Social Responsibilities of Business and Business Ethics

Why business owes a duty to society, the four kinds of social responsibility, duties to each interest group, pollution control and the elements of business ethics.

Key ideas

• Social responsibility is the duty of business to act in ways that society values; it is wider than legal responsibility, which is only obeying the law.
• The four kinds are economic (make wanted goods at a profit), legal (obey the law), ethical (fair conduct beyond the law) and discretionary (purely voluntary help).
• Arguments for it: business uses society’s resources, it serves the firm’s long-term interest, it avoids stricter regulation, and problems can become opportunities.
• Arguments against it: it cuts into profit, its cost passes to consumers, business lacks social skills, and no one can clearly hold business accountable for it.
• Business owes shareholders a fair return and true information, workers fair wages and safety, consumers safe goods of good quality, and the community lawful conduct and a clean environment.
• Air, water, land and noise pollution must be controlled to reduce health hazards and liability, save cost and protect the firm’s image.
• Business ethics are moral principles for business; they work through top management commitment, a published code, compliance mechanisms, involving all employees and measuring results.

Remember

Watch out

• Calling paying taxes a discretionary responsibility: it is legal, because the law requires it.
• Thinking social responsibility means only giving to charity: it covers economic, legal, ethical and discretionary duties.
• Giving “it reduces profit” as an argument for social responsibility: it is an argument against.

Worked example