The Social Responsibility of Corporations Is To....

Milton Friedman (1962, 1970: 33) famously asserted, "There is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." His 1970 article in the New York Times Magazine elaborates his rationale, including the misuse of principal's investment capital by the agent and the notion that social responsibility equates to a pseudo-tax of the corporation.

In the past decade or so, though debates about corporate social responsibility (CSR) remain (May, Cheney, & Roper, 2007), most practitioners and academics have moved beyond Friedman's thinking, determining that CSR provides numerous benefits both to the organization and to multiple stakeholders. Job applicants find organizations with CSR programs as more attractive places to work, customers value the community commitment implied by CSR, and CSR initiatives bestow a license to operate in the local community. Some research suggests that CSR programs can provide a financial advantage or a tax reduction. (I won't even mention how CSR can't possibly make up for the externalities involved in industry.) In 2013, India mandated that corporations meeting certain criteria spend 2% of its profits (determined by averaging profits in the past three years) on CSR programs. Even without these incentives or requirements, some executives firmly believe that good ethics demand investment in CSR.

This is not to say that CSR programs give firms leave to perform irresponsibly in other areas or that all CSR programs are created equal. In some cases, companies with a reputation for CSR can pay a penalty in reputation costs when they engage in harmful behavior. If CSR initiative are seen as inauthentic or fail to resonate with the company's strategic mission, values, or core competencies, stakeholders will be suspicious of them. Overall, though, investment in CSR should be viewed as a necessary strategic initiative.

Although companies provide varying levels of detail on public pages, then often like to tout their CSR and environmental programs with extensive information and photographs. I was surprised , when I was researching Amazon's CSR activities for this blog, to find very little on their website relating to community involvement and corporate philanthropy. After some digging, I found a very sparse section on "Amazon in the Community." There, the company summarizes their philosophy on CSR:

At Amazon, if we do our job right, our greatest contribution to the good of society will come from our core business activities: lowering prices, expanding selection, driving convenience, driving frustration-free packaging, creating Kindle, innovating in web services, and other initiatives we'll work hard on in the future.

I couldn't really believe it: this credo seems straight from Friedman! As reported by Slate, complaints about Amazon's penuriousness were published as early as 2007. In 2012, The Seattle Times called Amazon a "virtual no-show in hometown philanthropy." Their article reported, "several current and former Amazon employees said they have wanted to change the company culture to encourage more giving. But colleagues told them not to bother — they'd be better off figuring out how to do good on their own." One employee who asked if he could arrange for a donation to a non-profit directly from his paycheck was informed he would be charged a 6% fee by the payroll provider.

Since these exposés, Amazon seems to have increased its CSR activities. Their community page lists a number of non-profit organizations who have received grants or in-kind donations. Amazon also mentions employee volunteer efforts, but provides no details. Even before Amazon was criticized for their lack of largess, they did use their visibility to increase donations from individuals. After 9-11, Hurricane Katrina, the Japanese Tsunami, and Hurricane Sandy, Amazon posted notices that allowed their customers to make 1-click donations to the American Red Cross.

More recently, they have introduced Amazon Smile. When customers shop through the smile.amazon.com portal, 0.5% of their purchase total is donated via the AmazonSmile Foundation to a non-profit selected by the customer. (On Huffington Post, Brady Josephson warns how this program might prove disadvantageous to charities.)

Though Amazon has made some positive strides in the past few years, primarily by encouraging giving through customer efforts, as well as through increased donations to non-profit organizations, to meet the minimum expectations of key stakeholders, they need to increase their CSR efforts. Some stakeholders who are dissatisfied with current efforts include employees, vendors, and the local community. Simply by listening to the needs of these groups and determining how they might meet these needs through their core competencies would be a productive starting point. Outlining strategic CSR focus areas can maximize the impact of the CSR initiatives. Employing a corporate social responsibility professional can give CSR a higher profile in the company and give a centralized point for coordination and logistics and offer consistency and better communication.

As both an intrigued observer and Amazon customer, I am hopeful that Amazon will continue to build on the momentum generated by the launch of AmazonSmile.

References

Friedman, M. 1962. Capitalism and freedom. Chicago: University of Chicago Press. 

Friedman, M. 1970. "The social responsibility of business is to increase its profits," The New York Times Magazine: 32-33.

May, S., Cheney, G., & Roper, J. 2007. The debate over corporate social responsibility. Oxford: Oxford University Press.