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Abstract

In the book, The High-Purpose Company, Christina Arena explained that:

“Some regard the practice CSR as a form of philanthropy, or marketing. But most
experts in the field broadly define it as the effort companies make above and
beyond regulation to balance the needs of stakeholders with the need to make
profit.” (2007, p. IX)

From the above statement it can be observed that Corporate Social Responsibility (CSR) practice
does complicate companies’ effort to make maximum profit since they have to place some
considerations on giving back to the employees of the company and the society at large. Thus,
cautious approaches need to be made to ensure that stakeholders’ interest is well protected.
Nevertheless, it is important to highlight that more companies are seen practising CSR nowadays
compare to a decade ago. The companies are willing to donate their portions of the profit and
even opening departments specifically to cater the social obligations needed by the society.
For the purpose of this paper, our group intended to discuss the CSR practice in oil and
gas industries and related issues. Firstly, we will provide the definitions and overviews of CSR
by touching on two schools of CSR views. Then we would elaborate on the reasons that
companies are practising CSR. Finally we will discuss about the oil and gas industries approach
to CSR by using Shell and PETRONAS, which are the prominent oil and gas industry players in
Malaysia.

Definition
What is CSR and why do many people concern about it? In Reporting CSR who is, who isn’t and
some insights into why, the author Patricia Quinn listed few CSR definitions provided by the
respondents of a survey done by Accountancy Ireland. One respondent explained CSR as “means
ensuring that through the activities of the company, society in its broadest sense is treated with
the respect that you as an individual would expected to be treated” whereas another respondent
define CSR as “simply about giving a damn” (2007, p. 81-83).
These two definitions along with other definitions provided by other respondents, proved
that CSR theory is general and collective in nature. Any effort made by a company to ensure that

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the business activities did not bring any harm to the stakeholders and environment can be
considered as a CSR practice. Ones have to understand that CSR is not just about charity, but it
transcends to the process of doing the business itself by giving thoughts about the business
activities impacts towards environment and society as well as taking care about the employees
benefits.

Overview
In understanding CSR theory there are two schools of views that need to be discussed. The first
one is the Classical View. In the Management Ninth Edition textbook by Pearson International
Edition, Stephen P. Robbins and Mary Coulter clarify that “classical view says that
management’s only social responsibility is to maximize profits” due to the facts that classicists
believe that “stockholders or owners are the only legitimate concern” (2007, p.146 - 147).
This view is strongly promoted by Milton Friedman, a well-known economist and Nobel
Laureate. In his article, The Social Responsibility of Business is to Increase its Profits that
appeared in New York Times, Friedman argued that:

“What does it mean to say that "business" has responsibilities? Only people can
have responsibilities. A corporation is an artificial person and in this sense may
have artificial responsibilities, but "business" as a whole cannot be said to have
responsibilities, even in this vague sense…In a free-enterprise, private-property
system, a corporate executive is an employee of the owners of the business. He
has direct responsibility to his employers. That responsibility is to conduct the
business in accordance with their desires, which generally will be to make as
much money as possible while conforming to the basic rules of the society, both
those embodied in law and those embodied in ethical custom” (Para 2 – 4).

Friedman arguments are shared by other proponents of Classical view. Among the arguments
made by this group against CSR practices are a responsible business should only pursue profit
maximization strategy, pursuing social goals would undermine their economy productivity, the
socially responsible actions cost is a burden for that company, business leaders lack the skills to
address social issues as well as there are no direct lines of accountability for social actions
(Robbins and Coulter, p.148).
The Classical View is opposed by the Socioeconomic View, which argued that:

“Management’s social responsibility goes beyond making profits to include


protecting and improving society’s welfare. This position is based on the belief
corporations are not independent entities responsible only to stockholders. They
also have a responsibility to the larger society that allows their formation trough
various laws and regulations and supports them by purchasing their products and
services…business organizations are not just merely economic institutions.
Society expects and even encourages business to become involved in social,
political and legal issues” (Robbins and Coulter, p.146 – 147).

The proponents of Socioeconomic View believed that CSR practice will help companies to have
secure long-run profits and it will improve business’s stock price in the long run, create favorable
public image to the companies, help to ensure a better environment and assisting in solving other
social problems (Robbins and Coulter, p.148).

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