To understand the current state of Corporate Social Responsibility (often times called CR or CSR), it’s useful to look at the history of Corporate Social Responsibility. While corporations have been around since the Dutch East Indies Trading Company incorporated in 1602, their rapid rise in the 1790’s in America and Western Europe brought corporations into global prominence. By this time, issues between workers and the wealthy owners of corporations were commonplace (the first strike in America was in 1768), but it was the rise of unions through the industrial revolution in the mid 1800’s that enabled workers to leverage collective bargaining for safer, more secure, and more equal jobs. The growth of both companies and unions led governments to ultimately get involved to help define the role of corporations in society, a debate that is still very much alive.
In 1925, American President Calvin Coolidge famously said, “The chief business of the American people is business,” reflecting the broader notion that if the USA grew businesses, it would create prosperity for all. The proliferation of different legal entities (i.e. C-Corporations, Limited Liability Corporations, Partnerships, Limited Liability Partnerships, etc.) throughout the 20th century enabled more types of business to rise and prosper, with their investors and leaders given more legal protections. Laborers were weakened during this time to help promote the growth of business, yet as activism increased after World War II and The Great Depression, people became activists against companies, too – sometimes the very ones that employed them.
American economist Howard Bowen invented the term “corporate responsibility” in his 1953 book, Social Responsibilities of the Businessman, and has since become known as the “father of CSR.” A slew of other books quickly followed, including Joseph W. McGuire’s 1963 Business and Society, and Clarence C. Walton’s 1967 Corporate Social Responsibilities. In 1971, the Committee for Economic Development put forth the idea of a “social contract” when it published a three-tiered model of Social Responsibilities of Business Corporations. According to the Association of Corporate Citizenship Professionals: “The social contract is based on the idea that business functions because of public ‘consent,’ therefore business has an obligation to constructively serve the needs of society. This is often referred to today as ‘license to operate’ – that is to contribute more to society than solely their products for sale.” In 1976, professor Sandra L. Holmes created the first CSR survey, and shared results in a report, Executive Perceptions of Corporate Social Responsibility. In 1979, Archie B. Carroll, in his work A Three-Dimensional Conceptual Model of Corporate Performance, summarized that that companies (1) adopted principles, (2) created formal processes to achieve principles, and (3) developed policies to align the company. With these books, the idea of CSR was introduced to the public consciousness.
On the other hand, Milton Friedman’s Shareholder Theory, which was first published in the 1970’s and rose to rapid prominence in the 1980’s, stated that a firm’s responsibility is only to its shareholders. Around the same time, Peter Drucker’s Management by Objective principles, which took hold in MBA programs around the world, gave corporate leaders the tools to become profit maximizing machines in the 1990’s and early 2000. To cement their intent, the Business Purpose Roundtable, a convening of the world’s most successful CEO’s signed a declarative statement in 1997 that said, “The paramount duty of management and of boards of directors is to the corporation's stockholders”. Indeed, these principles were upheld in US courts in the landmark case eBay v. Newmark (Craigslist) in 2010, where the Court ruled that “Directors cannot . . . defend a business strategy that openly eschews stockholder wealth maximization.” In 2012, Chief Justice of the Delaware Supreme Court Leo Strine, Wake Forest L. Rev wrote, “The object of the corporation is to produce profits for the stockholders and . . . the social beliefs of the managers, no more than their own financial interests, cannot be their end in managing the corporation.”
Workers, citizens, and communities, empowered by online review systems, open forums, and social organizing means, rose against this philosophy of ‘shareholder capitalism’ and forced companies to evolve their thinking to include stakeholders across society. Social critique against companies increased as trust in companies declined, influenced strongly by the massive inequalities between shareholders of large corporations and their employees and competitors. The Edelman Trust Barometer themed its 2019 report “Trust at Work” showing a shift in what matters most for companies to participate in society - they must be trusted. Corporate citizenship has grown in the last couple decades through PR activities in an attempt to rebuild goodwill. Starbucks, an early adopter of highlighting corporate commitment to the world, brought “conscious capitalism” front and center with ideas like “it’s one cup, one planet,” where consumers could make up for their choices that hurt the planet by making coffee purchases that were supposedly doing some environmental good. Philosopher Slavoj Zizek, in his 2009 book, First as Tragedy, Then as Farce (summary video here), berated this idea, sharing that it was akin to demolishing communities with one’s left hand in the morning, only to help rebuild them in the afternoon with their right hand. In his 2018 book, “Winners Take All: The Elite Charade of Changing the World”, author Anand Giridharadas built on this critique and pummeled businesses, wealthy foundations, and philanthropists saying that the act of “giving back” was not sufficient to mitigate the harms and inequalities created by their core operations. In other words, generating wealth through irresponsible activities could not be redeemed by then giving away a portion of the profits.
Businesses began to notice this tide of resistance. In January of 2019, Larry Fink, CEO of Blackrock, one of the world’s largest investment banks, declared that clients must “contribute to society, or risk losing our support.” In 2019, the Business Purpose Roundtable modified a 20-year-old mission statement on the purpose of business, moving away from the outdated idea that businesses only exist to maximize shareholder wealth, and toward a more inclusive idea that, businesses must also exist to benefit their employees, supply chain, and the communities they operate in. The 180 CEO’s that signed this - including those from Amazon, Pepsi, and IBM - realized that they no longer had a choice. According to Deloitte’s 2019 Human Capital Trends Report, this year marks the rise of the “social enterprise”, a business model that combines profit-making with activities that respect and support the environment and its stakeholder network. According to Deloitte, an “Intensifying combination of economic, social, and political issues is forcing HR and business leaders to learn to lead the social enterprise—and reinvent their organizations around a human focus.”