Ethical and Social Responsibility of Businesses 

Every business main goal is to increase profits, specially publicly traded corporations; however, shouldn’t be social responsible with their actions be one of their main goals? These publicly traded corporations must respond to their stakeholders, such as board of directors, employees, and stockholders about their financial performance and long term goals. Over the years many companies in different industries have found themselves involved in hard situations due to their actions and responses to different social and environmental issues where they contribute in a negative way to create or worsen a situation that affects our society and/or our environment. Business’s journals and news papers often refer to the social responsibility of businesses. But, according to Milton Friedman, the 1976 Nobel Prize Winner in Economics, only people can have responsibilities, no businesses. Corporations are artificial persons and in this sense it can only have artificial responsibilities. Many will argue that regardless of whether or not a corporation is an artificial person with artificial responsibilities, it should have a responsibility within the society it does business in as well as to everyone whom that corporation’s actions affect.

Friedman goes on to clarify the reason why he feels corporations have only artificial responsibilities, being the main reason the fact that these corporations are run by individuals, by human beings, and he argues whether or not these social responsibilities are those of the individual executives of the corporation or those of the corporation itself. Friedman argues that the executive running the corporation has an obligation to the owner of the corporation not to the society. That their job is to run the corporation according to the wishes of the owners or stakeholders and to increase the profits for those directly affected by his commitment to his or her bosses, employees and stockholders.

So, if corporations have artificial responsibilities created by the perception of the society it conducts business in, shouldn’t the corporation live up to the expectations of this society? For instance, if a petroleum company has another oil spill in the Gulf , but the corporation itself does not have a social responsibility, and in addition to it, the main goal of its executives is to maximize profits, then perhaps, trying to remediate their oil spill will cost the company a significant amount of said profit. If Friedman is correct in his examination then, no one will fix the damage caused, and the contamination to our environment will be neglected in an effort of the corporate executives to satisfy their social responsibility to the corporation’s owners to maximize profits. The problem here rises on the fact that ignoring such actions and denying responsibility may also cost the corporation a large amount of profit. They may lose customers, have negative reactions among different groups of society, force stockholders that do not agree with their procedures sell their stock shares, significantly lowering their stock price and the overall value of the company.

In order to maximize profits corporations and/or its executives must be aware of the consequences of their actions or inactions, as it could be equally costly as to be socially responsible. Friedman argues the corporate executive is an individual person by itself, with his/her own personal views, believes, orientations and feelings towards society. From this points he explains that if the executive uses his or her own money and time to contribute to issues affecting the society where the business is operating in, or refuses to work for a corporation he/she does not feel in touch with its main cores, then he or she is acting as a principal and not as an agent of the corporation. In the other hand, if he or she starts a campaign to contribute to some social objectives while using the corporation’s money, time and resources, then the executive is not acting in the best interest of the corporation and stakeholders, and as a result of these actions the executives are not being socially responsible and have deviated from the main social responsibility to the corporation.

Many groups in society will argue that no matter who runs a corporation, those individuals that run it have a responsibility to society and the corporation itself has a responsibility towards that society as well. A responsibility to ensure their products and services do not endanger people, property nor the environment. A responsibility to ensure the process they use do not cause contamination to the air and water and the environment in general. A responsibility to ensure their product could help their customers satisfy a need while increasing profits to its stockholders. The corporation does not have to engage on a new social objective not related to its operation in order to be socially responsible, it simply has to ensure that its process is safe, mindful about the results of their actions and careful not to endanger its community or hurt its people. Having preventative procedures and responses in place could help those running a corporation keep it safe from unpredicted expenses and profitable for all at the same time by not having to incurred in new expenses to correct something that could have been prevented.

There is a fine line dividing the artificial responsibilities of the corporations and those of the executives that run it; and, no matter where this gray area lies there are benefits to the corporation and its executives for doing what is right and been socially responsible for the society the corporation does business in. The government allows for tax cuts and discounts based on the profits used for charitable causes and other social objectives in the community that could benefit the corporation itself. Doing so the corporation and its executives are able to use these funds to support a cause they believe on while reducing the tax cost of their operations and keeping or increasing profits by the means of tax reductions and waivers.

So why not been responsible in an effort to increase profits!

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