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Corporate Social Responsibility: the Sullivan Principles and South Africa

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Corporate Social Responsibility: the Sullivan Principles and South Africa Visions in Leisure and Business Volume 12 Number 4 Article 2 1994 Corporate Social Responsibility: The Sullivan Principles and South Africa Kenneth R. Gray Jackson State University Robert E. Karp Jackson State University Follow this and additional works at: https://scholarworks.bgsu.edu/visions Recommended Citation Gray, Kenneth R. and Karp, Robert E. (1994) "Corporate Social Responsibility: The Sullivan Principles and South Africa," Visions in Leisure and Business: Vol. 12 : No. 4 , Article 2. Available at: https://scholarworks.bgsu.edu/visions/vol12/iss4/2 This Article is brought to you for free and open access by the Journals at ScholarWorks@BGSU. It has been accepted for inclusion in Visions in Leisure and Business by an authorized editor of ScholarWorks@BGSU. CORPORATE SOCIAL RESPONSIBILITY: THE SULLIVAN PRINCIPLESAND SOUTH AFRICA BY DR. KENNETH R. GRAY, ASSOCIATE PROFESSOR AND DR. ROBERT E. KARP, PROFESsoa DEPARTMENT OF MANAGEMENT AND MARKETING JACKSON STATE UNIVERSITY 600 NORTH POINTE PARKWAY JACKSON, MISSISSIPPI39211 ABSTRACT Friedman and others who see business as having· a very central but . limited role in The Sullivan Principles (first pronounced in society contend that the business of business 1977) were developed as a code of conduct is business--not social issues or politics. to be followed by companies operating in There are those who view business more South Africa in an effort to confront the broadly (20, 19, 6, 24), and take the racial problems stemming from the racial viewpoint that business is both an economic segregation policies of the South African and a social institution. Business and other Government known as apartheid (2). This institutions of our society cannot be 'pure', paper examines the unique demands that the however desirable that may be. Their own Sullivan Principles place upon the self-interest forces them to be concerned corporations who are its signatories. This is with society and community and to be a rare occurrence in corporate history where predisposed to shoulder responsibility companies have been called and are beyond their own main areas of task and attempting to change the legal/political/ responsibility (7). social framework of a country and the impact of those companies on the larger U.S. corporations doing business in South South African society. The paper also Africa have been confronted with political evaluates the success of the Sullivan Code demands to cut their ties with that country. thirteen years after its introduction. Businesses were expected to take a 'moral stance' vis a vis the apartheid practice. This external pressure has contributed to the INTRODUCTION partial dismantling of the pillars of apartheid such as a scrapping of the group area act, The traditional role of business as prisonershave been released, etc. Presently, essentially fulfilling a limited economic role we are witnessing moves towards a broad­ has its articulate proponents (12, 16, 13). based government, reflecting the 4 demographic make-up of this diverse nation. effect, special management positions have However, global interdependence is had to be created. increasing and accelerating beyond all previous expectations. The changes occur the fastest in the field of technology and THE DOCTRINEOF ENLIGHTENED economics. They occur more slowly in SELF-INTEREST terms of political and legal reactions. Changes occur at even a slower pace in In classical economic thought, the education and public opinion. Finally, fundamental drive of business to maximize change is slowest with regard to social profits was automatically regulated by the norms and ethnic attitudes. competitive market place. As Adam Smith put it, each individual left to pursue his own The Sullivan Principles (first pronounced in selfish interest (laissez-faire) would be 1977) were developed as a ccxle of conduct guided "as by an unseen hand to promote the to be followed by companies operating in public good" (Smith, A., 1776). The major South Africa in an effort to confront the contemporary proponent of a limited-­ racial problems stemming from the racial strictly economic role for business is segregation policies of the South African economist Milton Friedman. Friedman's Government known as apartheid (2). This fundamental argument is that business paper examines the unique demands that the involvement in the social and political arena Sullivan Principle place upon the is a threat to freedom. He argues that if corporations who are its signatories. This is economic power is joined to political power, the first time in corporate history that concentration seems almost inevitable. companies have been called and are Friedman sees business as having a very attempting to change the legal/political/ - central but limited role in society and social framework of a country. The paper contends that the business of business is continues by examining the impact of those business--not socialissues or politics. companies on the larger South African society. The Sullivan Principles represented ...there is one and only one social a radical departure from the usual responsibility of business--to use economic/socialresponsibility functions that its resources and engage in mcxlemU.S. corporations assume. Is this an activities designed to increase its appropriate role forU.S. corporations? profits so long as it stays within the rules of the game, which is to say, As well, this paper attempts to evaluate the engages in open and free success of the Sullivan Ccxle 13 years after competition, without deception or its intrcxluction. We will elaborate on the fraud.. Few trends could so fact that while, African, Colored and Asians thoroughly undermine the very (according to South African racial foundations of our free society as categories) constitute 60% of the workforce, the acceptance by corporate less than three percent occupy positions in officials of a social responsibility management. Further, by law, those three other than to make as much money percent cannot directly supervise or have for their stockholders as possible. white employees reporting to them. In This is a fundamentally subversive doctrine (1962:133). 5 In contrast, Corporate Social Responsibility resolving major social problems of (CSR) is argued for, more or less, by the the day in the name of social theorists who take social contract, legal responsibility (19). creator, social responsiveness, social impact, power, interpenetration, reciprocation, The self-interest of the modern corporation corporate citizenship, and gratitude and the way it is pursued have diverged a approaches. The first principle of these great deal from the classic laissez-faire theories is that business and the corporation model. There is a broad recognition today are social in nature. Given the social nature that corporate self-interest is closely of business, corporations, their owners, involved in the well-being of the society of managers, and directors should discard the which business is an integral part, and from archaic and incomplete vision of the which it draws the basic requirements corporation as a narrowly economic, private needed for it to function at all--capital, institution. labor, customers. There is increased understanding that the corporation depends The competitive marketplace remains the on the goodwill of society, which can principal method of harmonizing business sustain or impair its existence through the and public interests, because it has proved acceptance or rejection of the corporations over a very long time to be an efficient way offerings. As Mr. Jim Bere, CEO of the of allocating economic resources to society's Borg-Wamer Corporation put it in a 1984 needs. Yet, governmental intervention has speech to students at the Harvard Business been required to promote and regulate the School, "business is a guest in the society conditions of competition. Nowhere has where it functions." this been better illustrated over the past twenty five years in the United States than This body of understanding is the basis for in the tobacco industry. Government also the doctrine that it is in the "enlightened has intervened to guide economic activity self-interest" of corporations to promote the toward major public objectives, as public. welfare in a positive way. This view determined by the political process, when is supported by scholars like Sturdivant, these cannot be achieved through the normal 1990, Steiner, 1971, Davis, 1966, and workings of the marketplace ( 4 ). Wal ton, 1967, who view business more broadly and take the viewpoint that business Business decision-making today is is both an economic and a social institution. a mixture of altruism, self-interest, The doctrine has gradually been developing and good citizenship. Managers do in business and public policy over the past take actions which are in the social several decades to the point where it interest even though there is a cost supports widespread corporate practices of a involved and the connection with social nature, ranging from corporate giving long-range profits is quite remote. to investments in attractive plants and other These actions traditionally were programs designed to improve the considered to be in the category of company's social environment. "good deeds." The issue today is that some people expect, and some According to William Fredrick (in Sethi & managers wonder whether they Falbe, eds. 1987:142-161), CSR rests on six should respond to, business's fundamentalprinciples: assuming a central role in 6 1. Power begets responsibility.
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