The Social Function of Business

Why Should Business be Ethically Sensitive?

Businesses play a major role in keeping any economy alive. It is therefore necessary to ensure the proper
and ethical governance of businesses. Business people-managers and employees, but above all the
organizational leaders-must behave in an ethical manner in managing and operating a business. Otherwise, no
one will be willing to invest in or loan money to the business. Business activities must be viewed and examined
from the perspective of morality. Business without ethics threatens the survival of human society and in some
cases, destroys the fiduciary relationships of people.
By beginning to study the social function of business, we begin to be introduced to fundamental concepts
of what is right or wrong in our human conduct and their implications for business as an important human activity.
The fundamental reason for examining the activities of business from the social and ethical perspective is for the
promotion of the common good, protection of the individual's interests, and the preservation of the human society
in general. Without this ethical consideration, business will be a chaotic human activity because there will be no
common understanding and agreement about what is the right and wrong human conduct.
Ethics are moral principles that guide the conduct of individuals. Unfortunately, business managers and
employees sometimes behave in an unethical manner. A number of managers of companies in the last two
decades engaged in accounting or business fraud. These ethical violations led to fines, firings, and lawsuits. In
some cases, managers were criminally prosecuted, convicted, and sent to prison.
The following are the four main reasons that may persuade a business to act ethically:
1. legal reasons, of which there are several different sorts;
2. public image reasons, which again, might encompass a number of different types;
3. pragmatic reasons, acknowledging that sometimes, acting ethically might be the most direct path to
business success; and
4. moral reasons, where it is affirmed that these reasons are different from each of the other three types.

Business' Role in Poverty Alleviation

Every morning national newspapers would report, "More than 20,000 people perished yesterday of
extreme poverty. The stories would put the stark numbers in context-up to 8,000 children dead of malaria, 5,000
mothers and fathers dead of tuberculosis, 7,500 young adults dead of AIDS, and thousands more dead of
diarrhea, respiratory infection, and other killer diseases that prey on bodies weakened by chronic hunger. Most
people are unaware of the daily struggles for survival, and of the vast numbers of impoverished people around
the world who lose that struggle (Sachs, 2005). Poverty is experienced and understood differently by different
people in different regions and at different times. Broadly, "poverty" is conceptualized as a deficiency or shortage
of some sort, typically in comparison either to the living standards of others within the same society or culture
(called "relative poverty"), or to a universal measure of adequate provision (called "absolute poverty").
Historically, this shortage has been considered synonymous with lack of income, or at least insufficient income
to meet a household's daily needs.
Businesses can help alleviate poverty with programs and projects that aim to improve the living conditions
in underdeveloped communities. With the alleviation of poverty, people become more capable workers and
professionals able to take advantage of the goods and services that businesses have to offer.

Areas of Business Most in Need of Ethical Attention

 Authentic and sustainable development means working at the real solutions in order to eradicate or at
least alleviate poverty. In agriculture-based economies such as the Philippines, the ultimate solutions are to be
found in: countryside and rural infrastructures; quality basic education for the children of the poor and in Muslim
areas, especially the education of women; cash transfers to the poorest of the poor; primary health services;
microcredit and microenterprise programs; technical skills training for secondary school students; and social
housing such as that provided by Gawad Kalinga. Concretely, it has been found that, as far as food security in
the Philippines is concerned, focus should be placed on addressing constraints on agricultural finance in order
to boost food productivity. Given the physical and environmental constraints on increasing land and water use
for food production and other economic activities, agricultural productivity will have to substantially improve to
meet the increasing demand for food. For this to happen, substantial investments must be made by both the
government and the private sector.
Each role in a business organization involves unique responsibilities (such as the obligations of an
employee to an employer or the fiduciary duties of management to the shareholders) that determine what a
person should do. Ethical issues arise in relationships with every corporate constituency, including: (a)
employees; (b) customers; (c) suppliers; (d) shareholders; and (e) society at large.
In the case of the Philippines, it might be good to examine issues relating to the following:
The Social Responsibilities of Capitalist Business Practices
Milton Friedman (American economist) famously stated that the only social responsibility of business is
to increase its profits. On the other hand, William Sauser, in the Journal of Business Ethics article "Ethics in
Business: Answering the Call," explained that business organizations have four levels of responsibility: (1)
Earning a profit; (2) Legal responsibility; (3) Ethical responsibility; and (4) Discretionary responsibility.
Responsibilities of businesses beyond profit making have come to be called Corporate Social Responsibility or
CSR. CSR, as defined by the World Business Council for Sustainable Development (WBCSD), is a 'continuing
commitment by business to behave ethically and contribute to economic development while improving the quality
of life of the workforce and their families, the local community, and society at large. More and more companies
are embracing CSR because of profitability, and also because more managers now believe that being a better
corporate citizen is a source of competitive advantage.
The Morality of Advertising
Advertising presents several ethical issues, one of them being Deceptive Advertisements. Deceptive ads
are those that make false statements about or misrepresent the product, for example, the picture presented in
the advertisement is different from the actual product. Deceptive ads may occur not only through sentences or
propositions but also through pictures, individual words, or through certain combinations of objects which can
deceive the eye and the mind. A typical example of deceptive advertising is one where the pictures from the box
of the product do not look the same as the contents of the product. In this case, the picture is said to be deceptive.
Article 108 of the Consumer Act of the Philippines (Republic Act No. 7394) declares that "The State shall
protect the consumer from misleading advertisements and fraudulent sales promotion practices." Article 110
states that "It shall be unlawful for any person to disseminate or to cause the dissemination of any false, deceptive
or misleading advertisement by Philippine mail or in commerce by print, radio, television, outdoor advertisement
or other medium for the purpose of inducing or which is likely to induce directly or indirectly the purchase of
consumer products or services. An advertisement shall be false, deceptive or misleading if it is not in conformity
with the provisions of this Act or if it is misleading in a material respect. In determining whether any advertisement
is false, deceptive or misleading, there shall be taken into account, among other things, not only representations
made or any combination thereof, but also the extent to which the advertisement fails to reveal material facts in
the light of such representations, or materials with respect to consequences which may result from the use or
application of consumer products or services to which the advertisement relates under the conditions prescribed
in said advertisement, or under such conditions as are customary or usual."