Reconciling Corporate Social Responsibility and Profitability: Guidelines for the Conscientious Manager
Reconciling Corporate Social Responsibility and Profitability: Guidelines for the Conscientious Manager
The chapter first reviews the legal and economic background of corporate social responsibility (CSR), beginning with an essay by Milton Friedman that highlights the tensions between corporate management’s moral duties to shareholders and its putative responsibilities to other stakeholders. The chapter then identifies different conceptions of CSR and the various players that exert influence in its ecosystem. The remainder of the chapter is devoted first, to the relatively easy case of CSR activities that are consistent with maximizing a firm’s financial value, and then to the more contested question of when a firm’s managers can pursue social or environmental goals that may lessen the firm’s financial value. Even when long-term profitability is the only metric, managers often must make tradeoffs among different stakeholders and between competing values such as cost and safety. They must make decisions in conditions of uncertainty, where the long-term perspective renders the assessments of benefit and risk all the more difficult. Moreover, managers must create and maintain an organizational structure and culture in which difficult issues are identified and responsibly addressed.
Keywords: corporate social responsibility, CSR, stakeholders, ESG, sustainability, shared value, corporate ethics, benefit corporations
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