Milton Friedman's Corporate Social Responsibility Of Business
However, in its contemporary context CSR is brilliantly defined as corporations involved in voluntary social and environmental efforts that transcends legal and ethical regulations (Davis, 1973; Piacentini; MacFadyen, & Eadie; McWilliams & Siegel, 2001).
The World Business Council on Sustainable Development (hereafter WBCSD) an internationally recognized organization for research on business development and environmental management, defines CSR as the commitment of business to contribute …show more content…
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.
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).
Furthermore, DiSegni, Huly and Akron (2015) in the Journal of Business Ethics argues that CSR helps to: enhance the image and reputation of the firm, which tends to gives the firm a competitive advantage over its competitors, which ultimately leads to increase market share, revenue growth and better financial …show more content…
Arguments against CSR
In sharp contrast to the arguments mentioned-above, many business leaders have discounted the concept that a business should invest in social responsibilities. These theorists argues that investment in social responsibilities violates the fiduciary (i.e. agency) relationship that exists between management and the shareholders (Bradgon 1972; Vance, 1975, Aupperle et al., 1985; Ullmann, 1985).
Additionally, many claim that social responsibilities creates room for ‘competing interests’. These competing interests, they argue results in the dilution of shareholders’ funds and profits, which may result in no real return in the future.
Another prominent argument, which stems from the shareholder theory and has gained currency in the late 1990’s, is the concern that investment in social responsibilities can place a business at a competitive disadvantage, in relation to its rivals. Furthermore, many argues that there is an opportunity cost i.e. the resources used on social responsibilities, could have been invested in research and development, marketing and product design which would likely result in an immediate