the businesses’ primary
purpose that is economic productivity. The main aim of businesses is to maximise

3. shareholders’ wealth. By participating in socially responsible activities businesses will be
forced to give up some amount of profit hence violating their fiduciary duty to shareholders.
Businesses already yield a lot of power in society if they pursue social goals they will have
even more influence. Another key point put forward by opposers of CSR is that it is used by
companies as a strategic tool to build brand loyalty and develop personal connections with
customers. Firms simply behave in a socially responsible way to the end to which they will
benefit.
With all of that being the question still remains should or shouldn’t the government put in
place laws to ensure that businesses not only conform to the their economic and legal
obligations but also make a social contribution? There are points to support both views.
Those in support of mandatory CSR insist that firms have created problems in society that
exceeds their legal obligations. Government should ensure that corporations resolve these
social issues by making it mandatory for firms to be socially responsible. Strict penalties
should be enforced to deal with those who do not comply. According to Broomhill (2007)
government needs to adapt a more proactive approach when it comes to CSR. Hertz (2004)
argues that governments need both to improve civil and market regulation of corporations,
and also to strengthen corporate law. Broomhill (2007) contends that while civil or market
based forms of regulation have had some effect in moderating anti-social corporate behaviour
the effect is necessarily limited however; the threat of litigation is proving to be more
effective. The tendency amongst government policy makers has been to encourage
corporations to voluntarily self-regulate. However, Herz cautions that policy makers pursue
this strategy to the detriment of not only external stakeholders but also multinational
corporations and claims that corporate regulation is in ‘our’ collective interest (Herz 2004:
202).

4. On the other hand, businesses insist that CSR should not be made mandatory. “A major
theme of much of the CSR discourse emanating from the business community is the
argument that regulating CSR is either unreliable or dangerous” (Broomhill, 2007). The
Melbourne based Business Community Intelligence presented the view of the Director for
Policy for Chartered Secretaries that mandating CSR reporting would render CSR
meaningless (Fox 2006). A similar view was endorsed by the Australian Parliamentary Joint
Committee on Corporations and Financial Services in June 2005 in its report: Corporate
Responsibility: Managing Risk and Creating Value. The key conclusion of the report stated:
The committee strongly supports further successful engagement
in the voluntary development and wide adoption of corporate
responsibility. The committee has formed the view that
mandatory approaches to regulating director’s duties and to
sustainability reporting are not appropriate. Consequent on the
recommendations of this report, the committee expects increasing
engagement by corporations in corporate responsibility activities.
This would obviate any future moves towards a mandatory
approach (Australian Government 2005: xix).
Companies contend that setting minimum standards inhibits novelty and that unless they are
able to gain competitive advantage from CSR companies cannot rationalize the cost.
Corporations help to create a lot of social problems; they also have resources available to
them to help alleviate these problems. While businesses main purpose is to maximise wealth
they also have a part to play in the society in which they operate. All things considered it is

5. in the country’s best interest for the government to implement mandatory social responsibility
for all firms and include heavy sanctions to punish those who do not comply. “The business
of business is to serve society, not just make money” (Dayton Hudson corporate
constitution).
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