Corporate social responsibility and managerial benefits through social contract theory

Managerial benefits of CSR

CSR improves brand image

CSR increases sales

CSR increases

Effects of CSR on customer satisfaction

CSR increases the demand of goods and services

CSR improves corporate performance

CSR affects employees, investors, and customers positively

CRS boosts recruitment and worker relations

This paper examines the concept of business ethics and corporate responsibility through the lens of the social contract theory as well as the agency theory. Much of it however is on the social contract theory that holds the opinion that corporations must operate within the society via contract of giving back and caring for their environment. The paper then discusses the benefits associated with corporate social responsibility to a given firm. We look at how in increases efficiency in a given corporation as well the effects of business ethics and social responsibility the company's relationships with employees, investors, and customers. A recommendation and conclusion then follows.

Introduction

The definition of CSR

The earlier definition of CSR such as the one provided by Bowen (1953) defined it as a technique that is used by corporations in the process of pursuing their policies, actions and decisions for both social and value purposes. Various other researchers have come up with different definitions of CSR. The definitions have however been on the basis of either social contract theory or the agency theory (Kim, 2011).The researchers who opt for the agency theory have the opinion that corporations should only be responsible to their stakeholders since it is the stakeholders who give the management the authority to work in the corporation as pointed out by Friedman (1970). On the contrary, the researchers who opt for the social contract theory are for the opinion that corporations have a form of a contract with the society in which they operate. This contract makes it necessary for them to be faithful in their operations and roles in the development of the society in which they operate. Mohr, Webb, and Harris (2001) defined CSR as being "a company's commitment to minimizing or eliminating any harmful effects and maximizing its long-run beneficial impact on society."(p. 47)

Managerial benefits of CSR

In the past, scholars theoretically argued that the strategies of CSR pointlessly raise a company's costs, thereby generating competitive disadvantage vis-avis competitors (Friedman, 1970). At variance with the agency theory viewpoint, several other studies have been suggesting that utilizing valuable company resources for good social performance objectives results into great managerial benefits instead of only financial advantages to the shareholders (Brammer and Millington, 2008). On the contrary, scholars have always argued that when the social performance is enhanced, it may result into getting superior resources (Waddock and Graves, 1997), employees with higher qualities, improved marketing of services and products and it might also result into the creation of unanticipated opportunities

CSR improves brand image

There are numerous benefits of CSR. The first one is improved brand image and also reputation which is essential in attracting and maintaining fresh employees and customers. The brand of the employees and also the shareholders is a valuable asset to them. The Corporate brand image and its reputation have in the current competitive world become vulnerable than before (Smith, 2003). Firms have become aware of this and the only way for them to remain competitive is by working with values over a longer term. Their reputation and image is vital for their financial success and also to their long-term. Besides, having a good reputation and image is more significant in a nation with an extremely huge numbers of people who are educated. A superb reputation and image therefore helps a corporation to enhance loyalty among their business partners, customers and NGO's which are capable of making stronger their position in the market and also empowering the firm. Having a good CSR benefits the firm in improved reputation and image which is the only way for a firm to get the trust of their suppliers, customers and other partners. A firm's reputation and image has of late become the most precious insubstantial assets and CSR is a significant part of corporate brand recognition and reputation.

CSR increases sales

Having a superb reputation and image will also result into financial benefits to the corporations via increased sales (Moir, 2001). Improved sales will not be attained through the selling of products and services for cheap prices; rather, it will come from services and products which are produced through ways where no harm has been done to the society, its people or its resources. Consumers of today have become very sensitive to the performance of CSR of the firms they are buying their services and goods from (Smith, 2002).

Effect of CSR on crisis resolution

Another corporate advantage of having good CSR is to deal with crisis for the corporation. Through having a direct relationship with the suppliers, a firm will eliminate the probabilities for them to get into a crisis. It is the avenue for a firm to improve its supply chain through acting honestly and responsibly and that way simply managing risk. The wish for the corporation to advance its risk management is a dominant factor at the back of CSR. Creating a superior figure and reputation is very important for firms. Firms believe that having an excellent reputation and image make them sustainable and competitive.

CSR is capable of bringing more and more productive employees and greater worker loyalty. The last corporate advantage of having a good CSR is that it helps the firm to handle crisis. During the times of crises, a firm having a good corporate reputation will enjoy a presupposition of innocence (Smith & Taylor, 2002). Being viewed as ethical or responsible is capable therefore of being a great asset for a firm during the times of crisis. The desire for firms to increase their risk management is a great factor lying behind CSR. It is important for a firm to act responsible and ethical but it is also dangerous for companies because as a company's reputation and image becomes stronger, it also begins to fall. This is capable of explaining the reason why numerous firms are not as transparent as they are capable of being or would want to be.

CSR increases sales

Corporate advantages of having a superb CSR include an increase in sales. More customers will be buying from the firm. This will increase the turnovers of the companies. The customers of today are not just concerned with the quality or the prices of services and products, but they are also concerned about the way the products have been produced and whether the process involved has harmed the society in any way, its people or its resources.

Possessing a good CSR in addition to improving sales is capable of also boosting recruitment and creating an improved relationship with the investors. Employees always want to work for firms that are operating in a socially, economically, and environmentally sustainable way (Smith, 2002). Superb working conditions and relations are capable of helping firms to keep their employees and also to attract new workers

Effects of CSR on customer satisfaction

Because customers have become more sensitive to firms performance, firms are now forced to function in a socially, economically and environmentally sustainable way (Smith, 2002). Good reputation is a way for firms to strength profits and to enhance consumer loyalty. A picture of being socially accountable adds to a picture of being honest and trustworthy. Reputation like such is a main drive of consumer and worker satisfaction and is frequently connected with sales growth. CSR harmonizes worker relations and improve recruitment. A superior reputation and image is capable also of being a great asset for a firm during the times of crisis. It is also a way of avoiding unconstructive publicity and protecting against unconstructive customer actions. Therefore it is vital for firms maintain a good relation and conversation with all the parties that are involved and to protect their brand.

CSR increases the demand of goods and services

Enhanced social performance is also capable of functioning in some ways as marketing does, by raising the general demand for services and products and also by minimizing sensitivity of consumer price. Furthermore, it has been recommended that constructive social performance is capable of reducing waste level within the processes of production. An additional theoretical stream, the stakeholder theory, is emphasizing that efficient administration of stakeholder relationships, the essential CSR blocks, are also capable of resulting into improved performance financially. They are arguing that recognizing and managing relationships with the main stakeholders is capable of mitigating the possibility of unconstructive regulatory, fiscal or legislative action, draw consumers who are socially conscious or even draw financial capital from investors who are socially responsive.

CSR improves corporate performance

Stakeholder management theories are suggesting that the strategies of CRS are capable of leading to improved performance by defending and enhancing the reputation of the firm (Freeman et al., 2007).Lastly, a considerable number of studies that are within the resource-based perspective of the company are arguing for the means through which behaviors which are socially responsible are capable of leading to competitive advantage.

CRS boosts recruitment and worker relations

A different advantage of having improved CSR for firms is that CSR is capable of boosting recruitment and harmonizing worker relations. Possessing a good CSR usually helps firms to exert a pull on, maintain and develop employees and also increase their performance. That way more and more prospective employees will be sending their applications to the firms . Workers always want to get meaning in their respective jobs and also take part in constructive change and based on this, they might decide to work for a firm having strong values than for firms lacking values. The employees of today like to work for firms that are socially responsible.

Recommendations

It is important that firms be engaged in corporate social responsibility while still maintaining their pursuit for profitability. Firms should ensure that their endeavor to be ethically and socially responsible are well planned in order to avoid the risks of CSR as pointed out by Huegens and Dentchev (2007). The CSR moves and activities must be carefully planned so that the intended benefits are realized in the end.It is worthwhile to plan the CSR initiative with all the stakeholders, workers and investors in order to mitigate its various risks.

Conclusion

Business ethics and social responsibility are important for every business venture. This is because they can aid a business entity in increasing their efficiency while fostering a god relationship between the corporation, its employees, investors as well as customers. This therefore translates to improved profitability and acceptance within the business and non-business circles. Every corporation should therefore embrace CSR for success and prosperity.