CSR and Stakeholder Theory: A Tale of Adam Smith

J Bus Ethics (2013) 112:301312 DOI 10.1007/s10551-012-1251-4

CSR and Stakeholder Theory: A Tale of Adam Smith

Jill A. Brown William R. Forster

Received: 26 May 2011 / Accepted: 15 February 2012 / Published online: 2 March 2012 Springer Science+Business Media B.V. 2012

Abstract This article leverages insights from the body of Adam Smiths work, including two lesser-known manuscriptsthe Theory of Moral Sentiments and Lectures in Jurisprudenceto help answer the question as to how companies should morally prioritize corporate social responsibility (CSR) initiatives and stakeholder claims. Smith makes philosophical distinctions between justice and benecence and perfect and imperfect rights, and we leverage those distinctions to speak to contemporary CSR and stakeholder management theories. We address the often-neglected question as to how far a company should be expected to go in pursuit of CSR initiatives and we offer a fresh perspective as to the role of business in relation to stakeholders and to society as a whole. Smiths moral insights help us to propose a practical framework of legitimacy in stakeholder claims that can help managers select appropriate and responsible CSR activities.

Keywords Adam Smith Benecence Corporate social

responsibility Justice Perfect rights Stakeholders

Introduction

For decades, scholars have discussed the relationship between business and society in the context of corporate social responsibility (CSR) (Carroll 1979) and stakeholder

theory (Freeman 1984). Many different philosophical approaches have been cited in this discussion, especially regarding the challenge of integrating the ethical perspective of CSR with the practical, managerial orientation of stakeholder theory (Mele 2008; Parmar et al. 2010; Windsor 2006). On the CSR side, these approaches have run the gambit from positivist/instrumental approaches (Jones 1995; Wartick and Cochran 1985) to normative approaches that are derived from a variety of deontological and teleological philosophies (Scherer and Palazzo 2007). On the stakeholder theory side, ethical components can be drawn from several sources including the Principles of Corporate Rights and Corporate Effects (Evan and Freeman 1988), pragmatism (Freeman et al. 2010), the normative viewpoint of businesses as moral agents (Donaldson and Preston 1995), and stakeholder applications like the Principle of Fairness (Phillips 1997). This article offers a different perspective through the lens of Adam Smith (circa 1759). Although Adam Smiths articles have primarily been used in economic theory, they also contain important...