Business Social Responsibility:
Altruism or Good Business?
Introduction
A dramatic shift in priorities is beginning to occur among companies that are becoming
aware of the dichotomy between personal values and professional life. Companies and organizations are struggling with the workforce transformation resulting in major social movements in the U.S.: one operating in the culture at large and one operating in business.
The business social responsibility movement over the last two decades, has encouraged corporations to play a role in improving their communities. The workplace is emerging as the delivery system for not only the integration of values people want to incorporate in their lives but for the sustainability organizations need to create for their customers.
The International Council for Small Business describes “Business Social Responsibility” as follows:
“Corporate social responsibility means the contribution that businesses make to the public good above and beyond the provision of goods and services that they exchange in the market. Public goods are specifically defined as goods that are not diminished by others’ enjoyment of them, and once provided, the public good is available to all. Examples include clean air, public radio, and community betterment. Because the term ‘corporate social responsibility’ reflects the bias toward big business, the term ‘business social responsibility’ should be used instead in an attempt to broaden consideration all for-profit organizations.” (1999)
So, what does social responsibility really mean? Essentially, social responsibility is a political concept. It means that the business organization must seek to placate the demands of numerous groups (Van Auken and Ireland, 1982). Because of rapid social change, gone are the days when a corporation or business could confine their efforts to simply making a profit and pleasing shareholders. Carroll’s (1979) definition of the four responsibilities that comprise a company’s concept of corporate social responsibility include economic, legal, ethical, and discretionary. This is useful in deciding what social responsibilities are forced upon the business by legal means versus those that are market driven.
However, there is still a great gap in social responsibility theory and research about the impact of social responsibility in small business. Most research has been limited to big business which ignores the more than 60% of the American work force that are employed by companies with fewer than 50 employees (Trost 1988).
This has great implications for the small business world as well as for me personally. As the owner of a small business, I would like to feel as though I operate with great conscience and social responsibility, not only to my employees and customers, but also to the community at large. A look at recent literature suggests that because of the minimal amount of research in small business social responsibility, that inferences must be made from the corporate level. However, the ultimate question still remains, Does a company have to demonstrate social responsibility in order to be successful?
Literature Review
Corporate social responsibility has gained in public awareness in the past couple of decades. That does not mean that corporations have been socially irresponsible, but mass media and modern means of communication have made their philanthropic endeavors more easily accessible and understood than those in the past. Andrew Carnegie and John Rockefeller were early pioneers in the translation of private funds into public good. Our country has numerous monuments to the philanthropic endeavors of early business. One needs look no further than many of the country’s universities and medical institutions to see private funds at work.
In this era of demonizing the corporate executive and the large impersonal conglomerates they lead such as Enron, Worldcom, and Arthur Anderson, it is not surprising that more than seven in ten Americans tell pollsters that they distrust the bosses of large companies. They find it disturbing that executives earn 300 times more than shop-floor workers and often gorge themselves on stock options (Economist 2002). But it is this style of leadership that has also allowed the American market to help to tackle the many social problems without developing a welfare state. Over the past two decades, we have witnessed the systematic blurring of the traditional roles of the public and private sector. It has been to the corporation’s advantage to step in and provide community services as the government stepped back (Gregg 2002).
The richer that Americans become, the higher the percentage of their incomes they are willing to give to charities. Americans with a personal fortune of m or more give away about 9% of their income a year, those worth m-10m give away 4.8% and those worth m-5 give away 3.8%. American philanthropic contributions accounted for 1% of the national income, compared to 0.2% in Europe (Economist 2002). Thus, Americans have a long, and profitable relationship with business and social responsibility.
Small business’s relationship with social responsibility has been a more nebulous one. Small business tends to be “out of sight and out of mind”. Social responsibility expectations are greater for large corporations because of their public visibility, economic power, and extensive involvement with numerous special interest groups, while small business had limited economic muscle and managerial wherewithal (VanAuken and Ireland 1982). Surveys have documented that consumer relations, product quality, employee concern, and profitability are viewed as fundamental social responsibilities of small business by the public (Thompson, Smith, and Howard 1993; Chrisman and Archer 1984; Chrisman and Fry1982). However, small business is bombarded daily by solicitations to partake in community activities or provide social support for any number of charitable events or causes.
Typical Weberian rationality suggests that social responsibility and efficiency are potential antagonists in an organization (Becker and Potter 2002). Some experts contend that small business needs not to embrace social responsibility as much as avoid social irresponsibility or business negligence ( VanAuken and Ireland 1982). These activities include refusal to adhere to government policies, taking advantage of consumers, deliberate damage to the environment, deceptive advertising, and discrimination against individuals (VanAuken and Ireland 1982). This school of thought implies that small business should not and cannot take part in social activism and community involvement. Yet a Canadian study of small business found that while a lower proportion of small business actually contribute to charitable organizations than large businesses, but as a group they donated more as a percentage of pre-tax income than larger firms (Martin 1985). This does not sound as though small business only concentrates inwardly to fulfill their social responsibility.
Are all corporations and small business self aware enough to provide these social policies, contributions, and actions based on innate altruistic tendencies? I think not. The enlightened self-interest model of business social responsibility posits that businesses can realize significant benefits through socially responsible behavior; some of these benefits include a well-educated, stable, satisfied work force, a healthy environment; and a thriving community in which to live and do business. (Fry, Keim, and Meiner 1982). This would lead one to believe that these advantages would then lead directly to an enhanced public image and higher prestige, which would lead to consumer confidence and purchase of their product, thus a lucrative business. The problem seems to be that most acts of goodwill typically occur in isolation (Benioff 2002).
Small business does not typically plan its charitable donations. Most donation decisions are primarily one-person decisions and there is not an established social issue policy or program (Thompson and Smith 1993). Furthermore, one case study confirms that personal preferences or owner values are highly significant in affecting what charity will receive a donation and at what level (Thompson and Smith 1993). These contributions are rarely advertised or exploited to the benefit of the business. Further problems in assessing small business contributions occur since they may include in-kind donations of time and/or product and not cash.
A study of 180 small business in the Los Angeles area lead researchers to divide small business people into 2 categories, Type P businesspersons who are profit-oriented and Type V individuals who are concerned about other values in addition to profitability. Only 12% could be categorized as type V and 88% were Type P, proving that social responsibility decisions of small business are still based on profitability (Wilson 1980). There is no explanation of why small business is so bad at informing and exploiting their good deeds to the public.
The public has said that community involvement by a company can have an effect on their purchasing decisions. A national survey of heads of household revealed that 14% of respondents claimed to seek out corporate do-gooders when making purchases, while another 40% found corporate citizenship to be a tiebreaking activity when choosing where to take their business. Further 56% said they would view a company’s publicizing of its philanthropy as a positive (Santoro 1997). But if the public is unaware of small business contributions, how can they be expected to patronize and supportive of socially responsible businesses?
Another aspect of good social responsibility is that employees who volunteer are more loyal to their employers. Companies with reputations for being socially responsive have a significant recruiting advantage (Ingram 1997). Employees like to work for companies that care. Companies that support the immediate community are supporting their employees, potential employees and the community wherein they operate. It only makes sense that the community should be aware that the business supports all of these microcosms that occur in their realm of operation.
Corporations have the advantage here by attaching their charitable and social support into large and complex advertising and other public awareness campaigns. It is easy often to remember that Home Depot supports the Olympic Team, that McDonald’s is a sponsor of Children’s Miracle Network, Anheiser Busch supports Mothers Against Drunk Drivers, and the list goes on and on. The public may not be aware that a small business allowed the local high school debate team to attend national competition or that the company provided meals for the local homeless or indigent. Studies show that most small business donate to have an impact on their immediate neighborhood or to achieve public visibility (Thompson and Smith 1993). But if the opportunity is not exploited to the advantage of the business, is that true altruism or poor business judgement?
There are those who believe that business social responsibility has gone too far. That the private sector may gain short-term leverage through community based activities, but businesses that perform public sector functions will, over time, lose either their competitive advantage or the very legitimacy they seek (Gregg 2002). If that is true, then business has taken over the responsibilities that should be delegated to government, that is to represent the public interest. The corporate sector is nimble, efficient and creative when it comes to pursuing its own interest and will find a way to maximize profits in virtually any circumstances that acknowledge is legitimate place in the economy (Gregg 2002). Government needs to rebalance the public/private sector roles and generate market-oriented public policy, instead of putting the public and private sector on a collision course (Gregg 2002). This becomes a threat with greater globalization of business. How can we accomplish all this while preserving the concept and the economic benefits of a global corporation? (Benioff 2002). Again, large corporate and global companies have the advantage over small business. They are able to leverage employees, equity, products, alliances and relationships to support stakeholders in a way that smaller, local companies could not, demonstrating the company’s value to the community (Benioff 2002).
The bottom line is big business will be affected more by public pressure. This does not imply that they are therefore more socially responsible than small business, it is that the social power of small business is limited when compared. There are those who believe that the small business community already has enough survival problems without trying to shoulder another role in society for which it is ill equipped, untrained, and unprepared (VanAuken and Ireland 1982).
So how can a small business compete and prove itself valuable to the community as well as produce a profit? One political strategy small business managers can use to formulate and then implement their socially responsible behaviors is to follow the average behaviors being displayed by firms in their industry. By doing so, they are assured that they are doing no less than others operating under the same general conditions (Bowan and Heire 1975). It is not necessarily the altruistic approach to social responsibility, but may be a good business plan that can reap profitable rewards, encourage employees, and aid the community at the same time.
Social responsibility approaches for business do not require total sacrifice but a blending of good business and good community, each feeding off the other for true success.
Analysis & Recommendations
The study of the social responsibility of business has led to an abundant amount of literature to issues of employee satisfaction and success for businesses that show commitment to the community. Although research is generally in the corporate arena, there are good inferences for all business, large and small.
There is a direct correlation between success and community involvement. While this is not a new strategy for business, it is taking on a new role in a society that is developing a more discriminating consumer. Consumers are becoming more sophisticated and looking beyond the narrow parameter of price in choosing what to buy and where to shop. Polls have shown that people are choosing to shop with people they trust and to support businesses that put something back into the community.
Some contend that as the marketplace goes global and onto the worldwide web, that socially responsible corporations no longer exists. Research still shows that community involvement by small business is good for business. Even major corporations with worldwide markets have a tendency to exploit their social responsibility on their websites and through advertising. Through this exploitation, benefits are seen by the company for bottom line profitability as well as deeper company commitment by present and potential employees. Exploitation of social responsibility is even accepted by the consumer. Major corporations are forming foundations and sponsoring major charitable events in order to let the public know they have a social “conscience”. Small business needs to follow suit, scaling and patterning their exploitation plans after those of their larger brothers in order to reap the rewards good social conscience deserves in the arena in which they operate.
In examining issues of social responsibility, I agree that it is integral to any business’ success. I cannot help but also wonder how the economy would affect consumers feelings over time. Most of my research literature came from an era of prosperity. Consumers could afford to be discriminating. As economic times become more difficult, would consumers forsake social responsibility for price? What does that say about the importance of social responsibility for the consumer? We will have to wait and see as consumer confidence wanes during hard economic times.
Research evidence and professional commentary tout the benefits of giving for the individuals in management. While it is only natural that working outside of the corporate environment should help to hone leadership skills, the return on investment for the individual is not deeply addressed. While volunteerism is a whole new business ethos than that of the profit world, the “warm fuzzies” that are created from community involvement should lead to a more well rounded and confident citizen whether in business or private life.
The business of business is business. The good works of those who spend their daily lives in business or the professions are not inherently more noble than those made by men and women in other walks of life, but I believe that through community involvement, the business community distinguishes itself. It gives the community unique qualities which define business. Those in business are often tolerant of risk, embrace change, have the willingness to commit, know how to be accountable, and have the ability to persevere in the face of adversity. They are able to form profitable partnerships that will benefit all involved including the community and can translate those business principles to the public sector to insure success. Success for the community and success for the business.
The most difficult task for any business is to sustain their commitment to social responsibility. While it is easy to throw money at a problem or volunteer for a special project as evidenced by America’s recent tragedies, will these businesses be able to sustain their sense of social responsibility for the long haul? While accolades and consumer awareness may be produced for a single magnanimous gesture, will it produce positive feelings and bottom line profitability over time? If a business is going to be socially responsible, they must make sure that they are committed to the community in which they operate for as long as they are in business. Thus, a true feeling of social responsibility is not limited to a specific instance but to the community as a whole for the duration of the business’ lifetime for it to truly practice social responsibility and reap the rewards that it has to offer.
American ingenuity, corporate and small business when banded together form a alliance of global magnitude. As social responsibility gains momentum and business continues to reach globalization, eventually the world can reap the benefits. It is a win-win situation on all levels.
Kofi Annan, the UN Secretary-General, has said: “Those who have the power and means, governments and businesses, must show that economics, properly applied, and profits, wisely invested, can bring social benefits within reach not only for the few, but for the many and eventually for all.”
Conclusion
This paper was formulated to give the reader a quick overview of the emerging and changing approach to business social responsibility. While most research has centered on large business or corporate approaches, small business may still be able to apply the same principles to their approach to social responsibility as well.
Social responsibility can be advantageous for any size business. While the corporate world has managed to exploit their socially responsible actions into consumer awareness, small business needs to learn to exploit their deeds albeit on a smaller stage to the consumers they reach as well.
The benefits of business social responsibility include increased public image, higher prestige, a well-educated, stable, satisfied work force, a healthy environment, and a thriving community in which to operate. Much is dependent on consumer confidence in your product and service but bottom line profit should be a result of socially conscious actions.
Small business social responsibility approaches can include developing policies about charitable contributions, patterning exploitation after larger businesses, and maintaining a level of responsibility that is equal to those in your profession. Social responsibility is a business lifetime commitment.
Yet there are those who would claim that business social responsibility steps over the line, that the public sector should take more in hand. Still there are questions to be answered. Will economic downturns affect business social responsibility? As the business market globalizes, will business social responsibility be pertinent to the local consumer? What are the implications for social responsibility on a worldwide stage? Can everyone; the consumer, small business, corporations, government and the world, reap the benefits of global social responsibility?
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