A firm must do business in a manner that satisfies the expectation of the community; each person living in the community has specific responsibilities towards it.
An individual, for instance, must respect social norms and values of conduct while a firm is allowed by the community to continue with its business operations and thus earn income as long as that business is sustainable. However, there are undesirable activities increase the earnings of the firm at the expenses of the community by adversely affecting the community at large (Yunus, 2007).
Thus, the question becomes, should the firm be operated to the advantage of its shareholders with the sole intention of increasing profits maximally regardless of the harm it does to the society, or should it take the principles of Corporate Social Responsibility and focus on legal, ethical and philanthropic expectations that have been place on it by government.
The main purpose of business is making profit. Friedman argues that it is a social responsibility of every business. Managers have right to conduct business in accordance with the employer’s desire.
It is no wonder that the main desire of every employer is to make as much money as possible, even if it is confronting social rules. Business cannot be responsible, only people can have responsibilities (Friedman, 1970). Business cannot be moral. Managers use CSR only to for their own projects and talking about “responsible manager or businessman”, we can talk only about a person who is subjective to social opinion.
Business is all about making money and making profit, it is the main purpose of any business. Consequently, corporations can only contribute to the society when they make a good business. All social responsibilities are preoccupations of the government and state. Many companies used to follow the motto that “the main purpose of business is making profit”.
There are endless examples of such behaviour of the companies. For example, Clasbeek (2003) provides the example of the British American Tobacco and Phillip Morris who did not provide full information about the influence of tobacco on health. As a result, it led to the addiction and death of their customers, many got tobacco-related illnesses (Glasbeek, 2003). The Nestle company also provided its products in poor countries, as a result, a number of babies got sick (Glasbeek, 2003).
However, can we punish these companies? On the one hand, their products were harmful, on the other hand, the companies were not responsible for the customers and the products people chose to consume. The actions of these companies were based on the Friedman theory.
There is some evidence to support this theory and prove that company should not be regulated by social rules. First, by being socially responsible the firm violates its profit maximization aim. This argument is based on the fact that firm exists only to make profit, a firm may actually best accomplish social responsibility if it earns higher profits by increasing effectiveness and decreasing costs (Friedman, 1970).
The research by Keith Davis (1973) provides the other arguments that support Friedmans’ point of view. He writes that the managers are the agents of the stakeholders and their main responsibility is to maximize the profit. The economic doctrine is the profit maximization. Thus, social and responsibility issues should not bother corporations and business people, as they are not responsible for the customer’s decisions.
The very idea of social responsibility means that it’s basically an ethical problem because it entails the subject of what is ethically wrong or right compared with the company’s responsibilities. Various people support the notion that a company’s social responsibility should only be towards its shareholders, while others hold contradictory perspective and argue that companies have a social responsibility of serving the community.
These days, the issues of social responsibilities that are regulated by ethical theories, that enter the business environment are regulated by social norms and provide key perspectives for business ethics (Crane & Matten, 2004).
The primary relations between society and business are economic one. These days, the issues of social and environmental impact and increased legislations in the areas of environmental protection and social welfare have lead corporations to reorganize and re-evaluate their business activities.
However, the focus has always been done on corporate interests (Banerjee, 2008). The CSR provides another vision of the business/society relations and argues that they should be based on societal interests. CSR strategies work under certain conditions, however, they are subjective to failures that can appear in market. And when the financial health of the company is questioned, and the choice must be made between the well-being of the company and ethical principles, gaining profit always wins. (Doane, 2005)
As an example of a successful use of the Corporate Social Responsibility is Nike. These days, Nike is considered to be a global leader among companies that focus on the improvement of the labour standards. They published on its Web page the list of its factories and social reports.
They have their own strategies to confront activities (Doane, 2005). A firm exists to offer services and goods to satisfy the needs of the community. Although, profit motivation is a vital justification for carrying out business operations, it must be seen as a consequence of firm’s service to the society. In actual fact, the success and development of firm is probable only by constant service to the community (Brockway, 1995).
The second approach of the business ethics is based on the Stakeholder theory. For example, the owners of AT&T widely dispread the stock of the former company among 3 million stockholders and was latter help by large groups of public stockholders, as well as among small family groups (Freeman, 2008).
Stakeholders theory presupposes that organizations are dependent on their stakeholders for resources. Stakeholders should provide the resources and services taking into consideration ethical criteria. Thus, they should consider other stakeholders, as well as managers should also consider them. Moreover, the organizational performance can be increased if stakeholders consider the shareholders.
Sustainability is another issue of the corporate social responsibility. These days, large corporations are preoccupied with the environmental issues.
For example, Toyota Australia is one of the companies that care about sustainable environment. In its Environmental Report 2003, it reported about new approaches to environmental management. They established new recycle-oriented vision, provided environmental initiative, invested in “Natural Step Training conducted for manufacturing employees” (Environmental Report, 2003).
Thus, we come to a conclusion that despite the main goal of business is to make profit, corporate responsibility is extremely important for successful business as well. There are many different points of view on business social responsibilities. However, gaining profit regardless social rules is unacceptable in modern society.
More and more corporate organizations adopt Corporate Social Responsibilities strategies and prove that successful results can be achieved. Moreover, business ethics is crucial for successful management. Thus, sensible development, consideration of the customer’s needs, improved internal and external communication should be an inseparable part of the business management.
The responsibilities must be shared among stakeholders, as well as managers and shareholders. In spite of the firm and whether non-profit or profit motivated, the managers and owners must keep in mind that whilst profit is necessary to support marketing and innovation activities, it is not the sole purpose of the firm existence as these activities are at times dreadful for community and risky to the firm’s long-term performance.
Reference List
Banerjee, B. (2008). Corporate Social Responsibility: The good, the bad and the ugly. Crit Sociol, 34(51). Web.
Brockway, G. P. (1995). The end of Economic Man, 3rd ed. New York: W. W. Norton.
Clasbeek, H. (2003). The invisible friend. New Internationalist, 113-115.
Davis, K. (1973). The Case for and against business assumption of social responsibilities. Academy of Management Journal, 16(2), 312-322. Web.
Doane, D. (2005). The myth of CSR. Stanford Social Innovation Review, 23-29.
Environmental Report. (2003). Toyota Motor Corporation Australia Limited. Web.
Freeman R. E. (2008). General issues in business ethics. In Joseph D. Van Zandt (Eds). Ethical issues in business: a philosophical approach. Prentice Hall: Pearson.
Friedman, M. (1970). The Social Responsibility of Business Is to Increase its Profits. New York Times Magazine, 56-61.
Lewis, G. (2010). The social Responsibility of business is to increase profit. Web.
Pava, Moses L. (2008). Why Corporations Should Not Abandon Social Responsibility. Journal of Business Ethics, 83(4), 805-812. Web.
Yunus, M. (2007). Social Business. Web.