ESSAY QUESTION: 'Corporate social responsibility strengthens corporate reputation and performance'. Discuss this statement using relevant management theory, research and concepts. Please see Marking...

Assignment
CSR & Management theories
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Introduction
Corporate Social Responsibility[CSR] strengthens corporate reputation and performance. The
term CSR was introduced way back in the 1950’s and has gained momentum since. The meaning
of CSR varies across organizations, some consider it to be a legal obligation while some take it
as doing what’s ethically correct. Some consider it as an act of charity and some as a duty to
respond in a socially responsible way. Corporate Social responsibility today is an indispensable
management concept. The purpose of any organization today is not merely driven by economics
but also by the social value it adds to the community.
The management theories that have developed around CSR can be broadly classified under -
Instrumental, Political, Integrative and Ethical. This paper will defend the claim that yes
Corporate Social Responsibility strengthens the reputation and performance of an organisation.
The paper will first explain the concepts of Social Responsibility, Corporate Reputation and
performance followed by an analysis of the management theories that support our claim through
research and evidence.
Corporate social responsibility entails the establishments of an ethical association between an
organization and its stake holders which is governed by transparency. It espouses the setting of
goals and objectives that is well-matched withthe sustainable development of our community and
environment.
Corporate Reputation refers to the way an organization is judged by both internal and external
stake holders based on its financial performance, its impact on the environment and the social
initiatives undertaken.
Corporate performance on the other hand can be determined based on factors such as revenue
generated, return on investment received and operational costs incurred.
Porter and Kramer (2006) state that an organization and the society in which it operates is
interlinked and interdependent because the organizations actions have a direct impact on the
community which can be either positive or negative. Hence an organization that impacts the
society in a positive way will have a good reputation. Good CSR initiatives can enhance the
performance of an organization as well since it helps in employee retention. It can strengthen the
bond that employees share with their organization and motivate them to perform better and
remain loyal to their organization. (Pearce & Doh, 2005).
The Management theories in support of CSR can be classified under – Instrumental,
Political, Integrative and Ethical.
Instrumental theory assumes that the business entity is solely an instrument for generating
wealth and that this is its only objective and social responsibility. The relationship between an
organization and the society in which it operates is merely economic. These theories support the
view that CSR initiatives should lead to an increase in the performance of the organization
through the generation of more profits. In support of this view (Friedman,1970) stated that ‘‘the
only one responsibility of business towards society is the maximization of profits to the
shareholders within the legal framework and the ethical custom of the country’’.
The Agency Theory of Management which is a part of the Instrumental Theory highlights the
importance of maximising shareholder value. Only those CSR initiatives should be undertaken
that increases the value received by shareholders but within the legal and ethical
framework.(Jensen and Meckling, 1976; Ross, 1973).
A second group of theories under Instrumental theories focus on strategies that help gain
competitive advantage.(Husted and Allen ,2001) state that good CSR initiatives can augment the
performance of an organization as it leads the organization to have a competitive advantage over
its competitors. This theory somehow contradicts Friedman’s theory of solely maximising profits
since its propagators claim that undertaking philanthropic activities is what gives the firm a
competitive advantage and enhances its reputation and performance.
(Hart,1995) states that competitive advantage can be gained by a firm if it focuses on sustainable
development, product stewardship and pollution prevention and if it uses it resources effectively
for the betterment of the society and integrates these ideologies with that of the vision of the
stakeholders.
Cause related marketing is a concept that has emerged from the instrumental theory.
Organizations that...