This paper examines corporate social responsibility (CSR) by tracing its definitional evolution from Bowen's early stakeholder-oriented framework through Friedman's shareholder primacy argument, then applies those competing perspectives to the airline industry. Drawing on Carroll's historical survey and contributions from Frederick, McGuire, and others, the paper argues that CSR is best understood by analyzing its component elements individually rather than treating it as a monolithic concept. Using Southwest Airlines and Air Asia as case studies, it demonstrates that most airline CSR initiatives are ultimately economically motivated — driven by differentiation strategy, cost reduction, or recruitment needs — and that genuinely altruistic CSR is largely absent from the industry.
The paper models a definition-first analytical approach: before applying CSR to any industry, it carefully surveys how the term has been defined across decades of scholarship (Carroll, Bowen, Frederick, Friedman). This technique — establishing conceptual clarity before application — is a hallmark of strong undergraduate business writing and prevents the vague, ungrounded use of buzzwords.
The paper opens with a framing introduction that previews its two-part structure. It then surveys CSR theory historically, moving from early stakeholder definitions through Friedman's shareholder critique and on to more nuanced modern views. A transitional section connects theory to business strategy via Porter's differentiation framework. The airline industry section applies all prior theory to specific company cases. The conclusion synthesizes the economic logic of CSR in a low-margin industry, arriving at the argument that altruistic CSR is essentially absent from aviation.
Companies talk a lot about "corporate social responsibility," but quite frankly nobody really knows what the term means. Every company seems to interpret the idea a little bit differently. There is nothing inherently wrong with that, but it raises challenges for managers trying to understand the concept and what relevance it has to their organizations. The best approach is to analyze the different elements of CSR individually and see how they apply. This approach also allows the organization to integrate each element with its strategy — trying to shoehorn a notoriously vague concept into strategy either results in it not really happening, or it happens but distracts the company from what it really wants to achieve.
The first part of this paper explores the different conceptions of CSR. This is absolutely essential. The word "social" in CSR is the key term, and it implies an external focus on the greater world. "Social" does not explicitly reflect the employees or just random stakeholder management — it reflects society, and the position that the company plays within society and the greater social order. We will therefore begin by examining the literature to derive a true understanding of what corporate social responsibility really is.
The next section applies this concept to a specific business — in this case, an airline. It could be any business, but a consistent example illustrates the issues more clearly. One of the more important questions that comes up in a discussion of CSR is the degree to which CSR is self-serving. Companies actively choose to perform activities under the banner of CSR, but why do they choose those activities and not others? Is it always a rational choice based on expected value? These questions are also important and will be addressed throughout the paper.
The first word, "corporate," is self-evident — we are talking about corporations. The second and third words are where the definition of corporate social responsibility gets a little fuzzy. "Social" seems to refer to society, social order, and social constructs. Inherently, this means people, which largely rules out the environment, save for the impact the environment has on people. In a case like Deepwater Horizon, that impact can be significant. "Responsibility" refers to the degree to which the company is accountable. Usually, this debate comes down to stakeholder theory versus the rational investor perspective grounded in agency theory.
Carroll (1999) attempts to chart the shifting definitions of CSR over the years. The idea is a twentieth-century construct; prior to this period, business was not really viewed as having social responsibility. For a long time, all businesses were small, with little impact beyond their immediate communities. They may still have had the capacity to do harm, but that harm was always limited, and there were immediate consequences from the community that ensured every business was well aware of its responsibilities. It is only with the rise of corporations — distinct legal entities often removed from their communities — that the idea of CSR emerged. One early work, by Bowen in 1953, defined CSR as "the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society" (Carroll, 1999). This definition implies what today would be known as stakeholder theory. A business interacts with the society in which it operates and therefore needs to take into consideration the "objectives and values" of that society. Our society is complex, with many competing objectives and values, and the vagueness of Bowen's definition opens things up for different stakeholders to demand different things of business. A more comprehensive definition of CSR is therefore needed.
Frederick (1960) argued in favor of business conducting activities that enhance total socio-economic welfare (Carroll, 1999). This brings up a critical element of the CSR discussion: the economic concept of externalities. Externalities are the outcomes created as a by-product of economic activity — unintended results that are not priced into the product. Thus, a firm creates an externality, but it does not appear in the financial statements. An example for an airline would be the air pollution generated as a by-product of flying. Air pollution is negative, but the cost is spread among all those who come into contact with it, rather than being charged to the airline the way that a plane or fuel would be. The cost of the pollution therefore receives no accounting.
The concept of externalities is important to the CSR discussion when one considers how the definition of CSR has been refined over time. Carroll notes that McGuire (1963) defined CSR as extending beyond the economic and legal obligations of the firm. This view directly contrasts with the shareholder perspective, which is based on rational choice and agency theory. This perspective was most famously articulated by Milton Friedman in 1971 when he argued that "the social responsibility of business is to increase its profits."
The idea behind Friedman's view is that corporations exist solely to earn returns for their shareholders. Shareholders invest in corporations in order to earn returns, and for no other reason. Should shareholders wish to contribute to social causes, they would do so out of the money they earn from their investments. Managers in corporations act as agents for the shareholders, and their role is to pursue those initiatives that will increase shareholder wealth. Thus, managers should only pursue social responsibility if it is the option that most enhances shareholder wealth. In this argument, Friedman directly contradicts McGuire, arguing that corporations should only be concerned with their economic and legal obligations.
Implicit in Friedman's view is the idea that because corporations are still supposed to follow the laws of the land, any corporate social responsibility should be written into law and enforced by government. Sjafell (2011) makes the same point — that nations need to enact laws to ensure corporations behave in accordance with the norms of the land, or the "objectives and values" as Bowen would have termed them. The issue with this idea is that corporations often have as much influence over the laws that are passed as the citizenry does, if not more. The structure of democracy matters, because it influences how laws will be written and enforced. If the interests of the citizenry take a back seat to the interests of corporations, then the notion that CSR can essentially be legislated according to social norms becomes hollow. The laws of the land reflect society's objectives and values in theory, and in a loose sense they probably do, but there is considerable room for deviation — and a significant time lag between changes in those objectives and values and corresponding changes in the law. Influence over legislation is not evenly distributed in our society, and this erodes the idea that CSR can be achieved through legal means alone.
Shum and Yam (2011) demonstrate that "financial market-driven economic responsibility does not automatically translate into social responsibility." There need to be other factors. If the legal system does not provide sufficient impetus for adopting CSR, and if other systems are inadequate, that leaves only the economic system. This finding supports the view that companies engage in CSR practices only when it is profitable to do so. Certainly, there are many examples of companies that make CSR part of their business models — The Body Shop is one famous example, as is Whole Foods — but the best examples tend to be firms operating in consumer-facing markets. Direct interaction with consumers provides immediate feedback in support of CSR, while companies that do not interact with consumers directly often do not receive this economic signal and are therefore less likely to focus on CSR.
There are a few points that undermine Friedman's view, however. His argument is predicated on the assumption that investors are purely rational. As an economist, Friedman worked with this assumption throughout his career, but in the real world investors are not purely rational. They get caught up in bubbles and crashes, they are risk-averse, and they tend to favor companies that are more familiar. Investors also make decisions on the basis of things besides financial return. The existence of ethical mutual funds, for example, illustrates that some people do incorporate ethics into their investment decisions. If this is the case, companies may choose to attract those investors with ethical policies. The same logic applies to customers — firms may benefit from attracting customers on the basis of their CSR credibility, if management judges that market to be profitable.
Further contributions over subsequent decades expanded on these concepts. Some have argued that corporations should remain primarily economic entities but should be free to pursue other goals. Others have contended that corporations pursue positive social policies only when they believe those policies might be profitable — for example, if they help differentiate the firm from competitors. Still others have suggested that opportunity cost must enter the discussion: only an action whose marginal value to the corporation is less than its marginal cost can truly be said to constitute CSR — anything else is simply the pursuit of profit that happens to have positive (or less negative) externalities (Carroll, 1999).
Daudigeos and Valiorgue (2011) argue against this narrow view, stating that companies should use the imperative for improved CSR to pursue "strategic options…to manage its negative external effects in a way that creates social and economic value." Their point is that a company is not inherently profit-seeking simply because it chooses a socially responsible strategy; it is being pragmatic and recognizing that CSR and profit are not mutually exclusive. The decision to pursue profit and the decision to uphold CSR principles is not a binary one.
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Sjafell, B. (2011). Why law matters: Corporate social responsibility and the futility of voluntary climate change mitigation. European Company Law, 8(2–3), 56–64.
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