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Business Environment

Notes 6. Lack of Broad Support: There is lack of pubic support for corporate social responsibility
and this condemns it to failure.

7. Lack of Accountability: There is no way to hold a business accountable for the outcomes
of its social programmes, once instituted.
(Both for and against arguments are given by Schermerhorn)

7.7.8 Social Responsibility and Profits

One of the biggest arguments against social responsibility is its cost and bearing on profitability.
Organizations exist for profit and their philanthropy can reduce profits. Laura P. Hartman has
rightly said:

"The problem of business and for business ethics is the equation of business money, specifically bottom line
accounting profits, and the pressure to increase those profits quarterly and annually. The organization is
structured, people are hired, jobs are described, managers are held accountable, raw materials are acquired,
and technology engaged to increase that bottom line. Everything and everybody within the company is
directed by that profit maximizing principle and expected to conform to its demands."
Laura P. Hartman (Perspective in Business Ethics, p. 243 ) Tata McGraw Hill 2003.
In a 1970 New York Times Magazine article, Friedman wrote his now well-known argument
that a business's social responsibility is to its stockholders; therefore its main objective is to
increase profits.
In 1967, Carr argued that business is a game in which there are certain rules. He held that a
person should set aside personal ethics and values in order to meet the needs of the corporation.
But reality is some thing else. In fact, profit is a natural end of meaningful social responsibility.
Any sales promotion technique may reap short-term profits but fulfilling social responsibility
results in long term gains. Managing and performing social responsibility not only yields profit
but also results in competitive advantages:
Decreasing Cost: Social responsibility helps in reducing the cost per unit and increasing their
efficiency and effectiveness. Training and development of employees increases their productivity.
If they are happy at home, if their children are getting good education, and if they are healthy,
their productivity goes up, leading to industrial peace, which also means an overall reduction in
costs.
Not only this, such organizations also attract the best available human resource for their
workforce, which again provide them a strategic advantage.

Example: TISCO hardly ever faced any industrial problem, only because of its healthy
HR policy. As early as in 1970, JRD Tata educated his employees at TISCO about family planning.
This resulted in economic and socially content families at TISCO. Indian organizations like
Infosys, Wipro, TCS, etc., have conquered the world only because of their value-based human
resource policy.
These are the companies where people dream about working. Today, if these companies have
any competitive advantage, it is their human resources. We thus see that managing social
responsibility gives a competitive advantage and bigger profits.
Brand Loyalty and High Sales: Social responsibility has a direct impact on brand loyalty sales
and profit. In fact, many organizations have successfully used social norms for boasting their
sales.

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