The Purpose of Business

Date: 2015-10-07; view: 470.

Ethics and Social Responsibility

Ethics and Social Responsibility of Business

Ethics is concerned with the code of values and principles that enables a person to choose between right and wrong. Ethics is about norms, values, rights and responsibilities, sharing, fairness, obligation and exchange.

The subject of business ethics, however, looks at more than the issue of behaving in a socially responsible manner. Business ethics focuses on a wide range of conduct by managers and employees. Moreover, the focus is on both the results and the means to achieve this result. For example, most people would feel that bribing a foreign official to obtain a contract is unethical.

It is important to differentiate between the concepts of legal and social responsibility. Legal responsibility deals with specific laws and regulations that dictate what an organization may and may not do. An organization that obeys all these laws and regulations is behaving in a legally responsible way, but it is not necessarily being socially responsible.

Social responsibility, in contrast to legal responsibility, involves a degree of voluntary response from the organization. This response is above and beyond what is specified by a law or regulatory agency.

There is a close relationship between the philosophy of business and business ethics. Philosophers specializing in business ethics are primarily interested in how business people ought to conduct themselves in the marketplace and in society. There is no common viewpoint about it. Most would argue that the main purpose of a business is to maximize profits for its owners, or in the case of a publicly-traded company, its stockholders. The late economist Milton Friedman was a proponent of this view, i.e. the stockholder model.

An alternative view to the stockholder model is the stakeholder model. Stakeholder theorists believe that people who have legitimate interests in a business also ought to have voice in how the business operates. But a business organization has responsibilities to everyone with a stake in, or an interest in, or a claim on the firm, including employees, suppliers, customers and the local community. According to this view, a company has to balance the interests of its owners with those of the other groups of people concerned by its existence. However, stakeholder theorists take contract theory a step further, maintaining that people outside of the business enterprise ought to have a say in how the business operates. Thus, for example, consumers, even community members who could be affected by what the business does, for example, by the pollutants of a factory, ought to have some control over the business.

Peter Drucker, the best known modern philosopher of business, defined the very purpose of business as creating a satisfied customer. This definition is also useful in evaluating to what extent a business is succeeding in fulfilling its stated purpose.

Other philosophers of business, for example, Geoffrey Klempner, are principally interested in examining how business is even possible, which is to say, how an enterprise саn function in society as a whole. Klempner states that theories of ethics and business are often at odds.