Different Views on Social Responsibility in Business Comparison and Contrast

Introduction

Thesis: Views on what social responsibility within the business world involves differ with Friedman, for instance, stating that it consists in maximizing profits and other scholars believing that it should focus on bringing good to the society; considering the moral justifications of each of these views and supporting them with real life examples will help to identify the consequences which each of them has for the society overall.

Social responsibility is an ethical theory which posits that any individual, organization, or government has primary responsibility to the society and should contribute into its development and promotion of its interests in the first place. When it comes to the business world, social responsibility consists in the use of ethical decision making and addressing the major concerns of the public through different programs and campaigns. Despite a relative preciseness of the social responsibility definition, there still exist different variations and interpretations of this concept which mostly focus on who should benefit from the socially responsible practices. Views on what social responsibility within the business world involves differ with Friedman, for instance, stating that it consists in maximizing profits and other scholars believing that it should focus on bringing good to the society; considering the moral justifications of each of these views and supporting them with real life examples will help to identify the consequences which each of them has for the society overall.

Friedman’s View on Social Responsibility in Business

What should be mentioned above all is that Friedman’s view on social responsibility in business is more self-oriented. He states that “In a free society … there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game” (Friedman, 1970, as cited in Rae & Wong, 2004, p. 131). Friedman believes that the concept of “social responsibility” in business is rather contradictory, which serves as a moral justification for his argument that any business should be profit-oriented.

Firstly, the contradiction within the “social responsibility” in business lies in the hierarchical structure of business owing to which each person has primary responsibility to somebody who is in charge of him/her; therefore, it is not this person’s direct decision and responsibility whether a particular action brings good for the society or business. Secondly, there exists certain discord as to what is believed to be “social responsibility” from the perspective of the corporate executive who makes decisions regarding the actions to be taken. Friedman believes that sometimes a socially responsible decision on the part of the corporate executive is unjust with respect to some of his/her employees, which, correspondingly, makes it socially irresponsible since the employees’ welfare is the welfare of the society. Friedman points out the following when discussing the corporate executive’s socially responsible action:

For example, that he is to refrain from increasing the price of the product in order to contribute to the social objective of preventing inflation, even though a price increase would be in the best interests of the corporation. Or that he is to make expenditures on reducing pollution beyond the amount that is in the best interests of the corporation or that is required by law in order to contribute to the social objective of improving the environment. Or that, at the expense of corporate profits, he is to hire “hardcore” unemployed instead of better qualified available workmen to contribute to the social objective of reducing poverty. (Friedman, 1970, as cited in Rae & Wong, 2004, p. 132)

In this way, Friedman tries to prove that no matter how hard a corporate executive may try to promote social responsibility, he/she will not succeed in this for there will always remain parties dissatisfied with his/her actions. Thus, if the returns to the stakeholders are reduced as a result of social responsibility (for instance, if each 10 cents from the shares are spend for treating the wastes), then the stakeholders’ money is spent, which does not make such an action socially responsible. Similarly, if the prices are increased (for the employees’ salary to be higher), the corporate executive is spending the consumers’ money. And lastly, if the employees’ wages is reduced, then their money is spent. Such confusions regarding what is right to do in any of these situations create an idea that doing good for the society is possible only at one’s own expense. This is why Friedman’s argument regarding social responsibility in business can be morally justified.

Monsanto is an example of a corporation which concentrates on gaining profits and which is regarded as socially irresponsible. Monsanto is one of the world’s largest agricultural companies which specialize on the sale of seeds, animal feeds, etc. It cannot be stated that the organization consciously violates social norms and harms the society. On the contrary, its primary aim is to ensure that the farmers have rich yields and that the products they grow are healthy and safe (The World according to Monsanto, 2008). The corporation produces fertilizers which do not harm the yields and which, as it states, are safe for the environment. One of such fertilizers is “Roundup” which is believed to kill weeds but save the yields at this. The protection of the crops, however, is achieved through modifying the cells of the crops on which the product is spread. This is regarded as genetic modification which is able to harm the health of people who consume the food grown in this way. At this, the corporation “stays within the rules of the game” (Friedman, 1970, as cited in Rae & Wong, 2004, p. 131), as Friedman puts it, because this food is regarded as substantially equivalent and is generally recognized as safe. Moreover, taking into account that this product helps to increase the amount of crops, the company considers itself as contributing into the welfare of the society. This makes Monsanto a corporation following Friedman’s advice, though the good of this advice for the society still needs to be proven.

Promoting Business and Society’s Interests

A view regarding social responsibility which is opposing to Friedman’s argument focuses on the idea that even in the business world the society’s interest should be pursued above all the others. According to this idea, “Social responsibility implies that a business decision maker in the process of serving his own business interests is obliged to take actions that also protect and enhance society’s interests” ( Davis, 1975, p. 166). In other words, any businessman should balance between making profits and contributing into the community. This should be done due to the fact that any business is responsible not only for the welfare of its own stakeholders, but for other stakeholders as well, because most of the businesses are interrelated. Another issue which social responsibility with respect to this view entails is environmental protection. These days a corporation is believed to be socially responsible if it is environmentally conscious. This idea began developing in the 1960s when numerous public protests and boycotts started to be organized with a demand to make corporations responsible for their actions (Vilcox & Mohan, 2007). Just like in case with Friedman’s argument regarding social responsibility, the argument in question has certain moral justifications.

First of all, exhibiting such kind of social responsibility is beneficial not only for the society, but for the organization as well because it allows it attracting a greater number of trading partners and raising finance (Sloman, 2005). The matter is that, at present, the field of ethically screened investments experiences unprecedented growth (Brooks & Dunn, 2009), which is why socially responsible businesses are becoming more and more profitable. In this case, social responsibility serves only as a motivation to gain more profits; despite this, however, it results in a great contribution into the society, which is why it is profitable to both the parties. Another justification of the abovementioned idea is that socially responsible organizations are able to preserve their personnel due to general satisfaction of people with their work. Even recruiting personnel for a socially responsible organization is easier. For instance, numerous surveys conducted among graduate students have shown that “they would be prepared to take a lower salary in order to work for a business with high ethical standards and a commitment to socially responsible business practices” (Sloman, 2005, p. 190). Thus, social responsibility reputation allows attracting not only business partners but employees as well, which means that any socially responsible company benefits from contributing into the community, and which makes its view on social responsibility morally justifiable. And finally, social responsibility is generally profitable for the company because it improves its performance and ensures the company with additional advertising. Being socially responsible helps to make the company stronger in terms of competition because the more successful an organization is “in being able to associate the image of ‘environmentally friendly’ to a particular product or brand, the more likely it is to enhance its sales or establish a measure of brand loyalty, and thereby to strengthen its competitive position” (Sloman, 2005, p. 190). Therefore, socially responsible performance of any business organization allows correcting market failures and improving the general way of how business is carried out. Since this is beneficial for not only the organizations themselves (due to the increasing profits), but to the society (because of the environmental protection), the idea that social responsibility in business should enhance the good for society is morally justifiable.

One of the brightest examples of socially responsible organizations is the Body Shop, the world’s second largest cosmetic franchise. More than two decades ago the corporation began promoting different social and environmental campaigns with the purpose of improving its business performance. In order to decrease the rates of anorexia and bulimia instances in women, the corporation launched a campaign directed against the media stereotyping women. It created a doll named Ruby which was an absolute opposition to the Barbie doll. It was a size 16 doll the primary purpose of which was to raise self-esteem in women who have lost it due to the body proportion standards imposed by the media. Though the sales of these dolls failed due to the Mattel’s suit of copyright infringement, the Body Shop not only managed to turn the world’s attention to the problem of media stereotyping women, but ensured itself additional advertising of a socially responsible organization, which resulted in the attraction of a bigger number of customers. Besides, the organization launched other campaigns tied to other social causes. Currently, it is known as a corporation manufacturing the products which are not tested on animals; apart from this, it is a supporter of the research on the alternative ways of testing products. During all this time of functioning as a socially responsible organization, the Body Shop “has been conducting social and environmental audits and reporting its social and environmental performance … The company’s vision is the integration of economic success, stakeholder engagement and social and environmental change” (Banerjee, 2007, p. 17). This makes the Body Shop an organization which succeeded in serving its own interests and promoting the interests of the society at the same time.

Consequences for Society

Contrasting two different views on social responsibility in business, it is worth mentioning that they have different consequences for the society overall. With regards to Monsanto, it should be stated that the consequences for the society are absolutely not positive. Perhaps, the idea that the company’s products allow growing healthier crops and increase their amounts (thus increasing the profits made from sales) may be regarded as a contribution into the community and promoting the interests of the society, but certain negative consequences which the use of the company’s fertilizers involves do not allow considering such a view on social responsibility beneficial for the society. One of such consequences is the import of genetically modified products due to the exchange system existing between such countries as Mexico and the USA, for instance. The process of exchanging seeds is an integral part of the agricultural system in Mexico. Mexico does not use chemical fertilizers or pesticides when growing the crops (corn, for example); it supplies the USA with ‘green’ seeds, while in return it gets 40% of genetically modified seeds (The World according to Monsanto, 2008). This, however, is the least harm done to the society. The greatest problem consists in the fact that using fertilizers and pesticides is relevantly expensive and not all the farmers in developing countries (such as India) can afford this. This results in the buyers’ purchasing genetically modified seeds which are more productive and the same modified products which taste and look better. Consequently, this entails losses for the farmers, which quite often results in their inability to pay off debts and increases rates of suicides among the population (The World according to Monsanto, 2008). Taking this into account, Monsanto’s view on social responsibility cannot be beneficial for the society because the consequences of such strategies as the one offered by Friedman are destructive.

In contrast, the consequences of the strategy opposite to Friedman’s are positive. First of all, the benefit of such a view on social responsibility in business consists in the contribution into the environmental protection. Thus, the Body Shop is currently in alliance with the United Kingdom’s Greenpeace. The corporation adopted from this organization a way to substitute for the whale spermaceti which is, as a rule, used in the production of cosmetics. The Greenpeace campaign on whales’ salvation and protection promoted the use of the jojoba oil instead of the whale spermaceti, which further resulted in the Body Shop’s launching campaigns addressing social concerns and even the company’s changing corporate practices into less environmentally destructive (Banerjee, 2007). Another consequence of the Body Shop’s having a society-oriented view on the social responsibility is its participation in community life. For instance, in 1991 the corporation launched the “Trade Not Aid” campaign the goal of which was “to support marginalized sectors of society to develop a livelihood within the context of sustainable development” (Rugman, Collinson, & Hodgetts, 2006, p. 621). Apart from this, the Community Trade Program initiated by the corporation allows the company purchasing natural products from Community Trade suppliers (Rugman, Collinson, & Hodgetts, 2006). This means that, unlike Monsanto, the Body Shop’s view on the social responsibility allows it enhancing the interests of the society and increasing its own profits at this.

Conclusion

Social responsibility in business can be viewed from different perspectives and, correspondingly, the consequences of different views can be completely opposite. After contrasting Friedman’s view on social responsibility in business it became clear that if his advices are followed, an organization is likely to maximize its profits, but its enhancing the interests of the society will be minimal. The example of Monsanto has proved this idea and revealed that, though some of the company’s practices were oriented towards improving the life of the society, they had adverse effects on it at the same time. The idea that social responsibility in business consists in balancing between getting the profits and contributing into the society’s welfare has shown to have positive consequences for the society and the environment. The case of the Body Shop has proven that having such a view on social responsibility can help to contribute into the general welfare of the society, as well as into the global fight with environmental problems.

Reference

Banerjee, S.B. (2007). Corporate social responsibility: the good, the bad and the ugly. London: Edward Elgar Publishing.

Brooks, L.J. & Dunn, P. (2009). Business & professional ethics for directors, executives & accountants. London: Cengage Learning.

Rae, S.B. (2004). Beyond integrity: a Judeo-Christian approach to business ethics. Grand Rapids: Zondervan.

Robin, M.-M. (2008). The World According to Monsanto [Video Documentary]. Available from YouTube.

Rugman, A.M., Cllinson, S., Hodgetts, R.M. (2006). International business. London: Pearson Education.

Sloman, J. (2005). The economic environment of business. London: Pearson Education.

Vilcox, M.W. & Mohan, T.O. (2007). Contemporary issues in business ethics. New York: Nova Publishers.