The Social Responsibility of a Business is to Increase Its Profits - Essay Example

?Management: Corporate Social Responsibility Department: Introduction The question in mind while thinking about Corporate Social Responsibility (CSR) is whether the business community should recognize and promote the cause. How do the CSR and its rationale benefit organizations and the business community? In order to argue that a business must ignore CSR in order to maximize profit, it should be clear how these businesses benefit tangibly from taking part in its policies, practices and activities. When a business focuses on maximizing profit, they are ignoring their responsibility towards society. Should a business worry about the importance of CSR or that of maximizing profit (Davis 1960)? The paper discusses the fact that it is a business’ social responsibility to maximize profit by ignoring corporate social responsibility. Argument 1 It is the responsibility of the corporate executive to generate as much profit for the business while complying with the fundamental societal rules. CSR has the policies that ensure a business conforms to these rules. Throughout the decades, the theory of Corporate Social Responsibility (CSR) continues to develop in significance and importance. It has been the subject of considerable debate, commentary, theory building and research. Regardless of the continuing discussions as to what it means and what it entails, it has enhanced and evolved in both practitioner communities and academic globally (Smith 2003). The notion that the responsibilities of business enterprises to society go past that of profit making for the shareholders has been here for many years. The phenomenon developed after the WW II and failed to take any direction in terms of significance until the 1960s and afterwards (Friedman 1970). So long as the government keeps the laws, corporations will continue to carry out their practices as the law permits them to maximize profit, so in other words, CSR is not the complete responsibility of corporations, but that of the governments. Edwards Freeman created the theory of the stakeholder, which deals with a person’s values and morals in organization management (Friedman 1970). The theory of the stockholder states that stockholders increase resources to corporate managers who operate as agents in developing their interests. The main purpose of any organization is to maximize profit. The problem is whether these organizations should have any responsibilities towards society. The function of a corporation is vital when attempting to comprehend what builds a ‘good’ corporation (Smith 2003). Since the beginning of debates over CSR, critics and supporters have been expressive about the arguments for and against the notion of CSR. There has been expansive discussion about these arguments. Embedded in the discussions for and against the theory of CSR are points made previously, possibly on a gradual basis, supporting the concept. The argument against CSR concept classically begins with the economic case expressed by the late Friedman (1970). According to Milton Friedman, the only duty of a business is to ensure maximum profit, and not worry about social responsibility. As a libertarian, he believes there is no need to get in the way of another person’s liberty. Milton supports free market and claims most developed capitalists states are, to some degree, welfares. According to him, the main social responsibility of a business is to ensure maximum profit, as long as it follows the rules of society. In short, a corporation should carry out its operations and take part in free and open competition exclusive of any fraud or deception. It is not right for businesses to have any form of social responsibility because most business owners become so in order to make profits. The issue of CSR also asks the question, who is responsible in ensuring the corporation follows CSR policies? Is it any person with power or the owner? Does an individual, as opposed to workers combined have moral duties (Smith 2003)? These are the type of questions that make CSR a hard responsibility for a company to follow. Milton argues that private competition influences people to be accountable for their actions and creates difficulty for exploitation. Social responsibility, to some extent, harms people’s liberty, which according to Friedman, happens to be the ultimate good (Friedman 1970). A corporation has the responsibility to increase profit for the sake of the stakeholders (Freeman, Velamuri & Moriarty 2006). Since they own the corporation, it appears morally necessary for managers of these corporations to work in the interests of the stockholders and make sure they get maximum returns. Therefore, it is not the corporation’s responsibility to divert profits in the concern of social responsibility. Corporations chose managers because of their abilities and skills in managing and carrying out business and not for their proficiency on social responsibility (Friedman 1970). Friedman states that a company will lose its stakeholders if it abandons its responsibility in making profits and concentrates on social responsibility. This is true because stakeholders invest in companies that make profits. This means that stakeholders will always look for companies that are making money and not those concerned with CSR. Argument 2 Friedman claimed that social issues should not be the worry of business people and that it is the duty of the free market structure to resolve these problems through its unregulated workings. Additional, this view states that, if it is difficult for the free market to solve the social issues, then the problem falls on the legislation and government and not the business. A second argument against CSR is that businesses lack the appropriate resources needed to deal with social activities. This argument holds that managers have an orientation towards operations and ?nance, and they lack the required social capability, to make socially oriented choices. CSR have policies that interfere with the primary goal of any business. The objection is that for a business to implement CSR would mean putting it into ?elds of venture that do not relate to their suitable aim. A different argument is that, through CSR, a business claims social power. This means that society would be giving a business the opportunity to add power to the one it already possesses. It is also a fact that pursuing CSR will make a business fail to compete fully globally. These are arguments raised years ago, but some people still consider them viable. The oppositions to the CSR theory also applied when people narrowly conceived the idea (Friedman 1970). Today, it is impossible to pick up a magazine, newspaper or journal without coming across several discussion of the CSR issue, or some recent or inventive example of what business is doing concerning CSR. Although, in a way, maximizing profits is a social responsibility since profitable business operations are a benefit to society in many ways, for example, in a utilitarian argument it improves social welfare (Roman, Hayibor, & Agle 1999). Profitability also helps in creating jobs for professionals, services and new products for customers, maximizing profits for stakeholders and improving society’s economy and taxes. In the end, the self-interest of a business to create profits leads to the benefit of society. Morality is something that comes because of the business institution and not through managers’ efforts to be ethical societal members (Friedman 1970). Another argument that supports the pursuit of profit by businesses is that business managers trying to maximize profits are also acting morally responsible. This is because shareholders employ them and, so they have a legal and moral obligation to do what is in the best interest of their employers, which is maximize profits. According to the theory of stakeholders by Edward Freeman, stakeholders are people that can affect a business or a business can affect through its actions, which means they have a claim on the business. He claims that corporate governance belongs to a wide group of managers, stakeholders, and unions. A business should not treat these groups as ‘a means to an end’. The law of corporations states that any corporation has a legal obligation of operating in the interest of shareholders. The economic approach is that managerial free enterprise defends itself through utilitarianism, however; the issue happens that no one has an incentive to prevent pollution or take on cleanup costs. Edward Freeman considers the aim of the corporation is to manage in regards to the interests of all those influenced by the actions of a corporation (Freeman, Velamuri & Moriarty 2006). He perceives the welfare of all those with interests in the business operations as being important, not only those who possess it. He points out that have an entirely profit driven technique does not fit society’s legal and economic climate. He believes that it is vital to redefine a corporation in note of this. A corporation needs to act and perform according to a set of ethical and core values. Edward argues that a company taking part in CSR activities will receive rewards from the market in financial and economic terms (Freeman, Velamuri & Moriarty 2006). Conclusion The CSR responsibilities need that corporations take on pieces of the responsibilities for the fundamental requirement of social and individual life in society. if a business concerns itself with societal responsibility it may end up losing money. It is true that the stakeholders have a right to make profits after investing in a company. Therefore, it is the sole duty of that company to ensure maximum profits. Bibliography Davis, K. 1960. Can business afford to ignore social responsibilities? California Management Review, vol. 2, pp. 70–76. Freeman, R. Edward, Velamuri, S. Ramakrishna & Moriarty, Brian. 2006. Company stakeholder responsibility: A New Approach to CSR. Institute for Corporate Ethics. Friedman, Milton. 1970. The social responsibility of business is to increase its profits. The New York Times Magazine. Available from http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html [23 March 2013] Roman, R.M., Hayibor, S. & Agle, B.R. 1999. The relationship between social and ?nancial performance. Business & Society, vol. 38, p. 109. Smith, N.C. 2003. Corporate social responsibility: whether or how? California Management Review, vol. 45, pp. 52–76. Read More