Reality of Social Responsibility

Given the arguments both for and against, what do businesses actually do in reality — concentrate on profit maximisation, or support social goals?

One of the most important recent changes in the attitude of business people is the realisation that they have social obligations to fulfil, besides ensuring their own survival through profitable activity. The chapter is honest that part of this realisation is not genuine and takes the form of mere lip service, thought necessary to protect the survival of private enterprise. Even so, private business does partly recognise a hard reality: a privately owned firm must meet the challenge of a democratic society where all people have human rights and can demand responsible conduct. Unless a business puts its house in order, changes its outlook, and plays its legitimate role as an organ of society, it has little chance of success.

External forces that have pushed businesses towards social responsibility:

• (i) Threat of public regulation: Democratically elected governments act as welfare states, responsible for all sections of society. Where businesses behave irresponsibly, the government acts to regulate them to protect people's interests. This threat of public regulation makes enterprises concerned about social responsibility.
• (ii) Pressure of labour movement: Over the last century, labour has become far more educated and organised, and the labour movement worldwide has grown very powerful. This forces enterprises to give due regard to workers' welfare instead of following a 'hire and fire' policy in which workers could be dealt with at will.
• (iii) Impact of consumer consciousness: The spread of education and mass media and rising market competition have made consumers aware of their rights and power. The old principle of caveat emptor ('let the buyer beware') has given way to 'customer is king', and enterprises now follow customer-oriented policies.
• (iv) Development of social standards for business: Businesses are no longer seen as money-crazy entities free to mint money at any cost. New social standards accept business as legitimate on the condition that it also serves social needs. Since it is society that permits business to exist and grow, business is ultimately judged by social standards — no business can be done in isolation from society.
• (v) Development of business education: The growth of business education, rich in the content of social responsibility, has made more people — as consumers, investors, employees or owners — aware of the social purpose of business and more sensitive to social issues than before.
• (vi) Relationship between social interest and business interest: Businesses have come to realise that social interest and business interest are not contradictory but complementary. The old belief that business grows only by exploiting society has given way to the view that the long-term benefit of business lies in serving society well. …