Page 176 - Performance Leadership

Chapter 10 The Social Role of Organizations • 165

The ISO definition highlights the triumvirate of economic, social,
and environmental issues, but focuses on benefiting not the organiza-
tion itself, but people, community, and society. The EU explicitly men-
tions business operations, but fails to mention that CSR needs to be
beneficial. My own definition of CSR is a combination of the two def-
initions:

Corporate social responsibility is a balanced approach for organizations to inte-
grate social and environmental concerns in business operations in a way that
aims to benefit the organization and its internal and external stakeholders.

The world’s most influential thinkers disagree on how to position
CSR. Nobel economist Milton Friedman is quite clear in his opinion 5
that the social responsibility of corporations is to maximize profits.
Managers are legal agents of the shareholders; their sole duty is to max-
imize the financial return to shareholders. Hence if they spend corpo-
rate funds for social purposes, they are essentially stealing from the
shareholders. The relationship between business and society is based
on creating and returning funds to the owners of the business. It is up
to shareholders to decide what to do with those returns—perhaps to
allocate the returns for social purposes or perhaps not. Kaplan and Nor-
ton, the creators of the balanced scorecard, have a similar approach.
They write, “The ultimate definition of success for public and non-
profit organizations is their performance in achieving their mission. Pri-
vate-sector organizations, regardless of industry sector, can use a
homogeneous financial perspective: increase shareholder value. Pub-
lic sector and nonprofit organizations, however, span a broad and
diverse set of missions and hence must define their social impact, their
6
high-level objective, differently.” This implies that private-sector organ-
izations do not have to define their social impact.
The well-known economist Peter Drucker comes from the same side
7
as Friedman, but he offers a slightly more nuanced view. Drucker
starts out by saying that “a bankrupt business is not a desirable employer
and is unlikely to be a good neighbor in a community; performance is
the institution’s first social responsibility.” He then adds that “manage-
ment must resist responsibility for a social problem . . . when the
demand goes beyond the institution’s competence.” And further, an
organization should ask itself, “do we possess authority in the area and