Sunday, January 12, 2020
Ethics and Social Responsibilities of Business Essay
It is cardinal fact that the â€Å"emergence of management as a distinct and identifiable activity in the modern era has had an important impact on the society with which it developed†(Massie 29). Even during the early the early days of the 20th century, most of the business corporations were predominantly concerned with their singular objective of profit maximization. As a matter of stark reality, business corporations are open system and, resultantly, they need to continuously interact with the society. Hence, many social activists began to question this singular motive of organization during the later part of the previous century. Many scholars like Bowen, pointed out that since the corporations drive their existence from the society, it must possess certain obligations towards the betterment of the later. Gradually, in the modern times, business ethics and corporate social responsibility (CSR) became a ‘science of conduct’ for almost all the business units (McNamara).            In very simple terms, business ethics is a â€Å"study of morality and standards of conducts†(Fred and Richard, 480). By the term ‘ethics’ we generally used to refer to the rules or principles which define right and wrong code of conduct. According to Walton, â€Å"business ethics is concerned with truth and justice and has variety of aspects such as expectations of the society, fair competition, advertizing, public relations, social responsibilities, consumer autonomy, and corporate behavior in the home country as well as abroad†(qtd. in Paul, 66).            In the modern era, the expectations and demand of the customer’s and the society as a whole has changed a lot, and hence, most of the business organizations have become more and more aware of their ethical and social responsibilities towards their interest groups. According to Kenneth R. Andrews, the term ethical and social responsibility mean the â€Å"intelligent and objective concern for the welfare of society that restraints individual and corporate behavior from ultimately destructive activities, no matter how immediately profitable, and leads in the direction of positive contribution to human betterment†(qtd. in Ray 24). Thus along with promoting its own interests, business should always behave in a responsible manner towards the interests and betterment of its employees, customers, creditors, government, shareholders and the society as a whole. Thus, as Davis and Robert have rightly observed, â€Å"corporate social responsibility indicates the management’s commitment towards upholding the interests of direct stakeholders and to behave in an economically and environmentally responsible manner†(Davis and Robert, 1975). To What Extent Should Business be involved in fulfilling Social Obligations For more than two centuries, the debate has still been going on about whether business should possess social and ethical responsibilities towards the society. If so, then the question naturally arrives – to what extent business should involve itself towards the betterment and welfare of the former? An analysis of facts and arguments are sure to make this point crystal clear. These are discussed hereunder as follows: Arguments against Businesses’ Involvements:            First of all, the principal objective of business is to generate profit and, hence, any involvement in social affairs or much ethical behavior is surely directed against this motive. In the views of Milton Friedman, only people can have responsibilities; business as a whole, considered as artificial person, cannot be expected to possess such responsibilities. The only responsibility that business should have is to maximize its profits (Friedman 1970).            Secondly, businesses have to incur excessive cost for any social involvements. But, where from this cost will come? This cost is generally adjusted by increasing the selling price of goods produced and services rendered by the business. Hence, â€Å"the corporate executives would be spending someone else’s money for a general social interest†(Friedman 1970). Hence, as a result of businesses’ involvement in social affairs, the society itself has to bear the burden of this excess cost. As Levitt puts it, the results would be socially less desirable than the previous days when firms were predominantly concerned with their only objective of profit-maximization (1958).            Thirdly, since any social involvements is sure to increase the price of products, the MNCs operating at overseas markets may face stiff competition from the local counterparts which may not be involved in fulfilling ethical and social obligations. This may create an weakened international balance of payments (BoP).            Fourthly, too much social involvements may immensely enhance the power and authority of business through political and social means itself. This can ultimately corrupt them in the subsequent times (Richard and Fred 480).            Fifthly, business executive lacks social skills and are not effective in handling social affairs. According to Friedman, the managers should concentrate on what they know the best – ‘how to make profits’ (1970).            Finally, there are no specifically defined parameters of ethical and social responsibility. â€Å"What does it mean to say that the corporate executive has a ‘social responsibility?†(Friedman 1970). There is no agreement that clearly defines what type of social, ethical and moral responsibilities that businesses should undertake. Arguments for Social and Ethical Responsibilities: The modern world has witnessed a drastic change in the expectations of the society. First of all, every business organization is a part of the social system. It earns its profits from the society in which it operates. Organizations should, therefore, always consider the impacts of its decisions on the society. Since businesses earn their profits from the society, the former must possess certain responsibilities to the later. Secondly, both the society and business are equally benefited when a symbiotic relationship exists between the two. The society gains through economic developments and reduction of unemployment rate, and, on the other hand, business is benefited through the customers and workforce supplied by the society. Thirdly, a positive social image helps the business to increase its brand image in the eye of the consumers and thereby increasing the number its loyal customers. A favorable public image helps the business to attract and retain skillful employees, great investors etc. Fourthly, a favorable public image helps the business to avoid the vigil eyes of the government and other regulatory agencies. It certainly provides greater independence and flexibility in the mode of their operations. Fifthly, social responsibility involves the conservation of natural resources which is very much beneficial not only to the society, but also for the business itself. Many products, like cans, bottles etc., which were considered as wastes in the earlier days, can now be recycled and profitably used. Sixthly, business possess considerable amount of power and authority – the exercise of this power should be balanced through a simultaneous display of ethical responsibility. Finally, business should prevent social problems for its own interests. Instead of allowing large scale unemployment leading to social political unrest, which can eventually spoil the operations of business in the subsequent times, business organization can rather become the source of employment for qualified and eligible people. Social and Ethical Responsibility on Interests Groups The International Seminar on Social Responsibility of Business has rightly observed that business corporations should be responsible to the following interests groups: Shareholders: The shareholders provide the prime resources i.e. the capital to the business for its existence, growth and development. Hence, the later must protect interests of the former. Employees: Employees are the most important assets for any organizations. It is through the employees that the business runs itself. In the earlier days, the management regarded its employees as only a factor of production and, therefore, denied their true rights. However, modern managements have rightly understood that unless the employees are happy, it is very much difficult to reach high levels of customer’s satisfaction. Customers: The most successful businesses of the world put the customer first, ahead of the investors (Mackey 2005). Modern organizations have realized the importance of keeping the customers satisfied. The growth of consumerism has contributed much to this realization. Creditors: The major inputs like machine, money, materials etc. are supplied by the creditors. Hence, business must behave ethically and responsively towards them. Society: Every business corporations, being open systems, operates within a social system. It draws its resources from the society in which it operates. Hence, it must be socially responsible for the welfare of the later. Government: It is the government of a country of state that provides the primary facilities for the growth and development of the business. Most of the governmental decisions are subjected towards the growth and betterment of the business. Hence, the business, in its turn, should behave ethically and in a socially responsible way towards the government. Conclusion Every business organization is a part of the economic and political system and not an isolated island without any foreign relations. It is the core of a network of relationships to individuals, groups, and things (Reddy and Tripathy 295). Hence, the management should always consider the impacts of their decisions on all the interest groups with which it is closely bonded. The business should operate as a trustee for the wellbeing of its employees, customers, the government, suppliers and creditors, shareholders and the society as a whole. In fact, the management’s duty is to mediate among all these social stakeholders in order to ensure that each of them gets a square deal and none of their interests and benefits are unduly sacrificed to those of the others. Social and ethical responsibilities â€Å"are management’s responsiveness to public consensus†(Adolph 1963).            Every civil citizen must possess some social and ethical responsibilities. True that the business corporations are considered as ‘artificial persons’ – but does that mean it should not possess any obligations towards the welfare of the system in which it grows and develops? Obviously, to increase profit is one of the prime motive of every business and from this point, any social involvements reduces the percentage of profit for the business. But, from a wider perspective, it can be concluded that, business corporations should â€Å"behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large†(Holme and Watts). References Adolph, A.B. The American Economic Republic, Harcourt Brace and World, New York, 1963 Corporate Social Responsibility: Evolution of a Definitional Construct: Carroll Business Society.1999, 268-295 Davis, K. and Robert, L. B. Business and Society, Environment and Responsibility, Revised  Edition, Tata McGraw Hill Book Company Inc. New York, 1975 Friedman, M. The Social Responsibility of Business is to Increase its Profit, New York  Times Magazine, 13 September, 1970 Friedman, M. ibid, 1970 Friedman, M. ibid, 1970 Holme, L and Watts, R. The World Business Council for Sustainable Development, Making  Good Business Sense – http://www.mallenbaker.net/csr/CSRfiles/definition.html Levitt, T. The Dangers of Social Responsibility, Harvard Business Review, Sept, 1958. Mackey, J. (qtd. in) Rethinking the Social Responsibilities of Business, October 2005            http://www.reason.com/news/show/32239.html McNamara, C. Complete Guide to Ethics Management: An Ethics Toolkit for Managers http://www.managementhelp.org/ethics/ethxgde.htm Massie, J.L. Ethical and Environmental Foundations, Essentials of Management, Fourth Edition, Prentice-Hall of India, New Delhi, 1995, 29 Paul, C. Ethics in Business, Introduction to Management, Modern Book House, Calcutta,            India, 1989, 66 Ray, S.M. Corporate Social Responsibility, An Introduction of Management Thoughts, Oriental Publications, New Delhi, 1979, 24 Redddy, P.N. and Tripathy, P.C. Social Responsibilities of Business, Principles of Management, Tata-McGraw Hill, New Delhi, 1995, 295 Redddy, P.N. and Tripathy, P.C. ibid, Richard, M.H. and Fred, L. Ethics and Social Responsibilities, International Management, Third Edition, McGraw Hill International Editions, 1997, 480 Richard, M.H. and Fred, L. ibid, 481 Stehi, S.P, Dimensions of Corporate Social Performance, An analytical Framework,  California Management Review, Vol. 17, No. 3, 1975, p. 58-64 The International Seminar on Social Responsibilities of Business: (qtd. in Mukharjee, P.B. Social Responsibilities of Business, 1994, 09
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