Classical and Socioeconomic Perspectives of Social Responsibility

The classical view of social responsibility and the socioeconomic view are two ideological perspectives seeking to define the role of business in the broader context of society. The classical view as advocated by economist Milton Friedman proposed that businesses have no obligation to their communities, other than to make the absolute most money for shareholders within a specific period of time. The socioeconomic view, which is the most popular throughout the world, states that organizations have a duty to act in the best interest of the public good while conducting business. In modern times, the general consensus is that the two views are not mutually exclusive. It is in fact possible to run a very successful business with tremendous profits, while at the same time sharing the benefits of capitalism with public and private entities in the external environment.

A high profile example of a large company ingraining an environmentally friendly attitude into their corporate culture can be cited during NBC Universal’s (a business unit of General Electric) Green week and Earth week. These are two action-oriented awareness initiatives inserted into content to raise awareness among the viewers of the various NBCU channels. Due to their ability to reach a wide audience and unique role as a mass audience broadcaster, this entity considers informational programs, which educate the public about the importance of environmentally themed events, a social responsibility.

On the other end of the social responsibility spectrum, American International Group (AIG), one of the largest insurance companies in the world, used innovative financial methods such as credit default swaps and complex derivative markets to generate high profits without regard to devastating long-term effects on their clients, society as a whole, and in the end, their own organization. Their culture promoted short-term personal gains for their executives, while focusing solely on maximizing profits. As a result of unethical business practices, which took advantage of government deregulation, the company required massive bailout loans from the United States Treasury in order to stay solvent. This led to tremendous losses for shareholders within the financial sector and had a negative ripple effect throughout the economy as a whole, contributing to the perfect storm that is the great economic recession of 2007-present. With billions of dollars of losses, top management was replaced and the company is in the process of being split into numerous entities.

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