Friedman And Milton Friedman's Corporate Social Responsibility?

Decent Essays
Up until the mid to late 20th century, businesses were only recognised for doing one thing which was to increase their profit return to their investors within legal boundaries. However, as a result of an era of social activists, Carroll (1991) acknowledges Corporate Social Responsibility (CSR) as a further extension of a business’s arm to also act within ethical and philanthropic avenues that society would expect of businesses.
Like most controversial discussions there is always two opposing views which I will introduce as those like Milton Friedman who opposed CSR as the only obligation a business had was to “make as much money as possible while conforming to the basic rules of society” and to not simply do this would be to disadvantage the
…show more content…
Friedman builds a case that (1) a business does not have responsibilities, businessmen do and they are acting as an agent of the principle (the company) and should therefore be serving the interests of the stockholder (Friedman 1970). Gibson (2000) despite supporting stakeholder theory, the component that “an individual surrenders a degree of autonomy to an organisation” (Gibson 2000; p. 252) is still relevant in the traditional view. If the shareholders’ interests are in line with maximising profits than, to a certain extent, so too are the businessmen’s actions. (2) If they were able to spend the profits of stockholders, a big issue would be knowing how much of the profits they are able to spend before it stops being the shareholders’ profits and becomes their losses, hence damaging their competitive advantages (Friedman 1970). Gibson (2000) also supports that it is not adequate for all stakeholders to be given an equal benefit because if stakeholders (other than the shareholders) are given power of influence over the business it is not fair that shareholders are not given, in return, power of influence over society’s communities and initiatives. (3) If the free-market is unable to solve social problems, the responsibility of the solutions should not befall corporate …show more content…
Carroll and Shabana (2010) retort that Friedman (1970) may believe in a business’ priority to make as much profit as possible but Friedman (1970) does say that this should be done within legal and ethical constraints and thus indicates that the only component of the pyramid that Friedman disapproves of is philanthropic responsibilities. In today’s business market engaging in philanthropic responsibilities is seen as the norm and comes under the stakeholder theory, where the business must take into account the interests of groups that have any sort of dealings with the business where they may be impacted; including customers, suppliers, communities and employers (Gibson 2000).
Benefits that come about from employing CSR initiatives are that of reducing costs and risks not so much in the short time but the viability of the business in the long term, whereby volunteer initiatives of the company in social and environmental problems will allow positive impacts from society in effect flexibility from future governmental regulations, and any sort of tax disadvantages (Carroll and Shabana 2010). This benefit works like clockwork where reducing negative social impacts now will result in future positive effects, and in turn the viability of the

Related Documents

  • Decent Essays

    According to Calkins and Jonathan Wight, first key criticisms toward Milton Friedman was about the description of the business manager role as to maximize profits for shareholders which is the CEO moral obligation. Calkins and Wight express their opposition to Friedman idea of narrowing the whole managerial concept on to maximizing profits because, profits play a big role in the market system in references to consumer’s preferences which is different from Milton Friedman concept. On Friedman point of view: There is a moral foundation required for a stable society and “Managers are to make as much money as possible for their owners and avoid other activities that reduce shareholder profits”. As it is emphasizes by M. Friedman:…

    • 759 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    Their social purpose is to make profits, grow bigger and make much money as possible for its stakeholders. Individuals who run these corporations do not care about what impact their business have or how they affect the social life of other people. From my point of view, this is the main reason why he claims that the business owners care about the social responsibilities of their social life, but they don't take care of the same social responsibilities when it comes to running their businesses. The way he was proposing was right. Companies and firms should be allowed to make as much profit as they can, but in return, legislations that will demand the benefits created by the businesses to be used to take care of the externalities from their companies should be set.…

    • 1164 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    Stockholder Model

    • 1850 Words
    • 8 Pages

    In Joseph Heath’s paper “Business Ethics without Stakeholders”, he exposes that the fiduciary relationship between managers and shareholders seems like “concepts with explicit moral overtones” which might derive from the thoughts on serving “as a natural point of departure for the development of a theory of business ethics” (p.108). Yet, “[it is still a] blurring of the distinction between the pursuit of self-interest on the part of individuals and the maximization of profit on the part of firms” (p.109) Thus, the potential “moral hazard in the relationship between managers and shareholders” is likely to be misjudged and the genuine conflicts also arise since manager is unable to take shareholders’ side instantly for every moral action he made. He questions how far beyond a manager should rely on shareholder’s interests without noticing stakeholder’s concerns in which it reveals that there are “limitations of any theoretical approach to business ethics that takes obligations to shareholders as the sole criterion of ethical conduct in business” (p.112) My view is consistent with Heath’s view on the stockholder model in which I will argue that even though managers should act towards owner’…

    • 1850 Words
    • 8 Pages
    Decent Essays
  • Decent Essays

    Corporate social responsibility ! this essay is going to discuss A business’s only responsibility is to produce profits.To what extent do you agree with this statement ! to answer whether am I for or against corporate social responsibility, I would say I disagree because I don 't believe in just making profit, I believes in giving back to the community. As we can see some businesses include poor people in their investments and this benefit both rich and poor people.! According to Mc Williams and Siegel, corporate social responsibility is the actions that appear to further some social good, beyond the interests of the firm and that which is required by law.…

    • 1078 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    In his controversial article, the social responsibility of a business is to increase profits; He vehemently expressed his position that the sole purpose of a business is to maximize the wealth of its shareholders (Friedman, 1970). However, Friedman was not completely against the stakeholder view, his main position is that unless a profitable motive could be establish for investment in social responsibilities, then they should not be undertaken. Stakeholder Theory In sharp contrast to shareholder theory, stakeholder theorists argues that a business is not only responsible to shareholders but to other stakeholder groups. A classical proponent of this theory is R. Edward Freeman. In his book, Strategic Management, he defines a stakeholder group as a group whose support is vital to the survival and success of the business (Freeman 1984).…

    • 1346 Words
    • 6 Pages
    Decent Essays
  • Decent Essays

    A business that acts on social responsibility rather than shareholder interest is undermining the system of a free society. It simply is not proper or fair for a business executive to act as the judicial, legislative, and executive function all at once. The only responsibility of a business is to use its resources to engage in activities that increase profits, both for the business and its shareholders. To most, corporate social responsibility seems appealing on the surface, but the road to corporate fraud and wrongdoings can be paved with good…

    • 1021 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    This argument gives rise to the thesis known as Adam Smith’s famous conception of the invisible hand. This theory offers the idea that some “invisible hand” serves as the conductor for a prosperous society ensuring resources are ideally allocated to all participants (Pfarrer, 2010). In brief, Friedman claimed that when businesses pursed only profits and was granted to do so under no restrictions, that they would inherently benefit the interests of others. However, this presented argument faces serious objections to it. Despite the promotion of society though profit maximisation, the intention of businesses become under scrutiny as their motive is questionable to the point that their beneficiary behaviour is fact selfishness (Mintzberg & Simons, 2002).…

    • 965 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    Someone like Milton Friedman would say that a business does not have a moral obligation to the community, but does have an obligation to maximize profits for shareholders. Some people would disagree with that and say that a business has a shared responsibility to shareholders and the community and that is what we will see argued today. (First to Debate) Milton Friedman: CSR is something known as Corporate Social Responsibility, something…

    • 1226 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    H. B Fuller Case Study

    • 949 Words
    • 4 Pages

    Following Milton Friedman who advocated free-market economy claimed that business has to try to maximize their its profits rather than pursing a social profit within laws and regulations. Let’s assume two different situations; the first one is a business desires only social profit rather than business’s profit. This is totally beneficial to community, customers, and governments, but it totally does not make sense to other people such as…

    • 949 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    However, the disadvantage of shareholder theory is that it largely ignores other factors that affect the company’s performance. When taken into account, these factors, which include the interests of stakeholders, may benefit the firm in different ways (e.g. happier employees leads to higher productivity, obeying government regulations lessens penalties, sustainable business processes leads to less pressure from environmental activists, social awareness entices customer loyalty, etc). In contrast, stakeholder theory focuses on what the first theory ignores. The changes in business environment that Freeman (1984) took note of in the 1980’s are still affecting firms today.…

    • 705 Words
    • 3 Pages
    Decent Essays