CA+-+Debate+1+-+Is+making+a+profit+the+only+social+responsibility+of+business?

Claudia Anzini Debate Paper 1 Is making a profit the only social responsibility of business? 3/3/14 Word Count: 1893

 In recent years, the social responsibility of a business has been more frequently brought into question. Most companies argue that their only responsibility is to their shareholders and that the main interested is to earn these shareholders a profit. Others say that with access to vast amounts of resources, large companies should take on more social responsibility than just earning a profit. Currently, corporate social responsibility (CSR) is defined as “economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time **[1]**.” While it is the company’s responsibility to earn a profit for the shareholders, they must do so within the law and also consider these other expectations that society has set forth. In a broad sense, they are no longer answer only to the investors, but to the employees, suppliers, customers, local community, and government as well. CSR is not to be confused with business ethics though. While some social responsibilities do come down to making ethical decisions for the good of the company, it does not focus on one individual or group’s behaviors within a company.

 Traditionally, companies have focused on make a profit and have thrived so far. According to “The ‘Social Responsibility’ of Business is to Earn a Profit **[4]**” since corporate executives are employed by the shareholders, they are only responsible to them. Like any other employee, executives are expected to make money for a company. If they do not, it is well within the right of the shareholders to remove the executive and replace them with someone else who will earn them money. When you bring other responsibilities into the equation, you are acting again the corporate fiduciary duties, which protect the shareholders in a company and ensure that employees are acting within the company’s best interest. Take for example inflation. To prevent inflation, a company is asked to stop increasing the price of a product, with no regards to what is best for the company. Maybe the company needs to increase the price because it costs more to produce or hasn’t been selling as well. By not increasing the prices, it may temporarily fix the inflation concerns but overall could do damage to the company’s profits. Another concern companies are being asked to help battle is unemployment rates. Most companies cannot create jobs out thin air, so this now affects the current job openings they have. A company might be asked to hire someone who is less qualified for a job since they are unemployed over a candidate who has better experience to bring to the company, just because they have a job already. All of these responsibilities a company takes on also cost money and this money would come from their bottom line. This means that a company is being asked to spend the money that should be going to the shareholders on social interests that these investors might have no input on. To combat this, a company could raise the price of products or lower the wages of employees, therefore feeding back into the problems social responsibility is trying to fix. Another concern about corporate social responsibility is the executive’s knowledge of the issue. These people became corporate executives because of their knowledge of the business and what is the best way to run it while earning large profits for the shareholders. They aren’t experts on inflation, unemployment, or even sustainability, so they shouldn’t be held accountable to address these problems.

 Mataconis makes a very strong argument for companies to continue along their current path of earning a profit. While it takes a while for him to make his point, it is clear that he fully supports a company’s shareholders and government support for social issues. His central argument is that a company could be asked to change something or address an issue, but since the executives, who would be the people in charge of social responsibility, are not experts in all or any of these concerns, it wouldn’t really fix anything. The bottom line is that the profits of a company would be at risk as would the company’s reputation. If a company helps fix inflation or reduces greenhouse gas emissions, but does so at the expense of keeping prices low or employee wages high, is that really being socially responsible to the stakeholders in the company? One of the few weak points of the article I found was in the argument for addressing pollution as a social concern. Mataconis argued that companies might try to reduce pollution what is required by the law since they don’t have the knowledge to know what an acceptable amount is. While I agree with most of the article thus far, I feel that a company would know what is affordable or within the shareholders’ interests and reduce their pollution accordingly. I also feel that since there are laws about pollution, for a company to earn a profit within the law, they would need to reduce pollution regardless of the company’s stance on social responsibility.

 With social media and better access to company information, there has been a huge push for companies to take on more social responsibility. “Social Responsibility no Longer Optional for Businesses **[2]**” argues just that point. Shoppers form ten different countries were interviewed and asked about their view on a company’s social responsibility policies. Over 90% of those who were surveyed stated that they would switch and be more loyal to a company they felt was making a positive impact to the environment, economic development, human rights, or the world’s poverty issue. Only 6% of these shoppers continued to hold onto the idea that companies are only responsible for earning a profit for their shareholders. The shoppers that look for products from socially responsible companies are also the ones using social media to their advantage. Social media has grown wildly as a source of pertinent information for consumers as well as a way to voice concerns or praise companies for what they are doing. Many people also take these social concerns past just the product they see on the shelves. When looking for jobs, they consider companies that have a solid corporate social responsibility plan. Even when looking at what company to shop at or place to consume food, customers put a company’s CSR into question. With corporate social responsibility no longer being a question of do or do not, consumers are now looking for what company is doing more and creating meaningful, long-term impacts.

 In Brooks’ article, he focuses on a different stakeholder in the corporate social responsibility debate. Instead of taking the traditional route of looking at the bottom line, he looks at the consumer, who would be keeping a company’s profits high through purchasing their products. He notes that customers are now more socially aware of what they are buying than they used to be and this really affects a consumers purchasing decision. While this is a strong argument, with good numbers to back it up, it is still very flawed at best. One of the first and biggest arguments made in this article is that customers want to support a good cause when they shop. While this is true, it is also noted that they will only do so if price and quality is not being sacrificed. Most companies who put out socially responsible products do so with no reduction in product quality. Some even increase their product quality as a result of being socially responsible, so this is not a major concern for the consumer. The issue lies in the pricing of the product. Starbucks claims to source their coffee in a responsible way and even uses paper cups that come from recycled products. A consumer can feel better about buying their product, but at a cost. A regular cup of coffee can cost anywhere from two to four times as much as purchasing a 99¢ coffee from the gas station. If you purchase at least one coffee every day for a month, that’s a $30 to $90 difference you could be spending and most people cannot afford that. Another issue raised was brand loyalty based on social responsibility practices. One of the largest contenders for this issue is Apple. Apple outsources many of its product development to other countries, where workers make less money than they can live on and work in horrible conditions. It has been noted that employees in these workshops have even gone as far as committing suicide due to these poor working conditions **[3]**. According to this study, conditions like this should lead to consumers switching products immediately, yet that is not what happened. People still continue to purchase iPhones and iPads, with no signs of them stopping any time soon.

 While the jury is still out on which side of the debate that companies should take, a different approach to the issue is being made. “Is Corporate Social Responsibility Profitable for Companies **[5]**” takes both aspects of the debate into question to see if profit and being socially responsible could go hand in hand. It discusses the concept of “shared value,” which relooks at the way corporate social responsibility is perceived. Instead of looking at CSR as profit vs. being socially responsible, shared value suggests that a company which is socially responsibly will take its interactions with society and channel them into new sources of revenue. For example, the electric car has an untapped market that focuses on producing cars that have less of a negative effect on the environment. If done correctly, a car company could generate a large profit from selling electric cars. As CSR grows from being about writing a donation check every few months to how a company functions, this concept of shared value seems less farfetched. While it is argued that profits should still be the number one priority for the investor’s sake, others argue that shareholders would appreciate knowing the investment they made was in a company that stands for something. Being socially responsible leads to more brand loyalty, increased profits, and thusly being able to hired better quality employees, all of which will attract even more investors in the company.

 Overall, there is no one answer to this issue. I believe that companies should be responsible for social issue that they themselves have contributed to, but profit should still be the main focus. Being socially responsible at the moment is more about making your brand attractive, which will lead to bigger profits, thus profit is still the guiding force behind what actions a company takes. In the case of bad practices, no company is perfect. If a company has a strong enough brand name, like Apple, or unique enough products, again like Apple, there will continue to be a market for their product, regardless of the conditions the company creates to get said product. Until better competition comes around for companies or it becomes more economically viable for a company to buy into corporate social responsibility, there will be no change within how companies run. I think the idea of rebranding corporate social responsibility as shared value has better merit than pushing companies to be more socially responsible. It sells the same idea with profit still as the bottom line. The growth of social media will also aide in this battle to get companies to invest in social responsibility.


 * __Citations: __**

1. Barnett, Tim. "Reference for Business." Corporate Social Responsibility. N.p., n.d. Web. 1 Mar. 2014. .

2. Brooks, Chad. "Social Responsibility No Longer Optional For Businesses." Fox Small Business Center. N.p., n.d. Web. 1 Mar. 2014. <http://smallbusiness.foxbusiness.com/marketing-sales/2013/05/24/social-responsibility-no-longer-optional-for-businesses/>.

<span style="font-family: 'Times New Roman',serif; font-size: 12pt;">3. Gayle, Damien. "Apple faces fresh questions after another apparent suicide by worker at Chinese iPad and iPhone supplier Foxconn." Mail Online. Associated Newspapers, 14 June 2012. Web. 1 Mar. 2014. <http://www.dailymail.co.uk/news/article-2159457/Apple-faces-fresh-questions-apparent-suicide-worker-Chinese-iPad-iPhone-supplier-Foxconn.html>.

<span style="font-family: 'Times New Roman',serif; font-size: 12pt;">4. Mataconis, Doug. "The ‘Social Responsibility’ Of Business Is To Earn A Profit." Outside the Beltway. N.p., n.d. Web. 1 Mar. 2014. <http://www.outsidethebeltway.com/the-social-responsibility-of-business-is-to-earn-a-profit/>.

<span style="font-family: 'Times New Roman',serif; font-size: 12pt;">5. Whaley, Floyd. "Is corporate social responsibility profitable for companies?."International Development News. N.p., n.d. Web. 1 Mar. 2014. <https://www.devex.com/news/is-corporate-social-responsibility-profitable-for- companies-80354>.