Corporate Social Responsibility? What?

It's one of the latest buzzwords in business today: Corporate Social Responsibility. But what exactly is it and why is it growing in the business world?

Wikipedia defines it as follows:
Corporate social responsibility (CSR)is a concept that suggests that commercial corporations have a duty of care to all of their stakeholders in all aspects of their business operations. A company’s stakeholders are all those who are influenced by, or can influence, a business’s decisions and actions. These can include (but are not limited to): employees, customers, suppliers, community organizations, subsidiaries and affiliates, joint venture partners, local neighborhoods, investors, and shareholders.

CSR requires that businesses account for and measure the actual or potential economic, social and environmental impacts of their decisions. In some cases the application of a strong CSR policy by a business can involve actions being taken which exceed the mere compliance with minimum legal requirements. This can sometimes give a company a competitive/reputational advantage by demonstrating that they have the interests of society at large as an integral part of their policy making. CSR goes beyond simple philanthropy and is more about corporate behaviour than it is about a company's charitable donation budget.

In other words, CSR is supposed to mean that companies should do the right thing when it comes to their business practices. In other words, the CSR is the conscience of the company.

So, it was with great interest that I have been watching TV and reading the newspapers these past few weeks looking for companies who wanted to complain that the Government of Canada reversed their policy on allowing companies to operate as Income Trusts (paying almost all profits of the company directly to shareholders and thus paying virtually no corporate taxes to the government). The only real complaining I heard was from the companies who were in the process of moving toward Income Trust corporations and not so much from the companies who had been operating as IT's.

The shareholders though, oh they complained. They complained that their regular source of income, the payment of company profits, was going to be washed up when Income Trusts came to an end. They complained that they were mostly seniors who had invested large portions of money into those same companies and were being paid in their retirement. Mostly, they complained that things change.

This got me to thinking.

It's pretty hard to convince the general public that a company is doing the right thing by avoiding paying corporate tax, even though those same taxes, if they paid them, would be used to build the roads that their goods travel on.

I'm sorry, but I just don't buy it. As more and more companies moved toward Income Trusts there would be less and less tax revenue generated to government. That means that the onus, my friends, would be on you and I to provide the infrastructure through our taxes, that would allow the companies to ship their goods on the roads they didn't pay for but we did, so that they could make a profit and then pass it on to those who invested in their companies, not necessarily you and I.

Corporate Social Responsibility means doing the right thing, and still making a profit. But do the right thing nonetheless.

Hey I totally understand why companies would operate as Income Trusts: the government said it was OK. I may be simple but I'm not an idiot. Why wouldn't a company not pay taxes if they weren't legally obligated to pay them?

It's the same principle that you and I employ every year in April when we try to squeeze out as much as we can on our tax returns. The difference is, that we're obliged to pay something. And that's why government stepped in and leveled the playing field.

At the end of the day though, the Corporate Social Responsibility statement of a company doesn't mean a thing, if the people who developed it are choosing to not do the right thing.

You will get what you give. That's a law that has been around for thousands of years and still applies today. Do the right thing, and it will come back to you. Yes it will. Sometimes though, we have to be nudged toward doing the right thing. I think that's what happened here.