Article published with permissions of the American Academy of Medical Administrators in AAMA EXECUTIVE. an online refereed journal, March 2011. Full credit for this insightful article goes to Dr. Sandra K. Collins, address below.
Corporate Social Responsibility: An Ethics-Based Concept in Healthcare
Sandra K. Collins, MBA, PhD
Associate Professor
Southern Illinois University Carbondale
College of Applied Sciences and Arts
School of Allied Health
Health Care Management
Carbondale, IL
Abstract
The topic of ethics is always one that can spur intense debate. This is true in virtually every business industry and the healthcare industry in no exception. An exploration of foundational ethics theories brings forth the Corporate Social Responsibility (CSR) concept. A notable concept, CSR, has been studied for decades and has been linked to many business disciplines. However, it is a largely misunderstood concept surrounded by key business consideration such as societal need and profit maximization. An extensive literature review reveals the underpinnings of the CSR concept originate from the ethics discipline. Sharing this research will perhaps allow healthcare professionals to more closely examine the public’s perceptions and expectations in terms of who healthcare professionals serve. Furthermore, exploring CSR concepts may act as a catalyst to increasing the awareness that acting for the good of society often requires profit maximization.
Introduction
When organizational strategies are created and decisions are made, a conflict can occur in terms of to whom the healthcare professionals within a facility are chiefly responsible. Are they accountable to the stockholders to maximize earnings, or are they accountable to the needs of society? Healthcare professionals must decide which group takes priority. This decision is grounded as an intense ethics debate and a foundational issue surrounding the concept of Corporate Social Responsibility (CSR).
It seems that business leaders in most industries are seeking ways to resolve social issues. Even healthcare organizations are attempting to identify themselves as ethical players in the patient-care arena. This seemingly has created an increased interest emphasis on CSR since there is perception that organizations practicing CSR philosophies are potentially more ethical than those that do not (1). Therefore, an understanding of the theoretical concepts associated with CSR and ethics doctrine is necessary for astute healthcare professionals. Exploring the evolution of these time-honored concepts will provide healthcare professionals with the foundation by which to examine their organizational goals in terms of societal need and profit maximization. As the research will clearly identify, too much focus on either can be devastating to a healthcare organization. A true balance is necessary.
CSR: An Evolving Concept
Many healthcare professionals have a natural propensity to want to help others. This is often why they entered the field in the first place. However, the healthcare industry, as a whole, must operate differently than it has in the past. Excellent patient care is always a lofty goal and should remain a key factor in any healthcare organization. However, it is often difficult for many healthcare professionals to see that excellent patient care can be hindered without profit maximization initiatives. This is even more difficult for the public to see. A healthcare organization believed to be profit focused would almost certainly meet severe public scrutiny.
Who healthcare professionals are accountable to, society or organizational stakeholders, has caused theories to surface which address how businesses, and those within, impact society. The outcome of this is an amplified concern for ethical expectations regarding social issues and philanthropic activities across all business industries. Catastrophes such as Hurricane Katrina have led to the establishment of an assortment of social expectations pertaining to how businesses ought to react to the needs of society (1,2). For example, Shell Oil saw fewer applications for employment after they purportedly refused to adequately focus on human rights in another country where it operated. Perhaps the public viewed the actions of Shell Oil as unethical and attempted to equalize the atrocity by inflicting harm back on the organization to send a strong message to organizational leaders (2,3).
CSR has been studies for years by researchers in a number of academic disciplines (2,4). There are three eras which define the progression of CSR.
• The first phase began in the 19th and 20th centuries when the organizational focus was chiefly on making the most money possible.
• Phase two ran between the 1920s and the 1930s. Profit maximization was still important but it no longer was the primary goal of organizations. This phase defined the expectation that organizational leaders should operate with concern beyond the organization’s stakeholders, but also be concerned with how business decisions impacted shareholders such as employees and community members.
• Phase three started in the 1960s and ran until the 1970s. The focus of this phase was on augmenting the quality of life of both organizational stakeholders and shareholders. During this phase, business leaders were expected to focus on their commitment to society and how their organizations could participate in solving social problems. Profit maximization was acceptable if those profits were gained ethically and if a portion of them were to be dedicated to social good (2,5).
Although widely accepted across multiple educational disciplines, CSR has also been vastly criticized. CSR is often labeled as being too vague with too many subjective and varied meanings (2,6). Furthermore, CSR has been criticized for being surrounded by value-laden judgments making it a highly subjective subject which may be impossible to apply universally (2,7).
Despite the numerous criticisms surrounding CSR, the social agreement between business and society has been progressively reorganized over many decades. Even political figure Franklin D. Roosevelt (FDR) discussed the relationship between business and society in his New Deal platform by creating a new philosophy which attested that the government was responsible for assuring businesses were doing more than merely creating conditions by which individuals could pursue happiness. FDR was adamant that organizations were responsible for guaranteeing the well-being of all community members. He believed the government was responsible for the level of happiness felt by everyone in the community. FDR’s efforts seemingly raised the level of social consciousness. (2,8).
The interest in how organizations, and the professionals within, impact society continues to develop (2,9). This has largely been driven by what society determines to be important. Topics such as global warming, environmental deterioration, discrimination, respect for human rights, safety in the workplace, and doing the right thing have become key issues for society (2,10).
Viewpoints of Corporate Social Responsibility
CSR is often defined as the procedure by which organizations try to meet their economic, legal, ethical, and discretionary responsibilities to society. It revolves around two contrasting viewpoints. These viewpoints are known as the Classical and the Socioeconomic (2,11). The Classical viewpoint indicates that the only responsibility an employee has is to the stockholders of the company. Therefore, the primary role of individuals within the organization is only to maximize profits (2,11,12).
Some theorists believe that the Classical viewpoint is appropriate since paying too much attention to the social good of the community may undermine the market mechanism. This potentially results in a loss to employees and consumers because someone must pay for the redistribution of organizational assets. Businesses typically do not absorb the financial losses but they pass them on to others in the form of increasing prices or decreasing wages (2,11). Theorists in support of the Classical viewpoint indicate that the principal social responsibility of all businesses is financial expansion (2,13).
The other predominant viewpoint is the Socioeconomic viewpoint. It indicates that the financial gains sought by organizations must be altruistic or essentially considered as the right thing to do. Profits must be achieved by following the laws, regulations, and social expectations (2,11,14). The responsibility of an organization’s employees goes beyond making money. It includes protecting the best interest of the communities, the environment, and the whole society in which the organization serves. Incidents such as withholding information from community members concerning life-threatening agents which were knowingly being emitted into the environment from factories has publically emphasized the importance of this CSR viewpoint (2,11). Even issues such as asbestos contamination demonstrate the Socioeconomic viewpoint. Organizations may find it difficult to maintain a healthy profit margin five years from now if what they are doing kills a great number of their employees within two years (2,11). Social legislation emerged from situations such as this and initiated the inception of groups such as the Environmental Protection Agency (EPA), the Equal Employment Opportunity Commission (EEOC), the Occupational Health and Safety Administration (OSHA), and the Consumer Product Safety Commission (CPSC) (2,14).
The Socioeconomic viewpoint agreed that maximizing profits is important, but only as a means to offer ethical and honorable services to all shareholders (2,14). The Socioeconomic viewpoint suggested that the Classical viewpoint does not serve the interest of the public (2,15).
Corporate Social Responsibility Orientations
Theories of CSR are linked to the evolving nature of societal expectations. The original CSR viewpoints have served as the foundational studies from which CSR theory has emerged. Theorists have determined that CSR is a personality construct and that ethical propensity will vary from individual to individual. The most widely accepted CSR model has been created by Archie Carroll and includes a range of obligations that businesses have to society including:
• Economic - organizations have an obligation to be both profitable and productive in order to meet the needs of society in terms of consumption. Activities which result in ineffective business operations, such as inappropriate allocation of resources or unwarranted risk taking, would be considered socially irresponsible.
• Legal - each organization must act within the limits of the law. Therefore, any attempts to meet the economic responsibilities of an organization must be legally acceptable. There is much controversy in terms of this orientation because of the conundrum which supposes that the real reason organizations act ethically is to avoid legal ramifications. Skeptics of ethical behavior in organizations have indicated that acting ethically to avoid unfavorable legal consequences is not the same as acting ethically for the good of society.
• Ethical - responsibility of an organization revolves around a variety of unwritten codes and social norms which are commonly held in society. These codes and behaviors are believed to be germane to the ongoing success and socially responsible behavior of organizations. Organizations which operate predominantly in the Ethical orientation of CSR theory will not need written laws to guide them toward ethical decisions and behavior.
• Discretionary - correlates with philanthropic activities (2,16). These activities can be perplexing to business leaders because they are largely ill defined. In other words, society expects organizations to volunteer and to have a humanitarian philosophy (2,15).
Individuals who have an economic CSR orientation will be innately driven to maximize profits for organizational stockholders. Individuals who fall within the legal, ethical, or discretional categories will be naturally driven by their concern for society and the organizational stakeholders such as employees, patients or customers, and those in the community (1,2,11).
The Connection to Ethics Doctrine
Studied for several decades, CSR originated from the theoretical assumptions that organizations are responsible to society and the community they serve. It originates from the supposition that organizations owe something to societal stakeholders rather than merely to the organization’s stockholders (2,17).
The theory of CSR has been widely accepted across numerous educational disciplines but it has been heavily criticized as well. Some theorists believe the theory is too elusively defined, while others have identified it as a measurable personality construct (2,6,7,18). As previously discussed, CSR has been linked with a variety of performance issues. It has also been linked to a number of theoretical concepts stemming from the realm of the ethics doctrine.
Nonmaleficence and Beneficence
CSR is a concept that has evolved from the theories surrounding the field of ethics. Two of the main ethical theories which correlate with CSR are nonmaleficence and beneficence. These two concepts are considered to be societal expectations.
The intent behind nonmaleficence is to do no harm. This philosophy is foundational and widely prevalent in the healthcare industry. It is most famously associated with the Hippocratic Oath which is taken by physicians. However, it can be useful in considering the impact of the decisions and actions of all healthcare professionals, as well as those in other business industries. Ethics theory indicated that organizational decisions and actions should be grounded in nonmaleficence. The do no harm philosophy should be extended to employees, patients or customers, vendors, communities, and anyone with whom the institution interacts. The goal of nonmaleficence is to protect all stakeholders from any type of harm.
Beneficence is another key ethical concept. It demands that individuals should relate to all organizational stakeholders with kindness and compassion. Both beneficence and CSR focus on how organizational decisions and actions impact stakeholders. This concept can be as simple as telling staff that they are appreciated and valued to as complex as addressing a distraught patient who cannot afford a necessary medical procedure (2,19).
The ethical theories of nonmaleficence and beneficence may seem relatively simple and easily achieved in the business industry. One particular industry which is heavily linked to these principles is the healthcare industry. Although nonmaleficience and beneficence are seemingly simplistic, the healthcare industry is wrought with complexities surrounding these foundational concepts. If the industry could operate how it was originally intended the complexity would be largely alleviated. In the beginning, this people-focused industry was based solely on the service of caring for the public rather than maximizing organizational profits. This philosophy is appreciated by CSR advocates. However, with today’s complex regulatory and reimbursement pressures, the healthcare industry has been forced to function more like a business. The focus has shifted from primarily being about helping the sick to covertly emphasizing making a profit (2,19).
Addressing Corporate Social Responsibility in Healthcare
The shift from serving the ill to profit maximization is duly noted in the healthcare field. In some respect, this shift has occurred out of necessity. For example, like other industries, healthcare organizations must attempt to recruit the most talented and skilled professionals. This is difficult to do if there are insufficient financial resources available to offer competitive salaries and benefit packages. Therefore, healthcare organizations have been forced to use business principles which allow them to make a profit so they will have the financial resources available to be competitive in the labor market. Without a skilled workforce, it is difficult if not impossible to offer quality patient care. This is essentially true in both for-profit and non-profit entities (2, 20).
However, being focused on profits creates a conflict in this particular industry considering that healthcare is perceived differently than virtually any other industry in terms of origination and mission (2,19). This is essentially true in both for-profit and non-profit entities because a social contract exists regardless of the profit status of the organization. A social contract exists between those who created the institution, those that seek care and trust in the facility, the providers of care who expend their talents and efforts to deliver care, the regulatory bodies that regulate the field, the taxpayers that largely finance the facility, the executives that create and implement policy, and a multitude of intermediary agencies such as professional associations, supplies, communities, and financial institutions.
Individuals within the organization which innately focus only on profits may make decisions or act in ways that cause public resentment. The public does not expect a healthcare organization to act like a business. They expect healthcare facilities, and the employees within, to care about their illnesses more than reimbursement schedules or managed care contracts. A large degree of trust is placed on the healthcare facility from the patients’ perspective. Therefore, the industry is held to a higher standard than typically any other business industry. This is perhaps why CSR has been widely accepted by the healthcare industry (2,19).
Conclusion
A close inspection of organizational goals comes from the exploration and study of CSR initiatives, historical evolution, and connection with ethics related expectations. The goals of CSR are defined by reflecting upon what responsibilities an organization and the professionals within should attempt to fulfill which guide and permeate throughout the organizational structure. Understanding the need for quality of care centered healthcare facilities is often more obvious; however, the need to function in a financially prosperous way often is less obscure (2, 21). The healthcare industry as a whole is in a place where profits are vital in the delivery of quality patient care. Not only are CSR activities and philosophies the expectation, but they are the ethical underpinnings of the organizational structure.
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