Ethical Viewpoint

Topics: Social responsibility, Profit maximization, Corporate social responsibility Pages: 8 (3078 words) Published: April 22, 2013
Corporate Social Responsibility (CSR) is always an on-going issue that companies have to cope with. What are the responsibilities that companies should take other than the maximization of return to shareholders and by taking such responsibilities, how it may affect the operation of the firms as well as how effectively such actions could have on the society. There have been two main positions on the CSR issue. The first is the Friedmanian one stating that “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 games” (published in the book “Capitalism and Freedom”). The other view is that companies can and should deviate from the goal of maximizing profit to take others responsibilities that help to promote the total welfare of the whole society. I will first discuss these two viewpoints and give my opinions on such reasons then, finally, draw up my conclusion on CSR. Discussion of the Friedman point of view:

From the Friedman viewpoint, businessmen who seriously take the CRS such as fighting poverty, avoiding pollution… are “unwitting puppets of the intellectual forces that have been undermining the basis of a free society”. He stated that the responsibilities of a company rest mostly in hand of the sole proprietors or the corporate executives. However, while sole proprietors are individuals i.e. they can act on their own behave, for corporate executives, there are several reasons that restrict them from exercise any other responsibilities than maximizing the return to shareholders – owners of the company i.e. usually maximizing the profit. The first reason is that in a private-property system, the executive is an employee of the shareholders, which means that he voluntarily and personally agrees to work under the direction and supervision of the shareholders in return for salary or other remunerations. Therefore, the executive has to commit with the shareholders’ interest, which is usually maximizing the profit. In some cases where the interest of the shareholders is not economic one than the work of executive may vary but it must be in line with the shareholders’ interest. This is also enhanced by law that the shareholders have the right to appoint or dismiss the executive. Therefore, if he cannot comply with the shareholders’ interest, he can be fired, which, from a personal point of view, there is no good for him to conduct CSR on behave of the company. In short, an executive of a firm, who has a huge impact on how the firm acts, is bound by the responsibility to the interest of the shareholders. This also implies that the executive cannot deploy resources that are not owned by himself to other social usages i.e. he cannot lower the price to stop inflation, he cannot make expenses for environmental practices beyond the legislation, he cannot give the earnings of the company to charity organizations. Because by doing so, he indirectly harms the interests of the owners of those resources. It seems that the CSR does not rest on the executives but rather on the owner of the company. Therefore, it may not suitable to discuss the role of the executive in conducting CSR but the decisions and interest of owners are what matter here. It is not affected whether the firm wants to conduct CSR or not but whether the owners want to take such responsibilities. The question here is that whether each of us (as individuals) should sacrifice our personal interests for the common good. The second reason is that when firms do CSR, it violates the efficient division of labour in the society. Doing social responsibilities on behave of the company is the same as redistributing resources in the society, a process which is currently carried by taxation system. This raises political questions in two levels: principle and consequences. On the grounds of principle aspect, the taxation is done by the...
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