Competition is a driving force whenever two or more people or businesses are pitted together toward a common goal. Athletes seeking a competitive advantage over each other will induce performance-enhancing drugs, knowing that they could be banned from the sport if discovered. Businesses looking to outperform their competitors will do whatever it takes to achieve that goal, including engaging in socially irresponsible acts especially if they think they can get away with it (Campbell, 2007). Success depends largely on producing a better, bigger, faster product that people will buy. Even businesses with a corporate social responsibility (CSR) program often abandon or overlook certain actions when profits are threatened.
The definition of CSR morphs depending on the nature of the business. For some business being socially responsible includes charitable contributions, implementation office recycling program, or bike to work day, providing fair and generous wages and benefits to employees, fair pricing for products, quality products, and its level of transparency and candor (Campbell). Companies adopt CSR strategies to balance social, economic, and environmental issues that will benefit people, the communities in which they operate and live, and society as a whole (Leonard & McAdam, 2003).
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Leonard and McAdam included the following issues that fall under corporate social responsibility: human rights; workplace and employee issues; unfair business practices; organizational governance; environmental aspects; marketplace and consumer issues; community involvement; and social development. A simple, all-encompassing definition of CSR includes two key points: a corporation acting socially responsible must do no harm to its stakeholders (investors, employees, customers, suppliers, or local community in which they operate); and two, if harm is done, the corporations must voluntarily rectify the problem as soon as it is discovered (Campbell).
As money is the driving force for any business – why is a business in business expect for being profitable – it would stand to reason that when threatened with fierce competition which could diminish profitability and success, that social responsible behavior would become a secondary concern. Many believe that maximizing profit should take precedence over socially responsible behavior, “. . . the imperative of profit and shareholder value maximization may cause corporations to act in ways that do not even meet the threshold of socially responsible behavior. . .” (Campbell, 2007, p. 952).
Keeping shareholders happy is necessary to continue to stay in business. Shareholders are one of the major stakeholders in corporations, so would not it be prudent to maximize shareholder value whenever and whatever the cost? Yet when competing for business, corporations will focus less on the stakeholders who do not directly impact business, than on those stakeholders that do impact business (Sethi, 1994), namely shareholders and top managers who earn bonuses based on performance. With profits as the true bottom line, less than stellar economic conditions and declines in shareholder value; corporations are not focused on socially responsible behavior to all stakeholders (Campbell). Since corporations abandon socially responsible behavior during times of weak financial performance, they will also depart from CSR when faced with stiff competition; another indicator or cause of weak financial performance.
Competition can be healthy during normal conditions, yet detrimentally harm businesses unable to keep up with technological advancements, speed, accuracy, quality, and price points of their competition. Without competition, companies may have little interest in CSR since there is no alternative to their product. Monopolies, unless there are government restrictions, have no competition to keep them in check and have no need to act socially responsible since customers have no alternatives: “. . . things like corporate reputation or customer loyalty will not affect sales, profitability, or survival much” (Campbell, p. 953). In competitive markets, regulation is just as vital to all stakeholders as in markets with monopolies in place.
Corporations must be held accountable. There will always be competition, and without regulations, companies will do what is necessary to beat the competition. Corporations with a strong, organized, and effective self-regulation program will be more likely to adhere to CSR behavior (Campbell). It is vital that this self-regulation is taught and reinforced to all the stakeholders; investors, employees, shareholders, public, and the community. With these levels of check in place, there will (hopefully) be someone who will call out any discrepancies and give the corporation the opportunity to rectify any harm.
Self-regulation is not always enough, since weak financial prospect can negate socially responsible behavior in many situations. Corporations are more likely to act socially responsible with state regulations, strong enforcement, significant consequences, and threats of exposure. Regulations by government entities, which are able to tax and regulate the business of business, create consequences for socially irresponsible behavior. Oftentimes these consequences are hefty financial fines, also creating a weak financial forecast for the corporation. Governments must check on the behavior of businesses and investigate any wrong doing in a timely manner. With the interconnectivity of the world through the internet, no secret is left unturned. Transparency will happen even if the corporation does not desire to let the truth be known. It is vital for corporations to be socially responsible, or the public will make them be socially liable.
Industry regulation and accountability is an out of the box way to keep competition from bringing out the worst in corporations. Normally, companies are trying to outdo each other with the next big discovery. One way to eliminate this is to work together, yet separately. A regulation industry where all the corporations creating like projects are all members could create a conglomerate where pricing is kept evenly, quality is standard, and there is an umbrella policy of corporate social responsibility, where the good of the consumer, employees and communities are the most important bottom line. Another way to align shareholders to corporate social responsibility is to tie profits to corporate social responsibility behavior through a points system. The more socially responsible programs that are implemented and followed, the higher the corporation is valued.
Irresponsibly and unethical behavior occurs in every business, organization, and corporation sector, and is not limited to large multi-billion dollar entities. From local churches, to Mom and Pop groceries stores, to non-profit community organizations, there are some businesses with people working that have no morals. Without morality, the concept of business ethics is not possible. While morality is primarily associated within the individual person, Sethi posited that increases in the complexity and technological orientation of economic activity would result in situations where morality is no longer rooted merely to individuals. Individual contributions toward a consensus collective action are necessary to maintain ethical action in large scale economic activities (Sethi). Strong individual morality must be transferred to the business. Corporations should look for people who have similar moral footprints to run and work with their business. CSR is not singly a corporate concept; social responsibility is a company-wide, world-wide concept rooted in a strong moral foundation.
- Campbell, J.L. (2007). Why would corporations behave in socially responsible ways? An Institutional theory of corporate social responsibility. Academy of Management Review, 32(3), 946-967.
- Leonard, D., & McAdam, R. (2003). Corporate Social Resposibility. Quality Progress, 27-32.
- Sethi, S.P. (1994). Imperfect markets: Business Ethics as an easy virtue. Journal of Business Ethics, 13, 803-815.
