Reference no: EM132128026

The Pyramid of Corporate Social Responsibility ("CSR") is a graphic representation of Carroll’s four-part definition of CSR.

According to Carroll, society has four expectations of a corporation-economic, legal, ethical, and philanthropic. The pyramid shows the economic responsibility at the bottom as it is the bedrock of corporate social responsibility.

It should be obvious that the first goal of a corporation is that it will be profitable. Companies that repeatedly do not show a profit will likely see falling stock prices and may find it more difficult to meet their legal, ethical and philanthropic responsibilities.

The second level is legal as society requires corporations to obey the requisite laws in their determination to make a profit. Companies can receive stiff penalties for breaking the law as has been evidenced by many corporate scandals in the recent past with Enron as the most famous example. In the recent past many publicly traded companies were investigated by federal regulatory agencies for abusive corporate practices and were subjected to penalties due to both misleading accounting as well as the lack of public disclosure.

The third level is the ethical responsibility aspect of corporate behavior. Simply put, society expects honest and fair reporting of financial operations by corporate executives. If this expectation is violated, the executives can face criminal charges, as was evidenced by the Martha Stewart insider trading case as well as the Enron case. At the other end of the spectrum, companies may find themselves recognized for their ethical activities. Starbucks and TOMs have been consistently recognized for their ethical practices.

At the top of the CSR pyramid is philanthropic responsibility. Society desires this of corporations, but the company has discretion in whether it performs at this high level.

While the economic profitability is the base of the pyramid, a CSR or stakeholder perspective should focus on the pyramid as a whole. Companies are expected to fulfill their economic, legal, ethical and philanthropic responsibilities simultaneously, meaning that companies need to make a profit, obey the law, engage in ethical practices and operate as a good corporate citizen.  

Questions

What is meant by the term "Corporate Social Responsibility" ("CSR")? Do companies engage in CSR as a result of a deep seated desire to improve society or is CSR designed merely as a facade to improve the bottom line of corporations?

Do you agree with the designations in the CSR pyramid that was developed by Carroll in 1996? Why or why not? If you were to develop a CSR pyramid, would you have different levels comprising CSR?