The Sole Responsibility of the Corporation is to Make Profit

Businesses across the word are regarded as having a central purpose; to survive and grow. This objective of the organizations has been regarded as Friedman to represent the fundamental right of the corporations. The conclusion drawn from the analysis of corporate responsibility and survival was that “the sole responsibility of the corporation is to make profit” (Machan & Chesher, 2002, p. 13). However this perspective has been challenged by other scholars who regard it to offer limited insight into the interplay between corporate social responsibility and profitability of an organization (Primeaux & Stieber, 1994). This paper analyses the notion of making profit as a business responsibility using the related ethical principles. Furthermore, the paper addresses the

Ethics and Organizational Responsibility

Although the statement of Friedman reflects a somewhat self-interested approach of corporations, Machan and Chesher (2002) have indicated that in order to promote business growth, firms have to respond to the community needs. The increasing pressure on the organizations has created the need to move beyond the simplified version of corporate responsibility (i.e. profitability) and adopt a wider perspective towards socially responsible business. The following section presents three key arguments against the statement which asserts that businesses are only responsible for profit making.

Stakeholder Theory and Business Responsibility

Scholars have argued that organizations need to take the needs of different stakeholders into consideration (Trevino & Nelson, 2010). The statement by Friedman serves the interests of business owners, who constitute a part of the organization’s stakeholders. However, there are other groups as well who are influenced by the decisions made by a corporation, thus being a part of the stakeholders. The community in which the organization operates, the legal institutions, other businesses in the industry, consumers and employees are some of the examples of stakeholders who are effected by a firm.

The focus of organization on fulfilling the needs of community, legal authority, employees etc. is based on stakeholder theory of ethics. The theory identifies primary and secondary stakeholders who have some direct or indirect involvement in the business (Weiss, 2014). The case of McDonalds and PETA is noteworthy to reflect how an organization has to shape its processes to appease the environmental forces by adopting a more ethical outlook (Carroll & Buchholtz, 2014).

Principle Based Ethics and Social Responsibility

[large]Another framework used to illustrate the social responsibility of the organizations is principles based ethics. It takes broad moral principles into consideration that can serve as a guide for the managers while making business decisions. McDonald (2014) has outlined the key ethical principles that guide the accountability practices in business entities, including integrity, objectivity, honesty etc. These principles allow the managers to make decision that are in compliance with these generic ethical values. For example Sarbanes Oxley act intends to bring accountability into the organizations through promoting integrity and objectivity (Ferrell, Fraedrich & Ferrell, 2016).

Adhering to the sole responsibility of making profits would negate these ethical principles which can result in brand damage as well as significant loss in sales and revenue. Sims (2003) has discussed the case of Enron Corporation where profit making was central to the company operations, while ethical conduct was largely overlooked by the management. The bottom line of the case is that failure to adhere to ethical principles has resulted in the collapse of this large case corporation. It can also be argued that ethical conduct can help in consumer retention which ultimately benefits the business (Ferrell et al., 2016).

Justice Based Ethics and Business Responsibility

Taking the statement of Friedman into consideration, making profits would justify the management offering low salary to the employees and engaging in practices that depict labour exploitation. However, such activities do not reflect an ethical approach of management-employee interaction. Justice based theory highlights fair treatment, including the equal employment opportunity and equity in compensation (Weiss, 2014). Whether the management is dealing with recruitment and selection of personnel or offering them compensation, fairness and justice needs to be maintained. Trevino and Nelson (2010) have asserted that employees attach a great deal of importance to the managerial attitude towards them. In addition, the presence of ethical and moral values encourages the employees to remain working for the corporation.

Conclusion

Ethical conduct of businesses is necessary to survive and maintain profitability in the contemporary era. The focus of management has shifted from profit making while exploiting resources towards a more humane and considerate attitude towards the internal and external stakeholders. Profit making is an essential part of the business processes, nevertheless, businesses in today’s era need to recognize how ethical conduct can help in achieving business growth and stability. Therefore, it can be concluded that businesses have responsibility towards internal and external stakeholders, which can be fulfilled by making ethical and morally sound decisions, which would lead the organization towards profitability and success.

References

Carroll, A., & Buchholtz, A. (2014). Business and society: Ethics, sustainability, and stakeholder management. USA: South-Western Cengage Learning.
Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2016). Business ethics: Ethical decision making & cases. USA: South-Western Cengage Learning.
Machan, T. R., & Chesher, J. E. (2002). A primer on business ethics. Oxford, England: Rowman & Littlefield Publishers.
McDonald, G. (2014). Business Ethics: A Contemporary Approach. Australia: Cambridge University Press.
Primeaux, P., & Stieber, J. (1994). Profit maximization: The ethical mandate of business. Journal of Business Ethics, 13(4), 287-294.
Trevino, L. K., & Nelson, K. A. (2010). Managing business ethics. USA: John Wiley & Sons.
Weiss, J. W. (2014). Business ethics: A stakeholder and issues management approach. USA: South-Western Cengage Learning.