Social Responsibility of Business

Social Responsibility of
Business
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Table of Contents
Introduction......................................................................................................................................3
Main Body.......................................................................................................................................3
Conclusion.......................................................................................................................................6
References........................................................................................................................................8
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Introduction
Social responsibility is an ethical framework that insists business on maximising
stakeholders' value not just shareholders' value (Carroll, 2015). Capitalism is considered as
natural business theory and traditional capitalists believe that basic nature of business is to
perform and operate with the aim of earning profit and maximising shareholders' wealth only.
But in recent past, it has been observed that businesses are not only socially responsible to its
owners but also to society at large from which it obtains resources. Trade off may often exist
between the two and effective social responsibility is to managing to sustain equilibrium the two.
Main Body
Doing business for the primary motive of earning profits is as natural as one can think of.
It is a one-size-fits-all type of rule. Even non-profit organisations need to raise money for their
operations. When it comes to affairs of a business, two parties are distinctly expressed as
separate. One is shareholder and other is stakeholder. Although shareholders are also a
stakeholder, they relationship with company is different fro other stakeholders and thus, they are
treated as different. Shareholders are the part owners of company and are responsible for it
personally through limited or unlimited liability while other stockholders only have a certain
connection or interest in either some project of company or in company as a whole. Other
stakeholders include employees, suppliers, government, investors, society at large, etc. They
both share common aspect that both are interested in long term growth and sustainable
development of the company. Other stockholders are not bound with survival of the company
because they are only with the company for their personal interest. Therefore, there are often
clashes between the two interests. There are various theories proposed around the basic
objectives of the business and the welfare of the stakeholders. Two most famous normative
theories are shareholder theory and stakeholder theory.
“The Social Responsibility of business is to increase its profits”. These words were
quoted by capitalist economist Milton Friedman. He proposed The Shareholder Theory. He
believed that a company is responsible for the welfare of only one stakeholder i.e. of
shareholders or owners of the business (Jahn and Brühl, 2018). He argued that a corporate is an
artificial person and acts through its executives. Executives are the employees of company who
are employed by owners and thus, are responsible to conduct its activities only in accordance
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