Debate

= Name: Nail Hanov = = Debate Paper #1 = = Topic: Is making a profit the only social responsibility of business? = = Date: 3/06/2014 = = Word Count: 1,605 =

With ecological disasters happening more often than ever more people question if businesses have to be obligated to follow additional ecological regulations that would make them more socially responsible. Yet others may say that corporations in particular have to be mainly concerned with making profit for its shareholders. There are many pros and cons to both sides of this argument and some of them will be addressed in this paper. To avoid being biased, articles from different supportive views will be presented and discussed in detail. The most impactful figure in our discussion would be a corporation that creates the most of ecological disasters such as oil spills and nature pollutions. From the economic point of view, any corporation can be defined as a large group of people earning leaving together. This may seem harmless until we look at them from many different angles. From the social view point, any corporation is a member of the society; however, it is pretty bad member of since it has no moral conscience and, hence, makes pretty bad decisions. To make more money many corporations exploit citizens from third world countries and pollute anywhere where the lack of environmental regulations exists. However, corporations did not behave like this always. They granted themselves these “superpowers” when 14th amendment was passed after which each corporation was viewed as a person. However, what does it exactly mean? It means that people, who make decisions that lead to environmental problems, are not responsible for them. The corporation takes the liability for actions taken by board of director and managers, people who essentially “drive” the company. To fully understand this “grand scheme” as many people call it, imagine that someone decides to speed on the road and then hits a pedestrian. In such case, the person who made the decision to speed would be convicted for causing the accident. If we translate that to the current situation with corporations then the car would be the one blamed for the accident and not the driver. That is one of the reasons why many companies knowingly violate environmental regulations. The liability does not strike people that “drive” the company. Nevertheless, on the opposite side of this argument there is a common statement that corporations are only responsible for making money and they don’t have to be concerned with environmental and other types of issues. So the pros and cons have to be looked at more carefully to clearly decide what makes sence. In 1970, an article called “The Social Responsibility of Business is to Increase its Profits” was written and published by Milton Friedman in The New York Times magazine. In this article, Friedman argues that the sole responsibility of a corporation is to profit its shareholders. He starts by saying that if the executive board of the company is not just concerned with its profits and brings the social impact angle to the business planning then that board is simply bunch of socialists. This idea can be clearly understood from the constitution of each corporation where it states that it has to be profitable to its shareholders. Therefore, it has to add interest to whichever product the company is producing to actually make that profit and stick to this main goal. In this sense, spending money on anything that does not relate to return profit would go directly against the constitution. In other words, if the corporation’s CEO decides to donate some of the profits to a social cause he would be considered a socialist and would also be going against the very nature of the corporation, unless it was fully approved by shareholders or such a donation would give a federal tax break. Friedman also says that although corporations are considered to be artificial persons they cannot have responsibilities and the executives are held responsible by owners and shareholders. However, since the main focus of owners and shareholders is to make profit it can be concluded that the main purpose of the executive board is to create that profit. Friedman says that these executives can use their own personal time and money for social causes but not the resources of the company that they do not own. After painting the overall picture and presenting the real goals of stakeholders, Friedman goes to elaborate the role of government in this relationship. He says that to avoid redistribution of wealth, that can be potentially caused in this strictly profit oriented system, elected civil officials must hold executive positions. This would also maintain a structure where all stakeholders have a voice. However, the side effect of doing so would be a bureaucracy like the one that is observed in certain branches of government. Therefore, expanding focus from just profit to social issues for a corporation would most likely create a socialist state. Friedman also acknowledges that the short term environmental concerns for a company would create a good image in the eyes of a major public but it can only be short term or otherwise many negative effects will follow. Overall, Friedman’s article does a good job presenting each stakeholder and linking them together. He justifies the profit drive and says that it is the main purpose and big part of the very essence of corporation but to control it there have to be some government regulations in place. The opposing view on this issue is presented by Joe DesJardin in the article called “Business and Environmental Sustainability” that was published in Business & Professional Ethics Journal. In his work, DesJardin highlights that the current practices and treatment of sustainability issues create a huge negative impact on biosphere of the planet. He states that the fully sustainable closed-loop manufacturing can actually be more profitable because businesses would actually be able to sell their waste to other companies. Also, by creating this recycling loop there would be no need to pollute the rivers and nature in general. Therefore, the overall social health would also be indirectly improved. DesJardin also highlights the urgency of fixing this problem by stating that the economic gap between wealthy industrialized countries and developing third world countries is immensely big and since corporations will always choose to pay bare minimum the situation will not change on its own. He says that in most cases an ethically moral chose from the company’s management is enough but since it would mean that the company would make less money it is a hard decision. So to compensate for these losses he says that if a company chooses a moral path they can claim their product to be sustainable and green to make an additional profit. However, if this alone is not enough to motivate companies, additional government regulations can and should be created. Also, if the company chooses to be a “trendsetter” they can lead other companies when the regulations take place. The problem with this approach is that the political campaigns are directly sponsored by corporations which makes it extremely hard for politicians to impose changes that most of those sponsors would not like. Third opinion on this matter is expressed in Betsy Atkins’ article called “Is Corporate Social Responsibility Possible?”. In the opening paragraph, she presents her viewpoint by saying, “the notion that the corporation should apply its assets for social purposes, rather than for the profit of its owners, the shareholders, is irresponsible”. She also says that one can certainly expect corporations to create good quality products, market them in an ethical manner and, most certainly, be in compliance with laws and regulations. Atkins also supports the idea of being eco-friendly through buying hybrid cars and supporting non-profit social organizations but as long as it does not involve corporation’s assets. She makes the argument in favor of corporations by giving a recent example where the state of Massachusetts gave taxpayers an option of paying additional taxes from their tax returns towards social causes but only less than 1% chose to do so. She uses this case to prove that the concept of individual social responsibility barely exists among the people that demand it from corporations. In this situation, when everyone has been given a right to demonstrate their concern for social issues by donating their own money vast majority failed to do so. Therefore, it should not be expected from corporations as they are technically considered individuals as well. Atkins says that social responsibility on the level of corporation means being transparent to the public, not using child labor overseas, producing a quality product and not misrepresenting it. She finally concludes by saying that social responsibility mostly refers to not what the company has to do but to what it is not doing. Overall, all of these articles highlight very important points that sometimes are overlooked. Undoubtedly, there are many things that most companies can do better in order to appear more concerned in the eyes of the public but it is also a matter of individual responsibility of each citizen. We can certainly say that if each person starts making at least a little difference then we will see the change of the landscape since people behind the big corporations are individuals as well.

Works Cited DesJardins, J. (2005). Business and Environmental Sustainability. Business & Professional Eithics Journal, 24(1 & 2), 35–59. Friedman, M. (1970, September 13). The Social Responsibility of Business is to Increase its Profits. The New York Times Magazine, pp. 1–6. Is Corporate Social Responsibility Responsible? - Forbes. (n.d.). Retrieved March 6, 2014, from http://www.forbes.com/2006/11/