Whose responsibility is it?

John Kirk | May 2, 2012

 

"There is one and only one social responsibility of business: to use its resources to engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud." M. Friedman, Capitalism and Freedom.

This famously quoted basis for stockholder theory outlines the responsibility of management to the owners of the company to make profit for them. But surely forty years later in 2012, “the rules of the game”, have changed. The company as a legal entity has the right to be treated as an individual, to buy and sell, to hire and fire. 

Does this entitlement also bring with it the responsibility to, as a corporate citizen of the planet; take into account its effect on the environment in which it does its business and ensure that that environment is damaged as little as possible?

I would suggest that any individual that has the legal right to use resources to make profit should be responsible for the use of those resources be they animal, mineral, or vegetable. Multinational firms are looking for sites where their costs are minimal therefore increasing the profit they make, but in doing this they have an effect not only on the countries and people which they choose to use but in those that they choose to discontinue using.

Globalisation is causing the world to be more and more an economic village in which companies will continue to utilise the best resources at the cheapest prices. Doing this can mean more jobs in third world countries, loss of jobs in first world countries, use of resources from mineral rich areas and increased environmental damage to countries with the least ability to deal with it. Who is responsible for these loses? Ultimately the responsibility comes down to individual choices by individual people who choose to consume the products or not. As long as there is a market for a product and it can be produced profitably somebody will take advantage of that opportunity. You need look no further than the extremely profitable trade in illicit drugs to see that regardless of the consequences someone is always willing to provide a service for profit. This is an extreme example but it is typical of the concept.

The choices we make, the purchases we buy, will in the end influence the companies of this world to provide what we desire. If in fact Friedman is correct and the responsibility of management is to make profit then all else including environmental concerns, human rights, and social responsibility are not part of the agenda. It is only when we the consumer decide to change” the rules of the game” to state that; our environment must be cared for, that human beings, wherever they work, should have a minimum level of work conditions and pay, and that the effects of conducting business in a community should also include a social responsibility to that community, that businesses will be required to make these core criteria part of the business agenda.

It is the choices we as individuals make that will decide how the businesses of the world act. They will and must bend to market desire.