MayesDebatePaper1

Meredith Mayes 10/4/11 Debate Paper #1 Word Count: 1,922 Corporate Responsibility

Some feel that businesses have social obligations; that companies owe the communities around them for the right to operate. There are two sides to this argument. One of these is that companies owe nothing to the community, and the only obligation of business is profit. The other side argues that companies take a lot from their community in terms of resources but give little in return, and that this is wrong. The stakeholders involved? Everyone from the highest CEO to the lowest factory workers to the unemployed. In order to address these responsibilities it is important to note that the primary responsibilities being sought are those to citizens affected by business policies, the environment and the social communities.

According to Milton Friedman, businesses have but one responsibility – profit. Any other objectives are socialistic and should not be tolerated by America’s free society. Friedman uses several arguments to defend why money should be the only motivation behind a businessman’s decision. For starters, businesses are not people; they are simply run by people. This means that businesses cannot be subjected to social obligations, as people can. Furthermore, while executives are the people running the business, they are still employees of the owners and thus their loyalty lies to the owners of the company and no one else. Many owners wish “to make as much money as possible while conforming to the basic rules of their society,” which limits the decisions that CEOs should make in order to benefit their company. The social benefits lauded by progressives come at a direct cost to what is owed to owners, employees and the customers. Equally important is the fact that while some companies work towards making a better environment for their business, this generally happens because of the long-term payoffs for the company. It costs money to develop technology to control emissions beyond the federal standards and it hurts efficiency to hire lower quality unemployed people over the highly qualified. Furthermore, the money for these social benefits is not the CEOs’ to spend; it comes out of the pockets of owners and employees. The other assertion that Friedman takes with respect to the social obligations of business is that it gives a substantial amount of power to CEOs that may not be wise.

Unfortunately for Friedman, the point he makes near the end of his explanation completely derails all of his other comments. Specifically, “it may be in the long-run interest of a corporation that is a major employer…to devote resources to providing amenities to that community…” Friedman openly admits that participating in the upkeep of communities can benefit companies in the long run. But while he claims such practices only work on the small scale, he seems to miss the point of such aid. If all such communities have a company providing such services, then they would flourish. If all the individual communities are flourishing, the area flourishes, the state flourishes, increasing interstate relationships and the national economy by allowing it to rely on itself. The United States is large enough to work with all the individual parts for most of its needs, causing it to be less dependent on other economies. On the other hand, a point that he barely touched upon also has merit in the argument against social responsibilities. There is a limited and highly conserved type of person who makes it into a CEO position and they are rarely those who feel they owe anything to the community around them. The number of corrupt CEOs that seem to crop up is staggering – and those are not the type of people the nation wants in control of the environment, schools, communities or local politics. These companies already hold too much power in the government and sway over politics, and it shows in loopholes already in the legal system, such as the exemption of the natural gas industry for complying with air standards. It is unlikely that companies would not abuse such power for their own benefit. And such potential abuse should be the most compelling argument against social interference from corporations. DesJardins disagrees that businesses have no social responsibilities. The sheer volume of social injustices needing to be righted suggests the need for external aid. However, he advocates not just social responsibility, but a restructuring of the entire business model due to its unsustainability as the responsibility. Currently, the economy benefits more from a 60 thousand dollar SUV than a 20 thousand dollar hybrid because money is the only thing accounted for in the economy, rather than external benefits for the people. This causes businesses to make poor social decisions. Businesses have an obligation to create things for people in response to the environment and perceived desires. But they also have an obligation to themselves and trying to read where the market is going. Today, it is going towards control and sustainability, and businesses must adapt to this, their social obligations in keeping the Earth the way people want and need it. In time, it is likely that communities of the future will hold businesses responsible for decisions they made today

This article spent very little time on the social responsibilities of businesses and the majority of the article deals with converting to sustainable business practices. This appears to be the author’s crusade, that business reforms occur, but these reforms must be economically stable, ecologically stable and morally sound. While there is little argument that current business models are unhealthy for the environment, the article contributes little to the argument of social responsibility of business other than that they should change their policies to those of a sustainable nature. As such, a third article was analyzed. This last article, written by Keith Davis of Arizona State, presented both sides of the article cogently. It defines social obligation as “the firm’s consideration of, and response to, issues beyond the narrow economic, technical, and legal requirements of the firm.” The first pro-responsibility argument made was that a firm that invests in its community receives better payouts in the form of a stronger community to conduct business in. The community will have reduced crime and thus higher property values, lower costs in police forces, and a stronger desire for people to move to the area. Working with the community also brings about a more positive public image, which in turn draws customers and employees alike. This positive image reinforces people’s belief in a company and their desire to support such a company. Without public support in a company, the company rarely survives, unless it is a monopoly, and consumers have no other way to acquire the goods for sale. Additionally, there is an Iron Law of Responsibility, which states that if businessmen do not operate with the consideration of social obligations, some third party eventually will, taking power away from the business, which is not ideal for the businessman. This third party is generally the government and regulations on business behavior, although American politics tend to allow companies to bid for loopholes in such laws by gaining the favor of politicians involved, which is a travesty. Finally, Davis summarizes that business should be trying, as it has the resources such as money and innovation, and their prevention would be betting than curing mistakes that they make, which is certainly true. Overall, these arguments are presented concisely, without bias and logically.

The same article also defends the other side of the argument, starting with profit maximization. Simply, the profit margin is the only way to measure the success of a company. The article then directly quotes Friedman on the responsibilities of businessmen to companies and how they cannot overstep their bounds by wasting other’s money. This argument has always seemed a little flimsy, since a man has many responsibilities and morals and those will always have a much stronger place in his mind than absent owners or customers he does not meet. Inarguably though, businesses on the margin cannot afford to make these obligations to society, and such expectations to would likely drive such companies out of business. Is it fair to force such companies out of business? Do the benefits mentioned above apply if people are losing jobs and incomes that the economy cannot afford to lose at this point in time? This question is difficult to answer. Many of the points made in favor of social obligation assume large profit margins in a time of prosperity, which is not realistic now. I do not pretend to understand all the economic nuances, but losing ever more businesses in the current economy would not stimulate very much, so any such changes would have to be gradual and only taken up by those companies who could afford to do so. In order to avoid such an effect, prices of many goods would rise, leading to higher costs and lower international competitiveness. This could spell disaster for the United States. The third point made in favor of the anti-responsibility is that businessmen lack the skills to be socially responsible. This argument seems flimsy, although the underlying point is sound, as many people are conflicted, if not internally then amongst the population; on what exactly are the best solutions for social ills. Additionally, business has enough power, which is my viewpoint on this topic, and should not be given any more for fear that business becomes the predominant social leader which eclipses individuals’ ability to regulate their own rights. Such a scenario frankly invites corrupt leaders to have a huge amount of control of the average person’s life, even a person otherwise unaffiliated with such a corporation.

As such, I believe that business should not aide in social situations. The only exception is that the company has an obligation to the environment. Without sound environmental practices, companies will ruin the world, their profits and quality of life for everyone regardless of age, race or religion. This obligation is generally mandated by governments and varies greatly from nation to nation. Should businesses take responsibility for their environmental effects, it would reduce the forcefulness of policies and government intervention in a business’ affairs. Every company produces wastes of some sort and companies are therefore directly responsible in this production and the consequences of their waste. However, this does not make companies responsible for others. It is easy to assume that a company has the same obligations as people since in the eyes of the law, a business is a person. In a world of materialism, many only see the benefits of having their life paid for by another. The high costs associated with such necessities as healthcare and education make the scenario of businesses paying for everything very alluring. In reality, this would be a disaster. Companies would essentially rule, not contribute, every facet of life, making everyone subject to the whims of business, and their loss of sponsorship would utterly destroy a person’s life. Businesses on the cusp would be unable to sustain such practices, driving them out of business, and exempting such businesses idolizes poor profits. Overall, companies need less power in our political system, not more. They lobby votes and policies, and this is an egregious violation of the legislative system. Should a company wish to aid its local neighborhood, there is nothing to stop it, and their money is welcome, but forced obligations give them far too much power over communities. In conclusion, no one should hold that much power over each individual. This directly violates the carefully constructed system of checks and balances in the American government.

Davis, Keith. __The Case for and Against Business Assumption of Social Responisibility.__ Academy of Management Journal, Volume 15, Number 2, 2001.[] DesJardins, Joe. __Business and Environmental Sustainability,__Business and Professional Ethics Journal, Volume 24, Nos 1 and 2, 2005. [] Friedman, Milton. __The Social Responisibilty of Business is to Increase Profits.__ The New York Times, 13 September, 1970. []