The socail responsibility of business is to increase its profit - Essay Example

- Abhisek.M.Jain Topic - Social Responsibility of a Businessman is to increase profits - 20/11/2008 Social Responsibility of a Business is to Increase the Profits PART-1 INTRODUCTION Social responsibility of a business means the responsibilities which the business must undertake for the betterment of the society. These are the policies and programmes which a business must pursue for the general upliftment of the society. The business must be concerned about the welfare of their customers, employees and the society on the whole. The idea behind assuming social responsibility by the business is to help for the rapid development of the society besides increasing the profits of the business. In the ancient times the businesses were concerned only about increasing the profits. But the modern business has to undertake certain social responsibilities also. The difference between traditional business and modern business is that the former is concerned only about economic and technical objectives while the latter extends it to social responsibilities as well. FRIEDMEN'S OBJECTION ON ASSUMING SOCIAL RESPONSIBILITIES There are various authors who have supported the idea of assuming social responsibilities by the business. On the other hand some authors feel that the question of assuming social responsibility by the business falls outside the scope of business. Milton Friedmen is of this view. According to Friedmen the political principal capitalism will be affected if the business assumes social responsibility. In a capitalist economy the business firm has the complete freedom of using its available resources in a manner it wants. But if the business firms are compelled to assume social responsibility the political principle of capitalism will be violated. The primary objective of any business must be to increase the profits. A proprietor invests money in his business only for the purpose of earning maximum profit and not for the purpose of assuming social responsibilities. A manager is trained only for making optimum and efficient use of the available resources of the firm. The managers are the representatives of the owners and the share-holders of the business. The owners will have main objective of maximising the profit. Therefore the managers have no right to direct the resources of the firm for any other purpose other than for the purpose of increasing the profits. There are various constraints which blocks a manager from assuming social responsibility. The corporate managers are trained to increase the profits and they do not have any idea about the manner in which they can improve social well-being of the people. Milton Friedmen feels that the principle of taxation would be violated if the business undertakes social responsibility, because the business will be using the money of the people for undertaking some measures for the betterment of the society. And this is similar to the taxes imposed by the government. The taxes imposed by the government and the money which the business use for undertaking social responsibility are similar because both the government and the business are using the money of the citizens for the benefit of the society. The government asks taxes from the public only for undertaking some social functions. And the right of taxes is given only to the government. So the business has no right to take money from the public for undertaking social works. If the people feel that they should contribute something for the betterment of the society they can use their own resources for undertaking these works. Friedmen believes that if we bring the concept of social responsibilities into the business it will amount to bringing socialism into the business which will be against the principle of capitalism or a free-enterprise economy. In a free enterprise economy the business firm has full freedom to use the available resources of the economy for maximising the profits. Only in a socialist economy the government will put various restrictions on the business firm and will have a main objective of promoting the welfare of the society. The concept of social responsibility in the business would mean bringing in the principles of socialism in the functioning of the business. PART - 2 OBJECTIONS AGAINST FRIEDMEN'S ARGUMENTS Milton Friedmen is of the view that the business must be concerned only about its profits. But I strongly feel that the business must be concerned both about its profits and also for the betterment of the society. The primary objective of the business firm is to earn profit and no one can deny it. But the business must also put in some efforts for the development of the society. The following are the reasons which will help to understand why the business must undertake social responsibility- 1. Businessmen are the citizens of the country. So the people expect the business firm to use their corporate power for the development of the society. As the citizens of the country it is their responsibility to contribute towards the development of the nation. 2. The business firm owes their existence to the statutory bodies of the government which are responsible to the society and so the government expects the business to undertake social responsibilities. 3. The economic interest of the business firm would be served better only if it undertakes social responsibilities. 4. If the business undertakes social responsibility it will reduce the work of the government in framing laws for regulating the business. This will reduce the cost of functioning of the business as conduct of the business under rules and regulations is very expensive. 5. If the business firm provides better wages, salaries and better condition of work and living to its employees they will be more efficient and will contribute more towards the productivity of the firm. 6. Since the business makes use of the large economic resources of the country it is the responsibility of the business to undertake social responsibility for the benefit of the society. Therefore we can say that Friedmen's objection is one-sided and it does not focus on all the aspects. PART-3 FRIEDMEN'S DEFENDER'S ARGUMENT A defender of Friedmen's argument can state that as the business invests his own resources into the business and therefore he has every right to use the resources in the way he likes. Therefore he has the right not to put into use the A-of-S principle. The A-of-S principle states that the main objective of the business is to assume social responsibility. The A-of-S view states that the businessman is an agent of the society. And as an agent of the society the business should take actions for the benefit of the society. Without assuming social responsibility the business purpose makes no sense. The following are the reasons which a defender of Friedmen's arguments can state for not assuming social responsibilities by the business- 1. A business spends huge economic resources and devotes his time in the business only for the purpose of earning profit and not for the purpose of undertaking any social responsibility. 2. If a business assumes social responsibility his cost of production would increase and therefore this will ultimately increase burden on the consumers. 3. If a business undertakes social responsibility the principle of free-enterprise economy will be violated. 4. The share-holders invest their money into the business only for the purpose of earning more dividend and therefore it is the responsibility of the business to divert all their resources towards maximising the profits. These are the points which a person can state in order to defend Milton Friedmen's arguments. A-of-S VIEW The A-of-S stresses on the point that the corporate managers should take some actions that would protect the social welfare of the people. But the point is that the corporate managers are trained only to maximise the profits and they will not have much of a idea to about how to contribute for the social welfare of the people. If we have to make A-of-S view compatible to the democratic principles we would have to make proposed changes in this principle- 1. The government should provide various concessions to the business undertaking social responsibility which would encourage the business to spend its resources for the betterment of the society, 2. The A-of-S principles should be modified so that both the society as well as the business should get some benefit out of it. 3. The business firm must be given the right of using the money of the share-holders in order to undertake social responsibility. 4. The government must take various measures to educate and make the corporate managers about the need and areas where they could contribute for the society. If the business applies the principles of social responsibility its operating costs will increase. But this increase in cost would be nullified by the fact that the business will be contributing much towards the development of the nation. PART-4 CONCLUSION Social responsibility means that the business should undertake some responsibility for the betterment of the society. Milton Friedmen is of the view that the concept of social responsibility falls beyond the scope of business and the business should be concerned only about increase its profits. He does not accept the A-of-S view in business. But the business must undertake some actions that will improve the social status of the citizens. The A-of-S view should be applied by the business for the benefit of the society. Though some modifications can be made in the A-of-S principle so that it can be beneficial to both the society as well as the business firms. The business has to take some steps that will improve the conditions of the consumers, employees and the public in general. WORKS-CITED 1. Shankaran, Ravi. "Business Environment" Chennai: Macmillan: 1994 Read More