Do Corporations Have Any Responsibility beyond Making a Profit - Essay Example

Business and Society Do Corporations Have Any Responsibility Beyond Making a Profit? Most of the businesses in the present day are engaged in activities relating to social responsibility. The interest in CSR has been renewed in the year 2008. This happened mainly because of the host of criticisms that the companies faced due to their selfish motives of gathering of the resources as well as their neglect towards the society. The practice of the large corporations to maximise their wealth ignoring the societal aspects had led to the formulation of various laws and regulations in different countries of the world. The organisations at the present day intend to contribute to a situation of equitable position in the society, a balanced environment and the development of a sustainable economy. Although most of the large corporations are chiefly engaged in these types of social activities, the smaller houses are also not beyond the scope of CSR. The smaller manufacturing and production companies are equally responsible for the exhaustion of the environmental resources and therefore it is also a part of their duty to give back some thing to nature and the society. If the present generation makes complete use of the existing resources there would be nothing left for the future generations to sustain in the long run. Therefore the companies that are operating in any economy should think beyond the interest of the shareholders and maximisation of profit but should formulate their policy that would add to the social welfare by and large. The ideal mission and vision of a particular company has remained a topic that has been discussed and deliberated on at length. Pros and cons position on the issue The stakeholder theory is often used to talk about the corporate social responsibility activities of the organisations. The corporations have legal obligations towards the shareholders of the businesses. Since the stakeholders are people belonging to the society contribution by the corporations in the CSR activities would contribute to the welfare of those shareholders implicitly. The organisations also have a moral and social responsibility which encourages them to take up social projects. The environmental impact that entails in the activities of the companies makes it a mandatory responsibility of them to take part in the contribution to social welfare. Thus as the companies move towards a goal of sustainability in the society the businesses are benefitted. It adds to the welfare of the businesses. On the other hand, the company board of directors are considered to be only employees of the shareholders (Manne, 1972). The shareholders invest in a company only for a monetary return and therefore the managers should focus only on the maximisation of profit. Any part of the accumulated profit should not be used up for any other uses, even if it is for the welfare of the society. The companies that distribute greater amount of profit as dividends would have a profit advantage and thus they would be able to retain a better position in the markets. The self interest of the companies would contribute to the profit of the stockholders which in turn would help in the societal welfare. According to Peter Drucker, every business should take part in rigorous social welfare activities because the businesses are social institutions. Being a part of the society they should serve the people and consider it to be an action of high order. Though the businesses would try to meet the demands they should keep one thing in mind that the decisions that they take should be sustainable and should not hamper the survival of the future generations. The shareholders would have the option of making good contribution to the society. By making proper use of the resources the wealth can be maximised which would benefit the economy at large. The code of conduct of all the organisations should be framed on an ethical basis. On the other hand Milton Friedman is an economist who has considered that maximisation of the social welfare should be the main goal of any organisation. The sole responsibility of the businesses is to maximise their profit because the shareholders have entrusted them with the responsibility of the companies (Friedman, 1970). As a privately owned enterprise companies should concentrate on the interest of the shareholders. The managers are the people who are supposed t carry out the instructions set by the investors. According to Freidman the duty of conducting the social projects rest with the government because they are the people who collect the taxes. An individual who works in an organisation is free to work in social activities but beyond the province of business. Optimal allocation of resources would only take place if the market forces are allowed to operate. There is no harm in pursuing profit for any organisation (Evan and Freeman, 1993). If social institutions are set up under the shade of a particular business it will pose a threat to that business. Areas of Agreement and Disagreement Many academics and management practitioners have supported the practice of CSR and they have put forward a number of reasons in support of their argument. Both Drucker and Freidman are justified in their own positions. However, both the theorists would agree on one point which is the approach for all business activities. Whether or not a business engages in any social activity, the approach should be fair and ethical. The social responsibility should not be carried out only as mandatory chore but the company should truly believe in the path that they intend to pursue. Jack Welch has also criticised the idea as ineffective. According to him the restriction of the value for the shareholders limit the growth of the company. The companies by pursuing CSR only fulfil the short term societal needs rather than creating a long term value for the company. Some of the other theorists are of the opinion that the profits are not equally shared among the people of the society. The purpose of a company is decided by the founders of the company and therefore the shareholders have little role to play here Strengths and weaknesses of the arguments The strength of these arguments is mainly the fundamental positions on which the point has been built up. The stakeholder theory approach is a very practical theory that has been used in support of the arguments. The relation between each of the stakeholders and their rights and obligations has been clearly defined in the arguments. The major weakness is that the opinions have been provided for particular people and authors who are concerned with the business, economy or the society. The lack of statistical data to support the arguments is visible (Barry, 1998). If examples of companies along with empirical studies had been provided it would have made the arguments stronger. Along with this the political aspects of the businesses and CSR have been ignored. No economy is free from political influence and so the arguments including the political objectives of the economy and the society should be included. Reflection on the issue In my opinion companies being a part of the society have some social responsibilities to fulfil. However this responsibility should be carried out more form an ethical and moral point of view. Issues relating to compliance and adherence to norms have become very important these days. These laws have been framed keeping in mind the various aspects of the business and the extent of measures that are needed to form a balanced society. If the companies comply with these norms framed by the respective nations that they operate in, it would ultimately lead to a sustainable business environment throughout the entire globe. The social welfare can be maximised if the objectives of the corporations are aligned with the objectives of the state. References Friedman, M. (13 September 1970). The Social Responsibility of Business Is to Increase Its Profits. New York Times Magazine. Barry, N.P. (1998). Business Ethics. London: Macmillan. Evan, W.R. and Freeman, R.E. (1993). A Stakeholder Theory of the Firm: Kantian Capitalism. Ethical Theory and Business. Englewood Cliffs: Prentice-Hall. Manne, H. (1972). The Modern Corporation and Social Responsibility. Washington, D.C.: American Enterprise Institute. Read More