This chapter offers a brief overview of the social responsibility of both corporate and small businesses, discussing its historical background. It examines the advantages and disadvantages associated with participating in socially responsible activities. Although the concept of corporate social responsibility emerged in the twentieth century, its origins can be traced back to ancient texts like Deuteronomy 24:10-13 and 25:13-16. Over the past century, companies have witnessed substantial growth in terms of size, importance, and impact.
Furthermore, the manufacturing and service delivery efficiency exhibited by corporations has led to the emergence of Corporate Social Responsibility (CSR) as a means to address their accomplishments (Krausz; Pava, 1995). CSR refers to the responsibility of businesspeople to adopt policies, make decisions, or take actions that align with the objectives and values of our society (Anderson, 1989).
Karake-Shalhoub (1999) identifies four theories of social responsibility: classical, stakeholder, social demandingness, and social activist theories. The classical theory is grounded in classical economic theory and asserts that business executives have a primary responsibility to shareholders. Their main goal is to improve efficiency and attain strong economic performance. Furthermore, managers must fulfill the requirements of shareholders.
The stakeholder theory suggests that corporate executives have a responsibility to stockholders but also acknowledge the impact of their actions on other groups such as employees, consumers, and creditors. Similarly, the social demandingness theory asserts that corporations are obligated to protect and promote certain interests of the general public. The social activist theory states that corporate managers should sometimes pursue projects that benefit public interests, even if not required. Overall, theorists commonly identify four main areas of corporate responsibility: economic, legal, moral, and discretionary responsibilities. Economic responsibility focuses on maximizing profits; legal responsibility involves operating within legal boundaries; moral responsibility entails establishing ethical standards; and discretionary responsibilities relate to voluntary acts of philanthropy. Large businesses and specific industries bear the primary burden of being socially responsible.
Big business is easily noticeable because of its familiar brand name, nationwide advertising and distribution, and diverse range of products. Therefore, it is frequently under public scrutiny. Conversely, certain sectors like manufacturing firms and power companies are prominently visible due to their issues with air, water, and chemical pollution. The idea of shifting from doing good to doing better in terms of social responsibility signifies that social responsibility should be regarded as an investment for corporations, leading to long-term profits rather than being seen as an expense.
Therefore, the responsibility for corporate responsibility lies with the directors, managers, and owners as long as business firms are not public property (Manley; Shrode, 1990). Research studies differ on whether there is a difference in ethical and social responsibility values among managerial levels.
Additional research studies have shown that various ethical and social responsibility value profiles may vary depending on specific situational dilemmas (Cox; Petrick, 1993). Unlike larger corporations, small and medium-sized businesses, non-national businesses, and department stores may not face as much scrutiny since they are less conspicuous and do not manufacture hazardous goods or emit substantial pollutants.
While large and small businesses face similar challenges, they may have different approaches to integrating doing good with improving their performance. Large companies, supported by comprehensive planning, policy, and strategy teams, may have the upper hand in implementing this concept. Conversely, smaller and medium-sized businesses with fewer resources may struggle to adopt social responsibility. Nonetheless, it is still encouraged for small businesses to participate in socially responsible activities.
Various social activities are undertaken by companies including making charitable contributions, providing senior citizen discounts, allocating funds for alcoholism and substance abuse treatment programs for employees, addressing customer complaints, offering product warranties, facilitating purchase exchanges, engaging in community service through volunteering or governance positions, investing in employee education, accommodating employees with children through child care or flexible working hours, promoting community events through advertising and sponsoring sports teams. Additionally, companies promote recycling efforts and provide special services to individuals with disabilities (Smith; Thompson; 1991).
The lack of research on social responsibility in small businesses can be attributed to several factors. Firstly, small businesses are believed by both the public and owner-managers to lack the necessary resources for implementing social action programs. Secondly, research corporations designed for large-scale corporations are not easily adaptable to small businesses. Thirdly, there is greater accessibility and availability of information regarding firm performance and social activities in publicly traded large-scale corporations. Lastly, large corporations have a higher level of public visibility, which generates more interest in theories and research about their Corporate Social Responsibility (CSR). Despite the limited research in this field, existing studies have found that small businesses primarily prioritize customer relations, particularly customer satisfaction, as their main social responsibility. Additionally, managers perceive consumer relations, product quality, employee concern, and profitability as key areas of social responsibility for small businesses.
Both managers and owners, whether they are in small businesses or large corporations, have similar perceptions of small business social responsibility. However, the degree of minority ownership may influence the level of social involvement by small businesses. Additionally, it has been discovered that managers in both small businesses and large corporations have similar views on acceptable ethical practices. Moreover, social involvement activities by small businesses tend to be structured in an informal manner.
Studies suggest that community perceptions of a firm’s social responsibility can have a strong impact. Brown and King (cited in Besser and Miller, 2000) discovered that norms and pressures from the community and peers carry more weight in influencing business ethics among small firms compared to moral or religious principles, anticipation of rewards, legal adherence, or fear of punishment.
Smith and Oakley (cited in Besser and Miller, 2000) find that business owners in non-metropolitan areas have different attitudes towards ethical behavior compared to those in metropolitan areas. Non-metropolitan business owners are less likely to accept questionable ethical behavior and have higher expectations for ethical behavior. This suggests that the community in which their firms are located greatly influences individuals who operate their own businesses in non-metropolitan areas.
Moreover, according to a study conducted by Besser and Miller, individuals who indicate the greatest extent of community support and leadership are also those who are most likely to proclaim their business as successful. This is possibly due to the community reciprocating the firm’s involvement in community matters. Additionally, it could be the case that successful businesses are more inclined to contribute to the community. Alternatively, a separate factor, such as the level of education of the business operator, may be influencing both perceptions of success and community support/leadership (Besser; Miller, 2000).
The Two Sides of Business Social Responsibility Businesses claim that supporting social responsibility activities is beneficial for the long-run interest of the business. It involves becoming intimately involved in and promoting and improving the communities in which it operates. This not only improves the corporate and local image of the company but also benefits the stockholders. Additionally, by creating better communities to live in, businesses can attract superior and happier workers who can contribute to better products and increased profits.
Opponents of socially responsible activities argue that businesses should prioritize maximizing efficiency and lowering costs for the benefit of society. They claim that implementing corporate social responsibility (CSR) contradicts the objective of profit maximization and could adversely affect stockholders. Additionally, they contend that CSR would result in higher prices for end products, causing hardship for all buyers.
Despite the belief that many corporate executives lack the knowledge, perception, skills, and patience to address societal issues and resolve them, a study conducted by Krausz and Pava examines how corporate social responsibility (CSR) affects financial performance. The study finds little evidence supporting the idea that socially responsible companies perform worse than others in terms of social responsibility criteria. In fact, there is some indication of a positive correlation between social responsibility and traditional financial performance.
In addition, research indicates that firms that prioritize social responsibility were more successful in the later period. The study conducted by Owen and Scherer (1993) also supports the belief among managers that socially responsible actions by corporations do impact market share. Managers specifically believe that actions related to environmental pollution, corporate philanthropy, and disclosure of social information have the most significant influence on market share.
Additionally, according to Samil’s (1992) study, social responsibility plays a crucial role in eliminating marketing pathology, which stems from insufficient inputs, inappropriate inputs, lack of information, maladaptive marketing philosophy, abnormal production processes, and abnormalities in internal marketing information. However, economic disadvantages can present an opportunity to gain market share. The disadvantaged population represents a significant market, and numerous small businesses are deploying strategies to capture this specific market share (Wuorio, 2003). This analysis brings together various literature reviews.
In the modern technology-driven business world, businesses must prioritize not only profits but also their impact on the environment and society. This requires recognizing legal, ethical, moral, and social obligations. Although larger corporations have a greater responsibility in this area, even smaller businesses participate in social responsibility to some extent.
Furthermore, the social responsibility of small businesses is significantly influenced by community values. Despite arguments suggesting that socially responsible actions may negatively affect business profits and stockholder interests, there is abundant evidence supporting the idea that these activities benefit both the company and society. Consequently, it is imperative for companies of all sizes to participate in social responsibility practices. This is crucial because such practices not only improve competitiveness and service quality but also foster a more compassionate society.
