Social Responsibility of a Business - Term Paper Example

Social Responsibility of a Business: Introduction: Some of the most fundamental questions that have been the focus of discussion since the industrialrevolution has started to show its impact upon the world in general and the environment in particular are; what are the responsibilities of business towards the society? How to balance between the owner’s interests and social concerns in a business, if at all, the balance has to be created? And is business a separate entity like a human being that has to be responsible and answerable to the society? The whole debate of business social responsibilities emerges from and cultivates in the flexibility and analytical looseness of the business entrepreneurs. Quite often, businessmen can be found expressing their concerns upon the social responsibilities of business. In the modern age, people have become extremely conscious about the issues of health and safety, and sustainability. Having sufficiently achieved the necessities of life, people, organizations, and agencies all are now heading towards achieving psychological contentment. That is why, issues like sustainable development have become a major concern in the contemporary age unlike past, when bringing the industrial revolution was more important that keeping environment healthy with a compromise upon development of technology. As businesses are the key drivers of economy and the practices adopted by business entrepreneurs play a decisive role in the maintenance of health and safety of the environment, a lot of debate has conventionally occurred regarding the relationship between business and society. This gave rise to the concept of corporate social responsibility (CSR). CSR had evolved as a concept to define the link between business and society (Klonoski, 1991 cited in Shah and Chen, 2010, p. 118). One of the leading scholars who have conventionally participated heavily in the debate of relationship between business and society is Carroll (1979) who defined the corporate social responsibility in these words, “The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point of time” (Carroll, 1979, p. 500). There are six basic responsibilities of the CSR as indicated in the figure below: Responsibilities of CSR (Rotariu and Ilies, 2011, p. 13). Another useful and well constructed definition of CSR is that it is “a prominent feature of the business and society literature, addressing topics of business ethics, corporate social performance, global corporate citizenship, and stakeholder management” (D’Amato, Henderson, and Florence, 2009, p. 2). In addition to CSR, another term that has been coined some time ago and that also explains the public concerns with business is public relations (PR). A comprehensive definition of public relations is; “PR practice is the art and social science of analyzing trends, predicting their consequences, counseling organizational leaders, and implementing planned programs of action which will serve both organization and public interest” (Wilcox et al. 2003 cited in Sinh, 2007). According to Grunig (2006 cited in Jones and Bartlett, 2009, p, 1), the biggest difficulty practitioners of public relations encounter is the enrollment of public relations in the business practices as an acknowledged management function. The social dimension of a business: Business in society exists because of Social Will. Society permits business to extract the resources that nature has given it since time immemorial, to market products and to provide necessary services to its members with the least side-effects on existing morality, social relationships, and the environment. (Alweiss, 2009). Social conscience of the business requires the entrepreneurs to provide the public with job opportunities, eradicate discrimination from the workplace on the basis of race, gender, religion and culture etc, and adopt such business practices that make it green, environment friendly and sustainable. “Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades” (Friedman, 1970). Such businessmen do acknowledge the significance of social dimension of business along with the importance of its profitability. While doing so, the entrepreneurs tend to defend the free enterprise. A critical analysis of the underlying factors suggests that these businessmen teach the lesson of unadulterated socialism. This paper tends to evaluate the statement, “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits” (Friedman 1993, p. 254) in light of the theories of PR and CSR. The paper takes an affirmative stance with respect to the aforementioned statement and draws reasons for this with examples. People, as human beings assume responsibilities. Every individual has certain set of responsibilities towards his/her own family as well as towards the society as a whole. The cliché goes like, “Man is a social animal”. Human beings have shared needs and interests. In comparison to humans, “A corporation is an artificial person and in this sense may have artificial responsibilities, but "business" as a whole cannot be said to have responsibilities, even in this vague sense” (Friedman, 1970). In order to gain a comprehensive understanding of the doctrine of a business’s responsibilities towards the society, it is imperative that we judge what a business means for whom. The Social responsibility of a business and corporate executives: When someone says that business has to be responsible socially, it essentially highlights the responsibilities of the organizational personnel in the business. Since the debate of social responsibility of business fundamentally implies at corporations, it makes sense to evaluate the responsibilities of corporate executives instead of individual owners. In a free-enterprise system, a corporate executive is not the business owner. Instead, he/she is an employee kept by the owner. In the capacity of being an employee, the individual is answerable to the employer for his/her actions. In a vast majority of cases, desires of the business owners fundamentally revolve around increasing the profitability of business while respecting the basic rules of work implemented in the place, which come from both the law as well as ethical customs Friedman (1970). Not always are the objectives of employers consistent with those of the corporate executives. For example, objectives of the manager of organizations made to serve eleemosynary purpose like a school or hospital are mainly to render social services. Profitability of work in such organizations is not the primary concern of business unlike the business of a cinema. Nonetheless, irrespective of the objective of owners, a corporate executive is only able to make the employers’ strategic planning real, and does not have any right to make independent decisions. The performance criteria as well as the contractual agreements for corporate executives are well defined. Being aware of the national and international issues and the significance of individualistic role and contribution in society, the corporate executive may feel obliged to devote his/her time, resources and energy to causes that he/she may deem important and worthy of his/her attention as well as retreat from fulfilling the commands of employers that go against his/her political views and religious beliefs Friedman (1970). In fact, many corporate executives do abandon jobs when they are asked to act against their moral values. The decision to spare a job in order to act in accordance with the standards of religion, morality and ethics are the very social responsibilities that are the focus of discussion here. What particularly needs to be realized at this point is that when a corporate executive goes against the consent of his/her employer, he/she essentially behaves not as an agent, but as a principal. Employers do not allow the corporate executives to use of employers’ resources for purposes out of the contract between the two. In light of this fact, if the corporate executives make informed independent decisions, social responsibilities of individuals are fulfilled, and not of the business. This leads us to think of the social responsibilities of a corporate executive in his/her capacity of being a businessman. The concept of social responsibilities of a corporate executive can only become practicable if he/she goes against the consent of his/her employers because the fundamental objective of employers is to earn money irrespective of the social consequences of their business practices Friedman (1970). “As an individual living in a cohesive society, every citizen has certain social responsibilities to care about. Business houses too are parts of society and naturally they too are necessarily bound by certain commitments and responsibilities to the society” (Rajan, 2010). Law requires corporations to adopt such business practices that are environment friendly and consume lesser natural resources in order to make the system sustainable Friedman (1970). Both of these social objectives make the corporations incur additional costs and put in more effort in adopting better business practices. Likewise, corporations should select unemployed people in place of already employed people so as to reduce poverty in the society. Again, in order to achieve this social objective, corporations would have to compromise upon the skill of their workforce and may have to incur huge costs in order to provide them with on-job training and customize their skills with the requirements of the job. Even if a corporate executive addresses the interests of society in any of these examples, the money he/she would spend would be the property of somebody else. “Insofar as his actions in accord with his "social responsibility" reduce returns to stockholders, he is spending their money” (Friedman, 1970). Such actions of corporate executives may also reduce the salaries of coworkers and cause an increase in the price at which product or service gets delivered to the customers. In addition to that, the corporate executes tend to impose taxes by doing this and decide the way in which the proceeds of tax would be spent. Two types of political concerns are awakened by this process, namely the principle and the repercussions. As far as the political principle is concerned, imposition and expenditure of taxes are both, functions of the government. In order to exercise these functions properly, government has formulated and implemented certain constitutional, judicial and parliamentary rations. This has been done in order to make the imposition of taxes according to the choices of public in general; After all, "taxation without representation" was one of the battle cries of the American Revolution. We have a system of checks and balances to separate the legislative function of imposing taxes and enacting expenditures from the executive function of collecting taxes and administering expenditure programs and from the judicial function of mediating disputes and interpreting the law. (Friedman, 1970). In this situation, stockholders select the businessman either directly or otherwise. The businessman plays the role of an executive, a jurist, and a legislator at the same time. It is for the businessman to decide in such cases how much tax should be imposed on whom and should also know the reason for that. Also, the tax proceeds are spent by the businessman. All of these measures are directed at improving environment, reducing inflation and poverty, and finding a solution to such other social issues. The reason behind letting the stockholders choose the corporate executive is that a corporate executive serves as an agent and addresses the concerns of principal. The very justification loses significance if the tax is imposed and proceeds are spent by the corporate executive for purposes of societal concern. Despite being employed in a private firm, the corporate executive essentially serves as a public employee. In accordance with the political principle, proper political process should be employed to select such civil servants. In this case, when the corporate executives need to impose taxes so as to collect sum to achieve the social objectives, assessment for the taxes must be made through political machinery and the societal concerns that need to be addressed should be determined with the help of a proper political process. This offers a potential reason to explain “why the doctrine of "social responsibility" involves the acceptance of the socialist view that political mechanisms, not market mechanisms, are the appropriate way to determine the allocation of scarce resources to alternative uses” (Friedman, 1970). Burden upon the corporate executive: On the consequential side of the story, it remains to be found if a corporate executive is able to discharge the social responsibilities. Friedman (1970) negates the idea of a corporate executives social responsibility beyond the fulfillment of his duty as assigned by the employer, by posing too many questions, some of which are; Even if he/she acquires an opportunity to spend the money, how will the corporate executive know if he/she is spending at the right place? How must a corporate executive know how to fight inflation? A corporate executive may be expert in running the firm. He/she may know the skill of producing, marketing, and financing a product that his/her company produces. But there is much more required to know how to fight inflation. Friedman (1970) doubts if it will really reduce the pressure of inflation if the corporate executive went against the original consent of the employer and held the price of good at a lower level. Friedman (1970) also doubts regarding the shortage of product in the market in case the corporate executive lowers the production to balance the lower price. Friedman (1970) further argues that these doubts require too much of empirical judgment in order to be resolved. It comes as a challenge to the corporate executive to decide the level of responsibility that he/she can reasonably impose on the customers, stockholders and employees. Another challenge for the corporate executive is to decide the share between him/her and others. The corporate executive can obviously not escape the customer, stockholders and employees after spending their money voluntarily or involuntarily. Friedman (1970) expresses that individualistic efforts to comply with the demands of corporate social responsibility may endanger the job of a corporate executive as it results into a decrease in the profitability of business. Conclusion: Analysis of Friedman (1970) argument suggests that it is not quite easy, and is rather, more often than not, impossible for a corporate executive to take independent decisions in accordance with the social responsibilities without due consent of the employers. When a corporate executive fails in his/her attempt to fulfill the social responsibility, it is nobody but he/she who is blamed. On the other hand, when he/she becomes successful in addressing the social concern without reducing the business’s profit margin, the success is fundamentally owned by the company. This biased attitude of employers often keeps corporate executives from understanding business as liable to the society. Corporate executives are only answerable to the employers. Moreover, in the present age of economic recession, not many people can risk being too sensitive towards the needs and concerns of the society because the social concerns often conflict with the strategic planning of the corporation. Businesses can not flourish without complete satisfaction of the businessmen. Nonetheless, the profits made by a business are meaningful to a society indirectly. When a business makes profit, it directly adds to the GDP of a country which strengthens it economically. The economic strength thus acquired facilitates the government in addressing the concerns of the society. References: Alweiss, B 2009, What are the social responsibilities of business? viewed, 8 May 2011, . Carroll, A 1979, A three-dimensional conceptual model of corporate performance, Academy of management Review, vol. 4, no. 4, pp. 497-505. D’Amato, A, Henderson, S, and Florence, S 2009, Corporate Social Responsibility and Sustainable Business: A Guide to Leadership Tasks and Functions, North Carolina: Center for Creative Leadership. Friedman, M 1970, The Social Responsibility of Business is to Increase its Profits, The New York Times Magazine, viewed, 8 May, 2011, . Friedman, M 1993, ‘The social responsibility of business is to increase its profits’ in Chryssides, G and Kaler, J (eds) An Introduction to Business Ethics. Chapman & Hall. Jones, K, and Bartlett, JL 2009, The strategic value of corporate social responsibility: A relationship management framework for public relations practice, PRism, vol. 6, no. 1, viewed, 8 May, 2011, . Rajan, CV 2010, What are the social responsibilities of business? Viewed, 8 May, 2011, . Rotariu, T, and Ilies, VI 2011, Public Relations and Corporate Social Responsibility: Theory and Social Action, Babeş-Bolyai University, Cluj-Napoca, viewed, 8 May, 2011, . Shah, MH, and Chen, X 2010, Relational Corporate Social Responsibility: Public Relations Implications in Culturally Confucius China, International Journal of Business and Social Science, vol. 1, no. 3, pp. 117-123, viewed, 8 May, 2011, . Sinh, NH 2007, What Role Should Public Relations Play in Improving Levels of Corporate Social Responsibility? viewed, 8 May, 2011, . Read More