Social Responsibility in Business
Friedman & Carroll's Differing Views on Business Responsibilities
Archie Carroll's four-dimensional business responsibility adds the "social responsibility" factor on Milton Friedman's traditional view of profit maximisation.
The basic responsibility of a firm is to maximise profits. This relays its fiduciary duty to safeguard the interests of its shareholders. Milton Friedman's view on business responsibility accentuates the importance of maximising firm's value. Archie Carroll on the other hand, creates a wider window of responsibility by incorporating social responsibility into the formula.
Friedman's Traditional View on Business Responsibility
Milton Friedman dictates that firms' primary responsibility is to maximise shareholder revenue and should overcome all hindrances in the environment to do so. This would include having employees work long hours, maintaining high prices or even sidelining the importance of environmental safety.
Friedman believes that if firms continue to operate this way, bearing in ming legal implications, the long-run success of the economy is justified just by the firms driving the economy through their profits.
Friedman points out that open and dfree competition without deception or fraud is the only responsibility of firms. By taking on social responsibilities, the firm may compromise their profitability and therefore shortchange shareholders.
Carroll's Four Responsibilities of Business
Archie Carroll on the other hand illustrates a wider scope of responsbility. There are four segments to his model, which comprise of economic, legal, ethical and discretionary responsibilities.
Economic responsibilities denote the maximisation of firms' values. Economically, firms are required to maximise their shareholders' earnings. This is done by producing goods and services that are in demand in the market.
Legal responsibilites are those that are defined by the authorities and firms are required to abide by them in a strict and disciplined manner.
Ethical responsibilities mark societal beliefs of "good behaviour." Firms, according to Carroll, must observe ethical standards when operating. This may be such as an appropriate overtime renumeration for long hours or an "unofficial" punch-out time. Ethical responsibilities are voids in the legal system and allow firms to act with humanitarian values in mind.
Discretionary responsibilities are voluntary oblibations a corporation takes on - these responsibilities are over and above ethical considerations. They may include charity runs or setting up "day-care" centres within the office.
Carroll and Friedman Agree on Basic ResponsibilitiesFrom the above description, one can see that Caroll and Friedman agree on the maximisation of firms' values as a core responsibility. They also advocate that such responsibility remain in-line with legal standards and therefore firms are not to engage in illegal activities.
In short Carroll and Friedman agree on the "Must-Do's" and the "Have-To's" of a firm. This implicates the economic and legal responsibilities of an organisation.
Caroll Looks Beyond Maximisation of ProfitsCarroll takes a firm's responsibilities further by talking about social responsibility. Under social responsibility, he outlines ethical and discretionary responsibilities. These are affectionately known as the "Should-Do's" and "Might-Do's" respectively. This gives a wider dimension to the importance of being a responsible firm. Social responsibility requires firms to look beyond figures and documents and to look out at people and the environment. Carroll foresees the importance of ethical standards as part of a firm's success in the long-run. By following beliefs of certain moral standards and pro-actively volunteering to search for charitable avenues, the social responsibility dimension will create a positive rapport between the firm and parties that are privy to its operations - this includes suppliers, clientele, employees and the surrounding community.
