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Corporate social responsibility or virtue signalling?

With the start of the Hayne Royal Commission into banks and financial services, throwing up horror stories of banks behaving badly, Australia's former Prime Minister Tony Abbot has had a lot to say:

Tony Abbott says the big banks should have focused on treating their customers ethically rather than spending time “virtue signalling” on “politically correct subjects”.

The former prime minister attacked the financial services industry for the revelations unearthed in the Hayne royal commission, declaring the boards and executives should have kept the focus on their core businesses rather than making political statements.

The big four banks publicly supported same-sex marriage in last year’s plebiscite and have all ruled out providing funding for the Adani coal mine.

“I’m very disappointed in the banks and you wonder how much better the banks would have been if they had been focused on doing their core business honestly and ethically rather than running around the place virtue signalling on any number of politically correct subjects,” Mr Abbott told 2GB radio (Brown, 2018).

Mr Abbott clearly is not a believer in corporate social responsibility (CSR), instead dismissing it as "virtue signalling". Whether he is right or not, the benefits of CSR remain in dispute. Advocates of a narrow view of CSR are not against social responsibility, they just believe that by being good, profitable businesses (without ripping off customers and other stakeholders), companies are being socially responsible by sharing capital across the economy. In contrast, advocates of the broad view of CSR are not against profit, they just believe that there is more to business than "the bottom line". Having said that, there may be times when, for either side of the argument, focus is lost and terrible, unethical things are done. Perhaps Mr Abbott is right?

The purpose of this assignment is not to decide who is right and who is wrong in this argument. Instead, you will take steps towards being an ethical decision-maker by being informed of the key aspects of each side of the CSR debate.

To complete this assignment, you are to research the academic literature on both the narrow and broad views of CSR and write a report that:

  1. Reviews the literature on these views, and
  2. Provides a comprehensive answer to Mr Abbott's position that 'the banks would have been if they had been focused on doing their core business honestly and ethically rather than running around the place virtue signalling on any number of politically correct subjects'. You must answer this statement by either supporting it (and explaining why) orrejecting it (and explaining why).

CSR: Narrow View vs Broad View

Some commonly known and heard instances covered under the topics concerning sustainable corporate environment, business principles or ethics, and corporate social responsibility include manager salaries, scarcity of natural resources, mass redundancies and highest recorded profits at the same time, corporate fraudulency and financial crisis. Mishaps like these are bound to raise questions regarding justice for both future and contemporary generations. The essential task of CSR is to avert these and other ethically unacceptable practices which can abate societal functions, harm companies and be detrimental for employees.in more Increasingly companies have realized the relevance of conducting their business with moral practices, even though they are yet to sufficiently incorporate CSR . The power and influence of corporates have been on the rise in the modern economy and that raises the topic whether companies hold a responsibility that lies beyond the scheme of making profit for their shareholders. The argument therefore centers on the topic of ethical responsibilities: whether business corporations should act in ways that takes into considerations things like social welfare and mass or communal well-being. The CSR follows two fundamental perspectives: the narrow and broad views of implementing ethical values into business regulations. However, it needs to be pointed out that CSR’s cannot solely be the renovation center of capitalism. It has to claim and initiate systematic and organized alterations in a marketplace economy. It therefore requires an innovative role for the chief players in the game: companies must become ethical as well as viable actors. The report identifies these new key roles in the policies of the CSR and does so with respect to Prime Minister Tony Abott’s statement on the bank’s action of refusing to fund the Adani coalmine as ‘virtue signaling’. The report elucidates the literature review of the broad and narrow views of CSR analyzing its relevance in the context of Australia’s crisis.

The chief concern of companies had been about making money for many years, as the only definitive goal of a business. The modern era almost compels companies to be aware and concerned about the welfare of society, which is officially known as corporate social responsibility. CSR is how a business caters to society’s welfare. This indicates how the managers of marketing are interested both in long-term business interest along with society’s well-being. Sustainability is the newest philosophical trend in context to social responsibility. A company will reap business if it helps in society’s growth and development through its business. If a company launches a product or specializes in a service that helps fulfilling the needs of society, it increases chances at maximizing profit. Make up creams manufactured using ingredients imported from developing countries, aiding to their growth is one example of companies that embrace the philosophy of social responsibility. Ben and Jerry’s (ice-cream maker) is another example who can take pride for supporting charities. The company has been making a donation of 7.5% of pre-tax profits to several charitable organizations. The progressive aspect of sustainability is centered on creating new and innovative products that, in the near future will help improve advancement and eradicate the ills of society. A backpack geared with solar panels for charging electronic devices or 100% bio-degradable reprocessed wooden coffins would be current examples. Stakeholder theory is another radical approach in which companies can carry out their social responsibilities. According to the theory, social responsibility should pay more attention to the company stakeholders, be it suppliers, owners, employees, management or customers or even the community. The approach is rather widespread, since the employees would prefer good wages, a secured job and the management would like to secure loyal customers, content workers and profit, while the community demands the corporations to pay their taxes, be offered proper and sustainable wages, additionally, be sensitive to the environment and not pollute it. Suppliers want an intact and well-functioning business, and owners, of course, are goaded towards maximizing profit.  

Companies' Responsibility towards Society

Critics of corporate social responsibility feel that the ultimate purpose of a business organization is to secure profit for the company’s stakeholders. Profit-oriented business critic state that for companies to participate in a socially responsible way, they need to spend more of their firm’s money and in the end are costing their shareholders. For instance, if a company is willing to import ingredients from a developing country instead of using a well-known source, then the added cost of shipping is borne out by the business associates (Servaes & Tamayo, 2013). Therefore, a robust and integrative perspective is required and important, which should be based on a system of deontological values, related to the core business of the company. This calls for considering social and ecological criteria. Some of these criteria include the nature of treatment towards employees, organization of the production process,  scrutinizing the offered and produced products and services, and how they are marketed, and responsible business practices of suppliers, the so-called supply chain (Martinuzzi & Krumay, 2013). Honorable merchants or virtuous managers alone won’t suffice, there is no denying this fact. Employees belonging to different levels of the company and who are integral to the same are essential for society. It further requires proper organizational structures and a clear set of rules. Although,  it is rather short-sighted to rely on a code of conduct, because it might mean “act according to some given rules”  in extreme cases which contradicts the principles of ethical reflection, which, in more simplified terms would imply thinking about good and evil, right and wrong. In other words, CSR is also about both individual entities and the structure of institutions. In business ethics one speaks of individual ethics and institutional ethics. Whereas, in reality, that is quite unrealistic, since the state should do more to promote a good and fair society (Epstein, 2018). Business ethicists do not just ask what the world is like, but also what it should be like and how it ought to be. Al the very least, it suggests where the journey should lead. At the same time, they provide practical suggestions about how to embark upon that journey. One speaks of questions, of justifications on one hand, and of implementation on the other; preferably in that order (Gamble, Thompson & Peteraf 2013). The state can effectively contribute to implementing corporate responsibility through law and politics, although it is within a limited array. If society is looked at from a bird’s eye-view, it will reveal different social systems: the economic systems, the justice system, the political system, for example. One can speak of the functionally differentiated society people live in.

The narrow view of CSR stands solely with the profit-maximizing goal of a corporation. It focuses on the two central responsibility of a business organization: to obtain material gain as much as possible, to comply with the essential cannons of on face civility (Friedman, 2013). Since the business is an artificial ‘person’, it has full flexibility to maintain artificial responsibility. The artificial construct that business is, the only entities that can be held responsible are the corporate executives and the just proprietors. As money making is the central goal of any profit-oriented establishment, the managers are compelled to function according to the owner’s interest. Friedman argues that business executive are entitled to social corporate responsibilities which are beyond their pursuit of profit (Gamble, Thompson and Peteraff,

Stakeholder Theory and Sustainability

Under the broad view of CSR, business executives must spend some part of the shareholder’s money for the sake of social interest (general) such as expending taxes and tariffs on social causes and also charge taxes on the owners for generating higher revenues. To utilize the resources of business and participate in activities that is designed to increment the profits (Schwartz, 2017) in a way it plays the game safe and sound is the main social responsibility of a business. In other words, a business must avoid any kind of fraudulence, unjust means for accumulating profit, and should operate in a way that it caters to the society apart from just earning profit. It is unlikely of financial managers to think about the social responsibility of the business in increasing profits. Although their focal concern would be to ask for money, both for themselves and the company, the efforts they make might be helpful in generating revenue within both the company and the community, offering benefits that shareholder and business owners do not usually consider (Martinuzzi & Krumay, 2013). Overall, the owner can judge the profit gained and losses suffered by the business based on the extent to which the business suffices the needs and requirements of the society individuals. This rule is applicable for small or large industries alike. The only way for a business to increase profit is by providing quality and valuable service to each individuals of the society.

The broad view propagates that any organization is obligated to the constituencies it affects apart from the shareholders alone. According to Keith Davies it is an indispensable aspect of social responsibility that the decision maker of a business involved in serving the company’s and his/her individual business interest, to take necessary and required actions that not only protects but also enhances the general interest of the society. (Grayson & Hodges, 2017) The company is owned by shareholders and they are required to entrust the management with the funds while the management can privilege from making as much money as can from the shareholders in return. It therefore becomes one of the fiduciary duties of the manager (of an organization/corporation) to look after the interests of a shareholder. Arguing with the theory of narrow view, the duties of the management is same for employees, customers and other constituencies. Moreover, as long as the business functions to meet and balance the needs of the shareholders, it hardly can face any difficulties with carrying out the social responsibilities.

The concept of CSR and its exercise it highly relevant in the context of Prime Minister Tony Abott’s disapproval of the four banks’ refusal to fund the Adani coal mine. The argument that follows will speak for the banks, and elucidate how they are justified in standing with the minor community and opposing the mine (Benister, 2013). The minister expressed particular disdain towards the banks’ actions. He was quoted claiming “I’m very disappointed in the banks and you wonder how much better the banks would have been if they had been focused on doing their core business honestly and ethically rather than running around the place virtue signalling on any number of politically correct subjects,” Mr Abbott told 2GB radio (Brown, 2018). The term became an instant buzzword following the Minister’s statement. For going further into the debate, the term requires clear explanation. Under signaling theory, virtue signaling refers to the on show expression of moral values and used to indicate piety or moralistic behavior among beliefs and religions (Barthomolew, 2015). Commentators use the term derogatorily to criticize what they consider superficial and empty, for organizations or groups that prioritize appearance and face value over fruitful action. It is needless pointing out that Abbott’s use of the term was, by all means, pejorative and he opposes the involvement of the corporate in socially controversial matters. The big four banks had supported same-sex marriage publicly and as an had ruled out providing any fund for the Adani coal mine as a stance to display support and solidarity with homosexuals who are disapproved by orthodox social organizations (Hashan, 2015). Any company regulated by the CSR, almost compulsively engages in action that is aimed at promoting and safeguarding social interest. If these banks are governed by a well-regulated CSR policy, it is their responsibility to undertake actions, demonstrate stances that work best for the welfare of the society (community, in this case). If the politics of the country affects each and every strata of the society, everyone, individual or corporations alike have equal rights in voicing an opinion regarding the happenings of the state. According to Mr.Abbott, the banks should rather focus on their core business than make political statement, but he misses out the point that all business involves politics and the operations and actions undertaken by a business is both deeply affected by, and affects the politics of the surrounding it is functioning in. Focusing on the former half of Abbott’s statement will reveal loopholes in his argument. He says banks should keep to core business and operate honestly and ‘ethically’, the Minister here, fails to realize that the step taken by the banks was essentially one principled on ethics and corporate values. As discussed earlier under the literature review section, the social responsibilities of corporations includes acting in ethical ways to ensure the wellbeing of society and its members. The latter half of the statement can be subjected to equal scrutiny. What Abbott claims to be ‘politically correct’ is not just related to the politics of the economy. Gay rights are quite fundamental to a free, socialist state, the refusal of which is a violation of fundamental rights (Berstein and taylor, 2013). Any organization dismissing individuals or refusing to serve them, based on their sexual orientation should be charged under law as it goes against the basic sense of justice. Considered this way, Abbott’s statement is self-contradictory in nature. On one hand, he suggests the banks maintain honesty and ethics in their actions, while criticizing their ‘ethical’ action as ‘virtual signaling’ on the other hand. Further, it must be noted, that this ‘core business’ of banks deals with all the communities in the society, the least of which is the LTBTQ community (Ross, 2017). It is the duty of service sectors like banks to cater to the requirements of all individuals living in society. Therefore, it becomes the responsibility of banks to oppose any association that hurts the moral sentiments of any particular community (Hunter, 2017). The action of the banks cannot be dismissed as merely virtue signaling, as they were not levelled at any religious or cult belief, but based on plain humanitarian grounds.

Exploring Relevance of CSR in Light of Australia's Crisis

Conclusion 

The concept of CSR is crucial to companies that wish to conduct business on ethical grounds. For proper functioning and for maintaining healthy consumer relationships, a business must consider both the broad and narrow views of the corporate social responsibilities. Any business association has solely and primarily to rely on society (collectively) for expanding and developing. Hence, it is only logical for a corporation to act in the best interest of society. Moreover a sufficient economy should have proper harmony among each sector and section of the society. The policy of CSR ensures harmony and stability within the relationships between business associations and individuals in society. Mr .Abbot may be partially correct about suggesting banks to stay put with their core business, but wholly dismissing the banks’ ethical action as virtue signaling can be argued in terms of ethics and justice. Fundamental rights are integral aspect of individual and communal welfare and therefore, are not necessarily political in nature. The argument is the report speaks against the claims made by Tony Abbot and justifies how the it was the duty of the banks, under the regulations implemented by the CSR, to stand by the community and rule out funding any organization that derogates a particular community out of sheer prejudice

References:

Amran, A., Lee, S. P., & Devi, S. S. (2014). The influence of governance structure and strategic corporate social responsibility toward sustainability reporting quality. Business Strategy and the Environment, 23(4), 217-235.

Bartholemew, J. (2015). The awful rise of ‘virtue signalling’. Spectator, 18.

Bennister, M. (2013). Is Australia Still the Lucky Country?. Political Insight, 4(3), 9-13.

Bernstein, M., & Taylor, V. (2013). The marrying kind?: Debating same-sex marriage within the lesbian and gay movement. University of Minnesota Press.

Crane, A., Matten, D., & Spence, L. (2013). Corporate social responsibility in a global context.

Doh, J. P., & Tashman, P. (2014). Half a world away: The integration and assimilation of corporate social responsibility, sustainability, and sustainable development in business school curricula. Corporate Social Responsibility and Environmental Management, 21(3), 131-142.

Epstein, M. J. (2018). Making sustainability work: Best practices in managing and measuring corporate social, environmental and economic impacts. Routledge.

Gamble, J. E., Thompson, A. A., & Peteraf, M. A. (2013). Essentials of strategic management: The quest for competitive advantage. McGraw-Hill/Irwin.

Grayson, D., & Hodges, A. (2017). Corporate social opportunity!: Seven steps to make corporate social responsibility work for your business. Routledge.

Hasham, N. (2015). Tragic for the wider world”: Tony Abbott decries court ruling against Adani coal mine. The Sydney Morning Herald, 7.

Homburg, C., Stierl, M., & Bornemann, T. (2013). Corporate social responsibility in business-to-business markets: How organizational customers account for supplier corporate social responsibility engagement. Journal of Marketing, 77(6), 54-72.

Hunter, N. D. (2017). The Sex Discrimination Argument in Gay Rights Cases. In Sexuality and Equality Law (pp. 175-194). Routledge.

Martinuzzi, A., & Krumay, B. (2013). The good, the bad, and the successful–how corporate social responsibility leads to competitive advantage and organizational transformation. Journal of change management, 13(4), 424-443.

Politician, C. E. O. (2016). Political Leadership in the Twenty-First Century. The Routledge Companion to Leadership, 359.

Robinson, G. (2014). Coalition’s appointments are part of a bigger pattern in policy advice. The Conversation.

Ross, D. (2016). Corporate social responsibility initiatives in Australia’s mining industry: An applied stakeholder approach. In Key Initiatives in Corporate Social Responsibility (pp. 261-278). Springer, Cham.

Ross, D. (2017). Dynamics of corporate social responsibility in Australia’s mining sector: A critical sociological analysis. In The dynamics of corporate social responsibility (pp. 187-201). Springer, Cham.

Schwartz, M. S. (2017). Corporate social responsibility. Routledge.

Servaes, H., & Tamayo, A. (2013). The impact of corporate social responsibility on firm value: The role of customer awareness. Management science, 59(5), 1045-1061.

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