SOCIAL RESPONSIBILITY AND THE

IMPORTANCE OF A STAKEHOLDER
ORIENTATION

FROM THE PERSPECTIVE OF SOCIAL RESPONSIBILITY,

BUSINESS ETHICS EMBODIES VALUES, NORMS, AND
EXPECTATIONS THAT REFLECT A CONCERN OF MAJOR
STAKEHOLDERS, INCLUDING CONSUMERS, EMPLOYEES,
SHAREHOLDERS, SUPPLIERS, COMPETITORS, AND THE
COMMUNITY.
In other words, these
takeholders have concern
for their rights and they are
also concerned about what
is fair and just.
Milton Friedman has been quoted as
saying that “the basic mission of
business (is) to produce goods and
services at a profit, and in doing
this, business (is) making its
maximum contribution to society
and, in fact, being socially
responsible.
Even with the business ethics
scandals of the twenty first
century, Friedman suggests that
although those individuals guilty of
wrongdoing should be held
accountable; the market is a better
deterrent than new laws and
regulations at deterring firms from
wrong doing.
Thus, Friedman would diminish
the role of stakeholders such as
the government and employees
in requiring that business
demonstrate responsible and
ethical behavior.
This Darwinian form of capitalism has
been associated with a “Wild West”
economy where anything goes in
business. Friedman’s capitalism is a
far cry from Adam Smith’s, one of the
founders of capitalism. Smith created
the concept of the invisible hand and
spoke about self-interest’ .
However, he went on to explain that “this
common good is associated with some
psychological motives that each
individual has to produce for the
common good. Values such as
Propriety, Prudence, Reason,
Sentiment and helping promoting
happiness of mankind”.
These values could be associated
with the needs and concerns of
stakeholders. Smith
established normative
expectations for motives and
behaviors in his theories about
the invisible hand.
In the twenty-first century, Friedman’s
form of capitalism is being replaced by
Smith’s original concept of capitalism
(or what is now called enlightened
capitalism), a notion of capitalism that
reemphasizes stakeholder concerns
and issues. This shift may be occurring
faster in developed countries than in
those still being developed.
The recent involvement of the government in
owning major interest in General Motors and
AIG, and minority ownership of large banks
such as Citigroup, changes the face of
capitalism in the United States. The
government’s $819 billion stimulus package
passed in 2009 increased its reach and
provided funding to reshape energy, health
care, and education policy.
Theodore Levitt, a renowned
business professor, once wrote
that although profits are
required for business just like
eating is required for living,
profit is not the purpose of
business any more than eating
is the purpose of life.
Norman Bowie, a well-known
philosopher, extended Levitt’s
sentiment by noting that
focusing on profit alone can
create an unfavorable paradox
that causes a firm to fail to
achieve its objective.
Bowie contends that when a
business also cares about the
well-being of stakeholders, it
earns trust and cooperation
that ultimately reduce costs
and increase productivity.
Thus Business organizations as integral part of
the society have certain obligations to the
society in which they operate. The executives
and employees of the corporations who carry
out business activity must act in a responsible
way so that a reasonable balance is maintained
between doing well in business and giving
better service to the society).
. It is a myth that in the world of business “market force is
everything”, “profit is everything”. Giving priority to profit
is natural to any business and is necessary for stability of
the organization. But it is not sufficient for long term
sustainability. Thus organizations are now focusing on
two more features in addition to the profit . The bottom
line such as: i) Respect for person; liberty and justice
;Respect for nature :environmental protection (i.e. thinking
about nature) . Thus three factors that contribute to long
term sustainability to business is widely known as triple
bottom line (profit i.e. the economic value, planet i.e. the
environmental value and people i.e. ethical value