Reflections on Some Basic Theories of Corporate Social Responsibility

Zhang Shi Yuan* Li Dan Ning**

[Abstract] Corporate social responsibility (CSR), a constant source of debate in the research of company laws, has attracted wide attention from scholars and increasin ly intensi!e studies ha!e been made in the respect" #his paper focuses the research on identification of the definition and characteristics of the concept of CSR, followed by an analysis on the !alue orientation on which $CSR% e&ists and on its theoretical basis" #he paper concludes with a tentati!e summary on the content of CSR and its le islation in China" ['eywords] Corporate social Responsibility #heoretical basis (e islation

I entification responsibility

an

characteristics

of

corporate

social

)hat does corporate social responsibility (CSR) refer to* #here is so far no consensus in the academic circles on the +uestion" ,owe!er, some -S scholars enerally ta.e it that CSR refers to the fact that board directors of a company, as the trustees of !arious interest parties, acti!ely participate in altruist acti!ities in order to perform their due corporate roles in the society" / Some other scholars are in fa!or of the opinion of most -S scholars that CSR means that those profit0oriented companies, when their decision ma.in bodies become certain that some underta.in s are mostly desired by the ma1ority of the society, should i!e up their intent of ma.in profits from the underta.in s and try to meet the e&pectations of the ma1ority" 2 2ther scholars belie!e, that CSR refers to the fact that companies shall not ta.e optimal0profit0 ma.in for directors as the sole aim of corporate e&istence" 3nstead, all social benefits rather than ma&imally impro!in shareholders interests should be considered as the sole ob1ecti!e of corporate e&istence" 3 Still, other scholars thin. that CSR refers to the social obli ation that a company has to be liable to in the maintenance and impro!ement of social benefits in addition to the pursuit of ma&imi4in shareholders

56rofessor of 7orthern 3ndustrial -ni!ersity, 6resident of Research 3nstitute of 8conomic (aws 55(ecturer, 3nstitute of 8conomic (aws, 7orthern 3ndustrial -ni!ersity (iu 9un ,ai: $Corporate Social Responsibility%, /;;; edition, 6ress of (aw, p<" < (iu (ian =u: $Corporate >o!ernance and Corporate Social Responsibility%, 6ress of -ni!ersity of Chinese 6olitical Science and (aw, p??" @ (iu 9un ,ai: $Corporate Social Responsibility%, /;;; edition, 6ress of (aw, p?" /

profits" 4 #hou h the description of CSR !aries, the core of it is similar, i"e" a company should underta.e certain social responsibilities and liabilities at the same time of ma.in profits for the company" #o sum up the !arious opinions by different scholars, we may conclude the followin as the main characteristics of corporate social responsibility" I CSR is a !in of responsibility of relations or positi"e responsibility >enerally spea.in , the word $responsibility% contains two folds of meanin s: responsibility of relations and method responsibility" #he former refers to the fact that the principal of one party ta.es up certain responsibilities based on certain .inds of relations of the principal of other parties" #his .ind of responsibility is actually an obli ationA the latter refers to the ne ati!e conse+uence, which should be borne by the principal who are liable to responsibility of relations (i"e" obli ations) and fails to perform his responsibility of relations" B CSR is, in fact, an obli ation of a company" 3t can be said that the $responsibility in $CSR% refers to an $obli ation%" 3n addition, the 1urisprudential circle ta.es an obli ation as a positi!e responsibility and the ne ati!e conse+uence resulted from default of obli ations as ne ati!e responsibility" 3f to loo. at CSR with this .ind of di!ision, then, it is ob!iously a .ind of positi!e responsibility" II CSR ta!es those concerne concerne party of obligations #ith non$sharehol ing interests as the

Accordin to eneral understandin , the so0called $concerned parties with non0 shareholdin interests% are deemed as the consistin part of the concerned parties of interests of the company, i"e" any non0shareholders, who are under actual, potential, direct and indirect influence of corporate decision0ma.in and corporate beha!iors" Specifically, they include company employees, consumers of company products, company creditors, beneficiaries of economic and social de!elopment plannin , resources and en!ironment, social securities and welfare facilities" Since the concerned parties with non0shareholdin interests ha!e their respecti!e interests in the company, the company has liabilities to maintain and secure their interests and this liability is what is called CSR" Accordin ly, the concerned parties with non0 shareholdin interests are also considered as the concerned parties of obli ation of the company" III CSR is an integration of legal an moral obligations of a company (e al obli ation, a statutory liability ta.in state coerci!e forces as its performance uarantee, means le al security of minimum re+uirement of morality necessary to maintain basic social order" Coral obli ation is a responsibility non0le ali4ed and
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(u Eai Fu: $8conomics and (e al Analysis on CSR%, 6ress of (aw, <GG< edition, p;?" Hhan )en Iian: $9urisprudence%, 6ress of (aw, /;;J edition, p/D@" <

!oluntarily performed by the obli ors and which ta.es any other means than the state coerci!e forces as its performin uarantee" 3t is a hi her demand of morality on people abo!e their le al obli ations" CSR, as an obli ation that a company is liable to the society, is not simply a le al obli ation or a moral obli ation" Rather, it is the inte ration of the two" %I&' CSR is an amen ment an complement to the con"entional principle of ma(imi)e profits for sharehol ers*

#he con!entional companies and company laws ta.e indi!idual principals (shareholders) as the startin point for consideration, belie!in that the hi hest or the sole ob1ecti!e of a company is to achie!e profits in order to ma&imi4e the profits for shareholders" )hereas, CSR ta.es social principals as its startin point, belie!in that the ob1ecti!e of a company should be of two dimensions" 3n addition to reali4in the ma&imum profits for shareholders, companies should also stri!e to maintain and up rade social benefits" 2f the two corporate ob1ecti!es of achie!in ma&imum corporate profits and social benefits, any sin le one of the ob1ecti!es will ha!e to be put under restriction by the other" #herefore, the ob1ecti!es of ma.in profits and of brin in social benefits are often found in stron tension" #heir respecti!e ob1ecti!es of ma&imi4ation are reali4ed under conditions of reciprocal interactions and a balance in corporate ob1ecti!es has also been maintained" 2b!iously, CSR is an amendment and complement to the con!entional principle of ma&imi4ed profits for shareholders" And this amendment and complement does not re1ect the principle of ma&imi4in profits for shareholders"?

II Theoretical Basis of CSR

I +conomic basis of CSR A company is, first of all, an economic setup with ma.in profits as its oal and it has the status of le al entity with independent economic interests" )hen loo.in at the social responsibilities that a company should ta.e, those scholars in the economic circle and who are in fa!or of this opinion belie!e that corporate ob1ecti!es lie in creatin ood conditions of e&istence and sound de!elopment prospect for a company" #he mana ers of a company should become concerned with the optimal lon 0term capital ains of the company in order to achie!e corporate oalsA if to achie!e the optimal lon 0term profits, a company will ha!e to ta.e up social responsibilities as well as the social cost thus incurred" )hen studyin on the relationship between social responsibilities and economic performance and efficiency, the focus is i!en on the research of the relationship between social responsibilities and economic performance and efficiency durin the lon 0term de!elopment process of a company so that a positi!e correlation of the two has been deri!ed"
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(u Eai Fu: $8conomics and (e al Analysis of CSR%, 6ress of (aw, <GG< edition, p/G/" @

 II Sociological basis of CSR Society is an or anic whole" Companies (enterprises) are components ma.in up the or anic whole" #o loo. at the relationship of society and companies, companies cannot sur!i!e in isolation from a society" Social de!elopment relies on the rowth of companies" #his interdependency decides that society and companies interplay with each other, and at the same time they are restricted by their respecti!e de!elopment rulesA what is more, companies, as a social setup, ha!e their independent interestsA social benefits is of public welfares" #he de!elopment ob1ecti!es of companies lie in ma&imi4in their corporate profits, whereas social de!elopment ob1ecti!es are for increment of common benefits of its members in a society" Also, companies, as one tier of a society, re+uire that corporate interests are put under constraint of social benefits and companys ob1ecti!es should comply with those of social benefits" #hus, it is made .nown +uite ob!iously that companies should underta.e their respecti!e social responsibilities" III Legal Basis of CSR

#he chief principle of law to follow in our country when re ulatin 1ustice and interests, and the contradictions between the relationships of !arious interests is to ta.e into account the interests of the state, the collecti!e and the indi!idual" Achie!in corporate profits and ta.in up social responsibilities are in fact a matter of the contradictory relationship between the indi!idual corporate business benefits and the collecti!e social benefits" )hen dealin with the relationship of the two, the first priority should be i!en to satisfyin the inte ral social benefits while pursuin indi!idual economic benefits, which re+uires that companies should ta.e up certain social responsibilities while see.in for optimal business benefits" Secondly, the criterion of re ulatin the !arious contradictions of relationships of interests is to prioriti4e efficiency while i!in consideration to 1ustice, which means when efficiency contradicts with 1ustice, efficiency o!erta.es as the dominatin factor" Companies should o after as hi h efficiency as possible in order to ac+uire the optimal business benefits" ,owe!er, moral factor will ha!e to be considered at the same time" 3f companies see. ruthlessly hi h efficiency and hi h profitability and therefore dama e the 1ustice and fair rules of the society, all the indi!iduals in the society will ultimately ha!e to pay a hea!y price" As far as ci!il law is concerned, a company, as a le al entity, is the principal of ci!il law" #he principle of public order and ood conducts is one of the most basic principles of modern ci!il law, which re+uires that the principals of ci!il cases shall not !iolate the public orders and ood conducts when en a ed in ci!il acti!ities, which also re+uires companies to underta.e non0performance liabilities on any beha!iors prohibited by law when en a ed in ci!il acti!ities" Secondly, the idea of ci!il law has transformed from the indi!idual principal pre!alent in the /; th century to
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the social principal de!eloped in the <G th century" JAs far as companies are concerned, they should also ma.e their shift from the self0centered business profits to the promotion of social benefits as a whole and ta.e up certain social responsibilities while not sacrificin self profit0ma.in opportunities" As far as the theories of economic laws are concerned, an economic law is the law used to achie!e state inter!ention of the economy" At different historical period, the measures, scope and !alue orientation of state inter!ention of the economy !ary as different o!ernments in power ha!e different policies" 2ne of the reasons that the state inter!enes on the or ani4ation and beha!ior of the mar.et principal is that the contradictions between the social ob1ecti!es of the beha!ior of the mar.et principal and its economic ob1ecti!es need to be inter!ened by the state for control" 2ne of the mar.et principal K companies, sometimes is not able to ta.e up !oluntarily social responsibilities and state inter!ention in the form of le islation is needed to force or uide companies to ta.e up social responsibilities" L III &alue Theory of CSR I Theories of "alue orientation of CSR /" #heory of ma&imi4ed profits for shareholders #he con!entional theory of CSR belie!es that companies, as a business setup, should ta.e optimal profit ma.in for shareholders as their most fundamental ob1ecti!e" #he reali4ation of the benefits of any other concerned interest parties who are under the influence of the companys beha!iors should not be deemed as the corporate ob1ecti!e" And the mana ement body of the company shall ha!e the ri ht to resort to any means to achie!e the oal when ma.in any decisions or ta.in any actions on behalf of the company" <" #heory of social responsibility for protection on the interests of the corporate sta.eholders other than shareholders #his school of theory maintains that ma&imi4in the interests of the shareholders of the company is the most important ob1ecti!e that a business or ani4ation should achie!e" ,owe!er, it should not be considered as the sole ob1ecti!e" As a business or ani4ation, a company is !itally interrelated with the o!erall social en!ironment" )hen in business acti!ities, a company should not only consider on the influence that the acti!ities may ha!e on shareholders, but also on the influence that they will ha!e on the interests of the parties other than the shareholders, includin employees, suppliers, customers, creditors and on the benefits of the o!ernment" )hen a
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(ian ,ui Iin : $>eneral 3ntroduction to Ci!il (aw%, 6ress of (aw, /;;B edition, p@J" Hhan Shi =uan, (iu (i: $2n CSR%, e&cerpt from $Classics of Chinese Commercial (aw% (Molume <GG<), 6ress of Cachine0buildin 3ndustry, <GG< edition, p//;" B

company ma.es any decision, it has to ta.e into account the benefits of these people" 2therwise, it should ta.e liabilities a ainst any harm or dama es thus incurred to these people" @" #heory of social responsibility on bein ood citi4ens

#his theory maintains that companies, as business or ani4ations, should ta.e profit ma.in as the corporate ob1ecti!es" ,owe!er, companies are also liable to offerin help, i"e" companies shall ha!e the obli ation to help sol!e certain social problems" For instance, companies shall ha!e the obli ation of ma.in donations to education or charity or ani4ations" ; D" #heory of social responsibility on minimum re+uirement of morality #his CSR theory belie!es that companies ha!e the obli ation to satisfyin shareholders interests rather than causin dama es to other parties" Ny this theory, as lon as companies ha!e a!oided causin or corrected the social harm caused due to their beha!ior durin the process of business acti!ities, the companies are deemed to ha!e fulfilled their social responsibilities" #he CSR theory of minimum re+uirement of morality is re arded by some scholars as conser!ati!e idealism, or in other words as the !oluntary compliance with the law" II &alue theory of CSR that China shall follo# #he abo!e0mentioned theories of CSR ha!e their respecti!e rational and irrational points" ,owe!er, one theory, in which the ad!anta es will ha!e to outwei h the disad!anta es, has to be selected amon them as the uidin theory for the practice in our country" As far as the theory of ma&imi4ed profits for shareholders is concerned, it has the merits of encoura in in!estment and promotin business de!elopment and prosperity, thou h there is the suspicion of causin harm to other concerned parties of interests" #herefore, this CSR theory should be insisted on in our country" )hen loo.in at the o!erall situation of our country, we see that the mar.et economy in our country is still not !ery de!eloped and business acti!ities are not prosperous enou h" #o ta.e up CSR in our country, the ob1ecti!e of ma&imi4ed profits for shareholders has to be achie!ed before ha!in the basis of emphasi4in the protection of other concerned principals of interests" #he ob1ecti!e ma&imi4ed profits for shareholders is the ultimate oal of a business or ani4ation and the protection of other concerned principal of interests, thou h also one of the corporate ob1ecti!es, is in secondary place and is subsidiary to the main ob1ecti!e" )hen the main ob1ecti!e and secondary ones are in conflict, the board of directors of the company should i!e up the secondary one and insist on the primary one" 2therwise, the conduct of the board of directors of the company !iolates the obli ation they should ta.e up of wor.in for the best interests of the company and the directors should bear any le al
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8dited by Hhan An Cin: $Company (aw%, 6ress of Hhon shan -ni!ersity, <GG@ edition, pDD" ?

responsibilities to the company"

I& Legislati"e practice an application of CSR in China

#he scope of CSR in different countries and different historical periods of the same country !aries reatly" 2!erall spea.in , CSR in peoples mind in the early sta es refers only to the moral obli ation a company underta.es in participatin in charity acti!ities or other social welfare acti!ities" )ith risin influence of companies on the society, more concerns on such social issues as safety and ecolo y and radual impro!ement on mandatory le islation on the issues, CRS be ins to ta.e in more e&tensi!e substances" I Content of CSR /" Responsibility to employees #he con!entional theory of company law maintains that employees are only the laborers of the company" #hey are non0 members of the company" ,owe!er, the interests and the fate of the employees are closely connected with the business operation of the company" #hey are considered as a type of .ey party of interests" 3n order to substantially secure and i!e full consideration to the benefits of employees, all the countries in the modern world list the responsibility to company employees as one of the most important content of social responsibility a company has to underta.e" <" Responsibility of consumers Consumers are the acceptors and users of the companys products" #he le!el of consumers li!in standards depends to a lar e e&tent on such factors as products, product types, product +uality and prices that the company offers to them" #he fact that consumers are scattered with limited ability to claim and the co!ert nature of product defects due to hi hly sophisticated modern technolo y, ob1ecti!ely puts consumers to a disad!anta ed position in the society" Necause of this fact, the ad!ocators of CSR deem the obli ation a company ta.es up towards consumers as an important content of CSR" @" Responsibility of creditors Creditors of a company are the concerned party of transactions and en1oy the obli atory ri hts, i"e" the company is liable to its creditors" )hether this obli ation is substantially carried out in!ol!es such ma1or issues as whether the e&pected economic benefits by the creditors of the company can be reali4ed" ,ence, the creditors of a company are .ey concerned parties of interests of a company" )hether a company fulfils its obli ation to its creditors is considered as both the obli ation of ci!il cases and a social responsibility the company should bear" 3n addition, the company also has the social responsibility to ensure transaction safety of the creditors
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roup as a whole" D" Responsibility of protection and rational utili4ation of en!ironment and resources This is a social responsibility that a company should bear towards the beneficiary of actual and potential en!ironment and resources" #he protection and rational utili4ation of en!ironment and resources concerns not only the immediate interests of contemporary enerations, but also the subsistence and de!elopment of future enerations" 3t is the precondition and .ey for human .ind to achie!e sustainable de!elopment" For companies to ta.e up responsibilities on protection and rational utili4ation of en!ironment and resources, it is an embodiment of companies to ta.e up responsibilities for the offsprin of man.ind and this responsibility is a typical CSR" B" Responsibility of economic and social de!elopment of the local community #his is the responsibility that a company will ta.e with the community it is located or the residents of the community as the concerned party of interests" #he company has inseparable contact with the located community" #he prosperity of the company brin s economic well0bein to the community, which also ma.es the residents of the community immediate !ictims to the dama es and pollution caused by the company" #he authorities of the communities offer necessary securities to the company in such areas as security and infrastructure so that the business acti!ities and operations of the company may be e&tended normally" All these factors mean that the company should ta.e on some special obli ation towards the community" ?" Responsibility of the cause of social welfare and public interests This responsibility of the company includes e&tensi!e contents, such as ma.in charity donations to hospitals, old peoples homes, diseased people and people in po!erty, employin disabled people, people with deficiency of labor s.ills and other people with difficulties to be employed, and rantin scholarships and other funds to educational institutions, participatin in pre!ention of criminal acti!ities or pro!idin funds for such act" #he obli ations companies underta.e towards social welfare and causes of public benefits are deemed as traditional CSR" ;G

II +mbo iment of CSR in Chinese legislation 3n our country, le islation has ta.en a step ahead in theoretical research of CSR, thou h no mature and systematic structure has been established in the respect" #he current le islation has included some of the content of CSR into the statutory articles,
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" (u Eai Fu: $8conomics and (e al Analysis of CSR%, 6ress of (aw, <GG< edition, p/G/" L

which can be seen in se!eral laws" /" 8nterprise (aw

#he e&istin 8nterprise (aw has been stipulated and fine0tuned with radually deepened economic system reform startin in /;JL, of which, the rele!ant stipulations on CSR, such as employees ta.in part in the corporate business mana ement, stipulations on labor protection, on en!ironmental protection, on liabilities of creditors and stipulations on buildup of spiritual ci!ili4ation and abidin by the professional ethics can be found in the rele!ant literature on enterprise laws, includin the 8nterprise (aw of State 2wned 8nterprises, Re ulations on #ownship and Rural Collecti!ely0owned 8nterprises, 3nterim 6ro!isions on 6ri!ate 8nterprises and the Company (aw" <" #a& (aw

3n order to pro!ide economic incenti!e mechanism for CSR acti!ities and ta.in into consideration of the interests and benefits of the shareholders and the social publics, the current ta& law in our country implements the system of reduced income ta& for donations to public welfare institutions and for po!erty alle!iation purposes" #his system promotes to a certain e&tent the e&ecution of CSR" @" Eonation (aw for 6ublic )elfare Cause

#he (aw of Eonation for 6ublic )elfare Causes comes formally into force on 2ct / st, /;;; in our country" #he law is applicable to any natural person, le al person and any or ani4ations or institutions that are willin to donate properties without compensation to any social roups of public welfare nature and non0profitable or ani4ations aimed at promotin public welfare and which are established le ally as by law" Companies may donate properties to the le ally prescribed public welfare causes as by law" #his pro!ides le al basis for the typical CSR act by companies who carry out the donation for public welfare purposes" 3n addition, this law has also reiterated the le islati!e spirit of rantin reduced rate of income ta& for donations of welfare nature and po!erty alle!iation purposes" D" Contract (aw

Accordin to Articles /L? and /LL of the current Contract (aw in our country, donees may re+uest for deli!ery of deed of ift which is of a public welfare or moral obli atory nature such as disaster alle!iation and po!erty alle!iation, irre!ocable donations, and rant properties, which donors fail to deli!er" #hese articles ser!e to offer le al support to the implementation of the law of corporate ta&es and any other donations of public welfare natures, which are not included in the stipulation of $the (aw of Eonations for 6ublic )elfare -nderta.in s%A at the same time, they help
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establish the principle of estoppel in donations of public welfare and moral obli atory natures, and wor. as a forceful pressure to ur e companies to cash in their promises made for sponsorin public welfare underta.in s so that CSR is substantially carried out"

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