One of the most controversial issues that has been widely debated over the last two decades is the corporate social responsibility of organizations. Opinions about business's social responsibilities lie mainly between two extremes. At the one extreme is the classical view that states business is an economic institution directed towards profit whose only responsibility to society is to provide goods and services and to return maximum benefits to shareholders (Robbins, Bergman, Stagg and Coulter, 2003: 136). The Nobel Prize winning economist Milton Friedman endorsed this classical view. Friedman said the primary responsibility of manager's is to operate the business to satisfy the interest of shareholders, and this interest of course is profit maximization (Robbins et al., 2003: 136). At the other extreme, there is the socioeconomic view that states business is a part of the larger society and, therefore, it has responsibilities other than simply maximizing profits (Robbins et al., 2003: 137). Some proponents of this view also contend that it is often in a company's financial self-interest to be socially responsible.
The topic of corporate social responsibility has been widely argued and debated about because it is becoming an increasingly important concern to the society in which an organization operates in. Over time the classical economic theory based business social responsibility evolved to see business social responsibility as more than just profit. Businesses worldwide have become more socially responsible, but they still are pursuing economic interests. Economic interests will always remain the number one priority for businesses all over the world. "Any mechanism for enforcing or urging social responsibility upon firms must of course reckon with a profit motive..." (Arrow, 1973: 304). This essay is going to look at the views of corporate social responsibility and then critically analyze the issues related to it, and then drawing up to a conclusion.
In any business, the main motive is of course profit. Businesses need to recover the money that they have invested in the market, and the fastest way of doing this is of course by profit maximization. When an organization engages in a business, they will face competition from other entrants in the same market. So, for an organization to get an edge over its competitors and stay in business, it has to lower the price of its goods or services (Arrow, 1973: 305). In any case, the company with the lowest price will most likely have an edge in selling its product compared to its competitors. The only way to achieve this is by reducing the cost of doing business by getting rid of unnecessary expenses. In this case, being socially responsible adds cost of doing business. These additional costs will be passed on to the consumers of the product, and this does not give an organization advantage over its competitors. For example, let's say company A and company B enters the market of making shoes together. Company A acts socially responsible and acts in the goodwill of the society, and on the other hand, company B satisfies only the minimum requirements of social responsibility that is required by the law. In this case, of course company B's products will be cheaper than company A's product because it has less production costs. And if a consumer goes to the shop to buy a pair of shoes, most probably the consumer will choose company B's product, because it is cheaper. In this case, company B gains the market share in the short run and most probably the long run as well. So, when a company is making profits there is no incentive for it to act socially responsible.
Another drawback of the socioeconomic view is that most organizations, especially those which produce harmful material, practice social responsibility just to divert the society's attention away from the business operation. Products based on tobacco and alcohol has been long unwanted by the majority population in a...
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