In my view the statement ‘the social responsibility of business is to increase profit’ is true to a point, however, I believe a corporation’s responsibilities spread beyond just maximising profits. The ‘Narrow View’ argues that profit maximisation is the only objective for a business. Levitt. T wrote, “In the end business has only two responsibilities- to obey the elementary canons of face-to-face civility (honesty, good faith and so on) and to seek material gain”. Milton Friedman argued that business has no social responsibilities other than to maximise profit.
Friedman also argues that the corporation is an artificial person and can, therefore, only have “artificial responsibilities. ” “Business” is apparently an even more artificial construct and therefore we are left with just proprietors and corporate executives who can actually be responsible. Because the function of business organisation is to make money, the owners of corporations employ executives to accomplish the goals, thus managers are obliged to act in the interest of owners. According to Friedman, executives have social corporate responsibilities beyond pursuit of profit.
They must spend shareholder money for general social interest such as taxing the owners and spending taxes on social causes. (Friedman, 1970) “There is one and only one social responsibility of business is to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud. ” If there was no initiation of force, there is nothing wrong with profit. However, at the same time, there are many instances of initiation of force that give businesses, and the market, the illusion of profit.
Most of the time, these initiations of force come in the form of which creates regulation benefiting one company at the disadvantage of free competition or some sort of subsidy which takes money from taxpayers. Every business has a responsibility to its owners and shareholders to increase its profits, but successful businesses also help provide for the community. Financial managers don’t often think about the business’ social responsibility to increase profits. However, while their main concern may be aking money for themselves and their company, their efforts will often generate revenue within the community, providing benefits which business owners and shareholders may never consider. All things being equal, the profit and loss of a business tells an owner how well or how poorly a business is meeting the wants and needs of individuals in society. This is true for a small or the largest of corporations. It doesn’t matter whether a business services a few folks locally, or a mass of population internationally, the role of profit and loss is still the same in any business situation.
The only way a business can increase profit is if a business, small, medium, or large is providing something of value to other individuals. Each of these businesses is benefiting someone in society, and the business knows this because of such profit. In contrast to what Friedman and Levitt said about business has other obligations in addition to pursuing profits, the broad view maintain that a corporation has obligations not just to its shareholders but to other constituencies that are affected.
Keith Davis stated that social responsibility implies that business decision maker in process of serving his own business interest is obliged to take actions that protect and enhance society’s interest. Shareholders own the company and they entrusts management with their funds and in return the management make as much money for them. The manager of a corporation does indeed have a fiduciary duty to look after the shareholder’s interest. In argue with the narrow view theory, management have duties to other constituencies as well like employees and customers. A stakeholder value perspective places worth on social responsibility above profit.
However, if the business is not profitable, it cannot provide for its valuable stakeholders. Thus, the business has a social responsibility to all involved to increase its profits. As long as the business works to balance the needs of all stakeholders, it should have no problem meeting its social responsibilities. When businesses increase their profits, they often create new jobs. Employees benefit from these jobs, and the community benefits from the money spent by these employees. When employees are able to spend money and pay taxes, they indirectly contribute to schools, libraries and other public institutions.
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