“There is one and only one social responsibility of the business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engage in open and free competition without deception or fraud” (Friedman 1962, 133). Critically discuss the merits of this statement in the contemporary business environment and identify and discuss other potential obligations a firm may have beyond profit. Use examples to illustrate.
Introduction:
The promising improvements in the sector of business have been largely associated with the implications of ethical and social responsibilities. As per Campbell (2007), the operations of business organizations have increased in terms of scale owing to the benefits of globalization and the reduction of intercultural and geographical barriers (Campbell, 2007). However, it is important to reflect on the necessity of complying with certain responsibilities by an organization during its activities in a particular jurisdiction. The varying social responsibilities of an organization could be anticipated through references to the different sources of research study literature. Amongst the various social responsibilities, an organization is required to engage in fair and free competition without any dilemmas arising from deception and fraud. The following essay would be directed towards accomplishing an impression of the merits associated with compliance with the social responsibility of free and fair competitive practices. The essay would aim at a critical reflection on study materials and research journals that would also help in identifying any other significant obligations that an organization should execute not only to acquire profits but also to develop other aspects of brand equity. While the social responsibility statement regarding profit acquisition through effective utilization of resources and engagement in productive activities, the responsibility towards the immediate environment and concerns of sustainability would also be discussed as significant highlights in the essay.
Ethical behaviour:
The references to the presence of a business organization in a specific jurisdiction are associated with particular indications towards the satisfaction of stakeholders. This would account for the first strata of ethical behaviour precedents that can be followed by an organization. The foremost obligation of an organization in ethical terms is to fulfil the interest of the stakeholders of the company that include employees, customers, shareholders and society members. As per Carroll (1991), ethical behaviour in corporate governance has been generically classified into three primary components including corporate social responsibility (CSR), ethics and sustainability (Carroll, 1991).
The domain of ethics is profoundly associated with the illustration of principles and values that are considered to be governing forces for determining the behaviour of individuals, governments and firms regarding the validity of a particular action. Ethical behaviour is profoundly associated with the implications of its definition as the appropriate course of action in almost every scenario alongside validating existence within specified legal precedents and regulations.
As per Carroll & Shabana (2010), the demand for ethically responsible behaviour from organizations is often identified on behalf of the government, media and customers which can lead to detrimental consequences for brand equity in case of non-compliance (Carroll & Shabana, 2010). Unethical behaviour could be anticipated in the case of an organization through specific characteristics such as establishing goals and objectives for promoting profits that could also imply support for inappropriate behaviours.
This factor could be redirected to the statement provided in the essay question to understand its merits. The indication towards the question suggests that an organization’s management should establish a reasonable course of action that does not promote unethical behaviour such as fraud or deception (Crane, Matten & Spence, 2013). The merits of establishing an organizational management framework that ensures that business resources are utilized effectively in business activities alongside refraining from any inappropriate means could be illustrated in the following section of the essay.
Merits of social responsibility:
As per Cavusgil, Knight & Riesenberger (2013), the precedent of social responsibility highlighted in the essay question could be streamlined to find out three notable factors that include ‘resources’, ‘profits’ and ‘rules of the game’.
The preferences for social responsibility of an organization to comply with the said rules has led to the proliferation of innovative approaches for ensuring environmental protection, job transparency and worker safety. However, the prime focus of the discussion in this context is vested in the social responsibility of free and fair competition without any scope for instances of fraud or deception. One of the foremost examples of unethical behaviour could be identified in the context of corporate or industrial espionage. Organizations have engaged in the acquisition of industry and commercial intelligence through unlawful means which is validated as market research (Friedman, 2009). However, a critical perspective on the same would facilitate examples of leading companies of the world being subject to allegations of espionage thereby losing their brand equity. From a general perspective, an organization has to right to collect information regarding its competitor in the context of the latter’s processes, policies and products. However, the collection of information about competitors is guided by certain rules and regulations that are protected by international and national trade agreements (Hill, 2014).
This allows the organizations to improve their brand equity alongside reducing the concerns of legal action. On the contrary, the example of two automobile companies Volvo and Volkswagen can be subjected to various ambiguities. The notable accusations brought forward by General Motors against Volkswagen could be anticipated as one of the notable examples of unethical behaviour.
The most notable confusion that is perceived in the realization of ethical behaviour in competition is the consideration of competitors as stakeholders (Homburg, Stierl & Bornemann, 2013). Therefore, an organization’s stakeholders are subject to bear responsibility for losses or profits which applies to competitors. Other merits that could be obtained by an organization through complying with its social responsibilities include the limitation of peer pressure on employees which is often associated with scenarios where unethical behaviour is promoted.
The legal guidelines associated with the social responsibility to make profits would also implore employees to emphasise organizational interests rather than self-interests that contribute to accomplishing profits in the most productive approach possible (Johnson, Whittington & Scholes, 2011). The organization could also develop trust in all levels of the value chain activities since managers would be responsible towards monitoring the ethical standards followed in the value chain. The minimal negligence of managers towards violation of ethical standards irrespective of the nature and scale of violation would be reflected in the behaviour of employees thereby validating the institution of a socially responsible business activity framework in an organization.
Other social responsibilities:
As per Morrison (2011), the organizational responsibilities could also be identified in terms of the various determinants of ethical behaviour such as organizational culture, societal culture, performance goals, leadership, decision-making processes and personal ethics. However, corporate social responsibility and sustainability can be accounted as the other responsibilities of an organization apart from authentic competitive action. Corporate social responsibility (CSR) is reflective of the identification of an organization’s contribution to society by fulfilling the obligations to the ecological environment as well as the local communities that are major stakeholders of the enterprise (Morrison, 2011).
The stakeholder theory of CSR implies the potential social responsibilities of an organization towards the environment, the community, the workplace and the marketplace. Organizations also need to focus on the responsibility of addressing the needs of the existing population while keeping concerns for the lives of future generations (Pai et al., 2015). The responsibilities of an organization seeking sustainability are aligned with specific aspects such as environmental, economic and social. Various organizations have implemented sustainable practices such as the protection of air quality, carbon emission reduction, water conservation and inducing flexible work processes for the reduction of costs and effective use of natural resources.
Conclusion:
The essay reflected critically on the scope of ethical behaviour in the context of the social responsibility of an organization. The major subject of the report was derived in the form of a critical discussion on the benefits derived from the social responsibility of an organization to ensure profits within the legal course of action. The essential themes that were discussed in the essay imply the illustration of the standard characteristics desired in ethical behaviour from an organization and the merits that are associated with responsible social behaviour.
The essay also reflected comprehensively on the perception of other responsibilities of an organization such as corporate social responsibility and sustainability practices. It is imperative to reflect critically on the inferences from the essay from a personal perspective to understand the scope of utilizing resources effectively for drawing productive outcomes for the business within ethical limits.
The concept of ethical behaviour has been perceived in general literature as an imposed precedent on organizations while it has to be understood as an integral aspect of operations of every enterprise to address the interests of associated stakeholders of the company such as customers, shareholders, competitors, local communities, government and employees. An organization can’t rely solely on accomplishing its social responsibilities owing to the variability of interests of different stakeholders. The references to the distinct precedents of ethical behaviour for individual stakeholder categories could provide reasonable insights into the strategic approaches that can be implemented by an organization to realize profits with effective utilization of resources while complying with necessary ethical and legal precedents.
However, organizations could look for opportunities to realize social responsibilities beyond the intended objectives of profit. From a personal view, the objectives of corporate social responsibility and sustainability could be realized effectively through the categorization of distinct responsibilities of an organization directed towards the marketplace, customers, employees and local communities.
Corporate social responsibility is a notable contribution to the improvement of profits of organizations with the increasing emphasis of pressure groups, governments and firms on the welfare of the neighbouring societies and communities. On the other hand, sustainability could be addressed through effective monitoring and performance measurement standards since an organization has to measure its efforts for sustainability in the specific dimensions of economic, social and environmental interests. The essay can be concluded with an indication towards the significance of social responsibility extending beyond the objective of economic responsibilities and addressing other factors such as legal and philanthropic responsibilities.
References
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Carroll, A.B., 1991. The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34(4), pp.39-48.
Carroll, A.B. and Shabana, K.M., 2010. The business case for corporate social responsibility: A review of concepts, research and practice. International Journal of management reviews, 12(1), pp.85-105.
Crane, A., Matten, D. and Spence, L.J., 2013. Corporate social responsibility in a global context.
Cavusgil, S. T., Knight, G. & Riesenberger, J. 2013. International Business: The New Realities. Global Edition. 4th Edition. Harlow: Essex: Pearson. Chapter 5
Friedman, M., 2009. Capitalism and freedom. University of Chicago Press.
Hill, C. W. 2014. International Business: Competing in the Global Marketplace”, 10th Ed, McGraw-Hill Irwin: New York. Chapter 5
Homburg, C., Stierl, M. and Bornemann, T., 2013. Corporate social responsibility in business-to-business markets: how organizational customers account for supplier corporate social responsibility engagement. Journal of Marketing, 77(6), pp.54-72.
Johnson, G., Whittington, R. & Scholes, K. 2011. Exploring Strategy: Text & Cases. 9th Edition. Prentice Hall: London. Chapter 4
Morrison, J. 2011. “The Global Business Environment: Meeting the Challenges”, 3rd ed, Palgrave: Basingstoke. Chapter 13 Page
Pai, D.C., Lai, C.S., Chiu, C.J. and Yang, C.F., 2015. Corporate social responsibility and brand advocacy in the business-to-business market: The mediated moderating effect of attribution. Journal of Business Ethics, 126(4), pp.685-696.
