Social Responsibility Journal 31

Volume 3 Number 4 2007

Corporate Social Responsibility and the Fetter of Profitability

Simeon Scott

Abstract
Purpose – The purpose of the paper is to examine five themes arising from definitions of corporate social responsibility
(CSR): responsibility to the community and society; promoting democracy and citizenship; reducing poverty and the
inequality between rich and poor; employee rights and working conditions; ethical behaviour. The paper also aims to
evaluate three important articles on CSR, and investigate conceptual value added, with reference to these five themes.
Design/methodology/approach – The paper uses a Hegelian dialectical method to analyse CSR. This method is used to
evaluate Friedman’s classic 1970 article, the 2004 Christian Aid Report, the 2006 Corporate Watch Report and the
conceptual value added aspects of CSR.
Findings – The evidence suggests strongly that, irrespective of the subjective will of CEOs, corporate profitability acts
as a fetter to authentic social responsibility.
Practical implications – As CSR tends to be reduced to a range of marketing techniques, of varying degrees of
sophistication, the paper calls for a discussion on ways in which producers and distributors can become authentically
responsible to the societies in which they operate.
Originality/value – An analysis of CSR that employs Hegelian dialectics provides a means of explaining the relevance of the
contradictions inherent in contemporary corporate and consumer behaviour. A study of these contradictions helps us to
understand the widely reported gulf between the theory and practice of CSR advocates. Such an understanding is likely to be
of value to those academics, students and others seeking to theorise, and bring into being, authentic social responsibility.
Keywords  Value added, Corporate social responsibility, Social theories
Paper type  Viewpoint

Introduction: What Is Corporate Social Responsibility (CSR)?

Over the last 20 years or so increasing numbers of companies have been making ethical claims concerning their products,
services and all aspects of their behaviour. Along with references to stakeholder dialogues, corporate citizenship, global
compacts and sustainable business, the term CSR looms large on websites, annual reports and other information
disseminated by a majority of large companies. This obviously begs the question: what is CSR? Let us then see how some
of its advocates define CSR.
According to Morrisons (2005), a leading British supermarket chain, CSR is “about understanding and managing
the relationship between our trading operations and the economy, environment and communities within which we operate”.
Morrisons claim that its CSR focus is on “managing the social, ethical and environmental issues that are material to our
commercial performance, through a programme of continuous improvement”. Like other CSR-committed companies,
Morrisons indicate key areas of its CSR programme, including working conditions, dietary health and nutrition. Widening
our focus, a coalition of 120 international companies, drawn from 30 countries and more than 20 major industrial sectors,
have come together under the aegis of the World Business Council for Sustainable Development (WBCSD) (1999). These
companies are committed to CSR, based on the central proposition: “business must accept greater accountability”.
Indicating that “CSR priority issues today are human rights, employee rights, environmental protection, supplier relations
and community involvement”, the WBCSD Report points out that a “formal and universally acceptable definition of CSR
has yet to emerge” and “will not issue any ‘one-size-fits-all’ code”. “CSR, in broad summary, is the ethical behaviour of a
company towards society. In particular, this means management acting responsibly in its relationships with our stakeholders
who have a legitimate interest in the business – not just the shareholders”; (1999, pp. 1-3). Promoting the idea of “the rich
helping the poor”, perhaps surprisingly, the Report speaks favourably of Bill Gates of Microsoft, amongst others, as
continuing the tradition of “philanthropic work. . . part of their civic obligations and social responsibility, of putting
something back” (5).
The American Department of State is committed to CSR. Claiming support from President Bush, Craner (2002),
American Assistant Secretary of State for Democracy, Human Rights and Labor, argues “the State Department supports
corporate responsibility”. Craner adds: “the US Government remains focused on its foreign policy goals in human rights
and promoting democracy. . . By supporting economic growth, we are supporting democracy”. Craner explicitly links
CSR and democracy: “The strongest foundations for the stability and predictability necessary for a sustainable business
environment are democratic governments that protect human rights. Corporate responsibility can help safeguard those
values”. The British government also supports CSR. Prime Minister Gordon Brown has argued that it is “an all year
round responsibility that companies accept for the environment around them, for the best working practices for their
engagement in their local communities. . . Now we need to move towards a challenging measure of corporate responsibility,
where we judge results not just by the input but by its outcomes: the difference we make to the world in which we live,
and the contribution we make to poverty reduction”; quoted in Corporate Social Responsibility: A Government Update
(2004, p. 2). In the Update Stephen Timms, Minister for CSR in the Blair UK government, writes: “There are many
definitions but we are all talking about how business takes account of its economic, social and environmental impacts in
the way it operates – maximising the benefits and minimising the downsides”. Arguing “the main focus of CSR should
continue to be a voluntary one”, Timms links CSR to reducing “inequalities and deprivation in communities across the
UK”, adding “we need help from business. We aim to encourage businesses to help tackle social exclusion”; (2004,
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pp. 3-4). In Russia, according to Schmida (2005, p. 8), the Putin government supports CSR: “The Kremlin defines it as
paying taxes in full, obeying the demands of the state and staying out of politics. This corruption of CSR’s meaning is
indicative of the Kremlin’s efforts to construct a vertical power structure where it is the sole source of authority and
legitimacy in the country”.
Turning to academic definitions of CSR; Hoskins (2005, p. 3) writes of “the difficulty of developing a commonly
accepted terminology and definitions”, with the result “I have resisted the urge to create new definitions”. However,
Hoskins writes: “CSR is often interchangeable with CR (Corporate Responsibility), and some companies use Sustainability
or Corporate Citizenship instead of CSR. The argument about CSR is the ‘S’– Social – which some companies have
suggested detracts from their business-related responsible activity by focussing on the social impacts (typically in the
community area) while not giving due regard to the importance of their ensuring the company’s operations are run
ethically and responsibly” (5-6). Another academic, Hopkins (2007, pp. 15–16), who is also a CEO, spends a full chapter
on the difficulties associated with defining CSR. His own definition of CSR is: being “concerned with treating the
stakeholders of the firm ethically or in a responsible manner. ‘Ethically or responsible’ means treating stakeholders in a
manner deemed acceptable in civilised societies. Social includes economic and environmental responsibility. Stakeholders
exist both within a firm and outside. The wider aim of social responsibility is to create higher and higher standards of
living, while preserving the profitability of the corporation, for peoples both within and outside the corporation”. Hoskins
assesses the strengths and weaknesses of a number of other definitions, concluding: “it is not easy to see how the definition
could be improved” (38); see also Hart (2005).
The definition from Hopkins is crucially important since it makes clear that a necessary condition of CSR is
“preserving the profitability of the corporation”. This is the key argument presented in this paper: profit as a fetter to
authentic social responsibility. In order to develop this argument, let us focus on five themes that feature in the “many
definitions” offered by CSR advocates. The five themes chosen from the above quotations are: responsibility to the
community and society; promoting democracy and citizenship; reducing poverty and the inequality between rich and
poor; employee rights and working conditions; ethical behaviour. These CSR-related themes will be investigated with
reference to evidence of corporate and, where relevant, government practice. As we shall see, a lack of unity between
CSR theory and practice emerges from this investigation. Applying Hegelian Marxist dialectics to corporate behaviour,
a theoretical explanation for this lack of unity is sought at the core of capitalism: profitability. Building on the idea of
profitability as a fetter to CSR, there follows a critical engagement with three critical approaches to CSR; firstly the free
market perspective, secondly the Christian Aid Report and thirdly the Corporate Watch Report. The paper ends with a
study of conceptual value added and a conclusion calling for a radical rethink of social responsibility.

Responsibility to the Community and Society

Turning to our first theme, we have noted that the WBCSD Report on CSR (1999), involving 120 companies, advocates
business “accountability” and “community involvement”, “ethical behaviour of a company towards society”. Similarly,
U.K. Prime Minister Gordon Brown has called for company “engagement in their local communities”. It is increasingly
the case that members of “society” or the “community” are stakeholder in the activities of the corporate giants that
straddle both the global and the local. However, this raises the question: how can CSR-oriented companies engage with
“society”? This in turn prompts the question: what is meant here by “society”? Some readers will recall former British
Prime Minister Margaret Thatcher’s claim that “there is no such thing as society. There are individual men and women,
and there are families”. With similar implications for “local communities”, Mrs Thatcher added: “people must look to
themselves first”; (Woman’s Own, 31 October 1987). Simply put, if there is no society and there are no communities, how
can CSR-orientated companies be responsible or accountable to them?
Despite the exaggerated neo-liberal rhetoric, Mrs Thatcher’s words do highlight the contrast between the collectivism
of the 1945–1979 era and the individualism of the post-1979 period in Britain. Recent decades in the UK have witnessed
major declines in membership of trade unions and political parties, falls in church attendance and the like. Female
participation in the labour market, often part-time and non-union, has increased and, on average, longer hours are being
worked. All of this militates towards increasingly atomised populations and local communities, with fewer means of
establishing collective identities. These trends are also apparent, to varying degrees, in Western Europe, North America
and elsewhere in advanced capitalist economies. With regard to with CSR-orientated companies, how do they engage with
such segregated societies and disparate communities in order to demonstrate responsible and accountable behaviour?
Substituting the term stakeholder for community or society, Hoskins (2005) addressed this question; suggesting
that CSR-orientated companies seek to “identify” and “understand the needs” of stakeholders, through employee focus
groups, public meetings, workshops and interviews. However, these approaches raise a number of issues; firstly, in a
society whose members increasingly “look to themselves”, each stakeholder will tend to support his or her immediate
interests, making meaningful consultation difficult. Secondly, for reasons we will examine later, employer-employee
focus groups are marked by the contradictory interests of the two sides. This may well result in employee suspicion,
cynicism and a lack of frankness. In such settings, power is unequally distributed between the two sides, with the agenda
being largely determined by the employer. Analogous remarks could be made with regard to corporate engagement with
other stakeholders.
Helping to explain the earlier-mentioned lack of definitional clarity with regard to CSR, the Corporate Watch
Report (2006), which we will examine more closely later, makes the point that responsibility is defined by companies
themselves, rather than being socially defined. The Report accused companies of “cherry-picking which stakeholders
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they engage with. . . companies only engage with those that are useful to them” (9). In jurisprudential terms, a company’s
claim to be socially responsible creates no obligations to its stakeholders. The latter, many of whose status as stakeholders
is involuntary, have no corresponding rights or privileges. In terms of contract law, stakeholders offer no consideration,
i.e. they offer no payment or anything of benefit to the company, and so can make no claim on it. Therefore, unless
corporate responsibilities are written into specific contracts, such responsibilities are largely rhetorical and contingent.
Using the example of 40 international drug companies filing suit to prevent South Africa manufacturing generic HIV/
AIDS drugs, Florini (2003) shows that global companies can use contract law in selected jurisdictions when their interests
are threatened. The overwhelming majority of global stakeholders, however, cannot litigate since “at the global level, no
such unified government exists”. Florini responds to this state of affairs by arguing in favour of “a social contract that
takes into account wider social interests”; adding “corporations must play a key role in negotiating the terms of that
global social contract”. Originally a social contract referred to an implicit agreement between a sovereign and all those
living within his or her jurisdiction. Traditional social contract theory has to be understood as central to the monarchical
legitimation process faced with the threat of republicanism. Similarly, Florini’s social contract is an attempt to transcend
explicit enforceable contracts, it is market-orientated thinking, part of a wider argument against the formation of
international state institutions able to police the activities of global corporations.
The global social contract argument is similar to the stakeholder view, which is presented by John Mackey,
founder and CEO of Whole Foods, in a debate with Milton Friedman before the latter’s death; see Reason (2005).
Mackey argues each stakeholder “will define the purpose of the business in terms of its own needs and desires, and each
perspective is valid and legitimate”. This relativist argument is spurious because it aggregates stakeholders in a misleading
way; some stakeholders will be in contractual relations with the company and some will not, with important implications
for the extent of Whole Foods’ social responsibility. However, Mackey candidly acknowledges: “a certain amount of
corporate philanthropy is simply good business”, it is “an excellent marketing strategy”.
In terms of corporate responsibility to society and community, the point here is to increase our understanding of
the nature of the global social contract, the stakeholder and related free market small-state, or anti-state, perspectives.
This paper advocates the Hegelian dialectic as an effective analytical tool for this purpose. Whilst a detailed review of
this method is beyond the scope of this paper, here we can usefully examine Hegel’s distinction between the particular,
individual, or local, on the one hand, and the universal, social, communal, on the other. However, unlike formal logical
categories, which remain strictly differentiated, for Hegel the particular can only be truly understood in terms of its
relationship with the universal and vice versa; on this see, for example, Inwood (1992), pages 302-5. In order to deepen
our understanding of the relationship between corporate interests and those of society, or the community, we need to be
aware of Hegel’s view that in capitalist society, despite its relatively undeveloped status in early 19th century Germany,
the particular and the universal are in an antagonistic relationship. Marx applied this analysis to Victorian England,
arguing that this antagonism arises from the social relationships inherent in the wage labour system, from which corporate
profits are generated.
Unwittingly, Hoskins (2005) develops this theme by repeated reminders that the cost of implementing CSR is
crucially important. Hoskins is implying that corporate responsibility is hamstrung by the necessary condition of long run
profitability. From the side of the individual company, the wider interests of customers, suppliers, workers, rival
businesses, local residents and other stakeholders will actually, or potentially, threaten profitability. From the side of the
collective stakeholders, their potential universality, or common humanity, is thwarted by the particularity of corporate
profitability. Hegel explains this in terms of formal logic, which distinguishes between a subject and its predicate, such
as a rose and the fact that it is red, an example used by Hegel. The subject here is the wellbeing of humanity, whereas
profit is merely a historically specific predicate of this subject, since profit is a mere income flow or accounting convention.
However, in a capitalist economy, the Hegelian critique continues, this relationship is turned upside down: profitability
tends to become the subject, it becomes the raison d’être of all economic relations. All human being, including social
responsibility, is demoted to the status of predicate; affirming Mackey’s description of CSR as a “marketing strategy” in
the service of “good business”, i.e. profitability.

Promoting Democracy and Citizenship

As we have seen, Craner’s (2002) speech refers to democracy, globalisation, freedom and human rights. The Assistant
Secretary of State links CSR with American “foreign policy goals”, including “promoting democracy”. Used in the
context of the Bush administration’s foreign policy, democracy is a politically loaded term. Therefore, in order to examine
the links between CSR and democracy we can investigate the genesis of the latter term, beginning with a brief review of
the relevant anthropological and archaeological research.
Using Hegelian dialectics, Sahlins (1974) indicates evidence for the existence of totalising democracy amongst
our hunter-gatherer ancestors and some agriculturalist societies in prehistory. The term totalising democracy indicates
that earliest tribal members made collective decisions regarding all aspects of their nomadic existence. Cooperation was
indispensible for survival where people lived in such a direct relationship with nature. Systematic exploitation and barter
appear to have been rare amongst these relatively affluent tribes; the ethic from each according to ability to each according
to need seems to have been the norm. From this zenith, the quality of human relations appear to have deteriorated as the
democratic institutions of early agriculture gave way to rule by the few over the many. From slavery in the ancient and
classical city-states there emerged feudalism, with a number of subsequent anti-democratic forms, including dictatorship,
theocracy and fascism. From this political evolution, liberal philosophers cite classical Athenian democracy approvingly;
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however, this brief political experiment was restricted to land- and slave-owning males. Similarly, the form of democracy
that developed in capitalist societies following the industrial revolution was only granted to wealthy minorities. Universal
suffrage was only conceded when it became clear that the capitalist class was unlikely to be adversely affected by
changes in government. However, as explained in the writings of the Hegel (1821 and 1942), under capitalism, democracy
is restricted to the political sphere. Crucially for our understanding of the links between CSR and democracy, the latter is
utterly banished from the sphere of production and distribution, which remains a plutocracy.
Lacking evidence to the contrary, we can only assume that Craner is referring to the kind of partial democracy
identified by Hegel. Whilst one-person one-vote applies in general and local elections, in the economy voting power
varies according to wealth and income; with regard to corporate decision making, one-share one-vote is the norm.
Therefore, since they own relatively few shares, under capitalist social relations the opportunity of the mass of stakeholders
to oversee CSR is severely circumscribed. With regard to Craner’s goal of linking CSR and “promoting democracy”,
Chua (2004) discusses the introduction of western pseudo-democracy in developing countries and elsewhere. Citing
events in Zimbabwe, for instance, she highlights the potentially disastrous implications for human wellbeing.
Advocates of CSR frequently refer to citizenship and, as Hoskins (2005, p. 5) indicates, even use CSR and
corporate citizenship as interchangeable terms; e.g. McIntosh et al. (2003). However, Hopkins (2007) expresses scepticism
about the term, especially the idea of corporate citizenship. In contemporary political theory, citizenship is associated
with the rights and duties of the inhabitants of republican states, such as the EU, based on the ideas that emerged from the
French Revolution. However, the term’s origins lie in ancient Greece, where citizens were the privileged few who
participated in democracy: exclusively male, mainly land- and slave-owners. Therefore, there is a certain ironic truth in
the term corporate citizenship, since the unequal, often exploitative, relationship between corporations and the mass of
citizens is analogous to the relation between citizens and non-citizens, i.e. women, foreigners and slaves, in ancient
Greece.

Reducing Poverty and the Inequality between Rich and Poor

Poverty and inequality are pressing issues for a significant portion of the world’s 6.5 billion people. This is recorded in
the World Bank’s (2007) annual Poverty report, listing the high proportions of those living on less than $1 a day and $2
a day. Devoting a chapter to CSR and world poverty, and drawing critical conclusions concerning much corporate
practice, Hopkins (2007, p. 138) analyses Prahalad and Hart’s claim that around 4 billion people “live on less than
US$1,500 per capita per year (real purchasing power parity values)”. As we have noted, career politicians, such as
Gordon Brown and Stephen Timms in Britain, have drawn attention to the links between CSR and poverty reduction.
CSR advocates often present their arguments on poverty with reference to such categories as “the richest 10 per cent”,
“the poorest 10 per cent”, or more simply “the rich” and “the poor”. As in formal logic, such categories are presented as
self-contained, with little consideration given to the relationship between them. In contrast, the Brazilian priest Helder
Camara reminds us of the Hegelian universal-particular relationship with his famous comment “When I give food to the
poor, they call me a saint. When I ask why the poor have no food, they call me a communist”; see Camara (1971).
Our understanding of the links between CSR, poverty and inequalities in wealth and income could be improved
by reviewing relevant economic theory. Eighteenth century economists, notably Adam Smith and Bernard Mandeville,
discussed the ethics of the new factory owners; who appeared to be motivated by profits, with little concern for the
welfare of the growing pool of landless people working for low wages in the growing towns and cities. As suggested from
the subtitle, Private Vices, Public Benefits, Bernard Mandeville’s (1705, 1989) satirical text on business, The Fable of the
Bees, examined the view that the “vices” of the new entrepreneurs, and their retinues, provided “public benefits”. He
pointed to the need for a multitude of hard working labourers on low wages so that Britain’s capitalists could outdo their
foreign rivals. Yet, noted Mandeville, such a state of affairs created profound social contradictions rather than “public
benefits” for the masses.
Troubled by Mandeville’s ideas, Adam Smith acknowledged: “Wherever there is great property, there is great
inequality. For every rich man, there must be at least five hundred poor, and the affluence of the few supposes the
indigence of the many” Smith (1776, 1976b, volume 2, pp. 709-10). Observing much self-interested behaviour by early
Scottish businesses, Smith (1776, 1976b, volume 1, pp. 26-7) famously sought to make a virtue of the necessity of
selfishness in a market economy: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect
our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love,
and never talk to them of our own necessities but of their advantages. Nobody but a beggar chooses to depend chiefly
upon the benevolence of his fellow citizens”. Such ideas were to form the basis of the free market anti-CSR lobby, see
Friedman (1970), which we will examine later. However, notwithstanding these remarks, Smith’s Wealth of Nations
explained how capitalist profit results from systematic exploitation; i.e. capitalists appropriating the full value in exchange
of workers, but paying only a part of this in wages. Smith’s analysis is helpful in explaining the causes of contemporary
income and wealth inequality, throwing light on what Hopkins (135) refers to as corporate “beggar-thy-neighbour”
practices, such as the use of cheap, usually young and female, third world workers from whom capitalists can appropriate
more value in exchange as compared with first world workers.
With important implications for supporters of CSR, in an earlier text Smith (1759, 1976a, p. 9) expressed
considerable doubt as to the inherent selfishness of man (sic), suggesting a contradictory, i.e. dualistic, ethics for those
engaged in business: “How selfish soever man may be supposed, there are evidently some principles in his nature, which
interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except
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the pleasure of seeing it”. These sentiments were to form the basis of pro-CSR arguments. Nevertheless, the subsequent
development of British capitalism, including its period of colonial expansion, suggested that the social responsibility of
its successful corporate leaders took second place to their “self-love”. Until the widening of the welfare state after 1945,
the evidence, including Engels’ (1844) study and Rowntree (1901), suggests that millions of British workers lived hand
to mouth in bad housing conditions whilst vast fortunes were made by a relatively small number of manufacturers and
bankers. Whilst Keynesian welfare-state capitalism reduced the gap between “the rich” and “the poor” from 1945 to 1979
in most western economies, the 1980s saw a reversal of this process and a rise in income and wealth inequality. The CSR-
supporter Hopkins (2007) usefully draws attention to the growing gap between rich and poor in the United States; similar
inequality exists, to varying degrees, in all western economies in the early 21st century. Whether business is “the solution”,
to quote Hopkins’ subtitle, to world poverty and inequality will, in large measure, be determined by developments in the
social relations of production, to which we now turn.

Employee Rights and Working Conditions

Given the references to human rights in some CSR definitions; see, for instance, the WBCSD Report (1999), let us begin
this section with the concept of a right. In jurisprudence, there is a longstanding debate on the issue of human rights; on
which subject Lockard, in Schalit (2002, p. 146), argues “Classic liberal human rights theory was born and continues to
live a dependent existence in the shadow of capital’s relation to labour, affordable only to those classes with means to pay
for the privilege. Poor and disenfranchised people have regarded human rights advocacy with due scepticism, fully aware
that a disadvantage in resources means probable inability to assert such rights”. This is apparent in English libel cases
where The Sun or News of the World, for example, can say what it likes, taking care only with those able to risk fortunes
in legal fees with no guarantee of success in court. Recent changes in legal aid provision have similarly meant that in
personal injury cases there is normally a no win no fee arrangement, which means that lawyers will cherry-pick the cases
they take. Despite the best efforts of the United Nations and the International Labour Organisation, in developing countries
a no money no rights situation is the norm as McIntosh et al. (2003, p. 144) implicitly confirm: “companies need to be
especially vigilant in countries where the state infrastructure is less developed and key legislation that protects human
rights is lacking”. Even where such legislation does exist it is often not enforced, as Hopkins (2007) confirms.
Hoskins (2005) is keen to conflate CSR and employee rights; however, he does not take the opportunity to call for
an extension of such rights by putting workers’ representatives in the boardroom. In order to understand why
CSR-orientated global companies fail to significantly extend employee rights, irrespective of the subjective ethics of
company executives, it is necessary to examine further the nature of capitalist social relations. Again employing Hegelian
Marxist analysis, this examination will reveal the internal contradictory relationship between the employer/capitalist, on
the one side, and the worker, on the other; for a discussion of this approach see Ollman (1993). This is an internal
relationship because the two sides are mutually dependent; one cannot exist without the other. The relationship is
contradictory because, other things being equal, what one side gains the other side loses. Simply put, higher wages means
the capitalist appropriates less value in exchange, resulting in lower profits. This central antagonism profoundly affects
all spheres of the capitalistic totality. So, for example, clothing and footwear manufacturers are under intense pressure to
reduce costs by subcontracting production to firms in developing countries; see Klein (2000) and Corporate Watch (2006,
p. 11) for the effects of restructuring in this sector. However, as workers lost their jobs in clothing and footwear, and other
sectors in the former manufacturing heartlands of Europe and North America in the 1980s, social contradictions manifested
themselves in the form of lack of aggregate demand, mass unemployment, social division, rioting, substantial rises in
social security payments and the like.
In Marxist terms, the central capitalist/worker contradiction inevitably dominates corporate enterprise. This
contradiction cannot be resolved but only moved. So, for example, a company can end a union dispute by paying higher
wages to local employees; however, this will reduce profits pro rata. Such a reduction will force home to the company’s
executives the dangers inherent in low profits, i.e. falls in share price and resulting threats of takeover, merger or even
liquidation. To the extent that the firm responds by seeking to increase labour and capital productivity, in order to protect
profits, this creates new contradictions in both labour relations and the need for investment in new technology. The boom
and bust cycle of the 1980s and early 1990s revealed how each act of corporate cost cutting reduced social purchasing
power, the contradiction at the core of Keynesian consumption theory. In the long run, production is only possible in an
exclusively capitalist society if profits accrue from the unpaid wages of workers. No amount of commitment to CSR can
negate this fundamental contradiction.
Were a corporation to take business ethics at face value, it would engage in fair exchange. However, by paying
the full equivalent in wages for the value created by its employees, such that the wages of a given group of workers could
purchase the equivalent in goods and services of the value added they had produced, profits would potentially be reduced
to zero. Given the social relations of capitalism, this situation is unsustainable. Irrespective of its promises to workers,
consumers and other stakeholders, an executive’s commitment to CSR is inevitably circumscribed by profitability.
Therefore, despite Sir Terry Leahy’s commitment to CSR, Tesco stands accused of price squeezing, “fining” of small
farmers along with other suppliers and paying low wages, notably those working for foreign suppliers; see Blythman
(2005). A second example of the activities of a CSR committed company is provided in Hopkins (2007, p. 143), who
discusses Gap’s outsourcing. The company’s response to criticisms of the treatment of workers by its suppliers in El
Salvador involved a number of reforms and setting up a monitoring system. However, Hopkins reports that according to
one NGO, Global Exchange, Gap “failed to implement all the reforms; it put minimal resources into the monitoring
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system and reneged on its pledge to extend such monitoring”. All of this raises questions about the place of CSR in the
genesis of business ethics, to which we now turn.

Ethical Behaviour
As we noted in the Introduction, advocates of CSR use the term ethics in their definitions. Yet there appears to be much
cynicism concerning corporate, and government, ethical standards in the advanced capitalist economies. For example,
British Ipsos-Mori attitude surveys are a useful source of public perceptions of corporate ethics in general and CSR in
particular. Lewis (2003, p. 2) summarises some of the results: “In the late seventies, the British public by two-to-one
agreed that the profits of large companies benefited their customers. Now the public by two-to-one disagrees. . .the
majority of the public also believe that large companies ‘don’t really care’ about the long-term environmental and social
impact of their actions. . . Other than the traditionally despised politicians and journalists, business leaders are the
professional group least trusted to tell the truth”. Similar results can be found in social attitude surveys in other capitalist
economies. Against a backdrop of deregulation, privatisation, globalisation, mass consumerism and anti-trade union
legislation, as Bower (1996, 2001) record, the behaviour of many high profile corporate leaders suggested the end justifies
the means ethics of The Prince, Machiavelli (1532). During this period, and into the 1990s, corporate misdemeanours
involving Ford, General Motors, Microsoft, Enron, WorldCom, Union Carbide, Wal-Mart to name but a few, received
extensive press coverage.
More recently, a major British “defence company”, i.e. armaments manufacturer, has made clear its commitment
to CSR: “BAE Systems recognises its responsibilities to the people it employs, its customers and suppliers, its shareholders,
the wider community and to the environment. We are a well-managed, responsible and ethical company and are determined
to be widely recognised for our world-class technology, the skills of our people and the seriousness with which we take
our corporate responsibilities. We are proud of the role we play as one of the leaders in the defence sector and as part of
this we recognise our specific responsibility to understand the concerns of others. We aim through this website and our
corporate reporting to provide information and demonstrate through our performance that BAE Systems is both a
responsible corporate citizen and a responsible defence company”; see BAE Systems (2007). The contradiction between
CSR theory and practice, for both BAE and the UK’s Blair government, is clear when we note that BAE’s Al Yamamah
arms contract with Saudi Arabia, the largest British arms deal in history, has been the subject of a bribery investigation
by the UK’s Serious Fraud Office (SFO). The OECD made plain its concern over continuing allegations of corrupt
payments of £1bn to Prince Bandar of Saudi Arabia, a country with a very poor record on social responsibility, particularly
women’s rights. However, despite its commitment to CSR, the British government pressured the SFO into dropping its
investigation. Former British Foreign Secretary Jack Straw, who supported halting the SFO investigation, expressed the
contradiction between the government’s commitment to CSR and the profitability of BAE, arguing “The world’s not
perfect”, adding “there are some difficult choices to be made here”; (The Independent 8 June 2007).
The American authorities are currently investigating the allegations against BAE; however, it will be interesting
see how these investigations develop, since it is known that the Saudi Royal family, including Prince Bandar, are very
close, politically and personally, to the Bush family; see Unger (2006). In his report on BAE Systems, the normally
cautious Sampson (2005, p. 293) argues the company “had often left a bad smell behind it, including suspicions of the
corruption and bribery which are endemic in the arms trade”. Partnoy (2004), Sampson (2005) and the satirical magazine
Private Eye, to name but three sources, suggest that most large companies, most of whom make CSR claims, have, at one
time or another, been accused of behaviour ranging from overt criminality to that which would be considered questionable
by a majority of the public. Some of the most sophisticated criticism of business ethics during the 1980s and 90s is
contained in the articles in Frank and Weiland (1997). However, this may be, from its beginnings in the 1960s, CSR
attracted criticisms, which are the subject of the next three sections.

Free Market Criticisms of CSR

The Economist is a high profile free market critic of CSR. One issue (22 January 2004) informs its readers: “Corporate
social responsibility is all the rage . . . It is now an industry in itself, with full-time staff, websites, newsletters, professional
associations and massed armies of consultants. . . The FTSE and Dow Jones have both launched indices of socially
responsible companies. Greed is out. Corporate virtue, or the appearance of it, is in”. The article is perhaps exaggerating
the extent of CSR “corporate virtue” so as to dramatise its disapproval of this approach to business ethics. In a seminal
article for the CSR debate, Friedman (1970) rejected the post-1945 Keynesian welfare-state consensus, arguing it was a
giant step towards socialism. He also rejected the argument “that business is not concerned ‘merely’ with profit but also
with promoting desirable ‘social’ ends”.
Friedman took exception to the view “that business has a ‘social conscience’ and takes seriously its responsibilities
for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of
the contemporary crop of reformers. In fact they are – or would be if they or anyone else took them seriously – preaching
pure and unadulterated socialism”. In response to the question: how far should “corporate executives” go in order to
“make as much money as possible” on behalf of their shareholders? Friedman answers: by “conforming to the basic rules
of society, both those embodied in law and those embodied in ethical custom”. He wanted business to “engage in activities
designed to increase its profits 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”. But this is surely question begging on a grand scale. Even by 1970, western
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societies were economically dominated by a relatively small number of large corporations, with turnovers greater than
many countries’ GNP. This state of affairs had as its corollary significant, but in 1970 narrowing, disparities in income
and wealth. Within a decade of the publication of Friedman’s article, western governments began to reverse Keynesian
welfare-state policies and the gap between rich and poor widened, with echoes of the social contradictions of 18th century
capitalism.
Friedman’s ideas found favour in boardrooms; there followed overt anti-state corporate intervention in the mass
media and academic debate. Covert corporate lobbying and funding of political parties increased substantially. By these
means corporations were able to change both “the law” and “ethical custom” in line with the thinking of Rand (1964),
Friedman and others critical of proto-CSR. Although not ridding America of minimum wage legislation, as Friedman had
wanted, corporate interests ensured that the minimum was kept so low as to be a near dead letter. In practice, millions of
American workers were employed by firms paying less than the minimum with impunity.
With regard to the contradiction between corporate altruism and the pursuit of profit, Friedman insisted that, in
their corporate capacity, business executives are bound to maximise profits, rather like scientists seeking facts without
reference to value-judgements. Only in their capacity as private citizens should executives indulge their social
responsibilities or value-judgements, argued Friedman. These roles must be kept strictly separate, according to Friedman
the positivist philosopher, because they correspond to two self-contained social spheres. We see here not only an attempt
to resolve Smith’s ethical contradictions, but also the sublimated world of the individual trader vis-à-vis oligopolistic
corporate capitalism. In this vein, Friedman writes of the “ideal free market... in which no individual can coerce any
other, all cooperation is voluntary... Society is a collection of individuals and of the various groups they voluntarily
form”; the “individual must serve a more general social interest – whether that be determined by a church or a dictator
or a majority”.
Friedman’s dualist, or fractured, thinking is an idealisation of the structural contradictions of the capitalist mode
of production prior to its modern global phase. In the 1980s, it became clear that selling more or less homogenous
products in competitive markets was subject to falling returns on capital. CEOs were soon to conclude that corporate
profitability could be considerably enhanced by the monopolistic power created by branding. The last vestiges of
Friedman’s “ideal free market” were soon to all but disappear. Despite Friedman’s advice, CSR and other corporate
ethical philosophies spread across the global market-place, a development which has not escaped the notice of other
critics of CSR.

The Christian Aid Report: Should Government Regulate CSR?

We have seen that companies and governments make theoretical CSR claims which are not matched by their CSR
practice. This state of affairs has attracted criticism from NGOs and others. For example, the Christian Aid Report (2004),
Behind the Mask, has received considerable publicity. The Report examines Royal Dutch Shell’s CSR claims, which
include a commitment to “core values of honesty, integrity and respect for people” (1). Taking the view that Shell’s
commitment is little more than a PR exercise, faced with a falling share price following the Ken Saro-Wiwa and Brent
Spar disasters, the Report argues that for some CSR companies “the rhetoric and the reality are simply contradictory” (2).
Coca Cola and British American Tobacco are also scrutinised in terms of their CSR claims in the Report. Unimpressed
by the practice of all three companies, the Report concludes: “those who suffer the most as a result are the poor and
vulnerable people in developing countries and the environments in which they live” (2).
The main recommendation of the Report is the call for government regulation of CSR; citing the precedent of UN
rules on corporate bribery. With this in mind, Christian Aid emphasises the “voluntary, corporate-led” status of CSR, this
being a means of avoiding “regulation at either national or international level”. The voluntary nature of CSR means its
corporate advocates “are concerned with their own reputations, with the potential damage of public campaigns directed
against them” (5). The Report goes further, quoting one critic: “One of the key functions of CSR is to enable further
deregulation” (15). Aware of surveys showing growing public support for ethical companies, the Report argues that
“CSR makes companies attractive to both mainstream investors and to the fast-growing ethical investment sector” (11).
However, the Report reiterates its call for regulation of CSR, since companies “can always walk away from voluntary
codes” (19), the Report finishes with detailed regulatory proposals under the rubric corporate social accountability.
Such calls for government regulations on CSR are predicated on the assumption of a neutral state, mediating
between competing fractions in favour of an overarching national interest. In order to retain its legitimacy, the state must
to some degree fulfil this function; however, during their post-18th century genesis, the organs of the state in countries
such as Britain became increasingly connected with the profitability of the companies in their jurisdiction. This connection
strengthened during the 1979-1997 Thatcher-Major period and during the subsequent Blair administrations. Parallel with
this, falling party membership subscriptions and reduced trade union income has resulted in a financial crisis for the
Labour Party, with funding increasingly coming from companies and individual capitalists. The 1997 Bernie Ecclestone
£1 million scandal and a host of subsequent examples, suggest that Blair’s three administrations have relied on a quid pro
quo with corporate patrons and sponsors. Abstracting from the murky world of corporate lobbying, Tony Blair has
established personal and political relationships with Lord Levy, Sir Terry Leahy and other wealthy businessmen. However,
whilst strengthening its corporate ties, the Labour Government has distanced itself from trade unions, NGOs and other
non-corporate pressure groups. In view of this, it is difficult to sustain the view that the UK Government is merely a
neutral arbiter in the body politic. All of which suggests that the Christian Aid regulation agenda is naïve. The BAE affair,
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the cash for honours police investigation and tax breaks for private equity companies, to name but three recent examples,
suggest that the Labour Government is unlikely to threaten corporate profitability, which it appears to consider synonymous
with the national interest, by legislating on CSR. The Government’s own commitment to CSR is clearly not matched by
its practice and the likelihood is that it too would prefer the ‘flexibility’ of a voluntary system.

The Corporate Watch Report

The Corporate Watch Report (2006) is marked by a deeper understanding of the relationship between corporate
profitability, CSR and the state. The Report argues “CSR was, is and always will be about avoiding regulation, covering
up the damage corporations cause to society and the environment and maintaining public cooperation with the corporate
dominated system” (2). However, superseding the Christian Aid call for regulation, Corporate Watch points out that
some companies are themselves calling for regulation: “companies are likely to support regulation when it supports their
business strategy or capitalises on areas where they have invested” (14). In other words, the public debate on CSR
regulation has become a space for marketing corporate competitive advantage.
The Report argues the CSR “approach to tackling major social and environmental problems is to enable the
powerful interests that caused the problems to profit from their resolution” (15). Critical of the stance of NGOs, the
Report also argues: “CSR is only the best that society can hope for if we do not visualise and struggle for anything
more. . .Responsibility for regulation of corporations should rest not with the corporations themselves, nor with NGOs,
but with society through a genuinely democratic process”, whereas a “divide and rule strategy has been successful in co-
opting the NGO establishment” (19-20). Anticipating this criticism, the Christian Aid Report (2004) acknowledged that
some “NGOs may have unwittingly enhanced company images” (14). However, the limits of the Corporate Watch
Report are its vagueness in seeking alternatives to CSR in particular and wage labour in general. In fact, the authors
appear to want to retain the capital-wage labour relation: “Workers need the space for collective bargaining where they
decide their rights and demand them” (22). This comment suggests that wage labour can somehow be reformed as part
of a process of establishing an authentic CSR; a view which takes no account of the inherent internal contractions of
capitalist wage labour relations, as discussed earlier.

CSR, Conceptual Value Added and Consumptive Exclusion

Before moving to the conclusion, let us examine CSR in the context of conceptual value added, on which see Klein
(2000). The term value added is derived from value in exchange, as noted in the discussion on Adam Smith’s Wealth of
Nations. In the labour process value is added to raw materials at each stage of production and the aggregate of this value
is exchanged for money in the market. Conceptual value added, however, refers to marketing, retailing and other
techniques that expand the difference between the costs of production of goods and the price at which they sell. CSR is
an important component of conceptual value added to the extent that it legitimises a retail price premium. That this is the
case is most obviously demonstrated with the marketing techniques associated with Fair Trade, green and organic
products. Assuming their authenticity, such products are the result of socially responsible, sustainable, practices and
indicate that reducing CSR to mere marketing strategy is to oversimplify 21st century corporate behaviour. However, in
contemporary capitalism, research has indicated that the additions to cost of these practices are more that offset by the
premium charged to the customer; Ebrahimi (Mail on Sunday, 24 September 2006).
Taking the argument a stage further, Beckmann and Elliot (2000) show how consumer behaviour, including brand
awareness, is not to be understood by reference to behaviouristic stimulus and response techniques, exemplified in
traditional downward sloping demand curves. The authors explain the importance of identity in contemporary consumer
behaviour, particularly the desire to be associated with a given social reference group. Sophisticated branding techniques
are central to this process. For example, although clearly not a CSR product, the Stella Artois strap line, “reassuringly
expensive”, openly seeks to create an upward sloping demand curve. The purchasing power of those buying CSR/
sustainable products is, on average, higher than those buying non-CSR products. Therefore, CSR branding and pricing
techniques will tend to create a social exclusion process. Echoing Veblen’s conspicuous consumption, the status of the
skilled working class and middles classes is both reaffirmed and enhanced: having increasingly defines being.
This process of consumptive exclusion created by the marketing of socially responsible and sustainable products
is an example of moving social contradictions from one space to another, rather than resolving them. Some of those facing
such consumptive exclusion, along with other forms of social marginalisation, will respond by engaging in antisocial, or
even criminal, activities. Others so excluded are vulnerable to corporate persuasion that they too can enjoy the good life
by means of credit cards and other, high-interest, forms of debt. Despite the misery caused to those defaulting on their
repayments, such debt-fuelled consumption has driven UK GNP growth in recent years. However, the potential for, and
the intensity of, an economic downturn is heightened if interest rates and unemployment were to rise significantly.

Conclusion: From Each According to Ability to Each According to Need

The Corporate Watch Report (2006) claims that “Exposing and rejecting CSR is a step towards addressing corporate
power”. In Hegelian terms, discovering the truth of this power cannot be attained by mere deduction, but only at the end
of an investigative journey. This paper could be interpreted as an early, tentative, step on this journey of discovery. An
important stage in the journey is addressing the genesis of corporate ethics and the part played by CSR in this ongoing
 Social Responsibility Journal 39
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process. However, “CSR as a tactic will only last so long”, argue that authors of Corporate Watch (21). Whilst we cannot
accurately predict the end of CSR, it is likely that its progress will be reversed to the extent that companies face a
downturn in sales. Similarly, CSR will be eclipsed by an alternative ethical philosophy as it ceases to offer competitive
advantage and SR investors suffer significantly reduced returns. Simply put, organisations predicated upon the profits
earned from the inherently antagonistic capitalist/worker relationship are likely to reconsider CSR when profitability is
threatened. In the long run, organisations can only act in a socially responsible way if their aims are consonant with those
of the society in which they are located; this cannot be the case in a society divided by antagonistic social classes. One
aim of this paper is to encourage academics and others to consider the implications of corporate profitability as a necessary
condition of social responsibility. Readers can no doubt bring to mind socially responsible projects that simply cannot
come into being in a society dominated by the fetter of corporate profitability. In acknowledging this fetter, we can take
the next step and investigate the forms that social responsibility might take in democratic organisations providing goods
and services according to the ethic from each according to ability to each according to need.

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