The importance of corporate social responsibility surfaced in the 1960s when social activists questioned the singular economic objective of business. Even today, good arguments can be made for and against businesses being socially responsible. (See Exhibit 3–2.) Yet, arguments aside, times have changed. Managers regularly confront decisions that have a dimension of social responsibility: philanthropy, pricing, employee relations, resource conservation, product quality, and doing business in countries with oppressive governments are just a few. To address these issues, managers may reassess packaging design, recyclability of products, environmental safety practices, outsourcing decisions, foreign supplier practices, employee policies, and the like.

Exhibit 3–2

Arguments For and Against Social Responsibility

Another way to look at this issue is whether social involvement affects a company’s economic performance, which numerous studies have done.17 Although most found a small positive relationship between social involvement and economic performance, no generalizable conclusions can be made because these studies have shown that the relationship is affected by various contextual factors such as firm size, industry, economic conditions, and regulatory environment.18 Other researchers have questioned causation. If a study showed that social involvement and economic performance were positively related, this didn’t necessarily mean that social involvement caused higher economic performance. It could simply mean that high profits afforded companies the “luxury” of being socially involved.19 Such concerns can’t be taken lightly. In fact, one study found that if the flawed empirical analyses in these studies were “corrected,” social responsibility had a neutral impact on a company’s financial performance.20 Another found that participating in social issues not related to the organization’s primary stakeholders had a negative effect on shareholder value.21 Despite all these concerns, after reanalyzing several studies, other researchers have concluded that managers can afford to be (and should be) socially responsible.22