Arguments for and

against Social
Responsibility of
Business
Arguments for Social Responsibility
There are several core ideas about social responsibility of business. Over the
period of time, the things have changed too much giving new thoughts and
replacing the classical economic view of profit maximization in the business.
Based on this feature in the present context, arguments for social responsibility
are as follows:
1. Business is a part of society
Business is a part of society. Society is a system and business is one of its
subsystems. Every subsystem of a system functions for the betterment of the whole
system and not for its own betterment only. This version applies to business too.
Therefore, business is responsible for the society as a whole and profit motive of the
business cannot have precedence over other motives of the society.
2. Long-term Self-interest of Business
Social responsibility is in the long-term self-interest of the business. Existence of
any business is because of existence of various social organs like financiers,
employees, customers, society as a whole, etc., and not otherwise. Therefore,
business should provide satisfaction to all these organs on continuous basis for
its continued existence. By discharging social responsibility, the business may
provide this satisfaction.
3. Moral Justification
Social responsibility has moral justification. This moral justification emerges
from the fact that if any one takes something from others, he must give
something to them in return. On moral ground, this equation must be based on
equity so that it continues. A business takes various inputs (money, materials,
people, information, etc.) from the society and gives outputs (goods and services)
to the society by using various inputs. System of taking inputs and giving outputs
works well only if it fulfills social requirements.
4. Creating Better Public Image
Any business which involves in fulfilling the aspirations of the society creates
better image in the public. Creation of this type of image is a source of satisfaction
itself for those who operate business. This also helps in increasing the business
volume, both in terms of taking inputs and giving outputs.
5. Avoidance of Government Regulations
Government aims at maintaining equilibrium in the society on long-term basis.
For this purpose, it tries to ensure that every organ of society meets social
requirements. If any organ fails to do so, government has power to take actions
against it. Since business is an organ of the society, government may take actions
against those business organizations which involve in activities not meeting
social requirements. In order to avoid such actions having long-term negative
impact, it is preferable to adopt social responsibility.
6. Maintenance of Society
For maintaining society, there are legal provisions but these provisions
cannot be comprehensive because of social changes on continuous basis.
Therefore, the business has to be socially responsible in order to avoid anti-
social activities so that society is maintained on continuous basis.
Arguments against Social Responsibility
:

There are various arguments against social

responsibility though most of these are based
on classical economics.

These arguments are as follows:

1. Contrary to Basic Function of Business
The basic function of a business is to provide a product to its customers at a price which is lower
than the level of satisfaction provided by the use of the product or, at the most, equal to that. If
this relationship is reversed, the product becomes meaningless.

Generally, cost of production is a significant factor in determining the product price. Discharge of
social responsibility adds to cost, hence product price which may reverse the above equation
and business may not remain viable in the long term.

Because of this phenomenon, Milton Friedman, a noted economist, has observed,

there is one and only one responsibility of business — to use its resources and engage in
activities designed to increase its profit so long as it stays within the rules of the game.
2. Conflict with Profit Motive
Social responsibility is in conflict with profit motive of business. Undertaking
business involves assuming risk. Earning profit is the reward for this risk. If social
responsibility is added as an objective of business, it reduces profit margin which is
against the concept of profit optimization even if not profit maximization. Thus,
social responsibility and profit motive do not proceed in the same direction.
3. Distortion in Resource Allocation
Social responsibility leads to distortion of resource allocation. Resources in an
economic system are allocated on the principle that every resource finds its most
optimum utilization. This utilization is best possible without social
responsibility and not with it. Thus, social resources may go in waste if the
concept of social responsibility is added to business operations.
 4. Imposition of Business Values
Discharging social responsibility involves lot of influence of the business
on the society. Therefore, by undertaking social responsibility, a business
is likely to impose its own values on the society, thereby replacing the
social values with business values. This phenomenon has taken place in
many cases. This is highly undesirable from social point of view.
5. Inefficiency in the System
Social responsibility brings inefficiency in the system. There is no substitute for the
power of self-interest to get people to act. Any replacement of self-interest will,
therefore, be fatal to the efficiency of the system. Social responsibility tends to
replace self-interest of business defined in terms of profit motive to a great extent,
thus, making the business as a system inefficient.
6. Operational Problems
There are certain operational problems in implementing social responsibility.
Conceptually as well as operationally, social responsibility is a confusing term.
Therefore, managers involved in managing business affairs are not very clear about
what they are expected to do under social responsibility. As a result, actions ranging
from mere showing lip sympathy to undertaking multi-crore concrete programmes are
included in social responsibility.
Conclusions
The arguments of those who argue that business organizations have nothing to
do with social responsibility except the maximization of shareholders’ wealth are
weak on two points.
1. First, they overstate the trend and ultimate magnitude of business’s voluntary
assumption of social responsibility.
2. Second, they want business organizations to do something they cannot do and
that is to ignore societal demands on them.