Corporate citizenship is an issue surrounded by controversy. Some researches support it by stating that companies have a social responsibility whereas the others maintain that the sole purpose of businesses is to make profits. In the literature, it is very difficult almost impossible to find a precise definition of corporate citizenship. Moreover, the linkage between utilitarianism and corporate citizenship is lacking. The utilitarianism theory, however, can be applied to address the issue of corporate citizenship. This theory acknowledges the role of companies as tools for accumulating wealth while at the same time puts some social responsibility on them. By applying this above-mentioned theory, managers can evaluate all the alternatives and select the one with the most beneficial outcomes to both the company and society; hence, balancing the conflicting interests of shareholders and those of society.
The issue of corporate citizenship has been a subject of debate for the past six decades. Eventually, the definition of corporate citizenship has been changing. The traditional view of corporate citizenship focused narrowly on philanthropy, which then shifted the focus on the relationship between business and society, and especially on the contribution of a company with respect to addressing social problems (Stitzer 45). The present day view of corporate citizenship is broader. Basically, organizations have to take into account societal interests through being responsible for how their activities affect the stakeholders such as communities, shareholders, employees, suppliers, and customers as well as the environment (Kotler and Lee 26). This responsibility requires a company to observe the law and legislation and willingly adopt the initiatives aimed at improving the wellbeing of society. Thus, corporate citizenship simply denotes the strategies adopted by companies to ensure that they act in a society friendly and ethical manner (Stitzer 45). There is a considerable heterogeneity with respect to the approaches and theories of corporate citizenship. In this paper, the issue of corporate citizenship will be analyzed through the lens of utilitarianism theory.
Ethical Issue – Corporate Citizenship
Corporate citizenship is becoming a popular catchphrase in the world of business, which is conceptualized when the companies are engaging in activities that can be described as social benefits and responsibility with regard to society. The scope of these activities is considerable and can encompass funding the schools and promoting socially responsible business practices to better the society among others. As it was mentioned earlier, the issue of corporate citizenship has been a hot issue for a long period of time. The core of this debate is whether the companies exist for the sole purpose of profit-making or they are also required to consider the environment and social concerns affecting society (McWilliams et. al. 17). Those researchers, who take the stance that the only aim of the operating company is to make profits, maintain the opinion that the market plays an intermediary role with regard to the allocation of resources. Thus, the allocation of resources for tackling environmental and social causes is an issue left for the market to handle (Tota and Shehu 555). The market in this sense represents the government and non-profit organizations. Moreover, those opposed to corporate citizenship believe that companies exist only to manufacture products/services instead of handling welfare activities (Stitzer 58). So, if managers focus their efforts on social responsibilities, then they are not engaging in their core duties for the firm at maximum capacity (Windsor 100). Lastly, they maintain that corporate citizenship is a costly undertaking for companies.
On the other hand, those sharing the view that firms have a social and environmental responsibility maintain that the market cannot be left to handle everything, which poses the need to have a mechanism for processing social and environmental causes (Kotler and Lee 30). The adherents of corporate citizenship view it as the right thing to do. This is because some of the societal problems like low wages and pollution are directly linked to the activities of companies. They also argue that companies have an access to the resources required to solve the bulk of problems that society has (Stitzer 60). Also, those people who support the notion of corporate citizenship stated that if companies are not socially responsible, the government will establish the regulations for fining those, which has been the case for the issue of environmental pollution. Thus, the companies can avoid a government intervention if they demonstrate a social responsibility (Kotler and Lee 29). Finally, corporate citizenship can contribute to profitability through enhancing the public image of companies.
An examination of both sides of the argument and considering the corporate citizenship attempts reveals that companies should be responsible for deleterious impacts associated with their activities. These days, corporate citizenship appears to be a trend since various corporations have realized that their activities are having disastrous impacts on society, especially for the case of industrial companies (Tarí 623). Another issue that emerges regarding corporate citizenship relates to whether companies can adopt a responsibility voluntarily or under some form of control (mandatory corporate citizenship). There is an agreement that corporate citizenship is being enforced instead of being embraced voluntarily, which suggests that companies are interested in corporate citizenship, but have to be forced to be responsible (McWilliams et. al. 16;Tota and Shehu 555). Applying the utilitarianism theory on the issue of corporate citizenship can provide some insights to resolving this debate – whether companies should operate solely to generate profits or whether they should show a careful consideration for social and environmental causes.
In scientific resources on corporate social responsibility, a precise definition of corporate citizenship is not given. Moreover, the relation between utilitarianism and corporate citizenship is not clearly stated either. There are various perspectives of corporate citizenship presented in the literature, which include ethical and economic perspectives (Renouard 85). The ethical perspective of corporate citizenship emphasizes that the role of the company with regard to society and various stakeholders is considerable. On the other hand, the economic view emphasizes that companies must first make profit for its shareholders, and only then, they might elect to show a social accountability. It happens very often when the authors attempt to illustrate that different corporations can use corporate citizenship as a tool for enhancing their financial performance or competitive advantage (Kotler and Lee 30; McWilliams et. al. 16). Also, these authors underline the likely linkage between a social and financial performance. These conflicting perspectives, however, are underpinned by two schools of philosophical thought, which are the utilitarian perspective and the Kantian perspective (defense of individual capabilities and rights, and human dignity) (Renouard 85). The paper focuses on utilitarianism, which refers to a philosophical school of thought that seeks to maximize the happiness of as many individuals as possible (Mill 45). Essentially, utilitarianism refers to consequentialism in the sense that that it focuses on the outcomes associated with the actions rather than intentions (Yunus 125). Through the utilitarianism perspective, corporate citizens are encouraged to maximize the wellbeing of the public.
Ethical Theory in Handling the Issue
The ethical theory that can be used to handle the issue of corporate citizenship is utilitarianism. Under the utilitarian theory, companies are viewed as a component of an economic system wherein their function is profit maximization (Tseng and Fan 326). The notion of corporate citizenship has appeared following the acknowledgement that economics of responsibility is needed, which is to be entrenched in the business ethics adopted by a company. Consequently, the conventional laissez-faire approach for doing business shifts the individualism towards a public control, and personal responsibility towards a social responsibility (Renouard 87). In addition, utilitarianism is akin to instrumental theories, whereby the company is viewed as the only instrument for wealth generation, and its social activities are only perceived as a means for achieving economic results (Windsor 100). Instrumental theories approach the fundamental notion that investing in a local community will, in the long run, offers the amenities and resources to the people of that particular community (Tota and Shehu 555).
The utilitarian approach to corporate citizenship has some association with the competitive advantage strategies adopted by the companies (Renouard 86). In this way, corporate citizenship is beneficial for an organization which can leverage to gain a competitive advantage. Therefore, the companies make use of altruistic social activities as marketing the tools. The utilitarian theories are further classified into two, which are the notion of functionalism and the social costs of the company (Stitzer 60). The social cost theory forms a foundation of corporate citizenship whereby the corporate non-economic forces have an influence on a socio-economic system of community (Renouard 87). The social cost theory is also referred to as an instrumental theory since it assumes that corporate citizenship is used by the organizations to achieve an end goal, which results in the view that a company’s social power depends on its relationship with society (Renouard 85). Based on this view, it is evident that the utilitarian theory proposes that companies should embrace social duties. With respect to the functionalist view of the utilitarian perspective, companies are considered to be a constituent of an economic system which goal is to make profit. Furthermore, companies are perceived as forms of investments that should make profits to stakeholders and investors (Stitzer 87). From the internal perspective of the company, corporate citizenship was developed as a defense mechanism against outside attacks due to the need to balance profit-making and social responsibilities for achieving certain equilibrium in economic system.
Besides CSR benefiting the company from a utilitarian perspective, it also serves to favor other stakeholders since its emphasis is placed on promoting the best outcome possible in an impartial manner. Utilitarians maintain that the best outcome possible is that which maximizes the happiness. In the context of corporate citizenship, utilitarians share the view that organizations have a moral responsibility to promote an outcome that considered the best possible in an impartial manner. Impartiality here means that the outcome is impartial as it depends on the beneficiary and benefactor (Renouard 85). This means that companies have an equal obligation of promoting the happiness of strangers as well as those having a close relationship with the company such as employees and customers.
Pros and Cons of the Way It has been Treated
A notable strength of the utilitarianism perspective in corporate citizenship is that it strives to strike a balance between the profit-making objectives of corporations and their social and environmental responsibility. The utilitarianism view assumes that companies have a role to play in society by acting as tools of wealth creation. Therefore, the company is allowed to leverage corporate citizenship for profitability. At the same time, the followers of utilitarianism maintain that companies have to promote utility for everybody and not only for the organization. In this way, the utilitarian theory seems to provide a solution to the corporate citizenship debate by suggesting that companies can still be socially responsible while at the same time make profits.
A weakness of the utilitarian perspective in the context of corporate citizenship is that it is extremely demanding. This approach to corporate citizenship requires the corporations to devote considerable proportions of their resources towards helping the unprivileged from across the globe. In addition, the utilitarian approach to corporate citizenship requires that corporations should not discriminate anyone when undertaking their social responsibilities, which presents considerable practical challenges for companies (Stitzer 90). Theoretically, there are some reasons that might compel the companies to favor some groups as a means of maximizing happiness. For instance, a company might opt to adopt social initiatives in poor while ignoring well-off areas. In this way, the company appears to be discriminatory when in real sense it is trying to maximize an utility.
The utilitarianism principle provides a framework that can guide business managers on matters regarding corporate citizenship. Moral philosophy represents the values, rules, and principles that one might use to determine whether an action is wrong or right. The utilitarianism theory can be applied in managerial decision-making. By using utilitarianism, managers can avoid dishonesty, financial deception, and corporate greed, which is often associated with egoism (Stitzer 89). In fact, managers who base their decisions on egoism are more inclined to make false promises to their relevant stakeholders including employees, customers, and the government among others.
The ethical theory of utilitarianism seeks to ensure that the largest number of people benefit from the decision made. Business managers who base their decisions on this theory can make ethically sound decisions and create value for their organizations and other stakeholders. This is because they are able to balance the conflicting needs of society and those of shareholders. By applying the utilitarian theory of ethics, managers are supposed to develop numerous reasonable options and chose the one having the greatest possible benefit for the largest number of people (Stitzer 90). An action that results in more good when compared to harm is often ethically justified.
Another implication of the utilitarianism principle is that it teaches managers to go beyond their interests and those of the company to focus on the broader societal interests. For such managers, the bets action is not that which favors the company alone but also the society (Tarí 628). In addition, by applying utilitarianism, managers teach themselves to consider the costs associated with a particular course of action to the company and society, which will reduce the probability of underestimating the potential harm associated with the activities of the company (Stitzer 85). The utilitarian theory also educates the managers not to put a lot of emphasis on economic value, but also prioritize a social one. A case in point is when a company is faced with the ethical dilemma of constructing a factory that will pose health hazards to the local community while at the same time creating the jobs for them and make profits for the shareholders. When utilitarianism is applied, the manager will consider numerous alternatives and evaluate them based on their outcomes on those involved.
The utilitarianism theory is a dominant ethical perspective that fits well with the free market view and economics; as a result, it has had a significant influence on thinking regarding business and management. This theory underpins the importance of considering the outcomes of an action rather than an intent. In this way, the best course of action is that which would lead to the greatest usefulness. Organizations can leverage the benefits associated with utilitarianism through evaluating the social and economic impacts of their activities on their stakeholders. The utilitarian theory also acknowledges the functional role of companies, and thus strives to balance the conflicting interests of shareholders and those of society.