Understanding the four theories of CSR is essential to shaping a CSR program because it helps to lay out the aims and mission of the corporation. In comparison with the other two theories that I’ve described, the Social Demandingness Theory (as it is called by Brummer) says that the corporation exists to carry out the demands of the broad public. Unlike the Stakeholder theory, this theory maintains that management is directly responsible to the general public.
The proponents of this model argue that managers consider the demands or expectations of their stakeholders and of the public. Executives should make decisions that promote the welfare of the general public as set out by these expectations. For example, Thorton Bradshaw asserts that firms should provide clean air and water in order to promote the health of the community. He also says that firms are responsible to create a working environment in which employees find fulfillment in their work and a community that experiences meaningful leisure and dignity.1
The recent financial crisis brought aspects of this theory to the fore of the debate regarding bailouts. According to this model, corporations are seen as common property.2 They are responsible to serve the general public and the general public is also responsible to uphold the corporation. For this reason, the public may be required to compensate or rescue holders of this property from their debts. In this sense the general public has a generalized ownership relation to corporate assets and a responsibility to monitor the conduct of managers and hold them accountable for poor decisions. If executives ignore the demands of the public, they jeopardize the very existence of their company and the public can choose to allow it to dissolve. As you can see, such a view gives the government a far more active role in corporate oversight and activity.
A primary strength of this theory is its fairness. Because corporations are viewed through the lens of social contract, in which the public gives consent for the corporation to operate, the legitimacy of the corporation rests upon its provision of social (including economic) benefits. The legitimacy of a company whose social costs outweigh its social benefits will be called into question. Take for example the choice of the government not to bailout WaMu as the Seattle-based bank was collapsing. While the precise reasons for this decision are unknown, the costs of such a bailout must have been perceived to have outweighed the social benefits of keeping WaMu afloat. The government chose to allow JP Morgan Chase to purchase WaMu rather than using public funds for a bailout.
As I see it, this model has some pretty glaring weaknesses, the foremost of which is the question: Which public? In other words, the idea of “a public” that makes demands on corporations is fundamentally problematic because there is no single or unified public, especially in our global economy. A U.S.-based company that operates overseas is given legitimacy under U.S. law but does that mean it needs not also serve the public of all of the countries in which it operates? Or does it only serve the interests of the American public? Who reaps the social benefits?
Second, I pose the question: Which benefits? How does one determine the benefits for which a particular company is responsible? For example, should the responsibility of the Seattle-based insurance company Safeco be directed toward the environment? The jobless? Those who lack insurance?
Finally, this model necessitates a strong government role in guiding the work of corporations. While I support government regulation that protects the public from an abuse of corporate power, I agree with the arguments by classical theorists that too much government involvement can inhibit economic growth and wealth creation, which should be the fundamental contribution of corporations to the greater public.
1Thorton Bradshaw, “Corporate Social Reform: An Executive’s Viewpoint.” in The Unstable Ground: Corporate Social Policy in a Dynamic Society, edited by S. Prakash Sethi, (Los Angeles: Melville Publishing Company, 1974), 24-25.
2Especially as argued by Hoffman and Fisher in “Corporate Responsibility: Property and Liability.” In Business Ethics: Readings and Cases in Corporate Morality. (New York: McGraw Hill, 1984), 142-149.