“Profit Maximization Is the Only Realistic Criterion by Which Business Organizational Effectiveness Should Be Reasonably Judged.”

Topics: Business ethics, Ethics, Social responsibility Pages: 11 (2689 words) Published: August 17, 2012
“Profit maximization is the only realistic criterion by which business organizational effectiveness should be reasonably judged.”

To face the above query Business Ethics and Corporate Social Responsibility theories and ideas are going to help us deduce if at all profit maximization is the only way to look at the organization’s effectiveness and if it’s realistic in today’s business world.

There have been a lot of different terms to define what corporate social responsibility is, profit maximization being among the popular meanings. One side consists of purely economic view where management’s only social responsibility is to maximize profit while the other side is all about socio-economic position holding values and ethical rules that managers and non- managerial employees are expected to follow.

General Overview
Business ethics
These are moral principles that guide the way a business runs / is conducted.

Approaches to business ethics
* Deriving Business Ethics from the Profit Motive
* Deriving Business Ethics from General Moral Obligations * Business Ethics restricted to following the Law
Corporate Social Responsibility (CSR)
Understanding your business’ impact on the wider world and considering how you can use this impact in a position way.

Dimensions of CSR
* Ethical dimension
* Economic dimension
* Philanthropic dimension
* Legal Dimension
* Civil law
* Criminal law

CSR Perspective
* Efficiency perspective
* Managers as Agents
* Manager as Owners
* Strategic Corporate Social Responsibility Perspective
* Inside Out Approach
* Outside In Approach
* Outside Out Approach
* Social Responsibility Perspective
In depth Discussion
Business Ethics
When business ethics is spoken of it usually means one of three things, i.e. i. Avoid breaking the criminal law in one’s work related activities. ii. Avoid actions that may result in civil law suits against the company and iii. Avoid actions that are bad for the company’s image.

Behaving ethically means distinguishing between right and wrong and making the best logical decision. It is not hard to identify unethical business practices; examples of such practices include; * Use of child labor

* Use of unlawfully copy righted materials
* Engaging in bribery
* Unfair treatment of the employees
* Discrimination and violation of human rights.

Approaches to business ethics
* Deriving Business Ethics from the profit motive

There has been an argument that there is symbiotic relation between ethics and business in which ethics naturally emerges from a profit oriented business. This approach has two versions; the weak and strong version.

Weak Version
This version suggests “good ethics result in good business” meaning moral business practices equals profit. Example, it is profitable to make safe products which will result in low product liability lawsuits. F.Hartley’s book, “Business Ethics” argues that long term interests of a business are served best by seeking a trusting relation with the public. (Hartley 1993) However this version has a number of problems.

Criticism of the weak version
* Moral business practices will have an economic benefit in a long run hence it provides less incentive for businesses designed to seek short term profits. * Some of these practices are not economically viable even in a long run. Example the act of keeping older workers who are no longer efficient as opposed to replacing them with younger more efficient workers * Importantly these moral business practices depend on what “at that time” will produce a profit. The same practices might not be viable economically in a different market.

Strong version
It suggests the reverse strategy that in a competitive and free market profit motive will bring about proper moral environment. I.e. when customers demand safe products and...
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