Flaws of classical view are seen such as the time frame and the degree on influence in today’s society (Robbins et al., 2003: pp. 138). Also stated that, if a company aims to maximize profit in the long run, the company has to recognize some social obligations such as being socially responsible, which may increase their cost. An activist approach should be implemented by protecting the welfare of society, preserving the environment and contributing positively as a socially responsible institution. Furthermore, most businesses in today’s world are stressing on the importance of being ethically responsible and maximizing profit is not the main priority.
One view of social responsibility suggests that economic responsibilities are of the greatest magnitude in an organization. This view is in relation to the classical or purely economic view. Firstly, economic responsibilities are to manufacture goods and services to be sold at a revenue and being compliant to societal commandment and regulations. As explained, the classical view states the primary priority of maximizing profit for an organization as long as it constitutes to the minimum requirement of the economic and legal responsibilities. The meaning of economic responsibilities is similar as classical view as both stresses on profit making compared to upholding social services and producing social goods for the comfort of the society. Even the founder of Atlanta business community perceives that the economic responsibility was to make a profit (Joyner and Payne, 2002: pp. 9). Although socioeconomic view also stresses on the maximization of profit, but this aim is regarded, as the second priority and not the first, like classical view. Consequently, it can be seen that the classical or purely economic view suggests that economic responsibilities are of the greatest magnitude in an organization as its main priority is profit maximization, which is the main economic responsibility.
Nevertheless, economic responsibilities suggested by classical view are not the greatest magnitude in an organization. Practicing socioeconomic view and being socially responsible is the greatest magnitude for an organization. As survival is the main priority in this view, the welfare and the society is important as without consumers, a business would not be able to survive. It is said that in order to serve the interest of all groups, the corporation must survive as a thriving business (Post, F, 2003: pp. 10).
Practicing socioeconomic view will not only permit a company to protect the environment and society’s welfare but also the shareholders. Many companies try to do good deeds because they believe taking care of the welfare of its workers and others in the society is also in the long-term interests of its shareholders (N.A, 2002: pp. 4). Therefore, not only will the welfare of others be protected, the shareholders also receive benefits.
By protecting its worker’s welfare and also others, the company would be a potential profit-making company in the long run by surviving through its workers and the support from the society. Joyner and Payne (2002) state “Managing by value, not by profits, is a powerful process that will set the business on the path to becoming a ‘Fortune 500’ company”. Hence, it can be seen that practicing socioeconomic view is better than classical view and clearly, economic responsibilities are not the greatest magnitude for an organization but being able to survive and obtain profit in the long run would better benefit everyone.
The importance of economic responsibility can be seen from the “Pyramid of Social Responsibility”. Alan Jones (2002) states, “The base of the pyramid is economic responsibilities followed by legal responsibilities and the top with ethical responsibilities”. A company, which only has profit maximization as primary priority from classical view may as well suffer through legal approaches if they do not constitute to protecting the welfare and environment. For example, as stated by Robbins (2003), Manville Corporations in the United States have been charged for producing asbestos, which causes fatal lung diseases. This company was practicing classical view and being economically responsible as to maximize profit. However, this company was forced to file for bankruptcy as this company was concealing information regarding the sickness that affected some of its employees. Hence, economic responsibilities suggested by classical view are not the greatest magnitude of an organization but being socially and ethically responsible is far more important.
Consequences after being just economically responsible may be higher then maximizing profit itself. The hazards, which may occur after a company tries to maximize profit, could bring the company down in the future. Coelho, McClure and Spry (2003) state, “If logging an area enhances short-run profits, managerial income may be increased. However, the downside is the potential litigation that will reduce the firm’s wealth not to mention the additional moral hazard if the damage that is caused is potentially greater than the wealth of the firm”. This shows no matter how much earnings a company may be maximized; its consequences for not being socially and ethically responsible would cause a bigger problem from the company in the future.
Hence, being economically responsible suggested by the classical view is not the greatest magnitude but by implementing socioeconomic view, the company will not only be able to survive, it will also be able to protect its shareholder’s interest, protect the environment and increasing the level of welfare in the society. Companies can uphold these responsibilities by producing better goods and services, lower prices and using nature-safe products. Implementation of moral and ethical values will ensure the survival of the business and reassuring long-term profits. These are the factors of practicing socioeconomic view and the greatest magnitude for an organization.
Being socially and ethically responsible is very much vital for businesses in today’s society. Geoffrey Lantos (2002) continues with “Ethical corporate social responsibility is morally mandatory and goes beyond fulfilling a firm’s economic and legal obligations, to its responsibilities to avoid harmful and social injuries, even if the business might not benefit from this”. This means that being ethical and socially responsible is a must in businesses aspire to increase the society’s welfare and others as well. In the business world, a corporate is seen a morally responsible to other groups and societies as any course of action of the company may create a negative effect in the environment.
Although the government is said responsible for all the harms that businesses have created, but welfares are also not provided by civil government (Lantos. G, 2002: pp. 15). This is far more important for an organization then just purely upholding economic responsibilities.
As been explained earlier for the classical view, most businesses would not engage in socially responsible activities, as it is rather costly as maximizing profit is the first priority. However, practicing socioeconomic view by being “friendly” to the society and environment may have a positive impact on the business itself in terms of profit. Geoffrey Lantos (2002) also explains that fine ethics may mean good business and how that may work.
Firstly, a business with high moral and ethical responsibilities will obliquely attract the attention of consumers, producers, suppliers’ even employees and this enhances its reputation as a socially responsible company. Then, being ethical and protecting the society and welfare will secure the business lots of money in terms of less fines and litigation. The company would even be safe from publicity of its appalling movements towards the society, especially with the high technology advancement today. With good status, the company would be assured of a good prospect in the future. Therefore, economic responsibilities of maximizing profit alone are not the greatest magnitude however, implementing socioeconomic view through endurance by protecting the society and environment is the greatest magnitude for an organization. It also ensures maximization of profit in the long run.
However, the classical view does state its point. Lantos (2002) supports that “It should be the role of individuals, not business, to provide such needs since it would not be in shareholders’ best interest to go beyond the profit maximization”. This is rather true as shareholders are merely investing to obtain maximize profit. If the company would engage in social issues, the company would generally receive a lower profit and this would weaken the demand of serving the best for its customers and workers would receive a lower pay. This is not a good move for the business and stockholders would starve as well. Hence, there are also advantages of the classical view suggesting that economic responsibilities are of the greatest magnitude. However, the support of socioeconomic view on survival first and profit maximization second, is higher as the survival of the business rely on the survival of free institutions such as uphold social justice, protecting welfare and preserving the environment (Lantos. G, 2002: pp 19). Furthermore, the survival of the business depends on the degree of welfare obtained by customers, producers, others and, the degree of being ethical and socially responsible for the environment.
To better understand the desirable socioeconomic view, the story on The Body Shop is a good example to start with. The Body Shop is famous for its statement “Profits With Principles”. As said by David Leong (2002), The Body Shop is well known for its products that are against animal testing and with the usage of natural substances. This business can be seen as an activist approach and practicing the socioeconomic view. This is because The Body Shop shows ethical and social responsibility as the company supports against abusing human rights, animal testing and very much favors environmental protection.
Besides, the business also takes part in wide range of activities such as fund-raising for the Malaysian Aids Foundation, PT Foundation and the Malaysian Nature Society. This company truly shows the practice of socioeconomic view and proves that economic responsibilities are not the greatest magnitude. Maximizing of profit was not its main priority but it was its values of being against animal testing and protecting the environment, which caught the attention of many. Hence, it became an internationally well-known company and is earning millions of dollars after a few years. This shows that implementing socioeconomic view benefits not only the environment and welfare of society but also maximizes the profit in the long run. It proves that economic responsibilities by classical view are not the greatest magnitude.
Another example to show the economic responsibilities are not the greatest magnitude is through the story “Exporting A Problem” by Macabe Keliher. This article is about Taiwanese companies dumping their toxic waste in other countries as Taiwan has tighter environmental companies have to pay a large amount of fines and this could jeopardize the company’s survival. Hence, their profit-making motive would never be successful.
From the example given, we can tell that implementing classical view, which suggests that economic responsibilities are the greatest magnitude is not true as maximizing profit is not the main priority, nevertheless, being able to survive, protecting the environment and the welfare of others in socioeconomic view are the greatest magnitude.
In brief, economic responsibilities such as maximizing profit as the primary priority are not the greatest magnitude of an organization but being ethical and socially responsible by preserving the environment and protecting the welfare and, others, is the greatest magnitude for survival of the company in order to maximize revenue in the long run such as The Body Shop illustration. Hence, businesses and companies should practice the socioeconomic view as they can implement both protection and preservation of welfare and environment, and, maximize profit in the long run, rather than merely maximizing profit as long as it constitutes to the legal requirements.
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