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SOCIAL RESPONSIBILITY.
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Discusses issues involved.... More...
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Paper Abstract:
Discusses issues involved. Business operations in 20th Century industrial society. Profits versus corporate social responsibility. Views of economist Milton Friedman and theory that corporations should be free to act as they wish within the rules of the game. Social-based regulations on business and industry, and impact on long-term profitability. Key elements of social responsibility.
Paper Introduction:
One statement currently in fashion holds, in effect, that: “The world that businesses are operating in is changing. In the future there will be an increasing need to give all of the stakeholders fair consideration, and not just those who provide capital.” One might excuse some of the world’s innocents for thinking that the world in which business operates changed long ago. When the sweat shops of early-twentieth century industrial society were eliminated and when societies appeared to be making businesses act as good citizens whether or not they were in actual fact, many people assumed that the world had changed. While the innocents hoped for the best, however, the forces of reaction were busy attempting to undo whatever modicum of social responsibility had been introduced into the operation of businesses.
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Some people, however, interpret the phrase, "so long as it stayswithin the rules of the game" differently than the Friedman interpretation. In the early-199 s, Buchholz (1991) observed that scholars "notcontent to view the corporation as solely an economic institution havingonly economic responsibilities have sought to develop new theories andrationales for the notion that a corporation has responsibilities tosociety that go beyond economic duties. D. 19). At the close of the decade of the 196 s, some people thought thatindustrial societies were beginning to develop a strong social conscience.One of the ideas being incorporated into the expanded concepts of corporatesocial responsibility was that all institutions and organizations -including business firms, which derived benefit from being a part of andwhich individually or collectively affected the direction of a society -had responsibilities to that society which extended beyond self interests.American economist Milton Friedman (197 ) and most business executives ofthe day, however, rejected this notion. 2. Buchholz (1991) added that,as long as the system worked "well enough for most people, there were notlikely to be any serious questions raised about the social performance ofbusiness outside the marketplace context. Thedistinction between the parties, rather, involves questions of either whichset of social objectives should be pursued through regulation, or of whattype of balance regulation should attempt to achieve in the short-runbetween progress toward an agreed upon long-term social objective and short-term profits and employment. Business entities have responsibilities that go beyond theproduction of goods and services at a profit. 21). They have been searching for atheoretical paradigm to replace or at least supplement the economicparadigm that explains corporate behavior in a free enterprise context andprescribes principles for management to follow in running an efficient andresponsible organization" (p. 4. Some people think that the protection of the natural environment or theprohibition of profiteering in the delivery of health care should be a partof "the rules of the game". Buchholz (1991) observed that, although not everyone accepted thenotion that business was solely an economic institution with only economicresponsibilities, "it does seem that this view of the corporation has beenthe prevailing view in our society" (p. In practice, all parties really want to impose social-basedregulations on business and industry, which become a part of "the rules ofthe game". Most certainly, society as a whole expects togain from the existence of the business organization. References Buchholz, R. There is significant doubt, however,concerning the negative impact of these regulations on the long-termprofitability of the affected firms. Orlitzky, M., & Benjamin, J. Friedman, M. In these latter contexts, the concept of thesimple trade-off between minimal and undefined societal benefits, on theone hand, and maximum corporate or entrepreneurial profits, on the otherhand, is insufficient as a criterion for describing and evaluating socialresponsibility of business organizations. Nor is it a question of who toregulate, as business and industry, as the engines of economic activity insocieties with market economies, are the regulation targets. 19). In the future there will bean increasing need to give all of the stakeholders fair consideration, andnot just those who provide capital." One might excuse some of the world'sinnocents for thinking that the world in which business operates changedlong ago. (2 1, December). Business Horizons, 34, 19-31. There is no doubt that the regulationsrequiring such protection increase the cost of doing business for manyfirms (Orlitzky & Benjamin, 2 1). While the innocents hoped for thebest, however, the forces of reaction were busy attempting to undo whatevermodicum of social responsibility had been introduced into the operation ofbusinesses. Friedman (197 ),of course, was referring to operations that fall within the framework ofthe principles of market economics, as he interprets these principles, andto operations that conform to the legal and ethical standards in the UnitedStates, as he thinks these standards should exist. For many critics of the concept of asocial responsibility for business organizations, this trade-off issufficient (Jones, 2 1). (1991, July-August). Society, however, has a right to expect long-term gains, as well asshort-term gains, and society has a right to be the primary beneficiary ofthe use of its resources. Attempts to broaden the notion ofcorporate responsibility have largely rested on some variation of thedoctrine of social responsibility. Business entities have impacts that go beyond simplemarketplace transactions. 3. It was the concern with socialresponsibilities that began to raise serious questions about this view ofthe corporation and its responsibilities to society" (p. Friedman (197 ) said that a corporation should be free to act as itwishes, so long as it stays within the rules of the game. While various definitions of socialresponsibility have been advocated, "there seem to be five key elements inmost, if not all, of these definitions" (Buchholz, 1991, p. Business and Society, 4 (4), 369-396. Corporate responsibility and thegood society: From economics to ecology. (2 1, December). One statement currently in fashion holds, in effect, that: "The worldthat businesses are operating in is changing. A. In return for thisexpected societal gain, however, the owners of the business organizationgain the opportunity to profit. (197 , September 13). Friedman (197 ) had hiscounterparts in the other major market economies. These responsibilities involve helping to solve importantsocial problems - especially those that the business entities have helpedcreate. New York Times Magazine, 122-126. Jones, A. Business entities serve a wider range of human values thaneconomic outcomes. The fiveelements are as follows: 1. Corporate socialperformance and firm risk. 5. When the sweat shops of early-twentieth century industrialsociety were eliminated and when societies appeared to be making businessesact as good citizens whether or not they were in actual fact, many peopleassumed that the world had changed. 21). Social responsibility and the utilities.Journal of Business Ethics, 219-229. When society permits the formation of a business organization, societyalso permits that business organization to gain access to and to usespecific societal resources. Business organizations have a broader constituency thanstockholders alone. The social responsibility ofbusiness is to increase its profits. The distinction between the Friedmans and the sociallyconscious regulators, therefore, is not whether or not to regulate, aseither side will regulate in practice.
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