Abstract
This research involves a review of the submissions to a 2005/06 Australian Government Inquiry into Corporate Social Responsibility. The Inquiry was established to investigate whether corporate social responsibilities and accountabilities should be regulated, or left to be determined by market forces. Our results show that the business community overwhelming favour an anti-regulation approach whereby corporations should be left with the flexibility to determine their social responsibilities and associated accountabilities and ‘enlightened self-interest’ should be retained as the guiding mechanism for social responsibility initiatives. In stark contrast, the submissions from social and environmental organisations and individuals provided counter-arguments in favour of a pro-regulation view. Ultimately Government embraced the ‘free market perspective’ promoted by the business community and decided against the introduction of national legislation pertaining to corporate social responsibilities.
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Notes
Whilst there does appear to be compelling evidence that the environment is in crisis with major concerns about the impending impacts of climate change, it is acknowledged that there are alternative perspectives. There are a number of well-respected scientists who question the evidence and suggest that climate change is either not created by humans or is not actually occurring. Some of the alternative opinions are that climate change has happened before and it is part of the ‘normal cycle’ of the planet, and/or the models predicting climate change are overly simplistic thereby providing questionable predictions. See Lonborg (2001) and Itoh and Watanabe (2007) for an overview of contrary perspectives.
There are various definitions of sustainable development, but the one most commonly cited is ‘development that meets the needs of the present world without compromising the ability of future generations to meet their own needs’ (World Commission on Environment and Development 1987).
As will be explained later in this article, ‘stakeholders’ can be defined as any identifiable group or individual who can affect the achievement of an organisation’s objectives, or is affected by the achievement of an organisation’s objectives (Freeman and Reed 1983).
James Hardie Industries Ltd was involved in the manufacture, distribution and mining of asbestos and related products. Thousands of legal claims have been made against the company for health impacts (notably related to asbestosis and mesothelioma) and it has been widely questioned whether the company properly fulfilled its social responsibilities to people impacted by its operations and products.
The document accompanying the Terms of Reference did not specifically identify what was meant by the term ‘stakeholder’.
This view is also consistent with CPA Australia (2011, p. 5.15) which, in defining shareholder primacy, states: “An organisation that focuses primarily on the interests of shareholders is considered to be embracing a shareholder primacy perspective. To many people, the adoption of a shareholder primacy perspective and the notion of corporate social responsibilities are mutually exclusive. That is, an organisation that fixates on the interests of shareholders is not really embracing the spirit of CSR”.
Hence, the label ‘stakeholder theory’ can be a confusing term. As Hasnas (1998, p. 28) states, “stakeholder theory is somewhat of a troublesome label because it is used to refer to both an empirical theory of management and a normative theory of business ethics, often without clearly distinguishing between the two”.
Friedman (Friedman 1970) is also quoted as stating that the “Corporate executive has a responsibility to make as much money as possible (maximise profits), while conforming to the basic rules of society, both those embodied in law and those embodied in ethical custom”. Whilst reference is made to ‘ethical custom’, Friedman’s view of ethical custom was relatively limited and was construed as requiring an organisation to engage in open and free competition (no coercion) without deception or fraud.
We will return to this point later in the article when we consider the role of personal social responsibility (PSR) and corporate stakeholder responsibility.
According to its website, the Business Council of Australia is an association of chief executives of leading Australian corporations with a combined national work force of almost 1 million people. It was established in 1983 to provide a forum for Australian business leadership to contribute directly to public policy debates in order to build a better and more prosperous Australian society.
Similar drivers have also been identified in documents released by other Australian business organisations. For example similar benefits were identified in a report released in 2003 by the Group of 100 (a body made up of the Chief Executive Officers of Australia’s largest corporations). The report was entitled Sustainability: A Guide to Triple Bottom Line Reporting.
Enlightened self-interest is deemed to be in operation (CPA 2011, p 5.18) “when an organisation responds to community concerns (as if to appear to be ‘caring’) in those situations where doing so also fulfils the goal of maximising the value of the organisation, and therefore, the wealth of the owners”.
It needs to be emphasised that submitting parties frequently only addressed a sub-set of the Terms of Reference, hence the tables in the article will show that a number of submissions did not address the issue in question.
Again, Table 1 provided earlier gives a full list of the Inquiry’s Terms of Reference.
Adam Smith’s most cited work is An Inquiry into the Nature and Causes of the Wealth of Nations (WN), as published in 1776. It was republished in 1937 as Smith (1937).
Collison also argues that the works of other well-respected economists have been misrepresented by vested interests. For example, the studies of Berle and Means (1937) have “become identified with conflicts of interest between owners and controllers of wealth when they explicitly argued that both should be subservient to wider interests…They commended public policy rather than self-interest as the proper mechanism for allocating corporate income streams. As with Adam Smith, their names have arguably become misleadingly linked with a particular agenda”.
Fineman (1996) undertook an investigation of the attitudes and views of senior supermarket managers in the UK.
Galbraith arguably also held ‘iconic status’ like Friedman and Smith, but probably because his arguments are supportive of legislation he does not get cited by business.
For example, although most consumers in Nielsen's 2011 Global Online Environment & Sustainability Survey of 25,000 consumers in 51 countries report that they want brands to be eco-friendly, less than 20 % are willing to pay more for sustainable goods (see http://www.nielsen.com/us/en/reports/2011/sustainable-efforts-environmental-concerns.html).
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Appendix
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Deegan, C., Shelly, M. Corporate Social Responsibilities: Alternative Perspectives About the Need to Legislate. J Bus Ethics 121, 499–526 (2014). https://doi.org/10.1007/s10551-013-1730-2
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DOI: https://doi.org/10.1007/s10551-013-1730-2