Milton’s assertion that the social obligation of company is to maximize profit is no longer appropriate in today’s business climate owing to shifts in corporate perspectives on community welfare activities and environmental protection. According to Milton (1970), the job of a firm is to its owners, and it should strive on growing their wealth and profits. He said that if corporations focused on profitability by acting within the law and participating in their economic role, they would indirectly advance their social duty by creating job opportunities and expanding the economy by paying taxes. In today’s setting, however, firms should put aside funds to contribute to social well-being and environmental sustainability. Various theoretical frameworks have been established to counter Milton’s assertion on corporate social responsibility, which states that firms should actively engage in corporate social responsibility. According to corporate social responsibility ideas, firms have economic, ethical, legal, and philanthropic obligations to the communities they serve. Business ethics theory also discusses the significance of corporations contributing in society by engaging in ethical actions that have a positive impact on society. It encourages firms to regard their communities and stakeholders while doing business. As a result, this article will address the necessity of firms going beyond profit-making and the advantages of participating in corporate social responsibility using stakeholder theory, the Triple Bottom Line, utilitarianism, and deontology.
Stakeholder theory differs from Friedman’s shareholder theory in that it sees all parties engaged in the firm as crucial to the growth of the business (Freeman and Dmytriyev, 2017 8). According to the stakeholder theory of corporate social responsibility, firms must consider the interests of all stakeholders in their operations. It emphasizes the relevance of corporate ethics, values, and morals while collaborating with stakeholders to enhance relationships and efficiency. Employees, shareholders, customers, communities, suppliers, and the environment are all important stakeholders in a company’s survival and growth (Freeman and Dmytriyev, 2017 9). They may have minor responsibilities in the company, but their contributions and support make it prosper. As a consequence, companies should not only concentrate on profit, but also extend their social responsibilities to help all stakeholders in order to achieve better commercial outcomes. Milton’s comment overlooks the fact that companies have an influence on all stakeholders, such as badly hurting the environment or failing to treat their people properly, which affects their morale and desire to work, as well as negatively influencing their profitability.
Furthermore, stakeholder theory contends that organizations are successful if they provide value to all of its stakeholders, which may result to increased profitability for the firm (Freeman and Dmytriyev, 2017 11). Organizations that cherish their people have higher productivity and lower employee turnover, which increases their financial capabilities. Businesses may increase their sales income by retaining and receiving more recommendations from pleased and happy consumers. Businesses attract more prospective investors and are recommended to additional investment options, hence increasing their chances of success. Businesses contribute to the best socioeconomic condition of the local community, and they are capable of elevating social well-being and contributing to a safer and cleaner environment in which they operate. As a result, considering all stakeholders in the business enhances earnings while also promoting the company’s reputation and support from many parties. firms that fail to appreciate consumer input are likely to lose customers who may consider other firms that do.
Furthermore, Milton’s views on the role of enterprises in their environment and society are challenged by the triple-bottom-line (TBL) paradigm, which stresses that social responsibility should be assessed in three dimensions: people, plant, and profit (Slaper and Hall, 2011 4). It asserts that a company’s social responsibility extends beyond profit to encompass its contribution to social well-being and environmental sustainability, as well as its influence on society. Businesses’ social and environmental effect may be determined by the influence of their operations on the community. It asserts that economic development attempts to improve quality of life and well-being through increasing work possibilities, retaining, growing, and recruiting more people. A company’s success should be assessed by how effectively it balances the three principles of profitability, social well-being, and environmental sustainability, since this demonstrates that firms can serve their shareholders while also giving back to society (Slaper and Hall, 2011 5). It encourages firms to consider all parties who contribute to their success, whether they donate money or labor; they are an important element of the company.
The triple bottom line (TBL) concept contradicts Milton’s assertion that corporations’ social obligation is to maximize shareholder profits. It underlines the need of corporations recognizing social and environmental assistance that benefits communities and other stakeholders (Slaper and Hall, 2011 5). It understands that corporate success is dependent not just on revenues and financial strength, but also on relationships with customers, support from suppliers and the local community, and the abilities of staff (Slaper and Hall, 2011 6). As a result, companies must prioritize their workers’ well-being and guarantee they contribute to community initiatives and other needs. They should also use the finest environmental sustainability methods to provide value and alleviate social problems. Given the society, environment, and profitability of the firms, it is expected that business success will result.
Furthermore, Milton’s stance on the social duty of corporations, which he claims is just earning profits, is challenged by business ethics theories. According to the utilitarian viewpoint, an ethical or correct option is one that produces the most benefit or good. It refutes Milton’s claim that just one stakeholder profits from business and overlooks others, such as workers, consumers, and suppliers (Singh and Mishra, 2018 102). It underlines the importance of corporations engaging in actions or deeds that enhance the total social well-being of all stakeholders. As a result, utilitarianism theory promotes contemporary corporations to participate in corporate social responsibility, which includes social well-being and environmental sustainability, which benefits a broader range of company stakeholders. According to the deontological theory, companies should establish norms and principles that guide them to have a moral commitment to all stakeholders (Singh and Mishra, 2018 97). Businesses must contribute to societal improvement through sponsoring programs or developing initiatives that benefit society or the environment.
Businesses that engage in corporate social responsibility profit more because they concentrate on more activities and initiatives that include many stakeholders who are encouraged to continue working for the corporation (Maqbool and Zameer, 2018 85). Participation in charitable activities in CSR necessitates financial assistance from the firm, which owners insist must pay back in the form of marketing or employee trust. A marketing strategy promoting enterprises is primarily social responsibility to the local community, society, and their clientele (Michel and Buler, 2016 1861). It gives the company a good reputation and a competitive edge. It helps firms garner support from both local and international groups. CSR assists companies in making necessary community improvements that benefit society, and other organizations may desire to collaborate in delivering helpful initiatives (Maqbool and Zameer, 2018 85). Businesses that just concentrate on profitability risk losing more money because they disregard other critical factors of company success.
Furthermore, corporate social obligations contribute to the strategic goals of organizations, which in turn contribute to their fundamental values and culture. Businesses gain employee trust and may acquire and keep the greatest staff, enhancing output and profitability. Employees and other stakeholders want to be connected with companies that make a good contribution to society and implement sustainable initiatives (Michel and Buler, 2016, 1859). It reduces staff turnover, which aids in the retention of qualified and experienced workers. Businesses boost client retention and loyalty, which leads to greater sales. Customers want to be connected with companies that give back to society by implementing programs and activities that address customer or local community concerns. A firm that participates in social duties, such as programs that promote environmental sustainability, also defends itself against environmental deterioration, natural resource depletion, and harsh treatment from locals (Michel and Buler, 2016 1860). It may motivate enterprises to implement cost-cutting measures such as the use of renewable energy and the recycling of materials (Maqbool and Zameer, 2018 90). The activities contribute to strategic goals of cost savings while also contributing to social responsibility.
Finally, corporate social responsibility ideas and business ethics theories are critical in refuting Milton’s assertion that the job of firms is not just to generate profits for their owners. According to the stakeholder hypothesis, while making choices, firms must consider all of its stakeholders. They should not just serve the demands of shareholders, but also of consumers, workers, suppliers, communities, and the environment. According to the triple bottom line idea, a company’s performance is determined by three factors. Businesses must take into account social well-being, profitability, and environmental sustainability. It contradicts the statement by implying that the job of business extends beyond profit maximization. According to business ethic theory, utilitarianism, and deontology theories, corporations should participate in activities that benefit their stakeholders the most. Businesses have a moral obligation to engage in social responsibility that benefits society. Businesses will benefit from a competitive edge and support from local and worldwide communities as a result of their great reputation.
References
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Friedman M. 1970. The Social Responsibility of Business is to Increase its Profits: The New York Times Magazine.
Maqbool, S. and Zameer, M.N., 2018. Corporate social responsibility and financial performance: An empirical analysis of Indian banks. Future Business Journal, 4(1), pp.84-93. https://doi.org/10.1016/j.fbj.2017.12.002
Michel N and Buler S A. 2016. Maximizing The Benefits of Corporate Social Responsibility. How Companies Can Derive Benefits from Corporate Social Responsibility. European Scientific Journal. 1857 – 7881 (Print) e – ISSN 1857- 7431. https://core.ac.uk/download/pdf/236406183.pdf
Singh, A.K. and Mishra, N.K., 2018. Ethical Theory and Business. International Journal of Humanities and Social Development Research, 2(1), pp.97-113.Doi: 10.30546/2523-4331.2018.2.1.97.
Slaper, T.F. and Hall, T.J., 2011. The triple bottom line: What is it, and how does it work? Indiana business review, 86(1), pp.4-8.
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