1. In financial terms, there is a positive correlation between corporate social performance and corporate financial performance (this correlation is discussed in both the reading and the video). It is unclear, however, which way the causality goes; i.e., does CSR increase profits, or do increased profits benefit CSR? Which way do you think it goes? Why?

2. In the reading, which ethical theory provides the strongest moral argument in support of CSR? Explain.

3. In the video "What is CSR?" by Alexandre Magnin, find the 7 benefits for CSR and list them here. Which do you think is the most important benefit? Why? Which is the least important?

4. In the video, between IKEA, Patagonia, and Starbucks, which firm's CSR strategy did Magnin describe as "real" and which did he describe as "fake?" Do you agree with his assessment? Why or why not?

7. The firm in society

Businesses as a whole command enormous resources, and as a result can have an enormous impact on society. One way that businesses impact society, of course, is by producing goods and services and by providing jobs. But businesses can also impact society by trying to solve social problems and by using their resources to influence states laws and regulations.

7.1 Corporate social responsibility

Corporate social responsibility, or CSR, is typically understood as actions by businesses that are (i) not legally required, and (ii) intended to benefit parties other than the corporation (where benefits to the corporation are understood in terms of return on equity, return on assets, or some other measure of financial performance). The parties who benefit may be more or less closely associated with the firm itself; they may be the firms own employees or people in distant lands.

A famous example of CSR involves the pharmaceutical company Merck. In the late 1970s, Merck was developing a drug to treat parasites in livestock, and it was discovered that a version of the drug might be used treat River Blindness, a disease that causes debilitating itching, pain, and eventually blindness. The problem was that the drug would cost millions of dollars to develop, and would generate little or no revenue for Merck, since the people afflicted with River Blindnessmillions of sub-Saharan Africanswere too poor to afford it. In the end, Merck decided to develop the drug. As expected, it was effective in treating River Blindness, but Merck made no money from it. As of this writing in 2016, Merck, now in concert with several nongovernmental organizations, continues to manufacture and distribute the drug for free throughout the developing world.

Corporate social responsibility, or CSR, is not the only term that business ethicists use to describe actions like Mercks. They might also be described as an example of corporate citizenship or corporate sustainability. It is doubtful that anything important hangs on ones choice of labels.

The scholarly literature on CSR is dominated by social scientists. Their question is typically whether, when, and how socially responsible actions benefit firms financially. The conventional wisdom seems to be that there is a slight positive correlation between corporate social performance and corporate financial performance, but it is unclear which way the causality goes.

That is, it is not clear whether prosocial behavior by firms causes them to be rewarded financially (e.g., by consumers who value their behavior), or whether financial success causes firms to engage in more prosocial behaviors (e.g., by freeing up resources that would otherwise be spent on core business functions). Since our concern is with normative questions, we will focus on moral reasons for and against CSR.

Some writers connect the debate about CSR with the debate about the ends of corporate governance. Thus Friedman objects to CSR, saying that managers should be maximizing shareholder wealth instead. Stakeholder theory is thought to be more accommodating of prosocial activity by firms, since it permits firms to do things other than increase shareholder wealth. But we do not need to see the debate about CSR as arguments about the proper ends of corporate governance. We can see it as a debate about the means to those ends, with some arguing, and others denying, that certain acts of prosocial behavior are required no matter what ends a firm pursues.

Many writers give broadly consequentialist reasons for CSR. The arguments tend to go as follows: (1) there are serious problems in the world, such as poverty, conflict, environmental degradation, and so on; (2) any agent with the resources and knowledge necessary to ameliorate these problems has a moral responsibility to do so, assuming the costs they incur on themselves are not great; (3) firms have the resources and knowledge necessary to ameliorate these problems without incurring great costs; therefore, (4) firms should ameliorate these problems. The view that someone should do something about the worlds problems seems clearly true to many people. Not only is there an opportunity to increase social welfare by alleviating suffering, suffering people may also have a right to assistance. The controversial issue is who should do something to help, and how much they should do. Thus defenders of the above argument focus most of their attention on establishing that firms have these duties, against those who say that these duties are properly assigned to states or individuals.

Defenders argue that firms are agents of justice, much like states and individuals, and have duties to aid the needy. We legitimate altruistic behavior by firms by undermining the claim that shareholders own them, and so are owed their surplus wealth. And even if we concede that firms

do not have social obligations, individuals have them, so the best way for many individuals to discharge them is through the activities of their firms.

Debates about CSR are not just debates about whether specific social ills should be addressed by specific corporations. They are also debates about what sort of society we want to live in. While acknowledging that firms benefit society through CSR, some think it is a mistake for people to encourage firms to engage in CSR as a practice. When we do so, we cede a portion of the public sphere to private actors. Instead of deciding together how we want to ameliorate social ills affecting our fellow community members, we leave it up to private organizations to decide what to do. Instead of sharpening our skills of democracy through deliberation, and reaffirming social bonds through mutual aid, we allow our skills and bonds to atrophy through disuse.

7.2 Firms, governments, and political CSR

Many businesses are active participants in the political arena. They support candidates for election, defend positions on issues in public debate, lobby government officials, and more. What does business ethics say about these activities?

Social scientists have produced a substantial literature on corporate political activity (CPA). This research focuses on such questions as: What forms does CPA take? What are the antecedents of CPA? What are its consequences? CPA raises many normative questions as well.

One question is whether firms are the right type of entities to engage in political activity. In large states, citizens often find it useful to join associations of like-minded others, the purpose of which is to represent their views in political decision-making. But while organizations like the Republican Party and the Sierra Club are suitable participants in the political arena, it is not clear that organizations like Merck or Wal-Mart are. This is because they have no recognized role in the political process, and citizens do not join or leave them based on political considerations. Some have criticized the U.S. Supreme Courts majority decision in Citizens Unitedwhich affirmed and enhanced firms rights to participate in political discourseon this basis. Alternatively, we might see firms as legitimate speakers on behalf of certain points of view.

Scholars have also raised questions about the goals of CPA. One thing a firm might do when it engages in CPA is provide valuable information to government officials. Society has an interest in knowing how proposed economic policies will affect firms; firms themselves are a good source of information on these questions. But some worry that firms more often engage in CPA in order to advance their own interests at the expense of their competitors. This activity is sometimes described, and condemned, as rent-seeking. Questions have been raised about the nature and permissibility of rent-seeking. According to standard definitions, rent-seeking is socially wasteful economic activity intended to secure benefits from the state rather than from the market. But there is disagreement about what counts as waste. Lobbying for agricultural subsidies is often described as a rent-seeking activity, but it can be important to secure a nations food supply. A related issue is whether firms are permitted to engage in rent-seeking behavior. The structure of the problem appears to be that of a prisoners dilemma: individual firms often do better if they engage in rent-seeking, but the economy as a whole does worse if all firms engage in it.

The forms of CPA identified aboveparticipating in public discourse and lobbying government officialsgo through the formal political process. But firms are increasingly engaging in what appears to be political activity that goes around or outside of this process, especially in circumstances in which the state is weak, corrupt, or incompetent. In the world today, firms are providing public goods such as healthcare and education, protecting peoples citizenship rights, and helping to create and enforce systems of private regulation or soft law. For example, when the Rana Plaza collapsed in Bangladesh in 2013, killing more than 1000 garment industry workers, new building codes and systems of enforcement were put into place. But they were put into place by the multinational corporations that are supplied by factories in Bangladesh, not by the government of Bangladesh. Writers characterize these activities as political because they are the kinds of actions that states normally perform, or should perform. These new forms of CPA called political CSRhave raised questions about the legitimacy of firms actions in democratically governed states.

If firms behave like states, then they must be governed like states. The form of governance must involve deliberative dialog among all stakeholders who are affected by a firms actions. Examples of this type of governance arrangement are multi-stakeholder initiatives (MSIs) that

bring together firms, non-governmental organizations, and members of local communities to deliberate and decide on policy matters, such as the Forest Stewardship Council (FSC), the Roundtable on Sustainable Palm Oil (RSPO), and the Extractive Industries Transparency Initiative (EITI). Against this, critics have charged that multi-stakeholder initiatives, while effective in producing dialog among stakeholders, are ineffective at holding firms to account. There is little doubt that firms can benefit society through political CSR. The building codes put into place by Western multinationals may well save the lives of many Bangladeshi garment workers. Unless new forms of corporate governance can be devised, however, these benefits may come at a cost to democratic self-rule.

A still more subtle way that firms can engage in political activity is through the exercise of their property rights. A firm might move out of a state in response to the passage of a law it does not favor, or it may threaten to move out of a state if such a law is passed. This may cause the states citizens to revise or edit their political decisions. As with certain cases of political CSR, we may applaud the results of this kind of political activity. Many applauded when the state of Indiana revised its law permitting discrimination against members of the LGBT community (on grounds of religious liberty) in response to claims by powerful firms, such as Salesforce.com and Angies List, that they would scale back their economic activity in the state. But it is unclear whether such behavior by firms should be encouraged. We may wish to draw a distinction between private individuals influencing political decision-making by exercising their property rights and firms doing the same thing.