Critical Analysis: Social Responsibility of Business, BUS3001, 2022

This essay critically analyzes Milton Friedman's assertion that the social responsibility of business is to increase its profits. The essay delves into contrasting theories of corporate social responsibility (CSR), exploring the perspectives of stakeholders and ethical considerations. It examines the evolution ...Read More

Social Responsibility of
Business

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
CONCLUSION ...............................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Along with profit making, it is needed for business to undertake social responsibility as many
entrepreneurs believes that business enterprise have to contribute in sorting various societal ills
by rendering job opportunities (Ramanna, 2020). It will lead to economic growth and it can
contribute a larger part in GDP. It is the responsibility of every business to generate higher
profits for shareholders. According to Friedman, he believed that public company should
maximise profits as well as shareholder value above all other objectives. He states that responds
to various social concerns rather than making revenue are not doing their jobs effectively and
cannot be considered as employees. A person can do anything with his money, similarly
employees should comply to desires of his associates. This project essay is based on Friedman's
statement regarding social responsibility to increase profit by using various theories.
TASK
The executives should enhance return percentage as much as possible they can, to
shareholders. According to Friedman employees who generates revenue and contributes on
social concerns, and makes converts into legislators. All types of business whether small,
medium or large were opting social responsible policies for better reason. In modern business
world, consumers are more conscious and that awareness indirectly affects their decision (Jehan
and et.al., 2020). If a company is not doing anything for achieving responsible business
practices, customers won't but anything. As per study of IBM, it was founded that 69% of
shoppers pay additional premium of 36% for upfront price of sustainable purchase. As per the
studies, companies which are completely integrated CSR in functioning can expect a higher
return on investment. It will lead to increase in sales volume and reduction in employee turnover.
One of the major reason for increased profit while integrating CSR into their operations, is that
customers pays attention to the method of company who reacts to political and social issues and
will eliminate enterprises with negative objective. So enterprise who promote CSR and positive
contribution can increase customer traffic and revenue. It is the core aim for every business to
maximise profit but along with maintaining a healthy relationship with social environment in
which they function (Wigmore, Lozano and Fernández, 2020). Companies who can demonstrate
reliance on society tend to have higher ptobability of success.

There are various benefits to social responsibility to business as companies which are
responsible to society reflects their ethical practices in which way business function its
operations. As consumers are strongly have knowledge about national, global and local issues
and it influences their buying decisions too. Consumers will purchase more more from those
enterprise who takes corrective measures on issues which deals with customers. Along with
enhancing company's margin, it also leads in boosting company's image. Company knows what
value does image can bring in making company more efficient. By rendering high quality
products along with great customer service and involved in high cause which demonstrates that
company takes care about environment as well as to consumers. If a company undertakes social
responsibility tend to get better media coverage which can enhance brand image of company.
Many customers uses social responsibility as a key portion of standard in deciding whether to
make investment in enterprise or to opt another alternative. Friedman argued that by returning
value to shareholder may be considered as core responsibility of enterprise and stakeholders
could opt company for investment purpose. He also believes that companies should concentrate
on their functions for purpose of creation core value for stakeholders and by returning value to
shareholders , they can take decision about the way they can uphold social values (Aluchna,
2017).
Corporate spending on social matters and Friedman argues that it was simple to spend
someone's else amount on any portfolio which stakeholders do not agree to opt for. As a
doctrine, this thought gives more of hyper charged in deal making in 1980 along with more on
corporate world by providing intense focus on shareholder value. In upcoming 50 years,
companies would more focus on various issues of social responsibility by tacking various areas
such as climate change, women's right, income disparity and racial justice (Birch, 2017). Many
businesses focus on improving such issue by taking essential steps. By making company more
social responsible, it will help in attracting potential customers along with retaining existing
customers. Now a days, people are more concerned about process rather than product. Many
customers are ready to pay higher prices, as they know portion of profit would contribute in
supporting causesin which they believes. Elon Musk, CEO of Tesla have brought large number
of customers which are more concerned to environment by producing electric powered
automobiles along with becoming largest host of green auto products. Google have also
supported various renewable energy projects across the world. This step towards environment

bolstered brand image of companies. While considering branding, it involves using CSR as by
demonstrating how unique organisation is from its rivals. Google have done it in significant
manner with Google Green Project which shows that Google builds technology which helps in
doing more for the planet. Social responsibility programs may be considered as a part of
company's culture which enhances employee morale and leads to higher productivity. One of the
important movement, #metoo which prompted companies in taking strong stands against
workplace harassment and discrimination. Employees are provided with foster environment in
which they feel comfortable and open to everyone.
Friedman also argued that it is the responsibility of government to tackle social
responsibility issues. Businesses should step up to create environmental and social responsible
investment, reduce carbon footprints along with improving corporate policies regarding income
equality and worker safety (Wickert and Risi, 2019). As many business are opting solar
technology in order to reduce dependency on power grids. By this, they can save overall cost of
company along with remaining sustainable towards environment. Friedman argued that a
business is neutrally moral and aims to enhance profits for stakeholders. Executives and directors
are chosen to accomplish single objective. It is the only moral responsibility of executives and
directors to meet shareholder's expectation that is to maximise return on investment. His view is
akin to social Darwinism and applying fittest principle of survival to market in order to ensure
best possible outcome. In addition to that, social economic view may be considered as a
utilitarian argument which emphasise on total socio-economic welfare of society and must be
enhanced. He proclaimed that companies who operates only for sake of maximising return of
shareholder and do not focus in social responsible activities are termed as unethical in utilitarian
point of view. If CSR detrimental to business, then shareholders will tend to avoid investing in
companies which act socially responsible. In first instance, Friedman fails to acknowledge that
by acting ethically can be value marketing proposition. By identifying consumer's desires, needs
and wants, business can offer products which matches with their ethical thresholds which leads
to adding value to both consumers and shareholders and avoids marketing myopia.
Consumers prefers goods that makes claims of having socially responsible on labels of
goods. Thus, Herzberg's Motivation hygiene theory helps this researchand hygiene factors are
those lesser conditions which should be met at workplace in order to safeguard dissatisfaction.
Schyut and Meijer have analysed role of CSR in buying pattern and for consumers, corporate

social performance serves more as hygiene rather than motivator. The growth of ethical
investment states that some external stakeholders prefers companies which does not look for
enhancement of revenue by ethical obstacles in their operations. It is also clear that hygiene
theory can be applicable to stakeholders. It is needed to satisfy their minimum expectations by
generating profit. Directors and executives who behave unethically creates dissatisfaction to
shareholders and it can be seen in various recent examples. Friedman argues against spending
amount for anything which do not support in enhancing stakeholder’s wealth. The socially
responsible activities are operated by businesses are distorting economic welfare as shareholders
are not able to decide how their money will be used. Business haves to focus on those activities
which yields higher profit and exclude charitable activities which do not generate profits directly.
Directors of organisation cannot act in any method to make revenue but have to abide by laws
and regulations. According to Friedman, a good corporation is not one which undertakes
activities only because they are sound but they are economic viable too. There are various
aspects of social responsibility to be undertaken in order to promote success of business
enterprise. Various companies are opting concept of CSR so that they can minimise impact of
operations on environment. Multinational companies like Tesco, Google and Tesla are reducing
carbon footprints by opting electric vehicles which emits less carbon than conventional vehicle.
In addition to that, they are more focusing on making business more sustainable as it is linked
with increased profits. Apart from profit making for shareholders, directors and executives
should comply with all norms in order to smooth functioning of business. It is cleared that many
theories are opted by Friedman in order to get clarified about its approach. Customers are more
attracted to those companies who are more concerned about social responsible and follows all
norms and legislations. It is imperative for companies to promote CSR which will positively
affect its performance and leads to increased profit.
CONCLUSION
From the above project essay, it was concluded that social responsibility plays crucial role in
enhancing company's profit as people are more concerned conscious about process rather than
product. Directors and executives have to work ethically and comply with all rules and
regulations formulated by government. Businesses have to engage with those activities which
generates higher profits for shareholders but excluding activities which do not generate profit.
The socio-economic view claims that organisation have to enhance best for the greatest value of

people and companies should undertake social responsible action as it maximises wealth of all
shareholder of company. Management have not full right to maximise profit as they have to act
within ethical and legal rules of game. It is imperative to company as to formulate effective
strategies which aligns its resources with socially responsibility.

REFERENCES
Books and Journals
Aluchna, M., 2017. Is corporate social responsibility sustainable? A critical approach. In The
Dynamics of Corporate Social Responsibility (pp. 9-25). Springer, Cham.
Birch, D., 2017. Corporate citizenship: Rethinking business beyond corporate social
responsibility. In Perspectives on corporate citizenship (pp. 53-65). Routledge.
Jehan and et.al.,., 2020. Relationship between organisational virtue and perceived role of ethics
and perception of social responsibility in business: Testing a mediation model. International
Journal of Business Governance and Ethics, 14(2), pp.166-180.
Ramanna, K., 2020. Friedman at 50: Is It Still the Social Responsibility of Business to Increase
Profits?. California Management Review, 62(3), pp.28-41.
Wickert, C. and Risi, D., 2019. Corporate social responsibility. Cambridge University Press.
Wigmore, A., Lozano, M.R. and Fernández, J.L.F., 2020. Management of University Social
Responsibility in business schools. An exploratory study: Article 100382. The International
Journal of Management Education, 18(2), pp.1-15.