Social Responsibility in Business
In examining the mission statements of multiple companies, it is apparent that corporations claim to prioritize social responsibility. Companies like Whole Foods, Ben &Jerry’s, Camano Island Coffee Roasters all actively contribute to different social causes. Even Philip Morris prioritizes “actively [participating] in societal concerns that are relevant to [its] businesses” over generating returns for its stockholders (Philip Morris, 2011).
There are many different views on the extent to which corporations should be involved in societal concerns. The three most prominent are the stockholder theory, the concept of social business, and the stakeholder theory. Of these, the stakeholder theory is the most appropriate. Because corporations are considered to be individuals within our society, they bear a certain amount of responsibility to their fellow citizens, so it is not enough for them to act only in the interest of their stockholders. However, corporations are entitled to earn profits, and therefore cannot be expected to act as purely social businesses. Consequently, businesses must look for a happy medium within the stakeholder theory, acting in the interests of the stockholders, customers, employees and civil society.
Milton Friedman, a major proponent of the stockholder theory, argues that beyond legal compliance, “the social responsibility of business is to increase its profits,” meaning corporations hold responsibilities only to their shareholders and the law (Friedman, 1970). One of the main points he addresses is the fact that when a company manager spends the company’s money on a social cause, he/she takes away from the maximum possible returns to the stockholders. In addition to taking from the stockholders, the price of the product may rise, taking away from the consumer, or wages might fall, taking away from the employees. Because of this, the manager “is in effect imposing taxes, on the one hand, and deciding how the tax proceeds shall
There are many different views on the extent to which corporations should be involved in societal concerns. The three most prominent are the stockholder theory, the concept of social business, and the stakeholder theory. Of these, the stakeholder theory is the most appropriate. Because corporations are considered to be individuals within our society, they bear a certain amount of responsibility to their fellow citizens, so it is not enough for them to act only in the interest of their stockholders. However, corporations are entitled to earn profits, and therefore cannot be expected to act as purely social businesses. Consequently, businesses must look for a happy medium within the stakeholder theory, acting in the interests of the stockholders, customers, employees and civil society.
Milton Friedman, a major proponent of the stockholder theory, argues that beyond legal compliance, “the social responsibility of business is to increase its profits,” meaning corporations hold responsibilities only to their shareholders and the law (Friedman, 1970). One of the main points he addresses is the fact that when a company manager spends the company’s money on a social cause, he/she takes away from the maximum possible returns to the stockholders. In addition to taking from the stockholders, the price of the product may rise, taking away from the consumer, or wages might fall, taking away from the employees. Because of this, the manager “is in effect imposing taxes, on the one hand, and deciding how the tax proceeds shall
Bibliography: Yunus, Mohammad. Building Social Business. New York, NY: PublicAffairs, 2010. Print. "The Ford Pinto Case." American Decades. 2001. Encyclopedia.com. 5 May. 2011 <http://www.encyclopedia.com>. Makower, Joel. "Milton Friedman and the Social Responsibility of Business." World Changing(2006): n. pag. Web. 5 May 2011. <http://www.worldchanging.com/archives/005373.html>. Marcoux, Alexei. "Business Ethics Gone Wrong."CATO Institute 22.3 (2000): n. pag. Web. 5 May 2011. <http://www.cato.org/pubs/policy_report/v22n3/cpr-22n3.html>. Hooker, John. "Why Business Ethics?." (2003): n. pag. Web. 5 May 2011. <http://web.tepper.cmu.edu/ethics/whybizethics.pdf>. Fassin, Yves. "The Stakeholder Model Refined."Journal of Business Ethics 83. (2006): 113-135. Web. 5 May 2011. <http://www.austincc.edu/njacobs/1370_Ethics/Ethics_Articles/Stakeholder.pdf>. Gunter, Marie. "Fair Trade or Fairly Traded?."Articlesbase. 2007. Web. 5 May 2011. <http://www.articlesbase.com/environment-articles/fair-trade-or-fairly-traded-fair-economy-promoters-share-views-with-onegreenglobecom-community-253833.html>.