Enterprise And Social Responsibility
Enterprise social responsibility means the act of conducting corporate activities in an ethical way by putting the interests of the community into considerations. An enterprise is said to be socially responsible if it responds to emerging societal expectations and priorities positively. An enterprise should be willing to act without waiting for regulatory confrontation. The enterprise should always balance the interests of the community against the interests of the shareholder. Thus, a corporation has societal responsibilities that extend beyond the making of profit for the company.
In the current world, businesses are being criticized for the neglect they show towards their societal responsibilities. Politicians and assorted activists have always complained that private businesses are more concerned about profit than the community. This has resulted in the concept of enterprise or corporate social responsibility that has become a strong social and political force. The concept of corporate social responsibility is not only expected to be observed by the large companies, but also medium and small companies (Mcintyre, Ivanaj, & Ivanaj, 2009, pg. 230). If the commercial activities of an enterprise are deemed to be destructive and unethical, it does not matter the type of corporation or business that engages in them. However, the most targeted companies in the world about the concept of social responsibility are the publicly traded companies. The manner these companies are created, run, and managed provide people with the opportunity to discuss whether they are concerned about the society (Sarkar, 2005, pg. 20).
The advocates of corporate social responsibility believe that since the public enterprises are fictitious person sustained by the grants given by the government, they have limited individual shareholders. Thus, these corporations are more obligated to be concerned about the society that corporations build on partnerships or sole proprietorships (Núñez, 2008, pg. 13). The advocates believe that the enterprises that act in a socially responsible way may be paying the society back for the cost of operating in their area. These are costs that companies do not receive an invoice.
Many academics and business leaders did not support the idea of corporate social responsibility. To them, the idea of enterprise social responsibility resulted in the government increasing its control of how the private companies operate. One of the most famous people who did not like the idea of enterprise social responsibility was Milton Friedman (Doherty & Thompson, 2006, pg. 383). He wrote an article that said that the main reason for the social responsibility of enterprises was to increase the profits. In his article, Friedman clarified the ethical and legal issues that were evident in the debate about social responsibility in businesses. Friedman said that corporations and businesses are groups of people. He also claimed that only people are required to have responsibilities. Thus, if a company donates to charity without the knowledge or authorization of the shareholders, it means that the managers decide on how they should spend other people’s money (Doherty & Thompson, 2006, pg. 383). According to Friedman, the main objective of a company should be clear, which would be only the social responsibility of the corporation. A company should be said to be socially responsible if it uses its money and resources to increase its profitability but follow the regulations, which is to engage in fair competitions without fraud or deception.
Freidman opinion has also been criticized by many people, who claim that he did not understand the idea of social responsibility. The critics argue that the shareholders are passive investors, which means that they do not have the control that is embraced by the real owners of the company. If the traditional ownership of an enterprise is not dissolved, the company is supposed to reconsider the dichotomy between the societal members and the shareholders (Crowther & Aras, 2010, pg. 563). It is deemed impossible to divide the profit-seeking activity of a corporation from the world of legal, social, and political decision-making. The specialization of role, something that is desirable in most companies, can not exist in the industrial economy of the modern world. The critics also argue that the government plays economic roles while the companies play political roles. Since enterprises are perceived as social institutions, they should live up to the standards of the society. The society has simply changed the standards of modern day corporations (Doherty & Thompson, 2006, pg. 383).
Economic benefits of using corporate social responsibility
Companies benefit in adopting the position of corporate social responsibility in their daily activities. They are motivated to involve the stakeholders in addressing social challenges and the running of the company. The main reason companies involve the stakeholders is that the companies know the impact the decisions made by the stakeholders can have on the society (Waddock, & Rasche, 2012, pg.53). The stakeholders can play a great role in punishing and reorganizing corporations. They can motivate the enterprises to change their company behavior. Changing the company behavior have economic benefits and cost to the enterprise.
One of the major benefits of embracing the corporate social responsibility in the running of a company is that it results in improved financial performance. Although it may be difficult to determine how the financial performance of a company is directly linked to the societal responsibility, study shows that they are related. Another advantage is that corporate social responsibility heightens the public responsibility of the company (Becchetti & Borzaga, 2010, pg.154). When an enterprise shows the willingness to provide the society with credible, accessible and verifiable information, it can garner more trust from the stakeholders. Candid and forthright reporting about the achievements of an enterprise and the performance shortfalls of a company helps it in creating a good reputation among the stakeholders due to honesty. When an enterprise makes a commitment publicly to increase its transparency and accountability, it needs to know that it is expected by the society to implement the accountability and transparency in its operations (Crowther & Aras, 2010, pg. 563). Failure to implement this results in the company receiving negative backlash from the society.
Another advantage of using the corporate social responsibility in the running of an enterprise is a reduced cost. Corporate social responsibility results in enhanced communications between the stakeholders and the company, which results in reduced costs in solving conflict and the decision-making the process (Becchetti & Borzaga, 2010, pg.154). When an enterprise engages the shareholders in addressing their concerns both effectively and proactively, they reduce the costs associated with the proposal of the shareholders. Additionally, the environmental and social reporting efforts can help the company in identifying priorities, which can be used to make sure that the enterprise is achieving the best results using the available resources (Sociaal-Economische, 2001, pg. 54).
A company that uses corporate social responsibility in its operations attracts investors more compared to companies that do not use the corporate social responsibility. In the modern world, investors are screening the operations of a company using non-financial metrics in analyzing the quality and potential profitability of their investments. The new non-financial metrics used to screen the performance of a company include environmental and labor practices, independence, corporate governance issues, and board diversity (Aras & Crowther, 2010, pg. 54). The investors also use the environmental and social criteria. According to researches and studies, investors are always willing to pay higher prices for companies whose stock is considered accountable. Thus, using the corporate social responsibility in a company increases its attractiveness to the investors (Zu, 2009, pg. 5).
The discussion and analysis on the role companies play in the society shows that the actions of an organization can result in the responsible behavior of the company, which can benefit the society and the organization. The social responsibility of an enterprise is very important, basing on the fact that the interests of the society and business are closely interrelated. Although many people have had many differences regarding the importance of the social responsibility of a corporation, the corporate social responsibility is expected to be a major business mainstream in a few years time. The language, resources, and tools used in the corporate social responsibility will be more aligned with the systems, norms, and standards of a business.
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