Responsibility in Business & the Adam Smith Business School

by Professor Carol Adams, Visiting Professor at the University of Glasgow.  This article was written for the Aspire magazine of the Adam Smith Business School, University of Glasgow.

Adam Smith and CSR

I knew very little about Adam Smith when I started working at the University of Glasgow, but I was prompted to do some research when I was asked to do a public lecture to the Royal Philosophical Society of Glasgow on Responsibility in Business. I had heard conflicting speculation about Adam Smith’s stand on corporate social responsibility. I’d heard that he was a supporter of capitalism, an enemy of government regulation, an advocate of market forces and that Margaret Thatcher drew on his work.   Thus the little I did know had led me to question the wisdom of naming the University’s Business School after this 18th Century professor.

In fact in his book, the Wealth of Nations (Smith, 1776), wealth is equated to well-being of people. And indeed I found out that much of Adam Smith’s thinking was based on morality, justice and doing good.  He advocated action when the rights of individuals are violated – action on the basis that action is called for and necessitated by justice.  Smith’s central tenet that a person’s rights according to law must be protected through a system of justice is an arguably moral stance (Brown and Forster, 2012). We might consider, for example, poor working conditions and unfair pay as a violation of rights (worker rights) (Brown and Forster, 2012) and therefore conclude that Smith would be opposed to corporate irresponsibility on these matters.  There has been a long history of such irresponsibility and worker rights are a key issue addressed by contemporary corporate sustainability reporting guidelines such as ISO 26000 and the Global Reporting Initiative (GRI) G4 Guidelines.

oil spillThere are indeed some controversial and incomplete interpretations of Adam Smith’s work used to shore up different arguments about the role of business in society in academic writing (for more on this read, for example, Brown and Forster, 2012; Cooney, 2012; Korten, 1995) and on websites.   In any case, I would argue that Adam Smith did not witness globalisation on the scale that we have, nor the challenges, even atrocities (such as Bhopal, oil spills, deaths due to dangerous products) and opportunities which globalisation has brought. Smith was in favour of small businesses and opposed forms of economic concentration that distort the market’s natural ability to establish a price that provides a fair return on land, labour, and capital (Korten, 1995).

Effects of globalisation

sweatshopThe globalisation of business which has occurred over the last few decades has made some companies more powerful than some national governments.  Globalisation made it easier for companies to exploit cheap labour, plunder natural resources and cause serious consequences for the natural environment, human health and biodiversity through pollution.  Companies have contributed to unequal distribution of wealth by repatriating profits earned from cheaper labour and lower (environmental) regulation in lesser developed countries back to the home country.  But things are changing (see Adams, 2014).

New form of corporate reporting

Companies such as Unilever, the Standard Bank Group in South Africa, the Royal Bank of Scotland Group and a number of others are recognising (albeit slowly in some cases and sometimes as a result of negative press) their ability to generate long term profits for shareholders depends on being responsible. The International Integrated Reporting Council, which has the support of the global accounting profession, is encouraging companies to think long term and to think about value creation much more broadly than just financial profit.  Business value is created through intellectual capital and relationships with customers, suppliers, local communities, partners and other stakeholders.  It is created through its workforce and through the use of natural capital (or environmental resources). This sort of value is not included in a company’s balance sheet but is of increasing interest to investors and other stakeholders.

This new form of corporate reporting is encouraging companies to think about their business model much more broadly than in terms of flows of money. People from different functions of the organisation, who don’t normally work together, are getting together to understand how the business really works and adds value.

The significant and ever complex challenges which businesses face today require a different sort of leader and graduate from those of yesterday and there are business schools around the world are working to address this.

References

Adams, C A (2014), “Sustainability and the company of the future”, in “Reinventing the company in the digital age”, BBVA OpenMind.  ISBN: 978-84-16142-92-7 You can view the author’s copy here

Brown, JA and Forster, WR (2012) “CSR and Stakeholder Theory: A tale of Adam Smith”, Journal of Business Ethics, DOI 10.1007/s10551-012-1251-4.

Cooney, S (2012) Adam Smith, Milton Friedman and the Social Responsibility of Business, Triplepundit, 20th August.

Korten, D C (1995) When corporations run the world, Kumarian Press.

 

Share this article

Speak Your Mind

*

Enter your email address to receive the latest posts