CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility

The concept of corporate social responsibility proposes that a private corporation has responsibilities to the society that extends beyond making profit. A company should be aware that its strategic decisions not only affects the company but the society at large. A decision to retrench workers,may seem a good strategy to save the company from crisis,but there is also a cost to the communities and families that are in the workforce. Take another example which is the discontinuing of a product,there might customers who are so dependent on the product and by the action of the company such products would no longer be available to them. Such situations raise questions of appropriateness of certain missions,objectives and strategies of business corporations.

RESPONSIBILITIES OF A BUSINESS FIRM

In general a business has some social responsibilities,the question then is how many of the must be fulfilled to still keep the firm profitable. Milton friedman and Archie carrol offer two contrasting views on the responsibilities of of business firms to society.

Friedman's Traditional View of Business Responsibility

Milton friedman argues against the concept of social responsibility, he says a business who acts in response to social factors by cutting prices to prevent Inflation or by hiring more hands than needed to help combat unemployment or making extra expenditures to curb the pollution rate according to friedman is spending the shareholder's money to fulfill a general social interest. He believes that this practice may later turn around to bite the society the company is trying to make better,because by taking on these social costs,the business becomes less efficient and there is a continuous wastage of money which may reduce the profitability of the business.

Friedman thus referred to the social responsibility as a "fundamentally subversive doctrine" and stated that "There is one and only one social responsibility of business- to use its resources and engaging in activities designed to increase its profits as long as it stays within the rules of the game,which is to say,engages in open and free competition without deception or fraud." He also says that "in a free enterprise,private- property system a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires,which generally will be to make as much money as possible while conforming to the basic rules of the society,both those embodied in law and those embodied in ethical custom."

Please note that although friedman sees maximization of profit as the ultimate aim of a business,he still advocates that managers should seek to maximize profits in an ethical way,free of the use of fraud and deception.Business managers should engage in open competition, Price collusion would be a moral wrong for friedman.According to friedman,business managers ought to follow the law and they ought to obey the ethical customs embedded in society.

Carroll's Four Responsibilities of Business

They have been many debates to the validity of friedman's reasoning of corporate social responsibility. According to william J Bryon, Distinguished professor of Ethics at georgetown university and past president of catholic university of America, he believes that profits are only a means to an end,not an end in itself. Bryon contends that to maximize profits cannot be the sole purpose of a business. He compares profits to food and says that just as a person needs food to survive and grow,so does a business corporation need profits to survive and grow.

Carrol proposes that managers of business organizations have four responsibilities which are economic,legal,ethical and discretionary.

Economic responsibilities: The economic responsibilities of a business enterprise is to produce goods and service that creates value to customers and provides profit to pay off creditors and render returns to the company's shareholders In the form of dividends.

Legal responsibilities: They are laws by the government of the country in which the business operates and also the laws of its foreign branches or subsidiaries which the business is expected to obey. For example,Us business firms are required to higher and promote people based on their credentials rather than to discriminate on non-job related characteristics such as race,gender or religion.

Ethical Responsibilities: Ethics are a system of moral principles and a branch of philosophy which defines what is good for individuals and society.An organizations management are expected to be morally upright and follow generally held beliefs about behaviour in a society.

Discretionary Responsibilities: They are the purely voluntary obligations a corporation assumes.Examples include providing day-care centers,training the hard-core unemployed and philantropic contributions.

Carroll lists these four responsibilities in order ot priority. He believes that a business firm must first make profits to satisfy its economic responsibility,it must hen follow the laws to continue its existence which would be fulfilling its legal responsibilities. There is evidence that companies found guilty of violating laws have lower profits and sales growth after conviction. To this extent there is a similarity between friedman's view and carroll's,but carrol goes a bit further by including two more responsibilities for firms

It is believed that the last two responsibilities are the social responsibilities and the should be followed after fulfilling its basic responsibilities which are the first two.A firm can fulfill its ethical responsibility by taking actions that the society tends to value but as not been put into law. Carroll suggests that if businesses fail to acknowledge ethical or discretionary responsibilities, that the government would would make laws regarding these responsibilites and make them legal responsibilities. As a result,the organization may have greater difficult in earning a profit than it would have if it had voluntarily assumed some ethical and discretionary responsibilities.

Friedman's position on social responsibility appears to be loosing traction with business executives. For example a 2006 survey of business executive across the world by McKinsey& company revealed that only 16% felt that businesses should focus solely on providing the biggest possible return to investors while obeying all laws and regulations , contrasted with 84% who stated that business should generate high returns to investors but balance it with contribution to the broader public good.