Social Responsibility: Arguments For and Against Social Responsibility
What is Social Responsibility?
The obligation of business to act in a manner which will serve in the best interest of society is termed as Social Responsibility. The obligation of business to take decisions and perform actions, which are desirable in terms of the objectives and values of our society is known as Social Responsibility.
In the words of Keith Davis,“Social Responsibility refers to the businessman’s decisions and actions taken for reasons at least partially beyond the firm’s direct economic or technical interests.”
- Businesses try to accomplish social gains along with economic gains, in which the business is interested.
- Profit Maximisation should not be the sole objective of social responsibility. The business should think about other people, society, etc.
- Social Responsibility is a broader concept than legal social responsibility. Legal responsibility can be fulfilled by mere compliance with the law; whereas, in the case of social responsibility, voluntary efforts are involved by businesses for the benefit of society.
Arguments for Social Responsibility
The arguments for Social Responsibility are as follows:
1. Justification for Existence and Growth: Business uses the resources of society and is a creation of society, so it is expected to satisfy human needs by providing goods and services. Profit earning should be looked at as an outcome of service to the people. If the image of the business is good, it enjoys the support of society, and it can prosper and grow only when it fulfils its social responsibility.
2. Long-term Interest of Firms: A firm can be profitable and prosperous only when it thinks of being profitable in the long run. A firm and its image stand to gain maximum profits in the long run when it has its highest goal as Service to Society. A business has to fulfil social responsibility towards various groups of society, like workers, consumers, shareholders, government officials, etc.
3. Avoidance of Government Regulations: If a business does not want intervention from the government, then it must fulfil social responsibility. The government can restrict the freedom and flexibility of a business, and enact and force them to assume social responsibility, so businesses should voluntarily fulfil their obligations to society.
4. Maintenance of Society: If the people related to the business feel that they are not getting their dues from the business, then they may resort to anti-social activities. This can distort the image of the business and can be very harmful, so businesses must fulfil their social responsibility.
5. Availability of Resources with Businesses: The problems of society can be effectively solved with the help of valuable financial and human resources of the businesses. For example, managerial talent and capital resources, and years of experience in organising business activities can help society to tackle its problems better, given the huge financial and human resources at its disposal.
6. Converting Problems into Opportunities: Businesses can convert problems into opportunities by taking risks. It takes risk as the reward of profit bearing. It not only solves social problems but also provides opportunities for growth. For example, the problem of regional disparity can be solved by setting up industries in backward regions, and it can benefit the business as it gets various tax benefits.
7. Better Environment for Doing Business: There are little chances for the success of a business when society is confronted with diverse and complicated problems. Thus, in order to have a better environment for doing business, the business should meet its social responsibilities.
8. Holding Business Responsible for Social Problems: As business uses capital, physical and human resources of the society and a lot of social problems like environmental pollution, unsafe workplace, corruption, etc., arise due to the activities of a business. So it becomes the moral responsibility of the business to help society in solving problems and serving society.
Arguments against Social Responsibility
The arguments against Social Responsibility are as follows:
1. Violation of Profit Maximisation Objective: It is considered that social responsibility is against the objective of profit maximisation. But business is an economic activity and its main goal is to earn and maximise profit.
2. Burden on Consumers: Huge financial investment, which has no proper return, is required to fulfil social responsibilities, like in the case of pollution control and environmental protection. The burden of such costs is usually passed on to consumers in the form of higher prices. It is unfair to pass the burden on consumers in the name of social responsibility.
3. Lack of Social Skills: There is a difference between the way in which how business problems and social problems are solved. A person might be good at managing a business but may not have the required skills to solve complex social problems. Therefore, social problems should be solved by specialised agencies.
4. Lack of Broad Public Support: Businesses do not get the support of people as the public does not like the involvement or interference of businesses in social programmes.
Reality of Social Responsibility
1. Threat of Public Regulation: There is always a threat of public regulation on businesses. Businesses have to act in a responsible manner otherwise strict actions are taken to regulate them for safeguarding people’s interests. Due to the threat of public regulation businesses now feel concerned with social responsibility.
2. Pressure of Labour Movement: Business enterprises are forced to pay due regard to the welfare of workers instead of following a policy of ‘hire and fire’ because labour is now more educated and organised. Because of such labour movements, businesses practice social responsibilities.
3. Impact of Consumer Consciousness: Consumers are more conscious of their rights and power in determining market forces because of the development of education and mass media and increasing competition in the market. The principle of Caveat Emptor or let the buyer beware has been replaced by the principle of ‘Customer is King’. Customer-oriented policies are now being followed by businesses.
4. Development of Social Standard for Business: A business cannot exist in isolation. Society permits a business to grow and prosper. Business is now not considered as a mere money-making entity. It has to follow social norms and standards as developed by society.
5. Development of Business Education: More and more people are aware of the social purpose of business because of the development of business education with its rich content of social responsibility. Consumers, investors, employees, and owners have become more aware and sensitive towards social issues than before.
6. Relationship between Social Interest and Business Interest: Social interest and business interest are not contradictory, but complementary to each other. Businesses have realised that they cannot grow in the long run by exploiting society. Instead, they can prosper by serving society.
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