Duong Nguyen Thuy EP-In-VN-FH-2013-702 duongnguyen.k49ftu@gmail.

com

Trueventus Sdn Bhd TN-In-MY-UN-2013-74 TN manager: yoongshang.chua@aiesec.net

Topic 3: THE FALLACIES OF CORPORATE RESPONSIBILITY: A CRITIQUE There is an old proverb that said, The road to hell, is paved with good intentions. It can be either viewed as another ambiguous and prudent philosophy of life which was echoed from our predecessors, or a concise yet novel summary of how the good is like in the pragmatic business world. Commonly, it is manifested under the term Corporate Social Responsibility (CSR)- the liaison which was initially constructed to deliver good intentions from a corporation to the society. However, up to the present, the primary goodwill of CSR has been distorted, intentionally or accidentally, by both sides, to a point that it turns out to lead them to hell which is packed with fallacies. The degradation of CSR, ironically, is progressing along with its worldwide rising popularity, which makes the landscape even more dismal. Corporate Social Responsibility or CSR, is called by various aliases, including corporate responsibility, corporate accountability, corporate ethics, citizenship, sustainability, stewardship and triple-E bottom line (Robert W.Sexty; 2011). Its origin can be traced back to before World War II, but it was not until the 1970s that the term officially took off (Christina Blundin; 2012). Overall, there has yet to be an official definition for CSR. According to Lombardo (2009), CSR has no single commonly accepted definition. The concept is a fuzzy one with unclear boundaries. It generally refers to business practices based on ethical values, with respect for people, communities, and the environment" (p.305) (Swinton W.Hudson, Jr; 2011). However, to beter analyze its core essence, lets cite European Commisions more specific and academic definition of CSR in 2010:CSR is a concept whereby companies integrate social and environmenal concerns in their business operation and in their interaction with their stakeholders on a voluntary basis (Christina Blundin; 2012). After decades of development, the prevailing CSR concept also contains health, safety, labour relations
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Duong Nguyen Thuy EP-In-VN-FH-2013-702 duongnguyen.k49ftu@gmail.com

Trueventus Sdn Bhd TN-In-MY-UN-2013-74 TN manager: yoongshang.chua@aiesec.net

and human rights issues besides social and environmental concerns. As the business world evolves through times, relationship between business and society has no longer been vague, but much more apparent and reciprocal. Therfore, it is quite reasonable for the society to demand corporations to promote better living surrondings for both internal and external stakeholders, who are directly affected by their long-term exploitation of natural and human resources. However, adoption of CSR today has drifted far away from its original benevolence, thanks to (?!) the small but persistent changes in individual perspective of both sides. To cast a broader view on CSRs downgrading, firstly, we should recall that it is conducted on a voluntary basis. After the occurence of worldwide notorious corporate wrongdoings in the 2000s, notably the Enron scandal, harsh criticism on the insatiable greed of companies and organizations for profit outbursted, followed by the urge to turn CSR, from on-a-voluntary-basis philanthropy, to a business etiquette that should be governed by laws. In recent years, in fact, CSR have gradually transformed, from a manifestation corporations can choose whether to take or not, into a legal obligation that is used to substantiate their profit. For instance, on August 29th 2013, India has supplanted the 60-year-old Companies Act in 1956 (also known as the 1956 act) by The Companies Act, 2013 that re-stated different level of profit proportion companies should mandatorily spend on their CSR activities each year. Other countries like the UK and Nigeria, have also imposed particular policies to control performance of corporations on CSR (Grant Thompson Report; 2013). Undoubtedly, these policies serve as a set of effective tools for the government to partly achieve sustainable development through balance between the business and non-business world. On the other hand, they seem to put a heavy slap on such claims that the domninant motivation of CSR descends from corporations independent willingness; in other words, on a voluntary basis. This has created a chain of ethical dilemma scenarios, mostly in the form of rhetorical questions,

Duong Nguyen Thuy EP-In-VN-FH-2013-702 duongnguyen.k49ftu@gmail.com

Trueventus Sdn Bhd TN-In-MY-UN-2013-74 TN manager: yoongshang.chua@aiesec.net

where corporations are heavily stuck between DOs and DONTs because of their equally unfavorable conditions. The first dilenma is, are good deeds taken under a force truly good deeds? If you are neither a loyal fan of ultilitarianism nor a Bolshevik-like personality, who may have great pleasure to prioritize the final outcome over the means in terms of ethics, then the answer is obviously no. The force to adopt CSR from the goverment make the concept itself seem disingenuous. Akin to our failure to totally approve of death penalty even though we know it helps the society to partly eradicate evil, benefits from philanthropy conducted under legal force are hard to agree on due to their untrue approach. The circumstance itself has led to the second question: if being regarded as a business etiquette, should CSR be equally perceived as a strategy that require careful planning? Supposing the answer is YES, again, are good deeds that intentionally planned like a scripted play truly good deeds? Otherwise, isnt it impartial to force corporations to follow CSR regulations without giving them the right to determine how to perform it? Obviously corporations can choose their way(s) of implementing CSR, therefore the chain of fallacies can continue its path. What some corporations actually pursue when taking CSR seriously is not the persistent avoidance of violationg the law, but a more pragmatic and business-like purpose: profit, and more than profit. As soon as the popularity of CSR was recognized, Milton Friedman an American economist - had written in his article on The New York Times Magaznie issued on September 13th, 1970 that: There is one and only one social responsibility of business to use it resources and engage in activities designed to increase its profit so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud. According to Friedman, the main advantage of CSR was not to solve social and human concerns, but to enhance the amount of profits in return, provided that no violation of law occured. Considering how law has increasingly focused on human rights
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Duong Nguyen Thuy EP-In-VN-FH-2013-702 duongnguyen.k49ftu@gmail.com

Trueventus Sdn Bhd TN-In-MY-UN-2013-74 TN manager: yoongshang.chua@aiesec.net

as well as inextricably linked to business - which means exclusively chasing profits under the name of CSR is more likely to drive corporations to devastating consequences rather than a bright future - Friedman theory turns out to be obsolete and short-sighted in the modern context. However, no one can deny the role of financial gain in attracting businesses to CSR acts. In a survey released on December 3rd, 2010 by Weber Shandwicks Social Impact - a communications program formulated to address pressing social issues the most important reason for corporations when seeking to invest in philanthropic or socially responsible initiatives was to help their business gain grow in developing communities. We may easily come to the conclusion that it is insincere and unacceptable to intentionally raise profit from CSR. Nevertheless, imagine that companies, especially the large ones, cannot find material business push for CSR, then how many of them would invest time and take real-sufficient CSR acts, by which the world can rely his fate on more effective agents to generate social progress like this moment? And it is not the last bus station yet. Controversies also emerges around the way corporations advertise their CSR acts. Ostentatious display of philanrthropy and social progress, once again, contributes to CSRs long list of ethical dilenma. The society tends to admire anonymous charity (as soon as they know about it), but every corporation who srictly complies with this unspoken theory may end up being regarded as evil as ones who never invest a thought on a CSR plan. However, the ulterior motive of it cast a much broader shadow on the fallacy of CSR. Under the same research of Weber Shandwicks Social Impact in 2010, the most striking part showed that more executives are placing emphasis on CSR programs over other business-oriented motivations. Roughly, 30% of executives choose social responsibility efforts over customer loyalty, which accounted for 15%; 6% choose to raise the bar in eliminating competition and only 4% are concerns surrounding engaging and maintaining employees. Why is the case? Because CSR is conducted within the companys interaction with their stakeholders, which makes it
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Duong Nguyen Thuy EP-In-VN-FH-2013-702 duongnguyen.k49ftu@gmail.com

Trueventus Sdn Bhd TN-In-MY-UN-2013-74 TN manager: yoongshang.chua@aiesec.net

among the best strategic approaches to construct and deliver a distinctive public image of the company to the community. A good public image, on the other hand, can present the company with much more precious treasures than solely physical profit, including his competitive advantage over other rivals in the market. This may partly explain corporations careful planning towards CSR before official implementation. The mixture of intellectual methods such as consultation from agencies, non-profits, academics, and specialized Know-Hows extracted from handbooks and case studies (Christina Bludin; 2012) is actually part of a comprehensive Marketing plan, which aims at consolidating the current market position of the company in the future. Overwhelmed by these alluring benefits, competition in promoting CSR acts has been escalating to the level of a battle, and that is exactly where Friedmans statement that CSR should engage in open and free competition without deception or fraud becomes an utopia. The harshly competitive environment among corporations by no means leads to the prosperity of either philanthropic investment or social problemsolving, but, in contrary, cause the true essence of CSR to be severely loosen. Through flamboyant advertisements and commercials of CSR acts, companies tend to exaggerate and/or misrepresent the conception of a social issue to the public, which can be best exemplified by the notorious case of Red Bear an instant noodle brand of Asia Food Corporation in Vietnam. In 2010, the brand launched a seemingly charitable campaign, with the release of a TV commercial that told a story of a young boy called Tuan, who had been diagnosed with an acute disease but was about to abort medical treatment because of his parents financial incapability. The commercial delivered the message that: By pursuing a pack of Read Bear instant noodle, each customer will contribute 10 Vietnamese Dong to the funds which had been raised for the sake of underprivileged children, and state a promise of financially assissting unwealthy families in paying the costs for treating their childrens illness. Red Bears touching story of an innocent yet unlucky boy did evoke immense conscience among the society afterwards, which
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Duong Nguyen Thuy EP-In-VN-FH-2013-702 duongnguyen.k49ftu@gmail.com

Trueventus Sdn Bhd TN-In-MY-UN-2013-74 TN manager: yoongshang.chua@aiesec.net

enhanced both sales and Asia Food Corporations public image. However, it was soon discovered that the story about Tuan was actually intentionally scripted and none of the characters ever existed in real life. The brands promise to financially support underpriviledged families and children was also poorly perfomed, which made the rage of the society even more long-lasting. Till now, Red Bear as well as Asia Foor Corporation have yet to recover from the crisis. This can also be an example for the second consequence of exhibiting CSR acts: it may help companies to cover their fallacious behaviours that either deceive the society or fail to live up to ought-to-be expectations, like Exxon Mobil. They earn billions of dollar each year in Africa, but, according to one of the companys online report, spent only around $5 million dollar per year on malaria control programs in Africa from 2000 to 2007 (Barrera Ricardo & Fras Ricardo; 2010). As the tag-line of CSR has been re-established no profit, no social promotion - the concept itself now seems to be full of material consideration, even deceit sometimes. A sobering (and gloomy) thought is that sooner or later, CSR may loose all of its eminent ingenuity and what remains is a shell with fragments of a corrupted spririt trapped inside. Certainly these fallacies have exposed only the dark corner of CSR, not the big, bright landscape. However, before the small cough becomes an epidemic disease, it is vital for both corporations and society to understand that ethic is a journey, not a destination (Barrera Ricardo & Fras Ricardo; 2010). True ethical behaviour cannot be accomplished through a single and short-term CSR plan, but a continual and integrated effort. It should be reflected on each and every daily business practice as well as a high degree of commitment and belief from both sides. Only through a complete yet explicit view of the picture can implementation of CSR be escaped from the greed for commercial interests of human and return to its genuine originality.

Duong Nguyen Thuy EP-In-VN-FH-2013-702 duongnguyen.k49ftu@gmail.com

Trueventus Sdn Bhd TN-In-MY-UN-2013-74 TN manager: yoongshang.chua@aiesec.net

REFERENCES Robert W.Sexty (2011). Canadian Business and Society: Ethics & Responsibilities 2nd edition. Blundin, Christina (February 5th, 2012). Corporate Social Responsibility: Fallacies and Flaws. MBA Student Scholarship. Paper 7. http://scholarsarchive.jwu.edu/mba_student/7 Swinton W.Hudson, Jr. (2011). Social Responsibility and the Morality of Profit. Retrieved http://www.gcu.edu/Ken-Blanchard-College-of-Business/The-Canyon-Journalof-Interdisciplinary-Studies/Social-Responsibility-and-the-Morality-of-Profits.php Grant Thompson (2013). Implications of Companies Act, 2013. Corporate Responsibility. Retrieved http://gtw3.grantthornton.in/assets/Companies_Act-CSR.pdf Milton Friedman (1970). The Social Responsibility of Business is to Increase its Profits. Retrieved http://www.colorado.edu/studentgroups/libertarians/issues/friedmansoc-resp-business.html Weber Shandwicks Social Impact survey (2010). Retrieved

http://www.corporatesecretary.com/articles/compliance-ethics-csr/11448/csr-takinggreater-importance-public-companies/
Barrera Ricardo & Fras Ricardo (2010). Fallacy and ostentation of corporate social responsibility (in some companies). Gary Blesky (2013). The downside of Corporate Social Responsibility at http://business.time.com/2013/12/03/the-downside-of-corporate-social-responsibility/