The Social Responsibility of Business Organizations

Do business organizations have social responsibility? And what is a corporate social responsibility? A number of articles in the online encyclopedia wikipedia on corporate social resposibility provide some very useful information. These are age old questions but with the advent of globalization this whole concept of corporate social responsibility is now receiving greater attention.

Milton Freidman, the US Economist who won the Nobel Prize in 1976 believes that a business has only one responsibility: economic performance. In other words, a business must show a profit and keep increasing its profits. Milton who propagated this concept in 1970 still maintains his position as you can read from interview in the BusinessWeek online.

It is futile to argue that business has no other responsibility except to increase profits for shareholders. If a business doesn't show a profit atleast equal to its cost of capital, it is wasting resources and shoud not be in such business. A company cannot ignore the other social responsibilities because it does exercise social power and it is operating in a social envioronment.

A business organization can decide whom to hire, whom to fire and whom to promote. It can establish rules for staff discipline, it can set prices for goods and services that it offers to consumers. The business organization is entrusted with social power to carry out such duties. It is therefore essential that power be balanced with responsibilty to avoid misuse and tyranny.
Thus every organization has to take full responsibilty for its impact on employees, the environment, customers and whoever and whatever it interacts.

In the Global Economic Forum held in Davos this year, a case for corporate social responsibilty was put up by the International Chairman of KPMG, highlighting the income disparities in the emerging economies particularly in India and China. There is a major challenge to distribute the wealth and the address issues of poverty and continue on a path of sustainable development.