The License to Operate
Who is the firm run for? Two classic answers frame the entire Corporate Social Responsibility (CSR) debate and set how firms treat society.
| View | Core Premise | Main Theorist |
|---|---|---|
| Shareholder view | Increase profits within the rules; spending on social causes without a mandate is illegitimate. | Friedman, 1970 |
| Stakeholder view | Manage a web of relationships—shareholders, employees, customers, suppliers, communities. | Freeman |
The stakeholder view warns that any neglected group can revoke your license to operate. Reputation is built in years and spent in days.
Carroll's pyramid stacks duties: economic (be profitable, the base), legal (obey rules), ethical (do right beyond rules), and philanthropic (give back, the crown). Pitfall: you cannot build legitimacy at the top while cracking the base. Charity from a polluter is pure greenwashing.
Tools and The Business Case
Stakeholder analysis maps groups by power (can they affect you?) and interest (do they care?): high-power/high-interest means manage closely; high-power/low-interest means keep satisfied. Positions move—yesterday's low-interest NGO is today's high-power litigant.
Sustainability extends the horizon through the triple bottom line (people, planet, profit) and ESG metrics (environmental, social, governance).
The business case: CSR pays through risk reduction, talent attraction, brand trust, and cheaper capital.
The Pitfall: CSR pays on long horizons, which is why quarterly-driven firms underinvest. Ethics scandals are governance failures before morality failures; incentives, controls, and culture decide what employees do when nobody watches.