Discuss the arguments for and against businesses' involvement in socially responsible activities
The prime responsibility of business is to make a reasonable return on its investment by producing a quality product at a reasonable price. Businesses are not to be charitable institutions. However, those who favor social responsibility of business use the arguments of a social contract, less government regulation, and long-run profits. The social contract argument is that, because society allows for the creation of corporations and gives them special rights, including a grant of limited liability, corporations owe a responsibility to society. The government regulation argument is that, by taking a more proactive role in addressing society's problems, corporations create a climate of trust and respect that has the effect of reducing government regulation. The long-run profit argument is that corporate involvement in social causes creates goodwill, which just makes good business sense.
Those who do not favor corporate involvement in socially responsible activities use the arguments of profitability, unfairness, accountability, and expertise. The argument regarding profitability is that, because corporations are artificial entities established for profit-making activities, their only social obligation should be to return as much money as possible to shareholders. The unfairness argument is that whenever corporations engage in social activities, they divert funds rightfully belonging to shareholders and/or employees to unrelated third parties. Corporations are private institutions that are subject to a lower standard of accountability than are public bodies. Substantial potential for abuse exists where a company may decide to support a wide range of social causes and yet submit to little public scrutiny. The expertise argument is that, although a corporation may have a high level of expertise in selling its goods and services, there is no guarantee that any promotion of social activities will be carried on with the same degree of competence.
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