Discrepancy Between The Ideal View Of Business example essay topic

'Outline the argument for and against business having social responsibilities beyond that of making a profit. In the light of this, do you think businesses should make charitable donations to the Tsunami appeal? Justify your answer. ' 26th April 2005 To best understand the nature of the posed question I propose the articulated finding of the widespread acceptance that cooperate official and labour leaders have a 'social responsibility' that extends beyond the realm of serving shareholder and its members (Friedman 1962, p. 133). The following essay is aimed at highlighting the role of businesses, whether they are to have interest other than solely making profit and if so what groups should benefit from the success of a company. According to Wilson (2004, Vol. 23, p. 23) arguments, the nature of existence for business or corporations should be 'everything to do with service to society, and only secondarily to do with profitability.

' But this is quite on the contrary to the apparently antediluvian view put forward by corporate executives Friedman and Levitt (cited in Wilson, 2004, Vol. 23, p. 23) highlighting '. the business of business is making money, not sweet music. ' So why is there discrepancy between the ideal view of business and which should be placed under higher priority the shareholders or stakeholders (society). To understand both points of view we need to identify the party's involved and the relationship they have to the business and business operations. A stockholder (shareholder) is one that owns or holds a share or shares of stock in company, enterprise or organisation (The American Heritage Dictionary of the English Language, Fourth Edition, 2005).

Shareholders are the financial backing in the organisation, they are generally people interested in making a profit (in the form of dividends) and they supply capital to the organisation. On the contrary stakeholder are seen as any party that has an interest in an organization. Stakeholders of a company include stockholders, bondholders, customers, suppliers, employees, and so forth (Scott, 2003). Given the definition or both involved parties it is clear to see that the success of the business in making a profit will please the shareholders however, to make long-run profits in turn requires compatibility and complacency from its revenue source; the stakeholders.

This requires the need for mission and vision driven company which must be truly responsive to stakeholders not only its shareholders (Wilson, 2004, Vol. 23, p. 23). These 'social responsibilities' must however be driven directly at the stakeholders involved with the business dealings in order to serve equally the shareholders. A clear example of miss-aimed social contribution and one which resulted in strong shareholder opposition was outlined when a number of Australian companies pledged finances to the tsunami relief effort in Asia. An ideally complementary statement was given by the spokesman of the Australian Shareholders Association, Stephen Matthews when he said that one foreseeable premise to make contributions to the tsunami relief would be to'. businesses who have activities up in South Asia (ABC - news online, 2005). ' Because after all the fundamental truth which may be hard to swallow and one which my opinion sways away from that of Freedman, is that business are there to make a profit.

The social responsibilities that they do act on are egotistically based upon a future increase in either customer relations, loyalty or positive exposure which in turn are a sole benefit to its shareholders. And as to the suggestion presented whether companies should make charitable donations to causes such as the tsunami relief appeal, my opinion is in strong lure of that of Mr. Matthew; 'donations should only be made in situations that are likely to benefit the company through greater market exposure (ABC - news online, 2005). ' Reference List: ABC News Online 2005, Australian Broadcasting Corporation, viewed 26 April 2005 Friedman, M 1962, Capitalism and Freedom, Phoenix Books, Chicago & London. Scott, DL 2003, Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor, Houghton Mifflin Company, Houghton. The American Heritage Dictionary of the English Language, 2000, ed. 4, Houghton Mifflin Company, Houghton.

Wilson, I 2004, The agenda refining corporate purpose: 5 key executive actions, vol. 2, no. 1, pp. 21 - 26..