Until a few years back, the objective of business was essentially to make profits. According to David Hawkins, formally most businesses followed the capitalist economic model for doing business whose main objective was to make profit with little regard or concern for the society. But today, business has entered into a new domain called corporate social responsibility (CSR) or business ethics where businesses are required to be ethical and responsible towards the society and the environment in which they operate. CSR and ethics in business has become an increasingly important topic in our society today. Many companies now recognize the importance of corporate social responsibility, but are still concerned about how businesses can balance the objective of making profits with that of being socially responsible to society.
Economists argue that enterprises already contribute to society through taxes paid of profits made and through people supported by the wages they receive for work performed. The most popular argument against CSR is that of the economist Milton Friedman who insists that businesses have only one social responsibility which is to make profit for their shareholders. Supporters of Friedman argue that if private enterprises start pursuing objectives like, fighting poverty and prevention of disease and make this their primary objective; they are no longer operating under the logic that dictates private enterprise. They argue that such objectives should be pursued by non-profit organisations and governments.
On the other hand there are those who believe business is not just about making profits but also about being responsible to the society. Sommerville (2004) argues that “the task of a corporate manager is to balance the interest of all the different groups who have a ‘stake’ in the company” (p.138). Tench and Yeomans (2006) and Harrison (2000) state that though companies are not a state or country they are part of the society in which they operate and as such must consider their impact on it. Those who advocate that businesses be socially responsible believe that businesses can balance the objective of making profit and being socially responsible. Wilcox et al (2003), say corporate citizenship enhances a company’s reputation and its ability to market goods and services adding that surveys show that more people buy products according to a company’s reputation. Tench and Yeomans (2006) gave the example of John Burke, who demonstrated that companies with a reputation for ethics and social responsibility grew at a rate of 11.3% annually from 1959 to 1990 while the growth rates for similar companies without the same ethical approach was 6.2%, showing how companies can balance the CSR agenda with that of making profits. Bjohn adds that corporate ethics leads to a more stable organisation and will improve the bottom line and drive higher profits.
Many businesses now are being forced by pressure groups, government and legislation to adopt positive measures to ensure their activities are environmentally responsible. So considering all these, business today is not just about making profits anymore. In my view, the main objective of a business is to make money because that is the reason it was established in the first place but not at the expense of society and so they should be ethical and responsible in the way they carry out their activities. What do you think?
On the other hand there are those who believe business is not just about making profits but also about being responsible to the society. Sommerville (2004) argues that “the task of a corporate manager is to balance the interest of all the different groups who have a ‘stake’ in the company” (p.138). Tench and Yeomans (2006) and Harrison (2000) state that though companies are not a state or country they are part of the society in which they operate and as such must consider their impact on it. Those who advocate that businesses be socially responsible believe that businesses can balance the objective of making profit and being socially responsible. Wilcox et al (2003), say corporate citizenship enhances a company’s reputation and its ability to market goods and services adding that surveys show that more people buy products according to a company’s reputation. Tench and Yeomans (2006) gave the example of John Burke, who demonstrated that companies with a reputation for ethics and social responsibility grew at a rate of 11.3% annually from 1959 to 1990 while the growth rates for similar companies without the same ethical approach was 6.2%, showing how companies can balance the CSR agenda with that of making profits. Bjohn adds that corporate ethics leads to a more stable organisation and will improve the bottom line and drive higher profits.
Many businesses now are being forced by pressure groups, government and legislation to adopt positive measures to ensure their activities are environmentally responsible. So considering all these, business today is not just about making profits anymore. In my view, the main objective of a business is to make money because that is the reason it was established in the first place but not at the expense of society and so they should be ethical and responsible in the way they carry out their activities. What do you think?
4 comments:
A business has to make profit to stay in business, however it also has to sustain the environment it is in to make its profit. Therefore, the must be a balance between profit making and sustainability in business.
Cheers,
Nabi
Its strange that the same companies (eg oil companies) who have had to implement CSR progrommes and have received a lot of bad press because of their actions here in the UK, to some extext don't get the same bad press in the Pacific. Its partly to do with the fact that these organisations have long been involved in the communities.
Which could explain my view that while yes CSR has been used as an escape goat for many corporations, over time, their internal business objectives have changed. They cannot be isolated in terms of leaving out their social responsibilities. Yes, profit is the foremost important objective, but it isn't the only one.
Businesses can actually balance the objective of making profit and being socially responsible. CRS can even be used as a business strategy. i.e. providing to the society what it needs thereby increasing its reputation and consequently its sales.
I don't believe that CSR is about balancing its responsability to society with profits. As future PR practitioners we should be aware of the motives behind CSR. Whilst I do not say that it always necessarily is simply a PR stunt, it remains fact, that businesses primarily exist to make profits. CSR - if done well - can enhance your reputation and in that be a valuable tool for maintaining relationships - which ultimately can lead to steady or higher profit.
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