The Early CSR Debate in the United States

With the beginning of the twentieth century, the role of modern corporations in societal life increasingly became an issue of political discussion. The question was whether such incorporated companies, primarily seeking to maximise profits on behalf of their shareholders, should be seen as ‘essentially a private association, subject to the law of the state but with no greater obligation than making money, or a public one which is supposed to act in the public interest?’ (Micklethwait and Wooldridge 2005: p. 54).

As early as in 1916, John Maurice Clark doubts whether modern capitalism and this new type of corporations serve the interests of the community. In an article in the Journal of Political Economy, he writes: ‘We have inherited an economics of irresponsibility. (…) We need an economics of responsibility, developed and embod- ied in our working business ethics’ (Clark 1916: 210). And he concludes: ‘The world is familiar enough with the conception of social responsibilities (…) But the fact that a large part of them are business responsibilities has not yet penetrated…’

(Clark 1916: 229).

However, for various reasons this early critique received little attention. It was only after WWII, at the beginning of the 1950s, that economists, theologians and philosophers re-started the theoretical discussion about the role of business in soci- ety, which became later known as the early CSR discussion (Carroll 2009). This series of critical publications started in 1953 with Howard Bowen’s seminal book Responsibilities of the Businessman. Therein, Bowen asks whether corporations bear social responsibilities beyond compliance with the law and making profit on behalf of their shareholders. In his book, he assigns a social responsibility to the businessman, which is defined as an obligation ‘to pursue those policies, to make those decisions, or to follow those lines of action that are desirable in terms of the objectives and values of our society’ (Bowen 2013, p. 6). While economic success remains the primary task of the businessman, he is also seen as a partner of govern- ments who ‘is expected to cooperate with government in the formulation and execu- tion of public policy’ (Bowen 2013: 28). For Bowen, the businessman functions as a trustee ‘not alone for stockholders or owners, but also for workers, suppliers, consumers, the immediate community, and the general public’ and should therefore

‘serve as a mediator, equitably balancing the legitimate interests of the several prin- cipal beneficiaries of corporate activity’ (Bowen 2013: 48–49). With this idea of balancing economic and social interests against each other, Bowen laid the founda- tion for our contemporary understanding of CSR as a responsibility towards a com- pany’s stakeholders.

Although Marquis W. Childs and Douglas Cater in their book Ethics in a Business Society cast some doubts on the assumption that businessmen will balance various interests in society, stating that such Greek idea of ‘equilibrium’ is alien to the US business world (Childs and Cater 1954: 83), they, nevertheless, admit that American business has become more concerned vis-à-vis the social dimension of their busi- ness activities (Childs and Cater 1954: 98–99). However, they remain sceptical 3 Does CSR Limit Our Understanding of Business Ethics?

because they fear ‘that the doctrine of social responsibility espoused by business- men is merely a propaganda device by which they hope to maintain power’ (Childs and Cater 1954: 99)—a concern that never lost its topicality and which is still pres- ent in the contemporary debate about CSR.

Only few years later, in 1957, Morrell Heald expresses his beliefs that the US business world has changed during the 1950s and writes: ‘A prominent aspect of the new capitalism (…) is the emergence of a ‘corporate conscience’, a recognition on the part of management of an obligation to the society it serves’ (Heald 1957: 375).

In his book The Social Responsibilities of Business, first published in 1970, Heald upholds the above-mentioned ‘equilibrium idea’ of the establishment of a balance between the interests of business and society by business’ management as a sign for the new type of capitalism of the 1950s. And he adds—based on the statements of leading managers of the US-industry—that managers’ original role of trusteeship is now supplemented by new ideas like ‘team-leadership’ or ‘stewardship’ (Heald 2005: 274–275). However, he sees some clouds appearing at the horizon. If busi- ness increasingly assumes additional social responsibilities and engages for com- munities, then the lines between corporate obligations and governmental responsibilities concerning the provision of public goods are blurring (Heald 2005:

279–280). In want of a political theory assigning corporate and governmental duties in society, it becomes increasingly unclear who bears which responsibilities in society.

In the 1960s and 1970s, the discussion about CSR shifted from the question of the responsibilities of the businessman to a broader discussion about the interrela- tion between business and society. Thus, for example, Joseph McGuire (1963) in his book Business and Society asks the question about the role of the business firm in contemporary society and of its influence upon American culture. Interestingly, he thereby adds a new question to the discussion: If those who direct the fortunes of the giant corporations exercise power not only over the economic but also over the political and social destiny of the whole nation, ‘where do they obtain the authority to wield this power, and to whom are they responsible?’ (McGuire 1963: 138). The main assumption of early economic theories that private property legitimises the use of economic power no longer held as managers of large corporations did not own them anymore. Although McGuire does not outline this concept further, he never- theless prepares the ground for the idea of a ‘license to operate’ as rationale for business operations in stating that to obtain public approval business has to behave

‘in accordance with the laws and ethical percepts of society’ (McGuire 1963: 276).

In his book Corporate Social Responsibilities, also Clarence Walton rejects the idea that corporations should only follow their economic interests. Probably too optimistically he states: ‘Growing evidence indicates that the modern corporation is consciously placing public interest on a level with self-interest and possibly above it’ (Walton 1967, vii). In this new understanding of corporations as socially respon- sible ‘citizens’, managers have to keep in mind the interrelationship between econ- omy and society and should contribute to the community beyond delivering useful products and services, paying salaries to their employees or generate dividend for their shareholders. ‘There is no denying the fact that citizenship entails additional

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burdens, but the evidence appears strong that corporate executives are willing to shoulder these responsibilities as part of their professional obligations’ (Walton 1967: 110).

By and large, this early debate on CSR is concerned with the role of business in and for society. Criticising the common understanding that making business is a private concern and separated from other spheres of society, the proponents of the concept of corporate social responsibility believe that business is a part of society and should be embedded in a set of commonly shared values. Business, therefore, should be conducted in a way that is supportive for the execution of public policy (Bowen 2013: 28) and which is in line with the objectives and ethical values of a society (Bowen 2013: 6). In general, the business-world should be aware of its dif- ferent social responsibilities vis-à-vis various groups in society.

This general idea is reflected in at least three specific issues. A first point con- cerns the excessive profit orientation of modern companies. The respective authors criticise the liberal doctrine of making profit as the best way to serve public wealth.

Although they see the pursuit of economic success as legitimate target in business, they doubt that monetary interests should always range before the interests of the community and that company earnings should go at the expense of the majority of the society (Bowen 2013: 48–49).

A second point is related to the issue of responsible management and the profes- sional role of managers. Managers are entrusted with power and, therefore, should act responsibly. As stewards of corporate assets entrusted to them by the community they have to use these assets not only in the interest of the company’s shareholders, but also in the interest of the society as a whole (Heald 2005: 274–275). Hence, responsibilities vis-à-vis the society have to be seen as part of the personal profes- sional obligations of managers (Walton 1967: 110).

Third, the early proponents of the idea of CSR argue that in modern capitalism a corporation’s license to operate can no longer be based on the idea of arbitrary use of private property. With the separation of ownership from management and since business affects the social life in many ways, corporations should prove that their policies do not follow pure economic interests but are in line with ethical norms and societal expectations of society to be granted with a socially legitimised license to operate (McGuire 1963, p. 276).

Admittedly, this early discussion mirrors a widely accepted but rather unspecific unease about developments in modern capitalism that were considered to be harm- ful for society. The discussion was far away from delivering a new management conception, which would allow for integrating the idea of corporate social responsi- bility into management doctrine or practice. However, a new idea has rooted in the academic world, and it took only a few years until a first management-oriented conception of CSR was offered by Archie Carroll’s (1979) Three-Dimensional Conceptual Model of Corporate Social Performance. In his contribution, Carroll defines four types of corporate responsibilities (Carroll 1979, 1991; Pinkston and Carroll 1996): (1) Corporations bear an economic responsibility and should run their business in a profitable manner; (2) they bear a legal responsibility and should obey the law; (3) they bear an ethical responsibility and should respect the demands 3 Does CSR Limit Our Understanding of Business Ethics?

of their stakeholders; and (4) additionally, they bear philanthropic responsibilities and should contribute to the common wealth by philanthropic engagement as good corporate citizens. This widely regarded new approach to CSR allowed it to inte- grate specific aspects of corporate responsibility into management practice by defin- ing clear requirements for managerial behaviour and decision-making. With this model, the discussion about corporate social responsibility not only shifted away from until then vague ideas about what social responsibilities corporations should bear but also became a conception for practical use.

However, this operationalisation of CSR for management practice departed from the original, broader CSR discussion about redefining the role of business in society.

The focus of the CSR debate was narrowed down to the practicability of different CSR strategies and the ways of how they should be implemented into day-to-day business operations. From this managerial perspective, the question was no longer, what responsibilities corporations reasonably should bear, but how such predefined types of responsibilities could be implemented, and which instruments can be used to make a corporation a ‘socially responsible’ one.