In the article "the social responsibility of business is to increase its profits" by Milton Friedman, he takes the position that various corporations can never be socially responsible. He believes that it's only the people in the company who have responsibilities. Friedman (1970) suggests that the concept of social responsibility should be taken by corporate executives of various businesses but not by businesses themselves. This is because it is the corporate executive's responsibility to conduct business and steer the business to profitability. The corporate executive's ethical values and those of the corporation owners should interact in a way that creates value in the corporation. They could be divergent but should be geared towards the profitability of the corporation. This paper is a critique of the article. The paper is based on a divergent view that is disagrees with the one provided by Friedman.
What is social corporate responsibility?
The definition of corporate social responsibility (CSR) is not clear cut. McWilliams and Siegel (2001) define CSR as "actions that appear to further some social good, beyond the interest of the firm and that which is required by law."(p.117).However, an important point to note is that CSR is more than just the observation of the law as pointed out by McWilliams & Siegel (2001). A better definition is provided by Frooman (1997) that points out that CSR is "An action by a firm, which the firm chooses to take, that substantially affects an identifiable social stakeholder's welfare." (p.227). It is therefore crucial for a socially responsible firm to initiate steps as well as adopt policies together with business practices that moves past the minimum legal requirements as well as effectively contribute to the key stakeholder's welfare. This therefore implies that CSR is viewed as a very comprehensive policy sets, programs and practices that are integrated seamlessly into the key business operations, decision making apparatus and supply chains in the given corporation. It however usually entails issues related to business ethics, governance, community investment, human rights, environments issues, the general market place and the workplace.
In this paper I am evaluating Milton Friedman's essay which states that The Social Responsibility of Business Is to Increase Its Profits. The essay was written in the year 1970. In all books and articles that I have examined about social responsibility, the Efficiency Perspective of Friedman is centrally placed. When I was conducting my research I realized that Friedman is always criticized because of being very classical. He strongly believes that the major objective of a manager or his moral role to the firm or to the business should be to always maximize profits. However, there is one condition complicating his perspective, not only to me but also to several well-known writers. According to him, the obligations of the manager ought to be carried out when in compliance with the vital societal rules, both the people who are embodied in law and also those who are embodied in moral tradition. This results in the question that the essay seeks to answer. The question is; to what degree is the "Efficiency Perspective" of Friedman giving a basis for moral and responsible international management behavior? And should we have any fear in case it fails to happen? To answer fully these queries, I need to first explain the two separate parts of the first query: responsible global management behavior and also moral global management behavior. In businesses these days they join these two sections, in that order, responsible and moral gets to social responsibility in global management. The other query expects the other models and theories that we ought to consider when the efficiency perspective of Friedman is not giving a basis for social responsibility in international management.
Before I move further to respond to these questions, I would like to elaborate more concerning the concept of social responsibility. Later, I will elaborate Friedman's full theory, and also its relationship with these numerous social responsibility models. After all these, I will give a conclusion.
In his well-known essay, Milton Friedman argues that the individuals responsible for actions and decisions in business are not to apply social responsibility in their power as the company executives. Rather, they should focus on maximizing their companies' profits. In the essay, he argues that the policy of social responsibility is a communist principle. The aim of this paper is to critically examine the worth of Friedman's arguments. I will sum up his main ailments and critically asses a number of lines of inference, and come up with a counter-argument. In Friedman's argument that corporate executives are not to exercise social responsibility, he states that the practice of social responsibility by corporate executives is unfair due to the fact that it comprise taxation that is not having representation. He also describes it as being undemocratic due to the fact that it invests the governmental power in an individual having no universal authorization to govern. Thirdly he describes it as being unwise, this is due to the fact that there exists no balances and checks in the wide collection of governmental power thus turned over to his judgment. Again, there is an infringement of trust; this is due to the fact that the executive is an employee of the owners of the corporations. He also says that it is futile. This is because the executive is not likely to be capable of anticipating the social effects of his actions and also because when he inflicts costs on his customers, stockholders or employees, it is probable that he may not gain their support and hence he will lose his power.
These conclusions are related. The second point which states that the process is undemocratic and the one that states that it unwise is dependent on the first argument that states that it is unfair on the view that the burden of taxes and the costs of tax proceeds are functions of the government. The point that states that there is violation of trust is also dependent on the first one which stated that the process is unfair. The point that stated that the process is futile is also dependent in part to the fourth point that stated that the there is violation of trust because it is the failure of the executives to meet his principal's interest whose outcome is the withdrawal of the support of the principal. The point that stated that the process is unfair is therefore at the basis of the dispute, if the point stating that the process is unfair is false, then Friedman's illustration of the consequent conclusions almost collapses completely.
Is it factual, then, that the executive who is performing socially responsible action is effectually
Imposing taxes and also making decision on how the proceeds from tax will be spent? In this case, Friedman is arguing by depicting the way an executive of a company will perform an action like that. He initially introduces examples to prove that implementing social responsibility in business normally costs money. He states refraining from an increase in price to help in the prevention of inflation, minimizing pollution to quantity that suite the interests of the firm to help better the surroundings. To find out that such costs are taxes, he argues that when such action is taken, the executive is applying the money of somebody else. The people whose monies are being taken are the customers, stockholders, or the workers. Instead of working as the agent of the employees, stockholders or the customers, the manager will spend the money in several other ways than they would have used it. The starting two premises show a connection between tax revenues and this money, with respect to their origins and to the reasons why they are applied. On the contrary, an expense is not a tax, only when it is directed to the contributor, regardless of his willingness to pay. Friedman's third argument only entails this key element of indisposition. The third argument shows the critical character of the paradigm on which Friedman bases the whole of his case.
Friedman's model in the examples above of socially responsible act and all through his essay, he portrays the corporate executive performing such action as a Lone Ranger, making decisions by himself entirely on what good things to do, when to take the action and the amount of money to spend.
Here, the entrepreneur who is self-selected or directly appointed or appointed by the stockholders indirectly is to be a legislator, jurist and an executive at the same time. He is to make decisions on the people to tax, the amount they should be taxed and the purpose for which they are being taxed. In this example, the corporate manager is not acting with the participation and the advice of the stakeholders in the firm. This is the foundation of Friedman's assertion that the executive is putting something on other…