Corporate social responsibility — The argument
It is often assumed that companies are simply concerned with profit maximisation and that they are not concerned with wider issues of social responsibility. This assumption or perception means companies are only concerned with the interest of shareholders and are not, therefore, concerned for the wellbeing of the community at large.
Lack of social responsibility on the part of companies can have enormously adverse effect on society. Indeed, some of the business practices of certain companies are nothing to write home about. For example, there are certain advertising companies that seek to misinform or in some way deceive the consumer, monopoly producers exploiting their monopoly position through charging excessively higher prices, the conscious decision to ignore water and air pollution limits because the chances of being caught are slim and are all prevailing in Ghana. Certain mining and quarrying companies are guilty of this circumstance.
The question to ask here is whether businesses should simply be concerned with profit or they should take broader social issues into account. If businesses behave in anti-social way, do we have to rely on government intervention? Are there any social pressures that can be brought to bear to persuade businesses to modify their behaviour? I want us to share two schools of thoughts or views of social responsibility here.
The classic view
According to this view, business managers are responsible only to their shareholders and as such should be concerned solely with profit maximisation. If managers in their business decisions take into account a wider set of social responsibilities, not only will they tend to undermine the market mechanism but they will be making social policy decisions in the field where they may have little or no expertise. If being socially responsible ultimately reduces profits, then shareholders lose and the company’s management have failed to discharge their duties. By diluting their purpose in pursuing other goals, companies extend their influence over society as a whole which cannot be good. Therefore, corporate directors should remain focus and be accountable to owners on the purpose for which their entities were established. That is to say maximising profit for the improvement of shareholders value.
The socioeconomic view
This view argues that the role of the modern business has changed, and that society expects businesses to adhere to certain morale and social responsibilities. Modern businesses are seen as more than economic institutions, as they are actively involved in society’s social political environments. As such, all businesses are responsible not only to their shareholders but to all stakeholders. Stakeholders are all those affected by the business operations not only shareholders, but workers, customers, suppliers, creditors and people living in the community. Giving the for-reaching environmental effects of many businesses, stake holding might extend to the whole society.
The argument
Arguably, some believe that social responsibility imposes costs on companies and that goes a long way to affect their revenue and, therefore, profits, while others believe that the opposite is true. Socially responsible business can reduce the need for the government regulation and the subsequent costs and restrictions that such intervention places on managerial decision making in every civilised society. Many industries prefer to be self-regulating not just to avoid government interference and restrictions, but because they can achieve any given social goal at lower costs once they win the trust and support of the community in which they operate.
It is, however, the case that there are still many companies that care little about the environment. For them, self-regulating might be preferred because it makes it easier for them to avoid the social responsibilities.
Those who support the classic view may argue that socially responsible business will generate costs which in turn affect the company’s economic performance because all those money to go into social responsibility could be ploughed back to expand and operate more profitably and pay more taxes to the government.
In contrast, supporters of the socio-economic view argue that any costs incurred in the short run will be offset in the long run as companies retain and enhance their market positions.
Conclusion
Whatever the case may be, I believe that in every field of endeavour, protecting and enhancing the quality of human life are more important than any objective.
Companies that put customers first and work hard to satisfy their needs become household names. They win the trust, confidence and support of their customers who include the people living within the communities in which they operate. Such atmosphere breeds a spirit of cooperation between companies and their customers, which make their businesses progress to beat and stay ahead of their competitors. Therefore, corporate social responsibility must be part of every corporate philosophy of our contemporary times.