Business ethics and social responsibility are two aspects of a well-functioning organization. Business ethics is divided into two terms such as business and ethics. Business means an organization where purchase and sale of goods or services to earn maximum profit. Ethics and morality are considered as the same thing, but some people define them differently. Ethics is standard behavior for a particular group whereas morality is a more general standard. Business ethics is considered as the rules, regulations, and principles within the organization. It makes clear-cut ideas about the organizational objectives. It provides a decision about organizational activities such as what is true or false, what work to be done, and what not to be done.
Definition of Social responsibility
“The Term Social Responsibility refers to the idea that companies and corporations should contribute wealth or resources solely dedicated to the improvement of society as a whole. The principle of social responsibility dictates that these entities should contribute at least a small amount of resources to the general well-being of humanity. These actions should not, in any way, be profit-generating.” (Social responsibility n.d.)
Different aspects of social responsibility
Nowadays the demand for ethical business processes increases day by day. It can be of both normative and descriptive decisions. In human resource management, the ethical issue arises based on the relationship between employer and employee. This consists of the rights and duties of an employer and employee. It includes the discrimination issues such as gender, race, faith, weight and beauty, etc. Every organization forms internal policies related to the ethical conduct of employees. These policies help to recognize the organization’s hope of workers and to provide direction on handling some of the more common ethical problems affected in the organization. Many of the ethical problems are controlled by employees by using their own judgment.
Organizations identify that they must bring business ethics for the success of their business. It can be examined from various viewpoints. That means collecting ideas from the whole employees, organization, and society. “The examination of the variety of problems that can arise from the business environment, and how employees, management, and the corporation can deal with them ethically. Problems such as fiduciary responsibility, corporate social responsibility, corporate governance, shareholder relations, insider trading, bribery, and discrimination are examined in business ethics.” (Business ethics n.d.).
Approaches to social responsibility
Approaches of social responsibilities are four types. They are social opposition, social obligation, social response, and social contribution. These positions range from the low level to high levels of social behavior patterns exhibited by business enterprises. Social opposition is the position taken by companies that have no obligation to the society in which they operate. Social obligation is referred to as the position taken by companies that believe that they should obey the law.
That means the only socially responsible behavior that is appropriate is the one prescribed by the law. Such businesses would install safety equipment that is required by the law but would not spend additional money to install even better safety equipment. The social response indicates the position taken by companies that meet their social responsibilities as dictated by law and will, on a selective basis, go beyond the legal requirement. Lastly, social contribution means the position taken by the companies which believe that they have a deep obligation to serve society.
Social responsibility Implementation
The implementation of social responsibility is of two types, based on the target of the implementation program. The first one is corporate accountability and the second one is business responsibility to society. Corporate accountability is towards owners and shareholders, employees, consumers and government. Business is primarily responsible to the shareholders, who are owners of the enterprise. Businesses should identify and remember the fact that owners have taken the risk of investing money in the business. The success of an enterprise depends, to a very large extent, on the morale of the employees and their wholehearted co-operation. Employees’ morale depends on job satisfaction, the relationship between employee and employer, and the discharge of the company’s responsibilities to them.
Organizational responsibilities towards the employees
It includes the following
- The payment of fair wages
- The provision for the best possible working condition
- The establishment of fair work standards and norms
- The provision for labour welfare facilities such as safety, health, and social measures, etc.
- Arrangements for proper training and education of the workers.
Organizational Responsibility towards customers
The customer is considered the king of every business enterprise. Society has entrusted the wealth-producing resources with the business. The important responsibilities of business towards customers are the following.
- To improve the efficiency of the functioning of business to increase productivity, reduce prices, improve quality, and smoothen the distribution system to make goods easily available.
- To do research and development, to improve quality and introduce better and new products.
- To take appropriate steps to remove the imperfections in the distribution system, including black marketing or profiteering by middlemen or anti-social elements.
- To supply goods at reasonable prices even when there is a seller’s market..
- To provide required after-sales service.
Responsibility towards Government
The business environment includes a politico-legal environment also which is the creation of the government. Since government offers a legal framework for businesses to function within, the business must be accountable to the government. The social responsibility of a business is to increase profit. The main responsibilities in the business are providing employment opportunities, avoiding discrimination, eliminating pollution, etc. In an organization, top-level management has the high authority to control and guide the subordinates. Top-level management includes the board of directors, chief executives etc. The Chief executive is an employee of the owners of the business. He has straight responsibility to his employers. That responsibility is to conduct the business under their desires.
Profit-making is the part of capitalism in which the business firms are showing an exploitative mentality. It is not suitable in the present business world. Good business ethics is the positive factor that keeps the value of the business at a higher level. In the case of the soft drink industry, giant firms are not following socially responsible business functions. It greatly affects the smooth functioning of their business in many parts of the world. In business ethics, exploitation of society has to be eliminated. If a company does not adhere to business ethics and breaks the laws, they usually end up being fined.
“Many companies have broken anti-trust, ethical and environmental laws and received fines worth millions. The problem is that the amount of money these companies are making outweighs the fines applied. Billion-dollar profits blind the companies to their lack of business ethics, and the dollar sign wins.” (Crystal 2009).
Arguments against social responsibility
The social responsibility concept is not free from criticisms. The important arguments against it are given below.
- Absence of social skills: – Managers may be good at business, but poor at solving social problems. Lack of expertise is a major problem before business managers in indulging and solving social problems.
- Business already has enough power: – Entrusting social responsibilities with business would only mean making business a more powerful institution in society. Economic power when combined with social access would destroy the harmony and welfare of the society, against the expectations.
- Lack of accountability: – Businessmen have no direct accountability. It is unwise to give responsibility to businessmen in areas where they are not accountable. Lack of accountability does not ensure the accomplishment of the desired objectives.
Discuss whether a company should put ethics and social responsibility ahead of profit-making. Why or why not? Provide examples and research evidence to support your answer
Business is an integral part of society. As an individual, a business corporation also is a member of the society in which it exists and operates. In the environment of modern economic development, no business organization can function in isolation without interacting with other elements in society. In fact, business depends on society for its inputs as well as for marketing its outputs. Being so much dependent on society, the business has definite obligations towards society.
Businesses are the organized efforts of enterprises to supply consumers with goods and services and to make a profit in the process. In its endeavor to fulfill its efforts, a business organization may adopt various strategies such as diversification, expansion, the opening of new branches, modernization, mechanization, integration, etc. All such strategies and decisions affect the interest of one group or another in the society such as the employees, consumers, public, government, etc. Thus business decisions and follow-up actions have social implications which bind organizations to assume some social responsibilities towards society. Business decisions should, therefore, protect and improve the welfare of all those who are affected by such decisions besides protecting the own interests of the business.
Need for social responsibility
- Changed public expectations about the business: Unlike in the past, society is not at the mercy of the business today. The public expects that businesses should cater to the needs of the people and should help improve the welfare of society. In the changed circumstances, a business could not overlook the public call because doing so would even lead to the dismissal of a corporation.
- Better environment for business: Caring for social obligations would help businesses to build up a favorable environment in the future. A highly satisfied group of customers, laborers, the public, and government can cause only less harm and obstacles for the business than those who are deprived of their rights from the business.
- Public image: Being responsive to social obligations earns reputation, brand equity, public image, and many other advantages for a company. The enhanced public image brings more customers, more sales, more profits, better employees, and finally a higher level of social recognition.
- Reduced government interference: Government seeks to regulate business in the public interest. A company that discharges its social obligations could avoid government interference in its affairs and economize time, money, and energy to derive the optimum benefit.
- Citizenship argument: Corporations are institutional members of society. Being citizens, corporations have civic duties and responsibilities. Like individuals, corporations should also try to improve the welfare of co-inhabitants and leave behind a better world for the generations to come.
A business firm has corporate responsibility towards the stockholders, customers, employees, suppliers, creditors, and the community. The market failure theory emphasized the positive and negative externalities of a business firm. Positive and negative externalities refer to “events which confer an appreciable benefit (inflict an appreciable damage) on some persons who were not fully consenting parties in reaching decisions which led directly or indirectly to the event in question.” (Tomer 1999, p.120).
Due to these factors, it is clear that a company should put ethics and social responsibility ahead of the profit-making objectives. Without meeting the social obligations properly, a business firm cannot operate successfully in society.
Examples and research evidence to support the argument
Companies can and should have social responsibility. They have to meet the rules and regulations prescribed by the government than their profitability objectives. Pollution control measures should be adopted by the companies even though it is not contributing profit to the business. It is a part of their social responsibility and it requires a good amount of financial investment. Even if pollution prevention is costly, they have to remove the waste created by them for the wellbeing of society. If the actions of the business are against the interest of the society they can no longer operate in society successfully. The existence of the business depends on the acceptability of society. The public will not allow the operation of an irresponsible business firm.
The exploitation of employees, environmental pollution, and corruption are the major issues in the business related to social responsibility. Individuals and organizations are now concentrating on social responsibility. Ethical and socially responsible business operations are essential for the long-term existence of firms.
“Company reputation and brand are greatly influenced by public perception. For example, in the largest global survey of the public’s expectations, the Millennium Poll on Corporate Social Responsibility documented that over 25,000 individuals across 23 countries in six continents revealed they form their impressions of companies by focusing on corporate citizenship and two out of three people want companies to go beyond making money and contribute to broader social goals.” (Lockwood 2009).
The business ethical issue of Primark, a retail clothing chain can be described as the best example of the social obligation of business towards society. In Asian countries, the cost of labor is much lower than in other parts of the world market. Primark came in contract with apparel producers in Asian countries such as India and Bangladesh, for supplying low-cost products to exploit the opportunity of lower labor costs prevailing in these countries.
The suppliers of Primark in Asian countries are attaining lower production costs by exploiting the refugees and child labor. The publicity of this fact among the international market community badly affected the image of Primark. Primark had breached the employment and immigration laws in the country for their business operations without securing minimum wage for them. It really affected their image as the supplier of low-rate garment products in the UK garment industry.
Primark insisted on being an ethical employer in the society in which it exists. They ensure the abolition of child labour. Products produced with child labour are not accepted by their suppliers. Accordingly, the subcontractors or suppliers using home-based child labour for their production refused the products from such suppliers. The Code of business conduct of Primark ensures its social responsibility. Safe and hygienic working conditions in the production centres are insisted in the code. “Child labour shall not be used, living wages are paid, working hours are not excessive, no discrimination is practiced, regular employment is provided, no harsh or inhumane treatment is allowed.” etc are other points in their Code of Business Conduct. (Our code of conduct 2008).
The recent efforts put forward by the company in Bangladesh reveals its fairness in dealing with ethical issues. The issue of child labour has been seriously taken by the company to keep itself in line with the ethical way of doing business. For example, the recent abolition of a contract with three Indian companies for purchasing goods indicates that the company is totally against child labour. The Indian companies which have used children for their manufacturing operations were trying to reduce the cost of production to meet the demands of the low-cost fashion makers. But, the company was very rigorous in its approach which took a non-sympathetic approach for dealing with such suppliers. (Khosla 2008).
Strategic corporate social responsibility of business firms involves the following factors
It is the first function of an ethically engaged business corporation. Firms have to align their formal business policies and procedures with the informal business culture. In order to sustain ethical responsibilities, firms have to align the corporate image with their business practice.
Ethically engaged firms have to value the perceptions of employees and customers. They required focusing on the difference as a valuable and useful resource for formulating CSR-related strategies.
Corporate firms have to create and maintain a clear and visible organizational structure, mission, policies and procedures. It will help to improve the trust and respect on the part of stakeholders and employees.
High levels of loyalty should be kept up by ethically engaged corporations for confronting the ethical issues in the business operations. Firms have to accept CSR as a core business policy rather than as a marketing strategy.
Ethically engaged firms are required to possess the courage for taking risks. The employees should have the courage to identify, assess and resolve ethical dilemmas.
Ethically engaged firms are responsible for predicting and overcoming ethical challenges. They are accountable to the stakeholders for meeting the responsibilities. Specific corporate goals regarding CSR have to be framed by ethically engaged firms. (Zerfass et al 2008, p.377). Some business theorists argued that ethical duties of business firms are limited to the follow-up of related laws and earning profit for the stakeholders.
Others argue that as an artificial member in the community it has ethical responsibility towards the society to which it belongs as like individual human beings. The Economist argues that follow-up of business laws and honest behavior is enough for a business firm to meet its corporate responsibility. “Law and ethics are distinct spheres. Sometimes we are ethically obligated to do things that the law doesn’t require; sometimes we might even be required by law to do things we find ethically questionable.” (Cline 2009).
The business firm has social responsibility more than the follow-up of business laws and earning profit which is to function properly without affecting the interests of the society badly. While making important decisions relating to the products, the production managers have to consider the quality issues relating to the product. Lower quality products can be produced at low cost and marketed at a higher price by misleading the customers through false advertisements relating to the quality. And thus, profit margins can be raised. These actions are merely profit-oriented and no social obligations are met by the company.
But when taking the long-term effect of the profit-oriented action it would not help the business to sustain for the long-term in the society. Thus, it reveals that companies have to consider social responsibilities more than a profit of the business for assuring their long-term existence in the business field.
Business ethics and corporate social responsibility are inevitable parts of the business functions of companies in the present world. Profit earning is a part of the corporate responsibility of the business firm towards its shareholders. An offering of standardized products and services at adequate cost is the responsibility of the firm towards the customers.
The provision of better working conditions, better payment for service, and better development opportunities are part of the responsibility of the company towards the employees and other organizational personnel in the organization. Along with the well-being of stockholders, keeping up the business value is also insisted in the socially responsible business operation. Customers are now watching closely the corporate responsibility of business firms towards society.
They have the opinion that firms have social roles and they have to meet the social goals through their operations. For creating sustainable value in the business, corporate social responsibility is required to be met by the business entities. “Companies increasingly have to consider their reputation capital in the marketplace and protect their brand by ensuring their operations are beyond reproach.” (Globalization and the business case for corporate social responsibility n.d.).
As an artificial member in the community, it has a responsibility towards the community to which it belongs, and thus socially ethical business practices have to be followed by the business for fulfilling this responsibility. By keeping the social responsibility, business firms can increase their goodwill and customer satisfaction. Business organizations have to consider business ethics in their day-to-day affairs.
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