Social Responsibility of Business: Critically Discussing Friedman's Statement

This essay critically discusses the statement by Friedman that the social responsibility of business is to increase its profits. It explores contrasting theories of social responsibility and provides examples of socially responsible behavior. The essay also examines the ethical and sustainability aspects of various organizations.

Social Responsibility
of Business (AS 1)

Table of Contents
ESSAY TOPIC................................................................................................................................1
“The social responsibility of business is to increase its profits” (Friedman, 1970). Critically
discuss this statement using contrasting theories and an extended example that illustrates Socially
Responsible behaviour”...................................................................................................................1
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Critical discussion of statement as per theories..........................................................................1
Critique of statement with examples illustrating socially responsible behaviour.......................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................6

ESSAY TOPIC
“The social responsibility of business is to increase its profits” (Friedman,
1970). Critically discuss this statement using contrasting theories and an
extended example that illustrates Socially Responsible behaviour”.
INTRODUCTION
Social responsibility can be seen in terms of both the activity and theory which is carried out by
an entity for the sole purpose of ensuring welfare of society via its operations. In accordance
with the thought process of Friedman, the most crucial social responsibility of an entity is
increment of its profits (Advantage, 2020). This statement consists of a number of layers which
can be comprehensively understood to gain knowledge of its actual meaning. To accomplish this
purpose, the following essay consists of contrasting theories of social responsibility. Along with
this, the essay also consists of examples of socially responsible behaviour. Lastly, it also includes
the ethical as well as sustainability standing of a wide array of organisations.
MAIN BODY
Critical discussion of statement as per theories
Social responsibility can be referred to as the responsibility as well as duty of an entity that
they are supposed to meet for stipulation of welfare for society (Barnett, 2019). In this relation, it
has been identified that there are many several which are related to the concept of social
responsibility. The arguments presented within theories are thus discussed in a comprehensive
manner as follows.
Friedman’s perspective v/s Freeman’s perspective
Friedman’s shareholder theory
Milton Friedman, a renowned economist, held the belief that it is significant for any
country to hold a free market system along with no governmental intervention in the
organisational operations. In accordance with this, Friedman created a doctrine as per which the
sole social responsibility of a company is to enhance its profits for the wide array of shareholders
pertaining to the company (Carroll, 2018). This theory effectively shaped the corporate culture
within the twentieth century, a time when capitalism along with freedom were regarded to be the
main purposes of a company assisting them in earning huge profits. In accordance with this
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theory, corporations need to be creating strategy and plans that are suitable for their business
operations and hold the capacity of making them earn huge profits in the long run.
Freeman’s stakeholder theory
The theory proposed by Freeman consists of ideology and premise that are contrasting to
those exhibited by Friedman. Freeman’s stakeholder theory is acknowledged to be more of an
evolved theory that was especially designed for the business entities pertaining to the 21st
century. The basic premise of this theory is that apart from increment of profits, there are several
other social responsibilities of a company that need to be duly met by an entity in due course of
time. Rather than just emphasizing upon the shareholder group, this theory emphasizes upon all
the stakeholder groups of an entity (Chuang, 2018). A suggestion was given by Freeman
whereby an entity possesses the social responsibility against all its stakeholder groups. The
concerned theory is discussed in a detailed manner as follows to take into account the various
social responsibilities of an entity.
Employees and managers – These are acknowledged to be the internal stakeholder groups
for a company who are the face behind the business operations. It is regarded to be the social
responsibility of a company to take into account all the needs of its workforce and managers and
thereby take due measures to address them all in a timely manner. It is important for a
corporation to make sure that its workforce along with managers are entitled to fair wage rates,
rewards and recognition that they are deserving to receive. Besides this, it is also the social
responsibility of the company to carry out training sessions so as to provide the employees with a
chance to flourish and grow with the passage of time (Demirag, 2018). This helps in empowering
them and giving them a chance to make their personalities better for the company.
Owners / shareholders – They also belong to the category of internal stakeholders. They
are the ones to invest money within shares of organisation, thereby providing capital to the entity
with the help of which company can effectually carry out its operations. The company holds the
social responsibility towards this stakeholder group in relation to increment of profits as these are
to be distributed as dividends within the shareholders.
Suppliers – They belong to the category of external stakeholders. These are the individuals
who tend to provide the company with raw materials for production or other purposes. Every
organisation holds a social responsibility towards this stakeholder group to make timely
payments so that healthy relations can be maintained with them (Ferrell, 2019).
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Customers – This is yet another group belonging to the category of external stakeholders.
They are the ones who act as the source behind increment of revenues along with profits for the
organisation. Customers is regarded to be the most stakeholder group whose social responsibility
should be supremely taken into account by the organisation in order to ensure its sustainability in
market place for a considerably longer period of time in future (Schembera, 2018). Thus, the
social responsibility is identified to be provision of high quality products along with after sale
services in a timely manner. Further, they should be provided with an opportunity to give
feedbacks to the entity.
Society – This external group is indirectly related with the business organisation. While
operating in society, society provides various resources to a company including premises, human
resources, basic amenities and more. So, it levies a social responsibility on an organisation that
they must also contribute towards society. The social responsibility of organisations towards the
society includes environment preservation, effective waste management and more.
Government – This is also an external stakeholder of an organisation which has the
authority to intervene in the operations and decisions of an organisation. An organisation has few
responsibilities against the government of the nation in which they operate; these responsibilities
include timely and correct payment of taxes and fulfilment of all formalities.
Critique of statement with examples illustrating socially responsible behaviour
In present time, it is highly important for the business association to focus on maximizing
their business productivity so that they can effectively attain higher profitability as well as
success in the same time (Schrempf-Stirling, 2018). Corporate social responsibility can be
effectively seen in four main types which include environment conservation, volunteerism,
philanthropy and diversity and labour practices.
With reference to the large scale companies, it can be said that the main focus of the
businesses is on acquiring philanthropy types of efforts with the motive of implementing
corporate social responsibility within the entity. This can be well understood with the help of
example. For instance: Here, Microsoft and Bill Gates Foundation focuses on bringing
technology within the society as well as community so that overall growth can be attained by
them effectively. Along with this, these large scale companies also believes that they cannot
attain success with just bringing innovation but at the same time they are also required to focus
on developing the community too so that they can make use of the same technology effectively
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and its maximum utilization can provide huge benefits to them in return (Soundararajan, 2018).
Along with this, it has been later determined that the individuals now a day’s feels connected to
the environment and also gives it most priority. In this regard, businesses who are believing in
serving the society by simply adopting several ways by which they can easily reduce
environmental issues such as reducing carbon footprints.
Here, it has been later analysed that the business association emphasizes on acquiring
several ways by which they can reduce greenhouse effects. Also, management team of the entity
focuses on the including diversity within the organization so that the respective individual as
well as entity could gain several initiatives which leads to the attainment of the success in the
rapid manner. Here, it can be said that business entities also incorporates several labour policies
and also reviews the existing policies at the constant basis so that several issue associated with
the diversity can be eliminated in the timely manner. This directly supports business entity in
developing positive culture within the entity that leads to the improvement in the motivation
level of organization (Sroka, 2018). Along with this, output of the same can be seen in the form
of improvement in the productivity as well as profitability of the same company.
Every business organisation is required to focus on following all the ethical norms within
the entity to that they can execute their each and every activity in rightful manner that leads to
enhancement in the sustainability of the organisation. This can be effectively done by simply
following each and every law and maintaining transparency within the same so that customers
can maintain trust among them. The ethical program followed by Microsoft simply includes 3
pillars like prevention, detection and remediation (Yuan, 2020). In the first pillar that is
prevention, it can be said that the entity focuses on developing effectively culture by simply
complying with the existing norms such as standards of business conduct, training and policies,
while utilising data analysis, proactive investigations, risk assessment, third party vetting etc.
Whereas, detection can be effectively done by testing the same and monitoring the buying of the
customers as well as their complaint reported towards the same. Controlling the process can be
taken as the best as it reduces the risk occurrence chances. Also, Microsoft only continues the
business with the suppliers who do not compromise with the ethical standards.
CONCLUSION
It is inferred that socially responsible behaviour exhibited by an organisation provides
assistance to it in enhancing its chances of growth and development in the long run. There are
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various theories linked to social responsibility of an organisation which present contrasting
ideologies. Further, it is analysed that socially responsible behaviour assists an entity in securing
its place in market for a long period.
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REFERENCES
Books and Journals
Advantage, C., 2020. Corporate Social Responsibility. CSR and Socially Responsible Investing
Strategies in Transitioning and Emerging Economies, p.65.
Barnett, M.L., 2019. The business case for corporate social responsibility: A critique and an
indirect path forward. Business & Society. 58(1). pp.167-190.
Carroll, A.B. and Brown, J.A., 2018. Corporate social responsibility: A review of current
concepts, research, and issues. In Corporate social responsibility. Emerald Publishing
Limited.
Chuang, S.P. and Huang, S.J., 2018. The effect of environmental corporate social responsibility
on environmental performance and business competitiveness: The mediation of green
information technology capital. Journal of Business Ethics. 150(4). pp.991-1009.
Demirag, I. ed., 2018. Corporate social responsibility, accountability and governance: Global
perspectives. Routledge.
Ferrell, O.C. And et. al., 2019. Business ethics, corporate social responsibility, and brand
attitudes: An exploratory study. Journal of Business Research. 95. pp.491-501.
Schembera, S., 2018. Implementing corporate social responsibility: Empirical insights on the
impact of the UN Global Compact on its business participants. Business & Society.
57(5). pp.783-825.
Schrempf-Stirling, J., 2018. State power: Rethinking the role of the state in political corporate
social responsibility. Journal of Business Ethics. 150(1). pp.1-14.
Soundararajan, V. and et. al., 2018. Small business social responsibility: A critical multilevel
review, synthesis and research agenda. International Journal of Management Reviews.
20(4). pp.934-956.
Sroka, W. and Szántó, R., 2018. Corporate social responsibility and business ethics in
controversial sectors: Analysis of research results. Journal of Entrepreneurship,
Management and Innovation. 14(3). pp.111-126.
Yuan, Y. and et. al., 2020. Business strategy and corporate social responsibility. Journal of
Business Ethics. 162(2). pp.359-377.
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