Social Responsibilities of a Business
This domain tests the vocabulary of corporate social responsibility and, more importantly, the live debate over what a business owes beyond profit. Questions typically ask you to classify an activity inside a CSR framework, or to predict how a shareholder-primacy theorist and a stakeholder theorist would each evaluate the same decision.
The shareholder view
Friedman (1970) argued that the social responsibility of business is to increase profits "while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom." On this view, a manager who spends shareholder money on general social causes acts as an unlegislated taxing authority. Note the qualifier: Friedman is not amoral. He requires law-abiding, non-deceptive conduct, and he explicitly rules out fraud and deception.
The stakeholder and CSR views
- Freeman (1984): manage the firm for all groups that affect or are affected by it.
- Carroll's pyramid, in priority order: economic, legal, ethical, philanthropic.
- Triple bottom line: people, planet, profit.
- Corporate citizenship, sustainability, and ESG extend accountability to environmental and governance metrics.
- Shared value (Porter & Kramer, 2011) argues social problems can be addressed profitably; critics call it profit maximization in new packaging.
Worked example: apparel brand after a supplier fire
Economic: keep sourcing costs low. Legal: comply with fire-safety codes and disclosure rules. Ethical: the brand's published code of conduct promised audits, so the gap is an integrity failure, not merely a public-relations problem. Philanthropic: fund victims' families. A Friedmanite would say fix the audit failures, because deception and lawbreaking breach the rules of the game, but a large voluntary donation beyond that is a misuse of shareholder funds. A stakeholder theorist would say workers and their communities are owed safe conditions regardless of profit. Both condemn the cover-up; they diverge on the donation.
Traps that cost marks
- Greenwashing: spending on marketing rather than on substance.
- Treating compliance as CSR - compliance is only the legal layer of the pyramid.
- Assuming Friedman opposed all ethics rather than unmandated philanthropy.
- Confusing cause-related marketing (a promotional tool) with philanthropy.
- Believing CSR requires pure altruism; strategic CSR is explicitly instrumental.