Social Responsibility of Business

Social Responsibility of
Business
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Table of Contents
Introduction......................................................................................................................................3
Main Body.......................................................................................................................................3
Various theories of Social Responsibilities.................................................................................3
Sustainability strategy and organisation's social behaviour........................................................6
Conclusion.......................................................................................................................................8
References........................................................................................................................................9
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Introduction
Social responsibility emphasizes dual responsibility of businesses i.e. to make money and
to interact ethically with society. Businesses are conceived to hold economic activities.
Therefore, traditional view of business social responsibility says that businesses exits to make
profits and all the ethical dilemmas are to be approached with a money-centred prospective
(Osagie and et.al.., 2019). Contemporary view believes that businesses derive their resources
from society and are thus, responsible to provide returns back to all stakeholders not just
shareholders. This is considered as main contradiction between shareholder's theory and stake-
holder's theory which pave way for two different forms of capitalistic theory.
Main Body
Various theories of Social Responsibilities
Capitalism is believed to be natural business theory and earning profits for owners
becomes natural responsibility of the businesses. Although earning profits is one-size-fits-all
type of rule for corporates who enter into business to perform commercial activities, it cannot be
termed as incorrect for even non-profit organisations which raise funds to perform their desired
service objectives. Both commercial and non-commercial organisations have certain
stakeholders. Stakeholders are those parties which are interested in the operations of the business
such as owners, employees, customers, suppliers, government, etc. Even though shareholders are
also stakeholders, they are considered different as they share different relationship with company
from other stakeholders. Shareholders are part owners of the organisations and have direct and
personal relationship with the well-being of the business while other stockholders only care
about their vested interests in the company, not overall well-being of the organisation (Windsor,
2019). This often results in the contradictions between shareholders and other stockholders. This
is the basis of two most famous normative theories of basic objectives of the business -
shareholder theory and Stakeholder theory.
Shareholder theory was proposed by capital economist Milton Friedman. He quoted
“The Social Responsibility of business is to increase its profits.” as he believed that a company
has only one aim i.e. profit maximisation and is responsible for welfare of only shareholders. He
argued that even though a company has a separate legal entity from its owners, it is not a real
person. It obtains its funds from owners and operates through its management and employees.
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