A corporation has a lot of responsibilities as it grows larger and larger. Inside the corporation, it has thousands of employees; they all depend on the corporation to support their families. In the society, the corporation’s affect the society. Although some Economists, such as Milton Friedman, argue that a corporation does not have any responsibility other than maximize shareholders’ profit, it is not true.
Corporations should do things to provide society’s good and avoid things that damage the society. From the perspective of the corporation, contributing to the society is good for their reputation. If they do anything to damage the society, even if the law does not restrict it, there will be a series of bad consequences (Wharton, 2012). For example, General Electric had known to be one of the largest air and water polluter in the United States. The government did not prohibit GE to dump PCBs (Polychlorinated biphenyls), a chemical that can damage the immune, reproductive, nervous and endocrine systems, into the Hudson River (“The Truth About Hudson River PCBs”).
Later it was found out the PCBs’ damage the neighborhood and cost GE millions of dollar to clean it up. It also damages GE’s reputation. When people found out the corporation’s damage to the community, people’s incentive to use their products or services decreases because nobody wants to support something that damages their neighborhood. The corporation needs to care about their responsibility because their customers do. A survey by Landor Associates found that 77% of consumers say it is important for companies to be socially responsible.
On the other hand, a corporation has a responsibility to the community where it is located because of the followings. A corporation has economic relationship as it pays salaries to its employees, buys inventories from supplier, and sells products or services to consumers. A corporation cannot isolate itself; it is always related to other stakeholders. The profit the corporation has comes from its stakeholders’ hard work. This kind of relationship brings responsibilities to the corporation. If a corporation does not take the responsibility, it causes damages to both the community and to the corporation too.
For instance, General Motors was the primary economic and social hub for Flint, Michigan (Moore, 1989). Most of the people in the town worked for General Motors and depended on it. However, General Motors suddenly closed all the factories and laid off all employees in Flint and moved the business to Mexico, where labors were much cheaper. General Motors’s action causes thousands of unemployment and urban decay.
People got no job, and some of them were unable to pay rent and got evicted before Christmas Eve. It was very difficult for them to find another job in Flint and hence many people moved. As a consequence of General Motors’s deindustrialization, Flint has suffered depopulation, economic decay, and high rates of crime, unemployment and poverty. What General Motors brought to Flint was miserable. It also developed a very bad image for the corporation. In 2009, General Motors filed Chapter 11 bankruptcy.
To conclude, if the corporation only care about its own profitability, it can only bring them short term growth. It does not benefit the corporation in long term if it ignores the society and will bring bad reputation. Corporation’s responsibility is one kind of public relation; corporation does it because the customers want it and it makes them look good. Especially nowadays consumers and other companies are likely to shun firms that develop unethical reputations. It will be unwise for corporations to damage their own image by not taking its corporation responsibility.
The corporation’s relationship and responsibility are different than other community institutions such as schools, the church and the police because its primary purpose is to maximize shareholders’ value, and the responsibility comes second, whereas the main purpose of community institutions is to serve the people in the community, and they are non-profit.
For a corporation, the goal is to make more sales, gain more market share and earn the maximum profit whereas community institutions’ goals are to satisfy their clients in an efficient way. Community institutions are essential to people, people cannot live with them. Corporations are to improve the quality of lives; they offer new products and services to make life easier and more enjoyable. Their functions and goals are different and therefore their responsibilities are different.
Friedman, Milton. “The Social Responsibility of Business is to Increase its Profits.” New York
Times. 13 Sep 1970: n. page. Web.
Moore, Michael, dir. Roger and Me. Warner Bros., 1989. Film.
Restakis, John. Humanizing the Economy. New Society Publishers, 2010. Print.
“The Truth About Hudson River PCBs.” Clean Up GE. N.p.. Web.
Wharton, Knowledge. “Why Companies Can No Longer Afford to Ignore Their Social
Responsibilities.”Time. (2012): n. page. Web.