By Jay Kim
“Corporate social responsibility” still might not be a familiar term in Korea. I think the time has come for Korea to think seriously about the social responsibility of corporations.
The demand for corporate social responsibility (CSR) first began to rise in the U.S. in the 1950s. There was a strong belief that, although a free market is important, businesses should take up some of the economic, legal, ethical, and philanthropic responsibilities for the society that makes the market possible.
There is a court case relevant to this: In 1952, a group of shareholders of AP Smith Manufacturing Company filed a lawsuit against the company’s management for a donation it made to Princeton University. They stated that the donation had nothing to do with making profits and the money should be returned to the shareholders.
The court ruled in favor of management, stating that corporations have social responsibilities. This helped consumer movements become much stronger.
Naturally, there was strong opposition to CSR. Milton Friedman, a winner of the Nobel Prize in Economics, claimed that the real social responsibility of corporations is to make the biggest profits possible, so it’s against the free market principle to state that their social responsibility is anything else.
Former American President Ronald Reagan also claimed that CSR meant a self-regulating charitable behavior of a corporation, there are no laws to enforce CSR, and that the government, not corporations, should be solving social problems.
However, as more cases arose of corporations raising the value of their brand and their profit margins by taking up social responsibilities, businesses’ thoughts on CSR have changed.
One example comes from Toronto, where subway rides on New Year’s Eve had been free for those who went to New Year’s Eve parties. However, one year the city decided to stop the program due to a lack of budget. Young people were disappointed by this, so Molson Coors Canada stepped in and announced that they would pay for the subway rides, an amazing example of CSR.
This was widely reported in the media, and the Minister of Transportation published a thank-you letter in local newspapers. This caused the brand value of Coors to skyrocket, and they ended up making a net profit several times more than what they ended up spending for the free transit program.
The publicity from the campaign, with the media covering the story as major news (serving as free commercials) and consumer organizations joining in with thanks to Coors, was worth far more than an expensive commercial with famous actors.
One day I saw a news story that a candidate running for the chairman of South Korea’s governing Grand National Party (GNP) received unexpected and rapturous applause from an audience during a June 25 campaign stop in Changwon when he said that small businesses were struggling because bigger businesses were only taking care of their own branches and families.
Cheong Wa Dae issued a statement stating that the expressions of certain politicians had gone a little too far, but it did not intend to defend corporations and that they would not press them even though their social contributions were falling short.
The presidential office seemed to share the politicians’ opinion that corporations were taking things too easy in response to the ever-worsening public opinion of them. Someone in the office’s economic department said that big corporations’ societal contributions for the last two years had been too meager.
It does nothing to summon the chairman of the Federation of Korean Industries to the National Assembly for him to give a statement where he expresses his concern about populism. The National Assembly is not an institution whose purpose is to recklessly summon corporate owners to be shamed on their floor.
Korea’s big businesses deserve praise for their amazing achievements. One can readily find merchandise made in Korea anywhere in the world. However, with their economic success they should also follow a corresponding rise in responsibilities. In the past, CSR activities were self-governed by corporations, but CSR has now become an area necessary for survival.
In the U.S., cases have arisen where CSR achievements are requested as a business requirement. It is never the case that CSR simply brings costs to corporations; rather, as Coors has shown, it can decrease negative public opinion of big businesses while increasing their brand value and profits. I believe that CSR, for big Korean businesses, can kill two birds with one stone.
Jay Kim is a former U.S. congressman. He serves as chairman of the Washington Korean-American Forum. For more information visit Kim’s website at www.jayckim.com.