“If you are in the luckiest of 1% of humanity, you owe it to the rest of humanity to think about the other 99%,” said Warren Buffett. Mr. Buffett understood that the purpose of any business is not only to make a profit but also to be responsible for its actions and decisions. Social responsibility is the duty of businesses towards society. Businessmen must review their impact of decisions and actions on the different sections of society.
According to Peter F Druker, “Social responsibility requires managers to consider whether their actions are likely to promote the public good, to advance the basic belief of society, to contribute to its stability strength and harmony.” Social responsibility refers to the voluntary efforts on the part of the business to contribute to the social well being. The moral idea behind this is that the businesses use resources of the society so they must give something back to the society.
The Need for Social Responsibility
- Self-interest: It is in the self-interest of the business to have a social responsibility as it opens opportunities for understanding the problems and issues of society.
- A better environment for Business: In today’s cynical age, social responsibility keeps the businesses honest and the markets stable.
- Public image: When a business takes initiative to solve the problems of the society, it puts the business in the goodwill of the people.
- Social power: A leader is a helper. Helping the society is a form of social responsibility. Executing social work helps the business attain social power within the society.
Arguments Supporting Social Responsibility
- The justification for existence and growth: The primary goal of business is to make profits as only profits can help the business sustain and expand. Profits should only be made as a return of service to the society by producing goods and services.
- The long-term-term interest in the firm: A firm is to gain maximum profits in the long run if it has it’s the highest goal as service to society. As humans are social beings, when they notice that a particular corporation is not serving its the best interest socially, they do not support the organization further.
- Avoidance of government regulations: Government is the highest authority in the nation. When a government feels that the business is not socially responsible or is creating problems like pollution, the government limits its freedom.
- Maintenance of Society: Business is one of the important pillars on which society survives. It is the responsibility of business to take care of society’s needs. Law alone cant help people with the issues they face. Therefore businesses contribute to the well being, peace and harmony of society.
- Availability of resources with Business: Business enterprises have huge financial resources, very efficient managers & contacts and thereby they can ensure that a social problem can be solved easily.
- Converting problems into opportunities: Business means risk. And turning risky situations into profits can also be related to solving social problems.
- Holding Business responsible for Social problems: Business enterprises are responsible for many problems such as pollution, discriminated employment, corruption, etc. It is the duty of the business to solve the problems created by them.
Arguments Against Social Responsibility
- Violation of maximization of the profit motive: This statement argues that business exists only for maximizing profits and businesses fulfil their social responsibility best by maximizing profits by increasing efficiency and reducing costs. They need not take up any additional obligations.
- Side effects on Consumers: Customers suffer because of the solving social problems and taking social care require huge financial investment. As the money within the business is used in social help, the business increase the cost of their products and services.
- Lack of Social skills: It is often stated that businessmen don’t fully under the social problems and thus can’t solve them efficiently.
- Personal resistance: People tend to dislike interference from businesses in their problems.
The Reality of Social Responsibility
- The threat of Public Regulation: Government agencies keep watchful eye on all the business operations. So to avoid government action, business should behave in a responsible manner.
- The pressure of Labour movement: Labour play an important role not only in production but also in the managerial factors of the organization. Labour nowadays are more educated and their movements are more powerful. ‘Hire and fire’ policy no longer work. Managers now have to be more responsible while dealing with labors.
- Impact of Consumer Consciousness: In this era, consumers are well aware of the quality and price of the product. Consumers are understanding their rights over the product and even in small issues, they file a suit in consumer court.
- Development of a Social standard for Business: New social standards consider business enterprises as legitimate but with a condition, they must also serve social needs.
- Development of Business Education: Business education has created an awareness among investors, consumers, employees, etc and the world is more sensitive towards social issues.
- The relationship between Social interest and Business Interest: People know that social interest and business interest are complementary. This means long-term benefits of the business.
- Development of Professional and Managerial Class: Earlier business houses only aimed at profit maximization but now professional management and educational institution have made a new kind of managers that give similar importance to social responsibility.
From the above seen ‘Realities of Social Responsibility’ it is clear that business houses must assume social responsibility for their survival, growth, and sustainability.
Solved Question for You
Question: List out the argument for the violation of maximization of the profit motive.
Answer: This statement argues that business exists only for maximizing profits and businesses fulfil their social responsibility best by maximizing profits by increasing efficiency and reducing costs. They need not take up any additional obligations. as they distract the organization from its core functions which in turn will harm the profits of the company.