Introduction
The article “The Social Responsibility of Business” by Milton Friedman is the primary source for this essay. Over an extended period, it has been evident that the social responsibility framework creates a unified and vital field of business growth since it encourages business institutions to incorporate fair business practices in any given situation. The framework in question considers the responsibilities and roles of the executives, managers, and all to protect the employee’s value in corporate business. Milton started the argument on how social responsibility affects a business’s profit while enhancing broader identity in the market industry. The main objective of the study is attained by incorporating the theories associated with organizational corporate social responsibility. Furthermore, it will develop logical arguments which contradicts and accepts with Friedman’s ideas.
Overview of Friedman’s Ideas
The goal of the paper, before it reviews the essay critically, is to provides a summary of the article’s key concepts. Friedman claims that the primary Shareholders are the companies’ primary customers, and these companies should prioritize social relations. His assertions are institution’s objective is to maximize returns and that as a result, they are accountable for providing the profits to the investors whose job it is to make investments in the company. Shareholders have an authority to determine which social groups should be included in the company and not the institution’s team making decisions for them. The objective of a company is to maximize profits for both its own advantage and that of its stakeholders, as it should. Friedman is right that the main goal of each is to serve the needs of their individual. The goal of a corporation is to turn a profit, but in order to do this, they must also invest in other things. Additionally, the company should highlight its customers, as they are the ones who decide how much money the company makes. For instance, the company’s customers are few and some have stopped using its products and services. Consequently, there won’t be any profit, which will result in the corporation’s demise. In my view, Friedman’s claim is false.
Corporate social responsibility is a term with many definitions and dimensions. In this instance, we’ll use the World Business Council for Sustainable Development. It is the process of growth, which is frequently used to define corporate social responsibility. Corporate responsibility is to promote economic growth while protecting resources for the future and present generations and furthermore to act responsibly for the benefit of the current and coming generations by doing the necessary work with all team members to improve their health in ways that benefit businesses, Organizations, as well as the larger society, are affected, in line with Friedman’s understanding of corporations’ obligation to return profits to shareholders is just one of their duties and not to anyone else. If a business practices corporate social responsibility to others, such as society, will fail if it fails to maintain focus on its one objective of managing the profits to their stockholders once more (Friedman, 2007).
Critical Analysis of Friedman’s Thesis on CSR
Theoretical Arguments and Logical Arguments
Carroll, a scholar, challenges Friedman’s assertion by pointing out that a corporation involves four social responsibilities. He exhibits social responsibilities, including social, economic, legal, and charitable duties. The social commitments by means of his pyramidal representation of corporate social duties. He emphasizes businesses acting in a fair and equitable manner to prevent chaos even in cases of financial obligations activities should bring profits for the cases they are not required to. The lawful obligations entail abiding by the rules and regulations for the benefit of everyone in the society. Finally, charitable obligations are all the requirements for corporations to comply with the established laws. Orders that businesses provide and implement are to improve the standard of living for employees and customers. The four obligations lay the groundwork for understanding the responsibilities of one’s community. Corporations have a responsibility to the society in which they are formed, according to Carrol (2016: Government should work with businesses to make sure they are socially responsible (Carrol, 2016).
Bowen, however, doesn’t agree with Friedman and claims that, aside from businesses, while pursuing its objectives of creating a profit, they must prioritize the society first by supporting them in any problem. Crane and his colleagues are another scholar who disagrees with them on issues like eradicating suffering. Colleagues who assert that a business needs a license from the government to start operating businesses. The government is responsible for imposing social obligations, such as establishing rules and assigning duties and ensuring environmental standards are met, demonstrating why businesses should be socially responsible. Additionally, Moore argues against this idea by claiming that corporations are aware of the expectations placed on them by their culture’s values and rules, which is their obligations. However, a lot of people disagree with some academics who support Friedman’s ideas. Levitt backs him up by stating that businesses have a responsibility to look for profits. He supports Friedman’s claim that businesses do not operate for their own benefit when he says that profit expansion. Giubilini seconds and adds that they have other obligations besides the main one. Only people are capable of reasoning, so they are the only ones who can decide which activities to engage in corporations.
Friedman maintains in his essay that the social responsibilities that employees have are on share owners only. The employees must abide by the managers’ decisions, which are focused on their shareowners, not the community. Employees follow manager’s rules by carrying out the various responsibilities within the business, such as making sure that the corporation’s operations go on smoothly. According to Friedman’s (2007) analysis of the shareholder model, share-owners should be the sole motivators of the business because they ensure its profitability (Friedman, 2007). According to the model, it requires the corporation’s CEO to distribute the acquired profits to the stockholders. However, the government’s use of income includes social obligations like stealing from the poor. According to this model, Friedman adds that the share-owners are the ultimate beneficiaries of the dividends. Keeping the rules of the corporation is a business’s only requirement in order to generate profits. For example, in real life, Apple was engaged in this type of business where apart from stealing Instead of earning profits, they engaged in theft, going against Friedman’s principle. We use Freeman’s argument, to prove the theoretical concern. He claims that for the business the corporation is just as important as the shareholders and customers. It must take into account every participant in the community in order to advance.
In addition, according to stakeholder theory, the representation of all social actors provides with the corporation many advantages, including increased success and subsequent growth. It shows that a company has more supporters and customers, which is the secret of corporate social responsibility (Corporate Social Responsibility and Millennials’ Stakeholder Approach, 2017) Friedman’s claim does not support obligation, in Freeman’s opinion (Laplume et al., 2008) recognize the key elements that, in this case, are the rules and regulations, don’t make a company successful. Additionally, he disregards social norms, regulations, and the shareholder model. Jackall asserts that various community members decide whether profits are high or low, indicating that they are significant to the company. The previous example of Enron is given. Again, the word corporation applies here; they disregarded the contributions of various social actors and focused on Friedman’s claim that their sole responsibility was to maximize profits for themselves. Due to this, Enron misappropriated their profits and their share-owners (Friedman, 2007). As a result, according to Freeman, the stakeholder model aids businesses in corporations to make effective use of their investments, respect each community member. The explanation, therefore, disagrees with Friedman’s assertion that corporations should make good use of their resources. Apart from the one commitment, the shareholder model and the argument both support those other obligations apply to corporations.
Friedman contends that businesses are not required to address social issues such as a lack of food and a decrease in suffering, but the government, which is incompatible with Legal ethics, in Carroll’s opinion: Businesses pay taxes, while the government collects them. He argues that corporations are busy with their responsibility of making decisions, you should use them to handle these issues (Mulligan, 1986). Additionally, government officials determine the levies that businesses should and should not pay in terms of profits. it extends that obligation to include deciding how to alleviate suffering in society. Friedman asserts that businesses lack a recognized or prescribed strategy for addressing social issues in matters like the government representatives who are willing to address them. Friedman says that businesses should not worry about their corporate social responsibility and instead concentrate on their own. On the contrary, Crane and his mates believe that they have a single obligation to make profits for their benefit. They believed that the involvement of the corporations with the large profits should be used to benefit society. Social actors help them succeed more, so they should give back to the community (Crane, A. and Glozer, S., 2016). They should be good by contributing to the resolution of various social issues, such as helping out when there is a food shortage. As the largest company on the planet, Amazon should prioritize solving problems as the community keeps growing.
Friedman contends that a company’s financial contributions to social causes cause a decrease in investment. The things are such as doing other things outside of business reduces investments, so it is said that the company should not engage in any charitable endeavors (Friedman, 2007). It speaks of using the money however one pleases, which is consistent with the egoism aspect that a company’s profits should only be used to benefit the company, its stakeholders, and It simply states that a good action gets tremendous results, nothing more. It claims that such activities bring happiness to society and generate substantial amounts of income for a large number of people. The utilitarian view contradicts Friedman’s claim and claims that more suffering and grief should be eliminated. It illustrates the significance of corporate social responsibility to corporations by highlighting the advantages it includes (Social Responsibility and Impact, 2020).
Businesses should focus their efforts on sustainability while making sure that they are concerned about the needs of both present and coming generations, but for Friedman, this is not the case. He states that the company’s primary objective is to focus on the profits. Sustainability, in Friedman’s view, would ensure that companies’ stakeholders are taken care of. He refers to a company engaging in other activities that divert attention from the primary objective, resulting in social issues. Additionally, Friedman contends that it is the failure to address issues like failure to make profits. The obligation of the employees and the corporate management to deal with sustainability that involves avoiding water and air pollution and using resources in an unsustainable manner. Friedman asserts that the corporation should be ignored so it can concentrate on pursuing its one and only goal of generating profits. Friedman’s argument is incorrect because, when it comes to sustainability, the corporation involves the managers and employees of the business in its responsibility. The stakeholders are also responsible, and as such, each of them is accountable for making sure that their actions and procedures are sustainable. When a company focuses solely on its own growth, it would not be sustainable. A lack of sustainability that ultimately destroys the entire society through pollution and other factors. Sustainability, therefore, should be the objective of every corporation for the raising the standard of living for both the present and the future.
Four different kinds of ethics also challenge Friedman’s claim and are applied to institutions. Virtue morals emphasize honesty more than anything else because it is a quality that is valued in corporations. The values that one ought to practice include loving, mercy, and being kind. Moral duties ensure that deeds that are evil are not suitable. Kant claims that people have the capacity to determine whether what they are doing correct stuff or not (Korsgaard, C.M., 1986). According to deliberate morals, actions are right if they ultimately lead to the achievement of some sort of good. Egoism and utilitarianism are the final two components of deliberate morality, along with the required results. Morality is concerned with rights, which implies that everyone has the freedom to pursue any course of action. It illustrates that when a person has an understanding of social responsibility, they are then responsible. The corporation should concentrate on other things besides morals, such as: sustainability in how it conducts its operations.
Use of Relevant Examples
Friedman uses examples to bolster his claims. He first claims that people are the ones with duties. Here Friedman forgets that people are the ones with obligations, not corporations and those who create corporations and are in charge of their excellent management, which Moreover, for a corporation to be socially responsible, both they and the corporation must be good. To be deemed as good, something must contribute to the societal well-being, which requires taking part in social duties. Second, he utilizes the example that the corporation’s head can operate in other obligations or functions outside the business, like donating his money to charity or engaging in other non-business. They fulfill their social obligations rather than a corporation, which has the exclusive. This isn’t right because, among other things, making profits is the responsibility of management (Friedman, 2007). Considering that he is the leader, he must be involved in duties and the business. Most people believed that failures at large corporations like Enron were caused by a lack of corporate social responsibility.
An example of a company which exists and has succeeded in its operations while being involved in helping the society is Amazon. It has prioritized solving the community problems as the community grows. This goes against the Friedman’s ideas. There is an example used by Friedman that the government is the one responsible for solving problems not the corporation. He defends his ideas using this example.
Conclusion
In conclusion, in his article, Friedman argues that a corporation has just one duty to its shareholders: In terms of the corporate social responsibility, making a profit for themselves and the stakeholder. According to Friedman, businesses should only be held to their legal obligations. He employs various strategies to maximize profit and distribute it to the stakeholders who performed the work. Examples to support his arguments include the problem of government solving the social issues pertaining to society, not the business, and the manager’s involvement in other activities, Friedman’s opinions run counter to the shareholder theory, which holds that the corporation is not the ultimate shareholder and asserts that all social actors must be involved for corporations to succeed. The various market structures that don’t still exist in Friedman’s essay and argument are examined in the United States through allowing the corporations to be governed by restrictions. A problem arises when a corporation’s purchasing power outweighs the community’s potential in looking for a constitutional solution to their social problems. However, the different corporations suffer harm as a result of collective decisions, particularly in the United States disregard the need for sustainable development and social responsibility, which means that the overall taking care of and caring for the environment is a way to prevent environmental damage and community decline. Governments should take collective responsibility, even if other nations pollute the water. By understanding that industries are using harmful chemicals and contributing to deforestation, it indicates a lack of corporate social responsibility harms society as a whole. Without taking into account sustainable development, each nation is concentrating on development and highlights the need to use resources for the current generation’s benefit. For example, when we examine various kinds of animals, the future ones are unlucky and plants, some of which are in danger of going extinct simply due to lack of people taking appropriate action. This demonstrates how in the debate over who is responsible for this. Friedman seeks to establish the cause of the particular issue. United States corporations are vying for better business operations while overlooking or disregarding the importance of corporate social responsibility.
References
FRIEDMAN, M. 2007. The social responsibility of business is to increase its profits. Corporate ethics and corporate governance. Springer. Corporate Social Responsibility and Millennials’ Stakeholder Approach. (2017). Journal of Leadership, Accountability and Ethics, 14(4). doi:10.33423/jlae.v14i4.1488.
CARROLL, A. B. 2016. Carroll’s pyramid of CSR: taking another look. International journal of corporate social responsibility, 1, 1-8.
Mulligan, T. (1986). A critique of Milton Friedman’s essay ?the social responsibility of business is to increase its profits? Journal of Business Ethics, 5(4), pp265-269. Social Responsibility and Impact Ethical: Underpinnings of Social Responsibility Feb 2020
LAPLUME, A. O., SONPAR, K. & LITZ, R. A. 2008. Stakeholder theory: Reviewing a theory that moves us. Journal of management, 34, 1152-1189.
Crane, A. and Glozer, S., 2016. Researching corporate social responsibility communication: Themes, opportunities and challenges. Journal of management studies, 53(7), pp.1223-1252.
Korsgaard, C.M., 1986. The right to lie: Kant on dealing with evil. Philosophy & Public Affairs, pp.325-349
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