Social responsibility of a business is a popular and controversial issue that is discussed actively in various business and scientific works. This paper critically analyses the main postulates expressed by Milton Freedman in his essay written in 1970, and opposes alternative views of other economists and analysts to his main findings.
It should be stated that the most important aspect of Freedman’s essay is the statement of the fact that all discussions around social responsibility are rhetoric words. He clarified that corporate executives performed their task in the interests of the shareholder who is eager to obtain his profits in business that did not exceed the bounds of legality. Freedman argued that money spent on the social projects as a personal decision of a socially conscious corporate executive was spent at the expense of shareholders’ money that is against their interests.
However, it is undeniable that such a position is a short-term vision of business conducting. Presently, taking into consideration numerous environmental issues, violation of human rights and community interests, even shareholders of the biggest corporations shift their attention to the long-term vision of doing business. This long-term direction of their business development will help the company to survive in the future. If the business corporations will be ignorant for the society’s problems that were created by corporations themselves, the situation will only get worse. Such a giant as Johnson and Johnson was one of the first companies that published its social responsibility report.
Drucker (1984) expressed an alternative position to perceiving and transforming modern business entities into the socially responsible market players. The author stated that business should use the opportunity to convert social responsibilities into the profitability realm. It means that “the proper ‘social responsibility’ of business is to tame the dragon, that is to turn a social problem into economic opportunity and economic benefit, into productive capacity, into human competence, into well-paid jobs, and into wealth”.
It is a positive tendency that more and more companies issued corporate social responsibility (CSR) reports that became a part of the annual financial reports of these companies. Such reports revealed the efforts made by the corporations in four major fields such as community, environment, workplace and marketplace. Such expressions as “money decide everything and money rule the world” gradually lose their relevance considering a global environmental change and raising the awareness of society focused on the preservation of nature and its resources for future generations. Naturally, it is much easier to maximize profits at all costs today not thinking about the consequences of such activities for the local and world community in the future.
It is worth stating at this point that industrial society nowadays suffers from various human and social problems. They were caused mainly by the extensive and fast development of large corporations and their extensive and thoughtless use of scarce resources. It results from conducting business operations that influence environmental state negatively, increase volumes of sales and revenues because of violation of the basic working conditions of employees. Therefore, it is the core task for the top management that are responsible for the strategic planning in the company to build their long-term plans in such a way that they will solve the most essential social problems or at least make the situation stable or developing towards improvement.
Every year, there is an evident tendency in the world economy to revise the basic tenets of business, a change in its major priorities and values. The “wild capitalism” in which each participant tries to obtain maximum profit without considering the interests of other industry’s players, sometimes with intentional disregard or violation of these interests rooted in the past. Socially responsible business is a modern type of business oriented not only on getting profits but also society, its needs and interests.
Idowu and Towler (2004) express more current view, since the findings stated by Friedman in 1970 lost some relevance taking into consideration global ecological situation, the rate at which corporations have developed the last decades and consequences of such a rapid development. They deny Friedman’s basic idea that business is just making money for the owner and that the sponsorship of projects directed on social responsibility is a violation of the owner’s interests. The authors underline that it is a popular trend to be a social responsible organization, whereas such a fact improves company’s corporate image. It is undeniable that taking social responsibilities means following the long-term path for a business development due to the support and investments in the community in which this business entity operates.
Moreover, Friedman is not right in stating that corporate executives “can do good–but only at their own expense”. It is corporate responsibility to help society to prevent further destruction of communities’ values caused by its previous unconsciousness or intentional action to harm the world around them with the purpose to obtain short-term benefits in terms of bonuses for the top management and interests for shareholders.
Higgins (2010) highlights that each company must implement a code of ethical conduct that will fix the main postulates that the company and its staff should follow. These norms should be compulsory for all employees. Socially responsible business is a business, which uses only such methods of the profit obtaining. Methods that do not bring harm to people, nature, society, and in some cases, must assume some of the state’s functions in the field of social security, health care, culture and sports development, protection of environment and is consistent with the standards of morality and ethics.