There are two main views on social responsibility namely the Classical view and the Socio-economic view. In the 8th Edition of their book titled Management, Steven P. Robins and Mary Coulter explain the Classical View by saying, Management’s only social responsibility was to maximize profits (create a financial return) by operating the business in the best interests of the stockholders (owners of the corporation). This view says that expending the firm’s resources on doing “social good” unjustifiably increases costs that lower profits to the owners and raises prices to consumers. Conversely, the Socio-economic view states that, Management’s social responsibility goes beyond making profits to include protecting and improving society’s welfare. That is to say Corporations are not independent entities responsible only to stockholders. Firms have a moral responsibility to larger society to become involved in social, legal, and political issues (Robbins & Coulter, 2005).
Milton Friedman the American Economics guru and recipient of the Nobel memorial prize in Economics epitomized the classical view. He “held that corporations are amoral and CEOs have only one duty: to maximize the profits of a company. He also said in an interview that business cannot have social responsibilities” (Wikipedia Encyclopedia, 2010). He sums up the classical view in an essay he wrote saying that, “there is only one social responsibility of business – to use its resources and engage in activities designed to increase its profit so long as it …engages in open and free competition without deception or fraud.” He explains that “corporate officers have no obligation to support such social causes as hiring the hardcore unemployed to reduce poverty, or reducing pollution beyond that mandated by law. Their sole task is to maximize profit for the company, subject to the limits of law and “rules of the game” that ensure “open and free competition without deception or fraud” (Hooker, 2003). Friedman’s essay titled “The Social Responsibility of Business Is to Increase its Profits,” was published in New York Times Magazine (September 13, 1970) and reprinted in Thomas Donaldson and Al Gini, eds., Case Studies in Business Ethics, 4th ed., Prentice-Hall (19xx) 56-61.
No doubt it was difficult to change from the classical mind-set (maximizing profits) to the socio-economic view (balancing ethics and profits) but slowly the change occurred and in my personal opinion, is still ongoing.
A statement by Henry Ford shows when the socio-economic view started to gain momentum. He is quoted as saying, “The terms of the contract between industry and society are changing …Now we are being asked to serve a wider range of human values and to accept an obligation to members of the public with whom we have no commercial transactions.” – Henry Ford II, 1969.
That is a good definition of social responsibility. It is an organization’s obligation or responsibility to serve a wider range of human values and to accept an obligation to members of the public with whom they have no commercial transactions.
Dr. Jared Carlberg defines Social Responsibility as “a business’ overall code of ethical conduct toward its customers, employees, investors, and community” i.e. its organizational stakeholders (Carlberg).
Social Responsibility is the “set of obligations an organization has to protect and enhance the society in which it functions” (Griffin, 2005).
It “encompasses the economic, legal, ethical and discretionary (philanthropic) expectations that society has of organizations at a given point in time” (Carroll & Buchholtz, 2008)
“Corporate social responsibility (CSR), also known as corporate responsibility, corporate citizenship, responsible business, sustainable responsible business (SRB), or corporate social performance, is a form of corporate, self-regulation integrated into a business model. Ideally, CSR policy would function as a built-in, self-regulating mechanism whereby business would monitor and ensure its adherence to law, ethical standards, and international norms. Business would embrace responsibility for the impact of their activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere. Furthermore, business would proactively promote the public interest by encouraging community growth and development, and voluntarily eliminating practices that harm the public sphere, regardless of legality. Essentially, CSR is the deliberate inclusion of public interest into corporate decision-making, and the honoring of a triple bottom line: People, Planet, Profit” (Wikipedia Encyclopedia, 2010).
It is the “overall way in which a business attempts to balance its commitments to relevant groups and individuals (stakeholders) in its social environment” (Ebert & Griffin, 2009)
Social Responsibility is the obligation or duty of an organization to act in ways that serve both its own interests and the interests of its stakeholders.
Who are the stakeholders? They are individuals, groups or organizations that the organization relates with by virtue of their operations and/or behavior in a society/community. These include customers, employees, investors, and the local and international community at large.
Social responsibility toward customers is achieved customers have full awareness of what they are buying or receiving i.e. no false advertisement. That means putting vital information into fine print in the hopes that the customer would not read it is social irresponsibility towards the customer. Social responsibility towards customers also involves pricing products fairly and giving them quality for their money. Price collusion and jacking up prices beyond the reasonably accepted level are all unethical practices hence socially irresponsible behavior towards customers. A good example is when fuel stations in Ghana intentional refuse to sell to customers and hoard fuel in expectation of a Price increase so they can sell at the new price and make unreasonable excessive profits. Such practices are unethical and socially irresponsible towards the consumer.
Social responsibility toward Employees is achieved when organizations provide employees with a safe working environment both physically and emotionally while providing employees with equal opportunities for rewards and career advancement. When an employer does not provide an employee with the opportunity to balance work and life, that behavior constitutes social irresponsibility towards the employee. A written Code of Conduct that prohibits sexual harassment for instance shows that the organization is being responsible towards its employees by creating a safe environment for them to work in.
Social responsibility toward Investors refers to conducting business in such a way that the investors’ interests are protected and they too have a safe business climate to work in. For instance, providing an investor with falsified documentation or twisted facts is unethical and hence socially irresponsible. But when the Civil Service provides them with good economic climate to work in, then the Service is being socially responsible to the investors.
The social responsibility of an organization reflects the ethical values and decisions of the top management of the organization. Businesses that act ethically towards their stakeholders are destined to succeed because all stakeholders will be happy. It is only when stakeholders are unhappy that they create problems for the organization.
Carlberg, J. (n.d.). Business Ethics & Social Responsibility. Lecture 4 .
Carroll, A. B., & Buchholtz, A. K. (2008). Corporate Citizenship, Social Responsibility, Responsiveness, and Performance. In A. B. Carroll, & A. K. Buchholtz, Business and Society: Ethics and Stakeholder Management (7 ed.). Cengage Learning.
Ebert, R. J., & Griffin, R. W. (2009). Business Ethics and Social Responsibility. In R. J. Ebert, & R. W. Griffin, Business Essentials (7 ed.). Texas A&M University, USA: Prentice Hall.
Griffin, R. W. (2005). The Ethical and Social Environment. In R. W. Griffin, Management (8 ed.). Houghton Mifflin Company.
Hooker, J. (2003, April). Why Business Ethics? Carnegie mellon University.
Microsoft® Student 2007 [DVD]. (2006). Ethics. Microsoft® Student 2007 [DVD] Encarta Encyclopedia . Redmond, WA, USA.
Office of the Head of Civil Serviice. Code of Conduct for the Ghana Civil Service. Accra, Ghana.
Robbins, S. P., & Coulter, M. (2005). Management. In S. P. Robbins, & M. Coulter, Management (8th ed.). Prentice Hall, Inc.
Wikipedia Encyclopedia. (2010). Corporate Social Responsibility. Retrieved from Wikipedia: http://www.wikipedia.org