Strategic Corporate Social Responsibility in Malaysia

Rusnah Muhamad, Noor Akma Mohd Salleh

• Publisher: Routledge
• Year: 2019
• ISBN:
  9780429614705
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

To fully comprehend corporate social responsibility (CSR), corporations must understand the many-sided nature of CSR. This book provides insight into the theoretical foundation, beliefs, and expectations of the multiple stakeholders; the governance of CSR commitment; and corporations' strategies associated with the design, development, implementation and communication strategies for CSR through the case study on Malaysia. The book also explains why corporations should pursue a dual economic and social function and why it being critical to an organisation's success. It also describes the CSR trends and influences such as sustainability and globalisation on the future of CSR.

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The evolution of corporate social responsibility

Rusnah Muhamad and Noor Akma Mohd Salleh

Introduction

It has been the duty of governments to address and solve the social issues in society in most countries for many centuries. However, in the late 18th century, with the incorporation of business enterprises, the business community started taking the initiative to contribute to addressing the social issues facing society based on the principles of ethics – the idea being that business enterprises have responsibilities to society beyond that of making profit for the shareholders. The contribution made by corporations in an effort to address social problems is generally known as corporate social responsibility (CSR). In general, CSR has typically been understood as the policies and practices that business people employ to be sure that society or stakeholders other than business owners are considered and protected in their strategies and operations (Carroll, 2016).

CSR is not a new concept, and its roots can be dated back before World War II. CSR has continued to grow in importance and significance in the following decades (Carroll & Shabana, 2010). CSR has been the subject of considerable debate, commentary, theory building, and research. Visser (2010) highlights that CSR has been debated and practised in many forms for more than 4,000 years. The most ancient examples of CSR are the unethical condemnation of usury in religious texts (Hinduism, Buddhism, and Islam) as well as the promotion of zakat in Islam (Visser, 2010).

However, according to Freeman and Hasnaoui (2011), CSR in name has existed for over 70 years. CSR has evolved from a narrow into a more complex and multifaceted concept (Cochran, 2007), but it is not a universally adopted concept as it is not commonly understood (Freeman & Hasnaoui, 2011). Various terms are associated with CSR, such as corporate responsibility, corporate citizenship, sustainability, corporate social performance (CSP), business ethics, corporate environment management, business and society, business and governance, and business and globalisation (Freeman & Hasnaoui, 2011; Yang & Guo, 2014). Lee (2007) asserts that CSR has been transformed from an irrelevant concept to one of the most orthodox and widely accepted concepts in the business world. He maintains that by the late 1990s, the idea of CSR was almost universally endorsed and promoted by all constituents in society including governments and corporations as well as non-governmental organisations and consumers.

According to Freeman and Hasnaoui (2011), CSR was first mentioned in monographs in 1926 by Clark, who notes that business has obligations to society. Martínez, Banerjee, and García-Sánchez (2016) argue that the debate on CSR dates back to the early 20th century during the period of intense increased production together with the second phase of the Industrial Revolution. The event, according to them, led authors such as Weber (in his book titled The Theory of Social and Economic Organization, published in 1922) and Clark (in his book titled Social Control of Business, published in 1939) to express the need to educate business people about the new framework of social responsibility. Yang and Guo (2014) argue that CSR was mainly an ethical event of business originating from Oliver Sheldon in 1924. They explain that, according to Sheldon, CSR refers to the responsibility of an enterprise to improve the interests of the community while pursuing its own profit. The evolution of the modern era of CSR started with the publication of Bowen’s seminal work in 1953 (Carroll, 1999; Lee, 2008; Carroll & Shabana, 2010; Visser, 2010; Moura-Leite & Padgett, 2011). Carroll (1999) proposes that Bowen deserves to be named as the Father of CSR given that Bowen’s book Social Responsibilities of the Businessmen stands out during this period. Bowen (1953) defines CSR as “the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of actions which are desirable in terms of the objectives and values of our society” (p. 6).

The remaining part of this chapter presents a discussion on the various phases of the evolution of CSR concept. Carroll (1999) adopts a chronological structure based on a decade-by-decade analysis to analyse the evolution of the concept. We have followed Carroll’s chronological analysis in an attempt to understand the CSR evolution in this chapter. We start with the 1950s, which is denoted as the modern era of CSR by most scholars (see, for example, Carroll, 1999; Lee, 2008; Carroll & Shabana, 2010; Moura-Leite & Padgett, 2011; Freeman & Hasnaoui, 2011; Yang & Guo, 2014; Carroll, 2016). We categorise the evolution into three main stages, namely, CSR in the 1950s and 1960s, CSR in the 1970s and 1980s, and CSR in the 1990s and onwards. The final section summarises and concludes the chapter.

CSR in the 1950s and 1960s

The idea of CSR has gradually evolved through several attempts to regulate the relationships between corporate organisations and their stakeholders (Lee, 2008; Bani-Khalid & Ahmed, 2017). The phenomenon has led to increasing concern from various stakeholders about the role and responsibility of businesses and the social impact of their operations on society.

According to Carroll and Shabana (2010), there was some limited discourse about CSR in the 1950s. Abrams (1951) was among the earlier proponents of CSR in the 1950s, introducing concerns about management’s broader responsibilities in a complex business world (Carroll & Shabana, 2010). Abrams argued that companies should also show concern for their employees, customers, and the public at large, and not simply maximise profits for shareholders. The work of Abrams identifies other parties besides shareholders that should be considered by businesses in their decision-making. Various authors noted that Bowen (1953) was the main contributor that sparked discussion on CSR in the 1950s (Carroll, 1999; Lee, 2008; Carroll & Shabana, 2010; Visser, 2010; Moura-Leite & Padgett, 2011).

Lee (2008) labels the first two decades of CSR evolution as “social responsibility of businessmen”, while Moura-Leite and Padgett (2011) label it as “ethical orientation and macro-social analysis”. Similarly, Yang and Guo (2014) contend that Bowen’s definition of CSR is an ethically oriented one, which refers to doing good for society. Lee (2008) highlights that the theoretical focus of CSR research in the 1950s and 1960s was on the macro-social institutions for promoting CSR, stemming from Bowen’s broader vision of a better American society in which economic and social goals reinforce each other; hence, suggesting that CSR is a complementary and corrective measure for some social failures inherent in a laissez-faire economy. In a similar line of thought, Moura-Leite and Padgett (2011) state that Bowen argues that social responsibility is not a panacea for all social problems facing society, but that it can guide businesses in the future in trying to answer whether or not businesses have a social responsibility. Therefore, Moura-Leite and Padgett (2011) claim that the debate on CSR during this era is normative in nature, providing an institutionally oriented justification for corporate managers to be concerned about their social responsibilities from the ethical perspective.

Carroll (1999) notes that the term social responsibility rather than CSR is the more commonly used term in the writings on CSR during this period. He rationalises this phenomenon due to the fact that the prominence and dominance of the modern corporations in the business sector had not yet occurred or been noted. The crux of Bowen’s book is that the belief that corporations are vital centres of power and decision-making and that the actions taken by these corporations touch and have an impact on the lives of citizens in various ways (see, for example, Lee, 2008; Moura-Leite & Padgett, 2011; Carroll, 2016). The key questions that Bowen raised in his book that remain relevant today are “what responsibilities to society may businessmen reasonably be expected to assume?” and “how can society make institutional changes to promote CSR?” (Carroll, 1999, 2016; Lee, 2008). Bowen’s seminal work coincided with various important events that supported and favoured the progress and development of CSR in the business arena (Lee, 2008) – among others, the court ruling that legalised corporate contributions for purposes other than that of a direct benefit to businesses; numerous pieces of legislation that were enacted to regulate the conduct of businesses and to protect employees and consumers; and the increasing number of consumer rights movements that challenged the corporate powers.

Moura-Leite and Padgett (2011) argue that the work of Peter Drucker that was published in 1954 was in line with Bowen’s seminal work on CSR. Martínez et al. (2016) concur by stating that Drucker pointed out the need to consider the factor of public opinion in the decision-making process of any organisation, regardless of size or industry. Drucker included public responsibility as one of the eight key areas in setting business objectives. According to Martínez et al. (2016), Drucker followed the same ethical obligation argument espoused by Bowen to recognise the growing requirement for managers to assume responsibility for the public good. In addition, Drucker’s proposal that objectives in public responsibility must be set according to the prevailing political and social conditions as perceived by management is also in line with Bowen’s thinking.

However, the opponents of CSR argue that the responsibility of the management of corporations is to maximise shareholders’ wealth, and that social problems should be handled by politicians and civil society (Lee, 2008). One of the main opponents is Levitt (1958), who maintained that the main responsibility of a corporation is to maximise its shareholders’ value (Freeman & Hasnaoui, 2011). Banerjee (2007) highlights that, in the opinion of Levitt, CSR would do harm to businesses. In the same line of thought, Carroll and Shabana (2010) wrote that Theodore Levitt closed out the 1950s by warning the business world about the dangers of social responsibility. Accordingly, Levitt opined that social concerns and the general welfare are not the responsibility of business, but of government, and that the main concern of a business is to “take care of the more material aspects of welfare” (Carroll & Shabana, 2010, p. 87). Levitt claimed that if the attention of businesses is to be given to social responsibilities, it will detract from the profit motive that is critical for business success. According to Carroll and Shabana (2010), despite Levitt’s warnings, CSR continued to grow in popularity and started taking a more meaningful shape during the 1960s. They highlight the two main drivers that advanced the evolution of CSR in this era, namely, the active social movements (civil rights, women’s rights, consumers’ rights, and the environmental movement), especially in the US, and the forward-thinking academics who were attempting to articulate what CSR really meant and the importance of CSR for businesses and society.

Carroll (1999) mentions that other notable authors on CSR in the 1950s include Eells (1956), Heald (1957), and Selekman (1959). A notable contributor towards the CSR literature, William C. Frederick, argued that three core ideas can be observed in terms of the meaning of CSR in the 1950s: corporate managers are public trustees; there is a need to balance the claims for corporate resources; and corporate philanthropy should manifest the support of businesses for good causes (Carroll & Shabana, 2010; Moura-Leite & Padgett, 2011). Carroll and Shabana (2010) assert that, in this era, the main idea of CSR was doing good works for society and there was little discussion to link CSR with the benefits it might have for businesses (Carroll & Shabana, 2010; Moura-Leite & Padgett, 2011). Therefore, there were few CSR actions by corporations that went beyond philanthropic activities (Carroll, 1999). Corporate managers and boards of directors began to realise that businesses exist due to the existence of society and, thus, businesses have some obligations to society (Rahman, 2011).

The literature on CSR expanded significantly in the 1960s, focusing on attempts to offer a more appropriate meaning of CSR and its role in business and society (Carroll, 1999; Moura-Leite & Padgett, 2011). According to Freeman and Hasnaoui (2011), the 1960s saw CSR as continuing to struggle for definition. Among the early authors in the 1960s who wrote on this topic was Keith Davis (Carroll, 1999; Freeman & Hasnaoui, 2011; Moura-Leite & Padgett, 2011). Davis (1960) brought to the fore the definition of social responsibility as a “nebulous idea” by defining CSR as “businessmen’s decisions and actions taken for reasons at least partially beyond the firm’s direct economic or technical interest” (p. 70). Davis claimed that some socially responsible business decisions have the potential to bring about a long-run economic gain for the firm (Carroll, 1999). Davis believed that economic power and social power come hand in hand, in that social power arises as a result of a growing economic power. Davis urged businesses to consider the interests of the various parties affected by the decisions and actions of businesses in order to win their endorsement and support. Davis (1960) raised three important points in his book, namely, “social responsibilities of businessmen need to be commensurate with their social power” (p. 71); “the avoidance of social responsibility leads to gradual erosion of social power” (p. 74); and “continued vitality of business depends upon its vigorous acceptance of socio-human responsibilities along with socio-economic responsibilities” (p. 74). Carroll (1999) considers Davis the runner-up to Bowen for the designation of Father of CSR due to his notable contribution to the early definitions of CSR. Davis is named as the father of the “Iron Law of Responsibility” for his work, which holds that the social responsibility of businessmen needs to be commensurate with their social power (Carroll, 1999; Moura-Leite & Padgett, 2011).

Another influential contributor in the 1960s who contributed significantly towards the evolution of the early definitions of CSR mentioned by Carroll (1999) is William C. Frederick. Frederick (1960) argued that business resources should also be used for broad social goals (Carroll & Shabana, 2010). Accordingly, Frederick stressed that businessmen should ensure the operation of an economic system that is able to meet public expectations, which means that the operation should be carried out in such a way that the production and distribution of goods and services could enhance the total social-economic welfare of the society (Carroll, 1999).

In 1962, a strong opponent to the concept of CSR, Milton Friedman, loudly voiced that the only social responsibility of a business is to make as much money as it can for its shareholders (Moura-Leite & Padgett, 2011). Friedman considered CSR a “subversive doctrine” that threatens the very foundation of a free enterprise society (Lee, 2008). Friedman, therefore, concurred with Levitt’s opinion that CSR is dangerous to businesses.

Joseph McGuire was mentioned as being another contributor to the evolution of the definition of CSR in the 1960s (see, for example, Carroll, 1999; Carroll & Shabana, 2010; Moura-Leite & Padgett, 2011). In his book titled Business and Society, which was published in 1963, he posited that the concept of social responsibility urges corporations to assume certain responsibilities to society, which should be extended beyond their economic and legal obligations. According to Carroll (1999), McGuire’s definition on CSR is more precise than th...

Table of contents

• Cover
• Half Title
• Series Page
• Title
• Copyright
• Dedication
• Contents
• List of figures
• List of tables
• Preface
• Acknowledgements
• List of contributors
• 1 The evolution of corporate social responsibility
• 2 Corporate social responsibility engagement by companies: theory, concept, model, and impact
• 3 Corporate social responsibility for whom?
• 4 The role of corporate governance and corporate social responsibility in socio-economic development
• 5 Corporate social responsibility in Malaysia
• 6 Social media and corporate social responsibility communication strategies
• 7 Corporate social responsibilities and learning capabilities: are they relevant?
• 8 Corporate social responsibility practices in Islamic banks
• 9 Corporate social responsibility balanced scorecard and the business performance of SMEs
• 10 Corporate social responsibility – fast forward
• Index