Question -
Answer -
The case in favour of taking up social responsibilities
(a) Existence and growth: Business enterprises exist to make profits by providing goods and services to consumers. Thus, we can say that their long-term growth prospect depends not only on their profits but also on how efficiently they serve society. Therefore, taking up social responsibilities supports the existence and growth of a business enterprise.
(b) Avoidance of government intervention: Business enterprises should always work in line with society’s values and ethics. This would help them fulfil their social responsibilities, which in turn would make them less prone to government intervention.
(c) Better environment for doing business: Businesses make use of society’s resource of human capital. Thus, by providing employment to people, they help solve the social problem of unemployment and poverty, thereby creating a favorable environment for business.
The case against taking up social responsibilities
(a) Violation of profit maximisation objectives: It is argued that a business enterprise exists to make a profit. Thus, if it engages itself in solving social problems, then it may not have enough resources to meet its primary objective of profit maximisation.
(b) Burden on consumers: It is argued that when a business enterprise is engaged in solving social problems such as environment pollution and unemployment, its expenditures increase. This increased financial burden is ultimately passed on to the consumers in the forms of higher prices of products.
(c) Lack of social skills: Businesspersons are basically trained to solve business-related problems such as minimising cost, maximising profits and increasing sales. However, they are not specialised in solving social problems. Thus, it is argued that social problems must be solved only by specialised agencies, which have the required training and skills.