The Social Responsibility of Business Is to Increase Its Profits

In stark contrast to the publication “Business Ethics and Stakeholder Analysis”, “The Social Responsibility” article seems to denounce the ethical view that CEO (as authoritative figure in the company) should look to include their businesses in philanthropic ventures as well as look out for the social well-being of all related stakeholders. While Freeman is adamant that the stakeholder should be put before company profits Friedman, albeit in a rather strong tone, poses some counter arguments that cannot be ignored. And while the ethical points made are quite valid, reality dictates that profits should be the CEO’s main focus.

The way the world is run and works is that there is a cycle in which governments are sustained by the spending power of its businesses who thrive on the spending power of the customer. Also put, the more the customer invests, the better off the country and government are. Friedman highlights that the CEO and other executives are placed in their position by the stockholders who expect returns on their investment. That is the job that the CEO has and that is what he must strive to accomplish. Friedman puts it rather bluntly that if CEO’s are concentrating on how more ethical the company should become then they are taking on the role of a social worker.”If they are to be civil servants then they must be selected through a political process” says Friedman who tried to further the claim that the job of the CEO is to purely make profits.

In some respects he is right but a CEO, in my opinion, can still be conscious about the ethicalness of the company and still produce profits. Friedman and Freeman take two very opposite and extreme view on this subject when I believe that, in this day and age, the middle ground is where the “best” solution is found. Stockholders are the final word no matter what way you look at it as to be prosperous and grow you need returns and investment which leads to think that between both ideas, Friedman’s is the only plausible one (unless the company has no desire to satisfy the investors who are also willing to take a loss on the investment). However, ethics needs to be involved in the strategic plans of these companies because in order to please stockholders there are always ethics that are compromised in some form. That is why I see the middle as the “best” solution as we all know no matter what if a company is doing its job in satisfying the stockholder then some ethics will be compromised but some can also be dealt with. This is all under the assumption that pleasing the stockholders is the companies objective and if it’s not then more ethics can be addressed which would lead to an economy that was more conscious about its ethic behavior but also less profitable.

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4 Responses to The Social Responsibility of Business Is to Increase Its Profits

  1. jte004 says:

    I can understand that there is a middle ground to be met in business ethics, because it is a very important part of society. A company can have a very drastic effect on the areas that they functions in and must be careful not to completely destroy the community in the pursuit of financial growth. One thing that needs to be addressed is the idea of a middle ground. A company can not and must not try to please every one that it interacts with because it will never be able to move forward in any direction. The company would spend all of their time and resources trying to be please every one and eventually break down. The company has some social responsibilities, but if they can not be all of them, how do you determine which ones are most important?

    • tesoman says:

      I think your right in everything you just said. And even more right in asking “how do you determine which ones are most important?” I’m not sure that there’s a right answer because if you ask an academic in Human Resources Management it would probably be leaning towards the company focusing on stakeholders while if you were to ask an academic in finance their response will most likely lean towards satisfying the stockholders.

      I’m of the belief that it’s a case by case situation where as a company you have to survive and must be consciously looking towards profits but at the same time there should be conscious effort to be more social responsible in terms of your effect to all your stakeholders doing as much as you can where you can. But in this day and age it all comes down to resources and those with more resources have no excuse to not be social responsible while, for their own survival, those who don’t have much are in a constant struggle and do-not/cannot prioritize social responsibility.

      This got me thinking about a case like WalMart….are they socially responsible? You look at their workers who are being paid minimum wage (which is less than what you need to be making to be over the poverty line) and asked to work odd hours because their jobs have a high turnover potential with the unemployment rate being at an all time high. In addition, WalMart provides a healthcare plan but most its workers are too poor to afford the $250 premium. (The Working Poor: Invisible in America by David K. Shipler) But let’s look at it in a different light; because they are being paid so low (under the poverty line) there is a slew of government incentives (including Medicare) that they can apply for and WalMart does a great job of letting them know what these programs are and how they can apply for them. Why not just pay them enough to get over the poverty line and off government support? What most people are finding is that they are much better under the poverty line than over it because the incentives provided by the government are that impactful. And while WalMart might be able to pay their employees just over the poverty line, I would be hard pressed to see them pay much more.

      It’s an interesting discussion because WalMart is recoding billions in profits each quarter but a majority of their labor force is under the poverty line. Some people at WalMark will claim they enjoy what they do, but I think its more because this is the best of a bunch of bad options.

  2. Pingback: Why unethical conduct in business is so common at this time in our history? Why is business ethics almost irrelevant? - Pilant's Business Ethics | Pilant's Business Ethics

  3. Pingback: Why unethical conduct in business is so common at this time in our history? Why is business ethics almost irrelevant? - Pilant's Business Ethics

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