The Main Purpose of Business - Case Study Example

Communication in Business The social responsibility of business is to increase its profits – Milton Friedman A business that makes nothing but money is a poor business. ~Henry Ford The contrasting ideologies, quoted above, are apt in describing the current on-going debate regarding the role of business in society today. On one end of the debate, there is a group of supporters who subscribe to the highly Anglo-Saxon ideologies of economics, wherein greater significance is given to the economic / financial aspect of business with little or no regard to the social issues (Godfrey and Hatch, 2007; Nelson, 2004). While on the other end, the ideology that - social aspect of business is indispensable and an inevitable part of corporate management, is stressed. Where one group argues that the sole purpose of a business is to maximize profits and create value for shareholders, the other support Corporate Social Responsibility (CSR) as a part of their corporate agenda. There has been a steady rise in the popularity and significance of CSR and its role in creating an impact on society, and ultimately on the business itself, leading to its adoption and implementation by several corporate giants. Companies across various sectors have taken up social responsibility and their duties towards the society, as a serious and significant part of their corporate agenda (Nelson, 2004). It is evident from the fact that annual report of companies’ now includes sustainability or social reports, where the social activities of a business are proudly displayed alongside the company’s financial reports. Companies today are highly aware of their role in the society and the impact on the everyday lives of its consumers. However, as the role and popularity of CSR continues to rise, an equally significant number of companies, across Europe are steadily moving towards the adoption of the conventional Anglo-Saxon shareholder value model – with greater emphasis on profits, sidelining social responsibility in the process. It is on account of this very reason, that the debates surrounding the purpose and role of business in society, has assumed global significance (The Economist, 2005). The role of business in society: According to some, the main purpose of business is to create wealth and maximize shareholder value, while others consider benefit to society as a part of business. However, regardless of the conflicting ideologies, the fact that business is arguably, the only human activity, which has a far reaching impact on the society, cannot be denied. It has the ability to assemble and accumulate human resources, on a large scale, who are engaged in the production of goods and services for public consumption, while generating profits in the process. Business not only generates profits for the stakeholders and owners but also create value to the society in the form of employment and providing a source of livelihood to millions of people. It is on account of this reason, that the role of business in society is far greater than merely generating profits and hence, companies today have readily incorporated the ethical and moral principles as a part of their corporate responsibility. Companies nowadays, strictly adhere to their social responsibility with the same zest and fervor as they comply in case of their legal obligations. The role of business in society, thus has widened in the recent years and has moved beyond the legal, financial and economic obligations to include social and environmental obligations as well (Blowfield, Murray, 2008). Arguments against corporate social responsibility Milton Friedman subscribed to the classical economic school of thought which contend that business has one and only one responsibility – towards the shareholders and owners and that social issues do not and must not figure on the list of corporate objectives. He further stated that social aspects are taken care of -by and in a free market economy, and in case it fails to do so, then it becomes the responsibility of the government, but business does not have anything to do with social issues. According to Friedman the basic role of management / business is: "to make as much money as possible while conforming to the basic rules of society, both those embodied in the law and those embodied in ethical customs". (Caroll, Buchholtz, 2008). Furthermore it is argued that business does not have the essential skills, resources and talent required to cater to social issues, and the managers are hired to take care of the financial and economic aspect of business, rather than social aspect. In such a situation, diverting from the key objective to achieve and cater to social issues, would only lead to serious consequences and defy the very purpose of business – that of maximizing financial gains. Furthermore, it is also argued that society has diverse needs which cannot be fulfilled by corporate organizations alone. Curing the society of social ills, is the responsibility of the government, social organizations and other support groups and not that of ‘business’ (Sims, 2003, Senser, 2007). In the words of Milton Friedman, “the business of business is business”. Interaction between business and society and role of CSR Business in present day’s global economy is not only an economic activity, but a socio-cultural activity which has the potential to impact the lives of not only those who are directly involved in the activity, but also of those who benefit from it. The companies thus, must focus on broadening their scope to include a wider section of the society, over and above those to whom they are directly responsible. Instead of adhering to their sole corporate agenda – that of maximizing profits, the companies have to be socially and environmentally alert and responsible, especially in the wake of their far reaching impact on the society. Business, contrary to popular belief, is no longer a mere economic activity, but a social one as well, especially since the companies doing business, do it in the public eye (Erickson et al., 2009). This is primarily the reason why companies today are increasingly adopting social and environmental causes and contributing to the society’s well being. The same is now clearly reflected in the companies’ annual reports, where their social initiatives are displayed by way of corporate social responsibility, alongside their financial profits. The social initiatives adopted by companies today, play a huge role in shaping their public image and if used correctly, they might have a fair chance of adopting and implementing a balanced corporate approach. Such efforts on the part of corporations help in shaping public perception for or against them, and influence their profitability. In order to support these arguments, the case of De Beers is discussed below: CSR and De Beers De Beers is an internationally renowned company headquartered in South Africa, involved in trading and mining of diamonds, and has a near monopoly in the market. It is the largest diamond trading and mining company in the world. However, it is also known to be one of the most unethical corporations in the world, on account of its alleged association with trading of ‘blood diamonds/ conflict diamonds’ (De Beers, 2010; Bieri, 2010). De Beers was accused of trading conflict diamonds, and violating the Human Rights as well as UN sanctions regarding trade of diamonds in the conflict gripped Angola region, thus indirectly participating in the fuelling of violence and bloodshed. The case of De Beers is a perfect example of corporatization of ethics, where the concerns and issues of the society at large, took precedence over attainment of economic objectives of the company. The notion of fair trade, adopted and portrayed by the company, is an antithesis of the actual policy of the company - that of a complete moral / ethical detachment. The company, however, claims to have a strong moral and ethical policy and displays a commitment towards the society. De Beers, in a bid to refurbish its deteriorating image in the industry, adopted strong steps and took up social causes to prove its commitment towards society. Over the years, De Beers has helped set up nature reserves such as the De Beers Venetia Limpopo Nature Reserve, aimed at promoting eco-tourism; established strong partnerships with environmental protection agencies for protecting wild animals; and also help set up animal farms, with a view to help the local community earn a source of livelihood, thus making a strong statement about its commitment towards social causes (Yakovleva, 2005). Conclusion The new and rapidly emerging concepts of corporate social responsibility and triple bottom lines, are more directed towards the company’s stakeholders rather than its shareholders. Since it is these stakeholders who get to decide, the fate of the company in terms of acceptance of its products and services and associating with it through engaging in employment. The ethically / morally or socially harmful policies such as that adopted by De Beers, could prove to be devastating, and cause long term damage to the company’s reputation and brand image. Companies in the 21st century are rapidly evolving and have begun to accept the challenge of handling both economic and social aspects of business. For companies in todays socially aware world, a well researched and structured CSR report alongside their financial reports is a sure shot formula for success. It not only enhances their image and perception in the public eye, but helps in attracting talented workforce and a motivated staff, who are more than willing to be associated with a socially aware company, thus leading to maximization of profits in the process. Hence, it wouldn’t be inappropriate to conclude that the business of business is business and more. References: Bieri, F., 2010. From blood diamonds to the Kimberley process: How NGOs cleaned up the global diamond industry, Ashgate Publishing, Pp. 18 - 22 Blowfield, M., Murray, A., 2008. Corporate Social Responsibility: A Critical Introduction, Oxford University Press, Pp. 381 - 385 Caroll, A. B., Buchholtz, A. K., 2008. Business and society: Ethics and stakeholder management, Cengage Learning Publication, Pp. 49 - 53 De Beers (2010). Sustainability at De Beers [Online] Available at: http://www.debeersgroup.com/ofr2010/sustainability/index.html [Accessed: March 26, 2011] Erickson, M., Stephenson, C., Bradley, H., Williams, S., 2009. Business in Society: People, Work and Organizations, Polity Publication, Pp. 118 - 120 Godfrey, P. C., Hatch, N. W., 2007. Researching corporate social responsibility: An agenda for the 21st century. Journal of Business Ethics, Vol 70 (1). Pp. 87 - 98 Nelson, J., 2004. The public role of private enterprise: Risks, opportunities and new models of engagement. Corporate social responsibility initiative working paper. Cambridge, MA: John F Kennedy School of Government, Harvard University Senser, R. A., 2007. Corporate social responsibility. Dissent, Vol. 54 (1). Pp. 77 -82 Sims, R. R., 2003. Ethics and corporate social responsibility: why giants fall. Greenwood publishing group. Pp. 63 - 65 The Economist., 2005. Business and society: The biggest contract. http://www.economist.com/node/4008642?story_id=E1_QDDRGQN [Accessed: March 20, 2011] Yakovleva, N., 2005. Corporate social responsibility in the mining industries, Ashgate Publishing, Pp. 90 - 93 Read More