ABSTRACT

Globalization has radically altered our economic thinking. The breakdown of the former Soviet Union in the late 1980s led to the apparent decline of a centralized state that drew on a specific interpretation of Marxism. This was an ideological state which upheld apparently pro-worker strategies in which profit-making was highly despised. Contrarily, Milton Friedman, a renowned economist who had also won Nobel prize, argued that in a free society ‘there is one and only one social responsibility of business – to use its 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 and fraud’.1 For him, profit-making is not a taboo; one is authorized to make as much money as possible while conforming to the basic rules of society – both those embedded in law and those embedded in the ethical custom. Critical of social responsibility syndrome, he further argued that ‘[f]ew trends could so thoroughly undermine the very foundation of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible’.2 This is what companies are expected to do to fulfil their ethical responsibilities to the shareholders within legally set parameters. Nonetheless, if their actions do not align with society’s broader view of ethical behaviour, the entire organization is at risk. Acting ethically therefore becomes ‘one of the best insurance policies a company can have’.3 In the changed environment of globalization, the corporate houses are increasingly being drawn to social obligations that can be ignored only at their peril. Besides adhering to the laws of the country, the companies are expected to fulfil social expectations. What is most critical in today’s corporate governance is the articulation of social obligations in terms of what is defined today as corporate social responsibility (CSR). The basic argument is linked with the specific kind of corporate behaviour upholding the commitment not only to the shareholders but also to the stakeholders at various levels of society. Corporate houses are being, as the argument goes, ‘challenged to be inclusive, sustainable and socially responsible’.4 As early as 1939, David Packard, the co-founder of Hewlett Packard Company, thus proclaimed that

I think, many people assume, wrongly, that a company exists simply to make money. While this is an important result of a company’s existence, we have to go deeper and find the real reason for our being. As we investigate this, we inevitably come to the conclusion that a group of people get together and exist as an institution that we call a company so that they are able to accomplish something collectively that they may not accomplish separately – they make a contribution to society, a phrase which sounds trite but is fundamental.5