Corporate social responsibility is defined as a business approach in which the long term interests of all concerned stakeholders are taken into consideration instead of only focusing on the company’s profitability. Social responsibility therefore implies that organizations must act in the best interests of their stockholders as well as the society in which they operate. Keeping this perspective in mind, PayPal’s decision to discontinue its services for websites dealing in obscene content is completely ethical, responsible and the right thing to do. The CSR Pyramid encapsulates the four levels of responsibilities that a business organization must ideally fulfill in its operations. At the bottom are the economic responsibilities which directly relate to ensuring that a business generates a profit (Lindgreen 2).
Next are the legal responsibilities of complying with the law of the land. This is followed by the ethical responsibilities of choosing to do the right thing often at the expense of revenues. The tip of the pyramid comprises philanthropic responsibilities which are the voluntary initiatives that a company might undertake in order to act as a responsible corporate citizen. All of these responsibilities combined determine the CSR obligations of a business with regards to the community that it is a part of. In the case of PayPal, the decision of not extending its services to websites with questionable content falls in the category of the company’s ethical and philanthropic responsibilities (Lindgreen 4).
As is always the case, there are both advantages and disadvantages of implementing a CSR strategy for any organization. On the positive side, acting responsibly allows a business to ensure that its practices are in line with societal expectations. In the case of PayPal, given the service provider’s reputation in the market and among its users, indicates that the company is generally seen as a socially responsible organization. To this end, people would expect PayPal to implement decisions that do not only create profits but are also ethical. By deciding to make its services unavailable for those platforms engaging in vulgar and obscene content, PayPal made an extremely strong and positive statement. This makes CSR an extremely practical business strategy as well because having a good reputation in the market also creates strong customer loyalty for any company. This means that when businesses such as PayPal utilize their considerable resources to initiate a positive societal change, it also results in long term profitability for the company due to its high customer retention rate (Lindgreen 5).
Developing and executing a CSR plan means that a company is taking a holistic view of the interests of all of its stakeholders instead of just focusing on maximizing the share prices and dividend ratios for its shareholders.
As of the case for the implementation of any new business strategy, there are always potential disadvantages that must be carefully understood prior to execution. In this particular case of PayPal, the greatest disadvantage that the company chose for itself was losing out on a steady and substantial revenue stream from customers such as Smashwords and Book Strand.com. the second problem for PayPal in this scenario is the fact that the content providers that it decided to issue warnings to had not been declared illegal by any regulatory body. Therefore, in deciding which platforms it wants to engage with is more or less up to the discretion of PayPal’s management. The business is playing the role of a moral police which is extremely complicated and controversial. This is because there are no legal boundaries or criteria according to which PayPal can make a judgment about who is wrong and who is right (Lindgreen 6).
Perhaps the most significant disadvantage is that the loss of revenues for PayPal as a result of its CSR policy will eventually lead to increased service rates for its existing customers. What PayPal needs to decide is if it is fair to pass on the burden of doing good to its valued customers (Lindgreen 7).
Works Cited
Lindgreen, Adam. "Corporate Social responsibility." International Journal of Management Review (2010): 1-7. Print.
