Chapter 5: The Whats, Whys, and Hows of Corporate Social Responsibility

While the role of corporations vis-a-vis society has been of longstanding concern, their engagement in corporate social responsibility is fairly recent. Corporate social responsibility (CSR) was coined in the 1950s and is today an essential part of corporate strategic planning. Yet Adam Smith, an 18th century economist and author of the Wealth of Nations and Milton Friedman, a prominent economist and follower, discussed the concept many years earlier. Smith posited the “invisible hand” of capitalism in which people vote with their dollars (Friedman, 1963/2009). Thus, each stakeholder would vote according to his/her own self-interests, guiding firms to provide goods and services accordingly. Friedman more bluntly argued that business only has a profit-making role and any involvement in philanthropy takes away from what belongs to one group of stakeholders, the shareholders. He firmly believed that the business of business is business (Friedman, 1970/2007).