In 1970, Milton Friedman wrote his noted piece ‘The social responsibility of business is to increase its profits’.Footnote 1 Specifically, Friedman uttered a widely cited sentence that fundamentally summarises his thought: in a free society,
‘there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.’
A lot has changed in the past fifty years. The World Business Council for Sustainable Development defined corporate social responsibility (CSR) as ‘the commitment of business to contribute to sustainable development, working with employees, their families, the local community and society at large to improve their quality of life’.Footnote 2 However, neither the definition of CSR nor the role that corporations and other institutions play in developing this concept is entirely clear.Footnote 3 The context I am navigating is emerging economies and the interconnectedness that binds us and the market together.Footnote 4
For one thing, CSR is no longer considered, as Friedman did in his article, a ‘fundamentally subversive doctrine’. While reflecting on how the world changed since Milton Friedman's piece, Oliver Hart states that companies should not necessarily ignore social responsibility. He posits that:
‘I agree with Friedman that most companies are set up to act on behalf of shareholders – shareholders have the votes, so I agree with him about that. I don't agree with him that it follows that companies should maximize profits or shareholder value. Why do I think that? Well, because shareholders may themselves not be interested just in the bottom line.’Footnote 5
Suppose shareholders were not just interested in profit-seeking and wealth maximisation, and did care about climate change, economic equality and overall societal welfare, then, in that case, companies have a comparative advantage relative to individuals when governments are not tackling social issues head on, Hart suggests.
In 2015, Paul Healy, Rebecca Henderson, David Moss, Karthik Ramanna and Luigi Zingales organised a conference at the Harvard Business School that was meant to kick off a series of several other conferences to discuss The Crisis in the Economic Theory of the Firm. The 2015 conference addressed a critical question: What happens to the standard theory of the firm when we incorporate the fact that firms are not only economic actors, but also political actors?
The premise of the current economic theory of the firm is profit-seeking but, as discussed in the 2015 conference, even Milton Friedman assumed that ‘the basic rules of the game’ are off limits to the profit agendas of firms. However, the rules of the game are often influenced – and perhaps sometimes even shaped – by firms wishing to extract private benefits. This realisation raises the following question, which was also debated at the 2015 conference: Is it socially optimal for firms to maximise profits by changing the rules of the game through political lobbying and related activities?
This question is complex. Oliver Hart's comments on Milton Friedman's essay seem to indicate that the answer may be no. The books Corporate Social Responsibility in Developing and Emerging Markets: Institutions, Actors and Sustainable Development and Business and Social Crisis in Africa help us to provide an answer to this question from a different, often overlooked, perspective – the perspective of corporations as political actors in developing countries and emerging economies. Specifically, my purpose in reviewing these two books together is to consider the question of the role of business in the politics of post-colonial and developing countries in the context of CSR.
In Corporate Social Responsibility in Developing and Emerging Markets, the reader finds a refreshing and clarifying approach to CSR. The book addresses the following main questions:
1 What are the linkages between CSR and sustainable development?
2 What does or can CSR mean for developing or emerging economies and in what ways does this deviate from orthodoxies and universalist approaches?
3 What institutional factors and actors influence or can influence the effectiveness of CSR in developing and emerging economies?
4 How can developing and emerging economies promote a flexible, diverse and reconstructed CSR that promotes inclusive and sustainable development?
The originality and distinction of the book lie in its focus on the social role of corporations in the context of developing countries and emerging economies during the post-Milton Friedman era. Developing countries face challenges such as high poverty, low income, economic vulnerability and infrastructural underdevelopment.Footnote 6 These countries, more often than not, assume a reactive position regarding the issues that impair their sustainable development. Several chapters of the book are successful in defining CSR through its transformative or enabling potential for developing countries. Several topics are of interest. I will highlight a few.
The book lays bare the contradictory aspects of CSR activities in post-colonial sub-Saharan Africa. It calls our attention to the forms in which CSR can be a disguise to legitimise the undemocratic actions of multinational companies where such actions may amount to new forms of neocolonialism.Footnote 7
The book calls our attention to CSR as a tool for human capital development. It provides a comparative, historical and empirical account of CSR practices across countries. It addresses the impact of corporate ownership structures on CSR. It focuses on the adoption of mandatory rules of CSR. Furthermore, it provides us with an account of how small businesses perceive CSR, the specific social responsibility activities that such informal businesses engage in and how these activities address the Sustainable Development Goals (SDGs).
The book examines the viability of private ordering as a means to promote the interests of stakeholders in activities or operations with an environmental-protection dimension.Footnote 8 The impact of the gender composition of the board of directors and the top management team (TMT) of business organisations in determining firm-level sustainability performance in developing economies is a point of analysis.
In sum, the breath of the book is impressive. The strength and novelty of the book derive from its interdisciplinarity, diverse methodological approaches and multidimensional perspectives involving institutional actors in countries such as South Africa, Nigeria, India, China, Turkey and Thailand.
The authors answer the questions from which the book started. However, the reader gets to the end wondering whether CSR can be designed to steer sustainable development in developing countries so as to place them in a position to have a conversation with developed countries on an equal footing regarding the metrics for attaining the SDGs. In other words, what is missing is an outward perspective that elevates the voices of developing countries. Still, the authors paved the way to a relatively new field (CSR and business sustainability in developing countries), the existence of which is, in and of itself, evidence of the momentum that sustainability studies have gained.Footnote 9 And that is a sign of our times.
In Business and Social Crisis in Africa, Antoinette Handley brings to light an intriguing puzzle – why do businesses voluntarily act as stewards of public welfare and goods in weakened states? The author explores the concept of business autonomy and corporate self-interest, and how they are manifested during moments of social crisis such as the height of the HIV/AIDS epidemic in Kenya, Uganda, Botswana and South Africa, and in response to severe political violence in Kenya and South Africa.
The concepts of business autonomy and self-interest express the idea that corporations as legal entities can and do make choices that surmount the political influence of the state. By studying the cases of Kenya, Uganda, Botswana and South Africa, Handley calls our attention to the difference between CSR and the activities that businesses develop for their own survival in contexts of profound political and social crisis. In the words of Thomas Paster:
‘Fear of expropriation or loss of entrepreneurial freedom is the main motive behind business advocacy of welfare expansion. A necessary condition for this strategy of pacification is the existence of a credible anticapitalist force of sufficient strength. If this argument holds, we should not expect to find evidence of business groups actively promoting the adoption or expansion of public social programs in the absence of such a force.’Footnote 10
While the book gives us an insight into the role of large firms in furthering societal welfare, it also clarifies the position of a solid, strong and educated labour force in facilitating the responses of businesses to social crisis. Handley's book explains that the business of business can be politics precisely because, in many circumstances, businesses can predict a shift in the status quo and take action ahead of the state. Businesses care about social welfare because they are politically interested. Their business autonomy allows them to adopt constructive responses embedded into the political economy and economic performance of the respective countries.
In one section, Handley uses a quote by Mancur Olson that states:
‘[an] organisation can in principle serve its members either by making the pie the society produces larger, so that its members would get larger slices even with the same shares as before, or alternatively by obtaining larger shares or slices of the social pie for its members. Our intuition tells us that the first method will rarely be chosen.’Footnote 11
Olson's words tell us a great deal about how businesses construe their self-interest. Handley's book teaches us that, in times of crisis, businesses can and will indeed increase the slice of the societal pie to survive. That is something different from acting according to the economic, legal and ethical expectations that society has of business organisations regarding their CSR.
The two books provide a stimulating discussion about CSR and business autonomy in developing countries and emerging economies. The definition of CSR is not entirely clear because defining a legal framework to respond to the socio-economic expectations of a given community depends on a deep and clear understanding of the historical context and the political, social and cultural landscape of that community. Both Corporate Social Responsibility in Emerging Markets and Business and Social Crisis in Africa add elements and details that expand our comprehension of CSR beyond the narrative normally attached to Western economies. Besides, the books tell us a story about the political role of the corporation that illuminates the purpose of this business entity in the global economy.
