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Effects of CSR on Company Performance in the Pharmaceutical Industry
Deng Zhiyao 3035233424
Defined as “a balanced approach for organizations to address economic, social
and environmental issues in a way that aims to benefit people, communities and
society” by International Organization of Standardization (2003), corporate social
responsibility (CSR) and its effects on company performance has been widely
debated throughout the years. While supporters argue that engaging in CSR
programs has positive influences on the companies in the long run and can at
least benefit them in terms of public relations, critics focus more on the costs
imposed by such programs and believe taking on these programs violates the
best interests of shareholders. Moreover, although studies in the theoretical front
provided valid evidences for the proponents of CSR, researchers found mixed
results through empirical studies (Foote et al., 2010). Overall, the effect of CSR
programs on companies’ performance still remain controversial. This essay uses
examples from the pharmaceutical industry to argue that CSR is in general
beneficial for a company’s performance if treated properly. Companies should
see it as a kind of investment and it is optimal for them to choose CSR programs
strategically.
Numerous studies have found CSR to be beneficial for corporations in
different ways. Some researchers argue that companies can gain consumer loyalty
and attachment by taking CSR efforts (Marin et al., 2004; Romani et al., 2013). The
logic in this argument is that since consumers value firms’ efforts in social
programs, firms are rewarded with enhanced reputation and brand recognition. It
is observed that pharmaceutical firms often place their responsibilities for
consumers in an important place. Industry giant GlaxoSmithKline (GSK) has
adopted various CSR programs to take up social responsibilities. Apart from
offering discounted drugs in developing countries and cooperating with
international organizations in providing not-for-profit drugs, their employees are
also trained to act consistently with the firm regarding social responsibility. It is
believed that consumers will benefit from improved ethical behavior of the
employees and the firms can earn enhanced reputations consequently (Smith,
2003). Another company Bayer Corporation (BC), however, suffered from heavy
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