Ethics and Social Responsibilities of Business Essay

The emergence of management as a distinct and identifiable activity in the modern era has had an important impact on the society with which it developed (Massie 1995). Till the early days of the twentieth century, organizations were predominantly concerned with their respective profit-maximizing activities. However, this singular intention of profit maximization of business farms was protested by the social activists during the later half of the 20th century. They pointed out that, since the organizations drive their business from the society, the former must possess some obligations towards the interests and welfare of the later. The concept of business ethics and corporate responsibility gained immense importance after the publication of Bowen’s Social Responsibilities of Businessman in the year 1953. Bowen opines that business corporations should have certain responsibilities towards the society in which it operates. Often business ethics and its social responsibilities are regarded as their â€Å"science of conduct† (McNamara).   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Ethics is the study of morality and standards of conducts (Fred and Richard, 480). The term ‘ethics’ is, in generally, used to refer to the rules and principles that define right and wrong conduct. The study of ethics is of immense importance in international management because ethical behavior in a particular country may be considered as an unethical practice in other countries. Ethical behavior of business has become an important aspect in today’s corporate environment. Even in the United States, trading scandals, bribes etc. have gained considerable media exposures and have aroused public concern regarding ethical practices in international business management. Corporate business ethics is primarily concerned with honesty, truth and justice and should consider several aspects like the expectations of society, fair competition, public relations, consumer autonomy, social responsibilities, adherence to the rules in the operating country, and so on. An organization should be always responsible in creating an environment that fosters ethical decision-making. Corporate social responsibility is seriously considering the impact of the company’s actions on society. In the views of Andrews, social responsibility means the intelligent and objective concern for the welfare of society that restrains individuals and corporate behavior from ultimately destructive activities, no matter how immediately profitable and signifies the positive contribution to human betterment. Social responsibility contends that the business organizations are responsible to all the interest groups with which it interacts. All the interests groups such as employees, customers, suppliers, government and society should be given importance equal to that of the shareholders of the respective companies. Thus, ethical and social responsibilities signifies that the management should pay attention to the welfare of the workers, consumers’ needs and safety, the interests and rights of creditors, government’s rules, regulations and policies, and the obligations of the organization towards society as a whole. Thus, in other words, â€Å"Corporate social responsibility indicates the management’s commitment towards upholding the interests of direct stakeholders and to behave in an economically and environmentally responsible manner† (Davis and Robert, 1975). Ethical and Social Responsibility of Corporate Organizations Corporate organizations which are concerned about business ethics and corporate social responsibility need to identify various interest groups which may influence the functioning of a firm and which, in turn, may be affected by the firm’s decisions. In fact, business enterprises are primarily responsible for the well being of six major interest groups which are discussed hereunder one by one: Protecting Shareholders’ Interests The most important responsibility of business organizations is to protect the interests of its shareholders. The shareholders provide the core resource – the capital – that enables an organization to operate and grow. They expect the management to use the capital judiciously and operate the business in an efficient way that would ensure a healthy return on their investment, both through dividends and through increase in stock value. Shareholders should be provided with adequate and timely information about the functioning of the organization. Protecting Employees’ Interests Employees are the biggest assets of the organizations. In the early days, managers regarded employees merely as one of the factors of production and denied them the right to obtain an equal distribution of income. But, with the passage of time, the situation has changed in a considerable way. Now, it is absolutely mandatory for the management to protect its employees’ interests. Government laws and regulations have now define the responsibilities of the employer – ensuring equal employment rights for men and women, offering timely pensions and other retirement benefits, and providing and maintaining a secure and healthy working environment. To protect the interests of employees, management must Treat the employees as the basic pillars of the organization. Develop administrative processes that promote cooperation between employers and employees. Foster a harmonious work atmosphere by adopting a progressive labor policy. This includes allowing the participation of workers in management, creating a sense of involvement, and improving the working conditions and living standards of workers. Provide fair wages (not merely the one determined by the market forces of demand and supply) and other financial benefits to workers to keep them motivated. Fair selection, training and promotion based on quality and merit – without any discrimination on the grounds of sex, race, religion, physical appearance and so on. Protecting Customers’ Interests In the recent times, great attention is delivered to the customers. In the age of cut-throat competition, business firms have rightly begun to realize the importance of maintaining a healthy relationship with the consumers. The growth and development of consumerism has compelled the organizations to become more aware of their duties and responsibilities towards the customers. â€Å"The most successful businesses put the customer first, instead of the investors† (Mackey). Business firms should fulfill their obligations to their customers by Charging reasonable prices for their products. Ensuring the provision of standardized and quality goods and services. Ensuring the easy availability of goods and services, so that customers do not have to spend too much time and energy in procuring them. Abstaining from unethical practices like hoarding, profiteering or creating artificial scarcity, misleading advertisement and so on. Refraining from deceiving customers by making false or misleading claims. Protecting Creditors and Suppliers’ Interests All the inputs productions are provided by the creditors and suppliers in the form of raw materials and capital. Hence, the management must take proper care in fulfilling its obligations towards the former. This can be done by: Creating a long-term and healthy business relationship with them. Making prompt payments to creditors and suppliers. Providing them with accurate, relevant and needed information. Protecting Society’s Interest Organizations function within a social system and draw their resources from this system. Therefore, they have certain obligations towards society. The management of business organizations can fulfill their obligations toward society by preserving and enhancing the well-being of the members of society. Management can do so in the following ways: Using its technical expertise to solve local problems. Setting socially desirable standards of living and avoiding unnecessary and wasteful expenditure. Playing an important role in civic affairs. Helping the society in events of national calamity, famine, war, and so on. Providing basic amenities, healthcare and education facilities, thus creating better living conditions. Establishing development programmers for the benefit of economically weaker sections of  the society. Protecting Governments’ Interests In any country, the Government provides the basic requirements for the survival and growth of business organizations. Most of the rules and policies which the government imposes are mainly in the favor of the businesses. Hence, the business, in turn, must have certain obligations to the business: Be law-abiding – respect the rules, procedures and policies of the government Pay all taxes and other dues fully, timely and honestly. Not bribe government employees and officials to obtain favors for the company. Not try to use political influence in its favor for own interests. Advantages and Disadvantages of Ethics and Corporate Social Responsibility In the modern era, the expectations of the consumers and the society have immensely changed and, resultantly, modern corporations have become much aware of their ethical and social responsiveness. However, opinions vary from scholars to scholars as to whether business should possess much, at least any, ethical and social responsibilities. Disadvantages The motive of any business is to maximize its profit. However, much ethical values and social responsibilities may act against this objective. Any investment (or loss) incurred by the business as a result of good social or ethical behavior are adjusted by increasing the selling of its products. Hence, â€Å"the motive would be socially less desirable than in the days before when business were concerned with social responsibilities† (Friedman 1970). Business derives immense power through its social involvements and ethical behavior. This power is generally derived from the government or through other political means. This increment in power can lead to corruption and even conflicts with customers, governments and the society as a whole in the subsequent times. Generally, business people lack the required skills to deal with the problems outside the organization. Social responsibility can be an excess burden of duty to them. Advantages Social involvements and strong ethical behavior boost up the image of the business corporations in the eye of the customers. Being socially responsive, business can increase the number of its loyal customers. A favorable public image helps the business to attract more employees, customers and investors. By being socially responsible, business organizations can easily avoid the attention of regulatory agencies and earn government’s trust; resulting in increasing flexibility and independence in their mode of operations. Businesses can increase conservation of natural resources by being socially responsible. For example, Items that were considered as waste before (like empty soft drink cans and plastic bottles) can be recycled and profitably used again. Society and business are equally benefited if a symbiotic relationship exists between the two. Instead of allowing high rate of unemployment leading to social crisis (which may ruin business operations in subsequent periods), businesses can rather be the source of employment in the economy for qualified and eligible people. Conclusion It is beyond any iota of doubt that every civil citizen must possess some moral or ethical values and responsibilities for the society in which he lives. Business organizations, considered as ‘artificial people’, therefore, should have the same values incorporated in it. Obviously, there are certain principles which is directed against this conclusion, but it is a cardinal truth that business corporations must â€Å"behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large† (Holme and Watts). References Bowen, H.R. (1953), Social Responsibilities of the Businessman, Harper & Row, New York, NY Corporate Social Responsibility: Evolution of a Definitional Construct: Carroll Business Society.1999, pp. 268-295 Davis, K. and Robert, L. B. Business and Society, Environment and Responsibility, Revised   Edition, Tata McGraw Hill Book Company Inc. New York, 1975 Friedman, M. The Social Responsibility of Business is to Increase its Profit, New York   Times Magazine, 13 September, 1970 Kuhn, J.W. Issues and Analysis, Values in a Business Society, Harcourt Brace Jonanovich, New York, 1968 Holme, L and Watts, R. The World Business Council for Sustainable Development,â€Å"Making   Good Business Sense† – http://www.mallenbaker.net/csr/CSRfiles/definition.html Joseph, L. M. Ethical and Environmental Foundations, Essentials of Management, Fourth Edition, Thirteenth Indian Reprint, Prentice-Hall of India, New Delhi, 1995 Mackey, J. (adapted from) Rethinking the Social Responsibilities of Business, October 2005   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   http://www.reason.com/news/show/32239.html McNamara, C. Complete Guide to Ethics Management: An Ethics Toolkit for Managers http://www.managementhelp.org/ethics/ethxgde.htm Richard, M.H. and Fred, L. Ethics and Social Responsibilities, International Management, Third Edition, McGraw Hill International Editions, 1997 Stehi, S.P, Dimensions of Corporate Social Performance, An analytical Framework,   California Management Review, Vol. 17, No. 3, 1975, p. 58 – 64 The International Seminar on Social Responsibilities of Business: (as quoted by Mukharji, P.B. Social Responsibilities of Business, p. 9