The Social Responsibility of Business - Essay Example

The Social responsibility of business March 29, The concept of social responsibility of business is often viewed with mixed feelings by different people. Some argue that a business should be socially responsible and accountable for its actions apart from concentrating on its profit oriented goals. However, there are other groups of people that believe that profit maximization should be the core responsibility of business in a free market economy system. As such, this paper seeks to critically analyse this concept of social responsibility of business in view of Milton Friedman’s article titled “The social responsibility of business is to increase its profits,” published in The New York Times Magazine of September 30, 1970. The first part of the paper discusses in detail the views of the author towards his philosophy. The second part of the paper will present a counter argument of Friedman’s philosophy. In a free market economy, businesses should utilise the existing market forces to generate as much profits as they can from their operations. Friedman argues that “The businessmen believe that they are defending free en­terprise when they declaim that business is not concerned "merely" with profit but also with promoting desirable "social" ends; that business has a "social conscience" and takes seriously its responsibilities for providing em­ployment, eliminating discrimination…” He goes on to state that only people have responsibilities not a corporation which is an artificial person. In other words, a corporate has artificial responsibilities which means that business as a whole cannot be said to have any responsibilities. The main argument here is that corporate leaders have a responsibility to their employers and that responsibility is to make as much money as possible from the operations of business. The manager of such corporate is an agent of the people who own the business and he has a responsibility to them not the society. As an individual, the manager of the corporate can have responsibilities such as assisting the need but he should do it from his own money not the company’s. Spending other people’s money according to Friedman is not the responsibility of the leader who should serve the best interests of the owners of business. In other words, the executive is just an agent acting on behalf of his principal. According to the author of the above mentioned article, it becomes a political principle to make expenditures to foster social objectives. Friedman argues that there are people who are elected into office to serve that purpose not individuals representing their respective corporations. Indeed, people can do good but only from their own expense not using the corporate’s money to engage in other social activities directed at fulfilling other people’s interests apart from those of the owners of business. Friedman supports his views by borrowing from the “socialist view that political mechanisms, not market mechanisms, are the appropriate way to determine the allocation of scarce re­sources to alternative uses.” These alternative uses refer to the attempts to uplift the welfare of the other people using the money belonging to the corporate not from individual pockets. Such actions harm the foundations of the free society, argues Friedman. He categorically states that the only social responsibility of business is to use the resources available to increase its profits in as far as it engages in open and free competition which is the basic tenet of the free market economy. In contrast to Friedman’s philosophy that “The social responsibility of business is to increase its profits,” the philosophy of enlightened marketing suggests otherwise. “The philosophy of enlightened marketing holds that a firm’s marketing should support the best long term performance of the marketing system,” (Kotler and Armstrong, 2010, p.619). Enlightened marketing consists of principles such as consumer oriented marketing as well as societal marketing. Basically, consumer oriented marketing entails that the firm should view and organise its marketing activities from the consumers’ point of view. In other words, it should strive to satisfy the needs of the defined group of customers by delivering superior value. Indeed, the main goal of any firm is to generate profits from its operations but it should also be noted that the same has a responsibility to do good things to the targeted consumers (Strydom, 2004). Thus, only by seeing the world through its customers’ eyes can the firm be in a better position to build lasting and profitable customer relationships (Kotler and Armstrong, 2010). A firm that is committed to fulfill the needs and interests of the customers while retaining its profit oriented goals is likely to create trust and loyalty among the targeted consumers. This gives it a competitive advantage over its rival competitors. Kotler and Armstrong (2010) go on to suggest that enlightened businesses should not only be concerned about generating profits from their activities but should be socially responsible and be accountable for their actions. Thus, corporate ethics as well as social responsibility have become topical for almost all businesses in different parts of the globe. This has prompted marketers to re-examine their relationships with social values and responsibilities and with the very earth that sustains us (Kotler and Armstrong, 2010). In other words, part of the social responsibility of business is to make sure that it does not cause an impact on the environment from its operations. Various organizations have adopted the strategy of incorporating corporate social responsibility (CSR) programs in their operations in order to gain the trust of the targeted of the people living in the environments in which they are operating. In a way, it can be seen that Friedman’s argument is weak when he say that a corporate is an artificial person therefore cannot have responsibilities. The glaring truth about the matter is that a corporate as an entity cannot operate alone without the input of the human being. In actual fact, the human beings are the major drivers of any business hence they should be liable for their actions. In actual fact, the contemporary marketers are being called upon to take greater responsibility for the social and environmental impact of their actions (Kotler and Armstrong, 2010). This notion has been supported by Saeed and Arshad (2012) who state that “Corporate social responsibility (CSR) has been touted as an effective management tool to strengthen the organizations’ performance through a better image in stakeholders mind and also because of their responsible behavior toward society and environment.” Businesses should not only be concerned about their profit oriented goals contrary to Friedman’s philosophy discussed above but should plough back part of their profits as a sign of goodwill to the members of the society in which they are operating. References Friedman, M. (1970, September 13). The social responsibility of business is to increase its profits. The New York Times Magazine. Retrieved from: http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html Kotler, P. & Armstrong, G. (2010). Principles of marketing. CT: Pearson Education. Strydom, J. (2004). Marketing. CT: JUTA, 2004. Saeed, M.M. & Arshad, F. (2012). “Corporate social responsibility as a source of competitive advantage: The mediating role of social capital and reputational capital.” Journal of Database Marketing & Customer Strategy Management 19, 219–232. doi:10.1057/dbm.2012.19Retrieved from:http://www.palgrave-journals.com/dbm/journal/v19/n4/full/dbm201219a.html Read More