ethic - The obligation of organisations to make a profit is incompatible with a socially responsible approach to business. Consequently, profit-driven organisations are unethical
...hing, allows them to fulfil that purpose”. Compatibility of profit and social responsibility There are many opinions and studies on whether a company profits financially from being socially responsible. It would seem that when studies of social responsibility and profit add the control of research and development, corporate social responsibility has a “neutral impact on financial performance” (McWilliams & Siegel 2000). Perhaps taking social responsibility seriously is a result of profit rather than the other way around. (Caulkin 2003). The ever present issue with the fragmented and strategic approaches to social responsibility mentioned earlier is that organisations only hold social responsibility and ethical behaviour as important while profits exist. The neoclassical economic theory does not consider social responsibility as an obligation of organisations. The neoclassical economic theory is that organisations exist purely to maximise profit for shareholders and that this will distribute wealth effectively across the community. A new theory of triple bottom line reporting encompasses “economic, social and environmental prosperity and responsibility” (Stormer 2003). Stormer (2003) does not believe that this theory has been embraced. The triple bottom line is the way forward to sustainable business (Cramer 2002). The triple bottom line theory still holds profit as a core value of business, as it will always be, but it also shows that profit can be compatible with socially responsible and ethical behaviour. The neoclassical economic theory can no longer be used as an excuse by multinational corporations for the “sweatshop like working conditions” (Sethi 2003) used in second and third world countries. Nike found this out in the early 1990’s when their products were boycotted by many consumers. These conditions are not just found abroad, in the late 1990’s Sportsgirl, Sussan and Katies were discredited for their use of home workers in Australia. (Davidson & Griffin 2003). “Large corporations can only survive in imperfect markets” and they will “take all necessary action to maintain these market imperfections . . . to sustain their above-normal profits.” (Sethi 2003). Organisations who make above normal profits often find that greed hinders acting ethically. An example of a profit driven organisation who has recently run slyly from their social responsibilities is the James Hardie Group. James Hardie have repeatedly practiced the theory of ‘if no one finds out then it is okay’ for many decades. Community and government pressure is making it difficult for James Hardie not to increase its claims fund. Hopefully an agreement can be made with the government of The Netherlands to make James Hardie accountable to its Australian former employees and customers. The socially accepted view of how organisations make, use and delve into profits is slowly changing. There is a global shift occurring where social issues that were formally government responsibility are now falling to big business. There is a general feeling that multinational companies especially, should be putting resources back into the communities and countries which rely on them. Multinationals can be dangerously influential in countries with unhealthy economies. For example, BHPs involvement in Papua New Guinea with the OK Tedi mine site. (Davidson & Griffin 2003). Corporate social responsibility “is the obligation of an organisation to act in ways that serve the interests of its stakeholders” (Schermerhorn, Campling, Poole & Wiesner 2004, p. 158). One social responsibility of profit driven organisations is to make a profit for its shareholders. One could argue that anything undertaken by the organisation that is not in line with this is not acting in a socially responsible way. However, this argument does seem to be narrow and can only give a short term outcome. There are a large number of stakeholders that organisations are now accountable to, including customers, employees, suppliers, and various government bodies. There is a fundamental flaw in having the corporation as the central system, that is, “stakeholders . . . are externalised and become marginalized by default.” (Stormer 2003). It seems logical that the more an organisation satisfies all its stakeholders, the more stable and profitable it will be. Happy customers who believe they are getting value and quality for money will remain loyal. If an organisation has a defective relationship with its employees, morale and productivity are likely to be low, and hence, will have lower profits. Johnson (2003) states that there are two human resource practices that contribute to profit. These are to chose, train, reward and promote the best people in the company; and then to engage in policies such as “on-site day care, family-friendly leave, excellent pay and benefits, and opportunities for women and minorities.” (Johnson 2003, p. 38). Good relationships with suppliers can produce mutually advantageous results. Non compliance with government bodies such as ATO and ASIC can lead to loss of reputation and monetary loss in the form of fines. “Firms that satisfy stakeholder demands or accurately signal their willingness to cooperate can often avoid higher costs that result from . . . government regulation, union contracts.” (Ruf, Muralidhar, Brown, Janney & Paul 2001). Due to growing social awareness on environmental issues and workplace practices (especially overseas) organisations are keen to market their ethical and socially responsible views and practices. Many organisations have a code of conduct and / or a code of ethics generally containing such key words as integrity and fairness. A problem faced by these organisations is do they live by it? Or does it sit on the shelf to look good for auditors? An example of a company that seems to have left it on the shelf was Enron. (Barlas, Cote, Francis & Kraft 2003). An example of a company that lives by its Mission and Value Statement is The Body Shop. The Body Shop is renowned for making social change and has differentiated itself from the market by its strategies. The Body Shop is a prime example of an organisation that marries profit and social responsibility well. The banks in Australia have definitely been trying to lift their soc...