SOCIAL RESPONSIBILITY AND THE

IMPORTANCE OF A STAKEHOLDER
ORIENTATION

FROM THE PERSPECTIVE OF SOCIAL

R E S P O N S I B I L I T Y, B U S I N E S S E T H I C S E M B O D I E S
V A L U E S , N O R M S , A N D E X P E C T AT I O N S T H AT
R E F L E C T A C O N C E R N O F M A J O R S TA K E H O L D E R S ,
INCLUDING CONSUMERS, EMPLOYEES,
SHAREHOLDERS, SUPPLIERS, COMPETITORS,
A N D T H E C O M M U N I T Y.
In other words, these takeholders
have concern for their rights and
they are also concerned about
what is fair and just.
Milton Friedman has been quoted as
saying that “the basic mission of
business (is) to produce goods and
services at a profit, and in doing this,
business (is) making its maximum
contribution to society and, in fact, being
socially responsible.
Even with the business ethics scandals of
the twenty first century, Friedman
suggests that although those individuals
guilty of wrongdoing should be held
accountable; the market is a better
deterrent than new laws and regulations
at deterring firms from wrong doing.
Thus, Friedman would diminish the
role of stakeholders such as the
government and employees in
requiring that business
demonstrate responsible and
ethical behavior.
This Darwinian form of capitalism has been
associated with a “Wild West” economy
where anything goes in business.
Friedman’s capitalism is a far cry from
Adam Smith’s, one of the founders of
capitalism. Smith created the concept of
the invisible hand and spoke about self-
interest’ .
However, he went on to explain that “this
common good is associated with some
psychological motives that each individual
has to produce for the common good.
Values such as Propriety, Prudence,
Reason, Sentiment and helping promoting
happiness of mankind”.
These values could be associated
with the needs and concerns of
stakeholders. Smith established
normative expectations for motives
and behaviors in his theories about
the invisible hand.
In the twenty-first century, Friedman’s form of
capitalism is being replaced by Smith’s
original concept of capitalism (or what is
now called enlightened capitalism), a
notion of capitalism that reemphasizes
stakeholder concerns and issues. This shift
may be occurring faster in developed
countries than in those still being
developed.
The recent involvement of the government in owning
major interest in General Motors and AIG, and
minority ownership of large banks such as
Citigroup, changes the face of capitalism in the
United States. The government’s $819 billion
stimulus package passed in 2009 increased its
reach and provided funding to reshape energy,
health care, and education policy.
Theodore Levitt, a renowned business
professor, once wrote that although
profits are required for business just
like eating is required for living,
profit is not the purpose of business
any more than eating is the purpose
of life.
Norman Bowie, a well-known
philosopher, extended Levitt’s
sentiment by noting that focusing
on profit alone can create an
unfavorable paradox that causes a
firm to fail to achieve its objective.
Bowie contends that when a business
also cares about the well-being of
stakeholders, it earns trust and
cooperation that ultimately reduce
costs and increase productivity.
Thus Business organizations as integral part of the
society have certain obligations to the society in which
they operate. The executives and employees of the
corporations who carry out business activity must act
in a responsible way so that a reasonable balance is
maintained between doing well in business and giving
better service to the society).
. It is a myth that in the world of business “market force is
everything”, “profit is everything”. Giving priority to profit is natural
to any business and is necessary for stability of the organization.
But it is not sufficient for long term sustainability. Thus
organizations are now focusing on two more features in addition
to the profit . The bottom line such as: i) Respect for person;
liberty and justice ;Respect for nature :environmental protection
(i.e. thinking about nature) . Thus three factors that contribute to
long term sustainability to business is widely known as triple
bottom line (profit i.e. the economic value, planet i.e. the
environmental value and people i.e. ethical value