Social responsibility of business

 

What is the purpose of a business? Is it just to make as much profit as possible for its shareholders? Or does a business have a wider responsibility to help solve society's problems? This is a very controversial topic.

Thirty or so years ago, discussions of social responsibility were of three types. Firstly, there was a lot of talk about how business people should behave in their work. Should they have the same ethical standards — the same principles — as they had in their private life? A question which was often discussed was: should an executive offer a bribe to secure a contract when he knew that his competitors were likely to do so? Secondly, people discussed the social responsibility of business towards its employees. They were interested in how organisations could improve the working conditions of their employees. Finally, social responsibility included the idea that business people should contribute to cultural activities. They should support activities like music festivals and art exhibitions. Executives were also expected to serve on educational committees, hospital boards, and so on. In other words, they had to take an active part in the life of their community.

These days, there is a new approach to social responsibility. Many people say that a business should try to meet the needs and interests of society. It has an obligation to help solve the problems of society. Because of this new concept, society expects more from its business organisations. For example, pressure is put on businesses to provide a safer environment. A chemical company, therefore, is not only expected to meet government standards regarding pollution, it must take steps to reduce pollution to as low a level as possible — even if this means reduced profits.

These days, businesses are expected to show social responsibility in all kinds of ways. They are urged to provide safer products; to protect and respect the environment; to hire more people from minority groups; to offer work opportunities to unemployed youngsters; to oppose racial discrimination and at all times to behave with integrity. The list is endless.

An example of the new approach can be found in banking. Some well-known British banks have had pressure put on them to stop doing business in South Africa. This is because many of their customers are opposed to South Africa's policy of Apartheid. For example, in 1986 Barclays Bank withdrew its business from South Africa. Similarly, a few years ago, some Swedish companies were criticised for taking part in an electrical power project in Africa. The project was located in a country which was then a Portuguese colony.

The new concept of social responsibility means that businesses and business people must have integrity. They must deal honestly with their employees, and with the outside world. As SirJohn Clark of the Plessey company says, 'I attach more importance to integrity than to ability.'

Successful companies are very sensitive if their integrity is attacked. They usually respond sharply. Some time ago, an English health inspector found fault with the standards of hygiene in a Trusthouse Forte hotel. Lord Forte was most upset by the inspector's accusations. Making no attempt to plead guilty and by so doing avoid publicity, the Trusthouse Forte Group fought the case in the courts. It also advertised in several national newspapers to give its side of the case.

The integrity of the shoe-making firm, Clark's, was recently questioned. To make its shoes, Clark's were using leather cured by sperm-whale oil. Conservation groups heard about this and put pressure on the company to stop using such leather. They even talked of boycotting the company's shoes. At first, Clark's said that it had no control over leather provided by its suppliers. However, a little later, the Chairman Daniel Clark gave a direct order that the company should only buy leather cured without sperm whale oil. He also invested in testing equipment to ensure that supplies of leather were free from this type of oil.

A lot of business people agree with the 'wider' concept of social responsibility. They accept that businesses should help to solve social problems — even if their businesses did not create them. And even if the social actions do not bring profits.

There are, nevertheless, some famous people who are against the new approach one of these is Milton Friedman, an American economist who won the Nobel Prize for Economics in 1976. Milton Friedman believes that business has only one social responsibility. That is 'to use its resources and energy in activities designed to increase its profits as long as it stays within the rules of the game... and engages in open and free competition, without deception and fraud. ' Friedman says that a business's social responsibility is 'to make as much money for its shareholders as possible'. Another famous person makes a similar point, Ian MacGregor has been chief executive of large organisations like British Steel and the National Coal Board. He says that a business's first priority is to create wealth. Many companies, he believes, have a concept of social responsibility which distracts them from this task.

It is certainly true that social actions cost money. And businesses have to bear that cost often by raising prices, lowering wages or having less profit. Someone has to pay for the social actions in the end — it may be the customer, the employee or the shareholder.

Of course, by showing social responsibility, the company may well benefit in the long run. A spokesman for the Rank-Xerox company spoke recently of the wide range of social projects Rank-Xerox were engaged in: grants of equipment to universities; information technology projects and seminars: training programmes in universities and schools; career seminars; sponsorship of art competitions etc. The spokesman said that the social projects were «an integral part of the company's business strategy». They were not some sort of charity work which would get a brief mention in the company's annual report. Being a large organisation, Rank-Xerox had many contacts with government departments and other groups in society. And, since it was a knowledge-based company, it needed to hire highly skilled people. Its social programmes were 'critical to its success'. There was no doubt that, in the long run, these activities were profitable to the organisation.

 

VOCABULARY

 

Concept -понятие

outside world – внешний мир

respond sharply – резко ответить

health inspector -инспектор здравоохранительных учреждений

to find fault with -придираться

standards of hygiene – стандарты гигиены

to plead guilty -признавать себя виновным

to give its side of the case – представить свою сторону случая

the Nobel prize – Нобелевская премия

open and free competition – открытая и свободная конкуренция

deception -обман

fraud -мошенничество

to raise prices – поднять цены

to lower wages – снизить зарплату

to benefit – приносить/извлекать пользу, выгоду

in the long run -в конце концов

grant – грант, стипендия

knowledge-based company – компания, основанная на знаниях

highly skilled people – специалисты высокой квалификации