The role of business in society

There are different opinions about the aims of organization. On the one hand there are people who consider organization as an economic integrity which is obligated to take care only of the effective use of its recourses. By doing so the organization fulfills en economic function of producing goods and services necessary for the society with free market economy while also providing work for citizens, maximum profit and compensations for shareholders.

According to this point of view, actively supported by Nobel Laureate Milton Friedman, the true role of business is “to use its energy and resources in activity, aimed at increasing profits under the condition that the business adheres to the rules of the game and is involved in an open competition without resorting to fraud and deceit”.

On the other hand it is believed that the organization is something more than the economic integrity. According to this point of view the modern organization is a complex part of the environment, which includes many components that affect the existence of the organization. The organizations have a responsibility to society in which they operate beyond and above providing efficiency, employment, profit and non-violation of the law. That is why the organizations have to devote part of their resources and efforts on social channels. They are obligated to sacrifice for the benefit and society improvement. Moreover, society has developed some ideas about how an organization has to behave to be considered as a good corporate member of served communities.

The debates about the role of business in society gave rise to numerous arguments for and against social responsibility.

The arguments in favor of social responsibility.

1. Favorable long-term business prospects. Social actions of businesses which improve the local community life or eliminate the need for state regulation may be in their own interests because of the benefits provided by participation in life of society. There are also favorable conditions for business in more prosperous society from a social point of view. Furthermore, even if the short-term costs of social actions are high, they can stimulate profits in the long term as consumers, suppliers and local community formed the more favorable image of the company.

2. Change of needs and expectations of the general public. Business-related social expectations have changed dramatically since the 1960s. To narrow the gap between new expectations and the actual response of businesses their involvement in solving social problems becomes both expected and necessary.

3. Availability of resources to assist in solving social problems. As the business has considerable human and financial resources it should allocate a part of them for social needs, therefore moral standards also have to manage its behavior. The company, like the individual members of society, must act in a socially responsible manner and should contribute to strengthening the moral foundations of society.

The arguments against social responsibility.

1. A violation of the principle of profit maximization. The direction of resources to social spending reduces the influence of the principle of maximizing profits. A company behaves mostly as a socially responsible, focusing only on economic interests and leaving social problems to governmental agencies and services, charitable institutions and educational organizations.

2. Spending on social involvement. Funds allocated to social spending, are cost of the enterprise. Eventually, these costs are transferred on consumers in the form of higher prices. In addition, firms participating in the competition in international markets with firms of other countries that do not bear the costs on social services are at a disadvantage in the competition. As a result, their sales in international markets reduce, what leads to a deterioration in balance of payments of the USA in foreign trade.

3. Insufficient level of accountability to the general public. Because managers are not chosen, they are not accountable to the public. The market system is well controlled economic performance of enterprises and bad - their social involvement.

4. Lack of ability to solve social problems. Staff of any company is best prepared to work in the fields of economy, market and technology. It lacks the experience allowing to make significant contributions to the solution of problems social in nature.

Дата добавления: 2015-11-16