The forceful argument of Milton Friedman, many business firms in practice contribute to various social causes. They give a donation to hospitals and educational institutions. Contribute to relief programmers, sponsor sports events, encourage. And motivate their employees to participate in community development projects, so on and so forth.
Define corporate social responsibility
Corporate Social responsibility, an allied issue, has received a great deal of attention particularly in recent years. There are various definitions of corporate social responsibility.
So, define corporate social responsibility as the obligation and commitment of managers to take a step for protecting and improving society’s welfare along with protecting their own interests.
Arguments for corporate social responsibility
The managers must have social responsibility because of the following reason:
01. Business is a part of society:
Since business organizations are a part of society they must have a positive attitude towards the needs of society. Business is only a sub-system of society and this sub-system must contribute to the welfare of the main system.
02. Avoidance of govt. regulation:
If the business does not care about its social liability, the govt. has to interfere increasingly in the business system, which adversely affects the progress of the business.
03. Code of conduct:
Members of professions are bound to follow a code of conduct. Code of conduct includes rules connected with professions, honesty, and morality, which form its base.
04. Public Image:
The business will retain the needed credibility with the public if it performs its social obligations. It will also fudge conflict with society in its own interest. A good connection with the workers, consumers, and suppliers will lead to the success of the business.
05. Organizational resources:
An organization has several pools of resources in form of men, money, competencies, and functional expertise. When an organization has three resources in hand, it is in a better position to work for social goals.
06. Precautionary measure:
If an organization lingers on dealing with the social issues now, it would land up putting out social fires. So that no time is left for realizing its goal of producing goods and services. Effectively, it is much cost-efficient to deal with the social issues since they turn into disasters consuming a massive part of management’s time.
07. Moral obligation:
The acceptance of managers’ social responsibility has been identified as a morally appropriate position. It is the ethical responsibility of the organization to assist in solving social problems.
08. Efficient and effective employees:
Recruiting employees has become easier for socially responsible organizations. Employees are charmed to contribute to more socially responsible organizations. For instance, tobacco companies have rigorously recruiting employees with the best skills and competencies.
09. Better organizational environment:
The organization that is most temperamental to the betterment of the social quality of life will consequently have the best society in which it can make its business operations. Employee hiring would be easier and the employee would of upper quality.
There would be a less rate of employee turnover and absenteeism. Due to all the social improvements, there will be a low crime rate consequently less money would be exhausted in form of taxes and for the sale of land. Thus an improved society will create a better business environment.
Arguments against social responsibility:
Economists like Frederick Hayek and Milton Friedman, however, have argued that a business firm should not swerve
This role should not be arrogated by corporate management whose primary mandate is economic. Milton Friedman put it as follows: “Few trends could so thoroughly undermine the very foundation of our society as the acceptance by the corporate office as a social responsibility other than to make as much money for their stockholders as possible. This is a fundamentally subversive doctrine.”
01. High social overhead cost:
The cost of social liability is a social cost that will not on the spot benefit the organization. The cost of social responsibility can lower the organizational efficiency and affect to complete in the corporate world.
02. Cost to society:
The cost of social responsibility is transferred on to the society and the society must bear with them.
03. Lack of social skills and competencies:
The managers are best at managing business matters but they may not have the required skills for solving social issues.
04. Profit maximization:
The main purpose of many organizations is profit maximization. In such a scenario the manager’s judgment is controlled by their desire to maximize profits for the organization’s shareholders while reasonably following the law and social custom.
Means of Social Responsibility:
The Social responsibilities of a financial manager are discussed below:
01. Protecting consumers:
the financial managers should ensure efficient, low-cost businesses that produce high-quality goods and services at the lowest possible cost. This means that companies must improve products and services that consumers want and demand, which leads to new technology and new products.
02. Paying fair wages:
It is the social responsibility of financial managers to pay fair wages and give other benefits to the employees of the organization. As a result, the goodwill of the firm will increase.
03. Maintaining fair hiring practices:
It is also the social responsibility of financial managers to ensure whether proper rules and regulations are being followed in hiring human resources for different projects.
04. Safe working conditions:
For employees, safe and riskless working conditions should be maintained by financial managers.
05. Supporting working condition:
It is the social responsibility of financial managers to support education for the employees of the firm as well as the society by establishing schools, colleges, training centers, or giving donations to the educational institution.
06. Pollution-free environment:
It is the social responsibility of financial managers to ensure a pollution-free environment. This is done by maintaining clean air, supplying clean water, producing eco-friendly products, proper waste management, etc.
07. Corruption free working environment:
To ensure a corruption-free working environment is the most important social responsibility of financial managers. Corruption not only deteriorates the moral obligation of employees but also throws the existence of the firm into a threat.
08. Protection investor’s interest:
Protecting the overall interest of investors is the main social responsibility of financial managers.
09. Protect creditor’s interest:
The social responsibility of a financial manager is to protect creditor’s interests. It will ensure to pay the creditors in due time and funds should be created to pay the long-term obligations of creditors.
Over the last few decades sustainability has become a growing focus of many corporate social responsibility efforts. In a sense, corporations have always been worried about their capability to be productive, or sustainable, in the long term.
However, the concept of sustainability has evolved to such an extent that it is now viewed by future generations to meet their own needs. Therefore, more companies are being proactive and taking steps to address