Question

Social Responsibility of Business

Can the concept of maximizing corporate profits be consistent or is it contrary to a practice of conducting business in a highly ethical manner? Please explain your answer. Try to include thoughts discussed in the debate between Whole Foods' John Mackey and Cypress Semiconductor's T. J. Rodgers, contained in our materials, the article titled “Rethinking the Social Responsibility of Business”. Do you have examples from your life or professional experience? If appropriate include thoughts about other Course Members ideas to support your opinion?

Answer 1

The perspective regarding business comes to everyone’s mind is maximizing profit. But weather in ethical way or unethical way it is still a matter of concern. The Neo classical approach explains the economies of maximization concept of the business but in the ethical way but in contrary to this approach ownership theory of the firm assumes the profit maximization with the shareholders wealth creation. But both are contrary to each other. The process of maximizing corporate profit is not only done by the unethical way. Although the unethical way of maximizing profit works in the long term but it stabilizes the business in long run. The concept of maximizing profit is the short sighted view of enhancing the profit of the business which leads to the unethical way either by exploiting resources, exploiting employees to work overnight, etc. This is contrary to a practice of conducting business in a highly ethical manner because ethics comes with the certain norms or codes of conducts which should not be broken in unfavourable situation. The business ethics is something that is malleable and uncertain. It is a process in which societal interest is included. When we talk about business ethics it is long time process of profit maximization within the limits of codes of business. The primary purpose of the business must be solved by the help of codes of conduct. Nobody can be rich with business overnight. Hence, taking care of each shareholder or stakeholder interest in the business is very important which leads to the wealth maximization in turn maximize profit.

Business is like a game in which if the rules are broken then the business have to face consequences either of the following ways ethically, socially, economically, legally etc. over a period of time.

I had working experience of an advisory company which provide the capital market advisory to their customers. The employees of the company was selling their products to customers by calling them over phone. Their work was manipulating the customers by providing unclear information so that they met losses and then again employees of the company pitch to their customers for higher services packages. This process generates profits nearly INR 3.5 crores in a month but after 2 years the company losses its faith among its customers and legal complains was filled against the company directors and over the period it had shut its business due to legal procedures over it.

Hence, ethics is most important part of any business and it goes with the profit maximization over long run.