Corporate Social Responsibility

Corporate Social Responsibility (CSR) is defined as “situations where the firm goes beyond compliance and engages in ‘actions that appear to further some social good, beyond the interests of the firm and that which is required by law’.” (McWilliams, 2006) This cultural ideology includes less environmentally harmful manufacturing processes, recycling programs, products with environmentally-friendly technologies, employee empowerment regarding socially responsible practices, and active involvement in social programs (e.g. Ronald McDonald house, United Way). The concept of CSR began with an eighteenth century philosopher and political economist Adam Smith. He expressed in “An Inquiry into the Nature and Causes of the Wealth of Nations,” that the needs and desires of society could best be met by the free interaction of individuals and organizations in the marketplace. “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard for their own interest.” These laid the foundation of corporate social responsibility, where consumers were aware about the social benefits of creating the wealth of nations and of financing actions to “advance the interest of society.” (Smith, 1909) What is good for society is good for business and what is good for business should be good for society. During the Industrial revolution, many corporations created whole communities, consisting of housing, churches, hospitals, for their employees and families. However, few were concerned with employee safety, environmental impact or their effect on society as a whole. The government was primarily responsible for ensuring enforcement of socially responsible behavior of the corporations. Legislation that protected the stakeholders was the primary base of this early CSR. Management and stakeholders were not held responsible for negligent practices affecting either the environment or their employees. The backlash