According to Milton Friedman, there is one and only one social responsibility of business. It is to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud (Friedman 1970).
However, an organization’s role concerning social responsibility and its effects on society are being increasingly scrutinized. Most importantly, businesses must consider behaviors that its customers will and will not accept. The responsibility of an organization to promote the interests of a society as a whole, rather than its stakeholders, is the distinction between ethics and law. Put simply, law dictates what is required and ethics dictates what should be required.
A conscientious manager with a morally responsible approach to business is one of the most valuable assets to an organization. The agent needs to regulate any situation regarding ethics, because law and government may not solely determine its outcome.
Determining the legality judgment of an action is based on common law, regulations, and court decisions. These laws were created to protect individuals and their interests in society. They are requirements, and the government may use power to enforce them. The law mandates that organizations oblige to ethical policies such as employment law, federal regulations, and codes of ethics. If a manager is faced with a situation that contains ethical elements, it is suggested to consider whether the behavior or result complies with:
• Applicable laws, regulations, and government codes
• Organizational standards
• Professional standards
Legal and ethical behavior may not always be combined. What may be legal may not be ethical and vice versa. The preceding points illustrate that complying by the law does not always agree with ethical behavior. Managers must evaluate what is legal and what its stakeholders and society deems ethical as well. As a manager, establishing a set of ethical guidelines for detecting, resolving, and forestalling ethical breaches often prevents a company from getting into subsequent legal conflicts (Anstead 1996).
The essence of ethics is doing the right thing, especially under difficult circumstances, and that involves being able to reason well about what the right thing to do actually is. To be able to make good decisions ethically, a manager needs to have thoughtfully developed his or her personal set of standards or values. (Waddock 2012).
The Ethics Resource Center’s 2011 National Business Ethics Survey (NBES) examined how leaders performed at ethical culture. The NBES indicates a decrease in confidence in managers’ and leaders’ ethical behavior and warns of a “looming ethics-downturn” in corporate America (O’Brien 2012). It is imperative that agents of an organization act ethically because any relentless pursuit of self-interest could lead to a collective disaster. The erosion of essential values leads to cynicism in society, and potentially violence and fatalism.
The NBES recommends that ethical leadership be incorporated as a criterion in performance evaluations for managers. It also suggests that leaders communicate both their personal commitment to ethical conduct as well as how they link business integrity to their business strategy. After all, it is the manager that determines not just the values, ethics, honesty, but also profitability, which is dependent on the business’s customers.
Ethical business practices contribute to the strategic strategies of an organization by enhancing overall corporate health in three important areas.
• Productivity of employees
• Positive public image that attracts customers
• Minimizing regulation from government agencies
Successful and sustained businesses, at their cores, share a universal trait- they are focused on providing value to and sharing values with the societies in which they operate. The members of society that are directly involved with the companies are most often customers, employees, suppliers, and shareholders. Fundamentally, business is about creating value for stakeholders (Castellani 2007).
Milton Friedman has a point that the only social responsibility of a business is to create a profit for its stakeholders. Nevertheless, it is the overall actions and behavior of the agents who represent the business that decide whether that certain business will last long enough to create those profits. Resilient ethics and their adherence in business builds and sustains public confidence in the marketplace.
Castellani, J. (2007). Shaping tomorrow’s business leaders: principles and practices for a model business ethics program. In Charlottesville: Business Roundtable Institute for Corporate Ethics.
O'Brien, G. (2012, February 28). Retrieved from http://business-ethics.com/2012/02/28/9027-managers-and-ethics-the-importance-of-tone-in-the-middle/
The New York Times Magazine, September 13, 1970. Copyright @ 1970 by The New York Times Company.
Waddock, Sandra. "Ethical Role of the Manager." Encyclopedia of Business Ethics and Society. Ed. . Thousand Oaks, CA: SAGE, 2007. 786-91. SAGE Reference Online. Web. 30 Jan. 2012.