Corporate Social Responsibility: Ethics and Profitability

The era of liberalization, privatization, globalization, digital technology and information super highways have resulted in intense global competition. In such an intensely competitive environment business ethics and corporate social responsibility have gained in importance. Ethics can be defined as the conception of what is right and fair conduct or behavior. It can be equated with the concept of morals - one's ability to choose between right and wrong, good and bad, acceptable and unacceptable.

Morals, ethics, and corporate social responsibility are not mutually exclusive; rather, they are interrelated and somewhat interdependent.

From the perspective of social responsibility, business ethics embodies standards, norms, and expectations that reflect a concern of major stakeholders, including consumers, employees, shareholders, suppliers, competitors and the community (Ferrel, 2007). These stakeholders have concerns about what is fair, just or in keeping with respect for or protection of stakeholders’ rights.

The earliest contribution to the modern discussion on social responsibility was made by Howard Bowen who suggested that business organizations should consider the social implications of their business (Koontz 2004: 36).

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World Business Council for Sustainable Development has defined corporate social responsibility comprehensively as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large. " In broad summary it is the ethical behavior of a company towards society.

The debate of whether business should be socially responsible or it should get on with what it does best: making profits continues.

Some economists are of the opinion that companies are satisfying the demands of the society by addressing and meeting legal issues and it is not possible for them to meet the additional demands of the society. According to Milton Friedman companies can be socially responsible and contribute the greatest to the society by manufacturing and offering goods and services at the greatest profit. However business corporations operate in a pluralistic society.

There is a high level of interaction and interdependence between the business, the government and the society. There are numerous reasons why profitable and successful corporations have a moral/ethical duty to be socially responsible and pay back to the society through charitable contributions. To become competitive and profitable business organizations need quality resources like human resources, financial resources, infrastructure, and raw materials which come from the society. It is the loyal customers from the community who contribute to its profits by consuming its products and services.

Businesses have the requisite financial and managerial resources to contribute to the improvement of the quality of life of the underprivileged in the community who can be potential future customers or employees of such businesses. For example General Electric through its foundation has invested in programs for providing a quality education especially for individuals from under-represented and disadvantaged backgrounds. The company supports high-impact initiatives that improve the access, equity and quality of public education in GE communities around the world.

Similarly Bill and Melinda Gates Foundation contributes liberally to improve the quality of life of people around the globe. The foundation has pledged $ 168. 7 million to PATH to develop a new generation vaccination for malaria, a disease that kills thousands of African children daily. It is also very sensitive to the problems and harm faced by homeless children in the United States and has contributed $40 million to support new housing schemes for more than 2700 homeless children in the United States.

Since industrial revolution business organizations have been consuming non-renewable resources and dumping sewage, production wastes and trash into air, rivers, streams and open land. The impact of such corporate action has affected the community through environment pollution, acid rain, global warming and depletion of the ozone layer, and so the corporate businesses have an ethical responsibility to reduce the negative impact of their actions and contribute to the betterment of the environment. For example Proctor and Gamble has been analyzing the effects that ingredients in their products have on the environment.

The company remains committed to improving the environmental quality of its products, packaging, and operations around the world (Joyner, 2002). Similarly Japanese auto giant Toyota Motor Corporation has accepted the responsibility of the contribution of its automobiles to global warming. It has responded by investing heavily in designing and developing fuel efficient hybrid cars to reduce the adverse impact of its products on the natural environment. Shareholders who own the company definitely have the first call on management.

Contributions to charity and other social responsibility initiatives taken up by business organizations will actually lead to the creation of long-term value and better profits for shareholders. According to Professor Pratima Bansal, of the Richard Ivey School of Business, being socially responsible makes good business sense to companies. Such business corporations will be evaluated very favorably by the different stakeholders. The companies will be able to attract and recruit the best intellectual capital of talented and committed employees to work for their organizations.

They will also be able to acquire the loyalty of their customers as such customers would prefer to buy products and services offered by socially responsible companies thus contributing to greater profitability. Similarly sound investors would be willing to invest in socially responsible and ethical companies in their present business activities and their future growth initiatives and so also government representatives would be very willing to support the investment proposals and provide better infrastructure and tax benefits for such companies. All this will lead to the firms gaining competitive advantage over their rivals.