The Social Responsibility Of Business

Milton Friedman’s shareholder theory of management says that the purpose of a business is to make money for the owner or the stockholders of the business. Friedman says that there is only one social responsibility for the business: to use its resources in order to increase

First thing let us start with a little overview of what Milton Friedman exposed in his article. It seems that the whole point of his essay revolves around one basic statement which clearly says that the only social responsibility of business is to use its resources and engage in activities designed to increase its profits so long it stays within the rules of the game (Milton Friedman, the social responsibility of business is to increase profit).

What Friedman implies is that shareholders should only be concerned with maximizing profits and not be obligated to be “socially responsible.” In that case, the manager would only have one priority, to maximize profits. However, what if that manager determined that social endeavors is the best option to maximize profits? This would make the corporation socially responsible while still maintaining maximum profits. The argument presented by Friedman in this case is that while the manager is performing as expected by maximizing profits, this type of “social responsibility is frequently a cloak for actions that are justified on other grounds rather than a reason for those actions.”

The ethical issues presented in this case are the different views that each individual has on how the idea of corporate social responsibility (CSR). This dispute is between Mr. Milton Friedman, John Mackey, and T.J. Rodgers; all of which has a different outlook on CSR. The definition of CSR refers to the responsibilities that business has to the society in which it operates and to those actions that a business can be held accountable. Most philosophers have come up with three different types of responsibilities that corporations can be held accountable for. The first and most important of the three is a corporation’s duty to not cause harm. If a corporation can

Milton Friedman argues that persons may choose to undertake social responsibilities to their communities, churches, or nations, and devote their own incomes to causes that they deem morally worthy. But, he adds, if corporate executives attempt to take such social responsibilities or to direct the corporation’s profits to such personal causes, without approval from the shareholders, then:

Friedman’s second argument follows a similar idea, but with another reason why the businessman’s ideas of social responsibility aren’t to be fulfilled through the business. If the agent of a business would spend money to further his supposed social responsibilities, he is using something that is not his to spend as he sees fit. Any money earned by increasing the price to consumers, decreasing the wages of the workers, or withheld from the stockholders belongs to the business and has been taken from these parties to be used in ways that they could have used it on their own. If the agent uses the money in

The prevalent view of business’ social responsibility is Milton Friedman’s agent-owner theory. His thesis mainly says that“ There is one and only one social responsibility of business – to use its resources and engage

Therefore when Friedman mentions the role of a corporate executive, it doesn’t make sense for an individual working towards improving the business to care about social responsibilities if it isn’t a desire of his employer (Friedman, 1970). A corporate executive should only worry about social responsibility in his personal life not when the corporations stakeholders and employers money is at stake (Friedman, 1970). When a corporate executive acts voluntarily, he is “acting as a principle, not an agent; he is spending his money or time or energy…” (Friedman, 1970,

In this paper, I show that Friedman’s argument that it is immoral for managers to act on social responsibilities, fails. He relies on that assertion that shareholders expect a maximal return on their investment and if managers spend corporate funds on “social responsibilities,” they are in turn taking profits away from shareholders and using their money for an unintended purpose. However, this claim is false, as shareholders cannot expect maximal profits and cannot dictate exactly what company funds are spent on.

Nevertheless, Friedman pointed out that the profits has taken the firms in to the hand of business intellectuals by which Friedman recommend that the financial system by which the organisation run its business is in the restricted responsibility protection which makes the organisations to privatise their profits (Friedman 1970 pp. 177-184). Friedman also suggested that according to him the shareholder theory in terms of socially responsible can only increase the profit. But on the other hand shareholder theory of Edward Freeman completely support the theory of shareholder towards its role to be socially responsible in the society and maximising the profits for the benefits of shareholders within the firms and society as well (Freeman 2008 pp. 162-165).

Milton Friedman wrote in his famous 1970’s article in The New York Times Magazine, that “the one and only social responsibility of business, is to increase profits for shareholders.” Milton Friedman's view on business responsibility accentuates the importance of maximizing firm's value. He pointed that the “there is one and only one social responsibility of business –to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engaged in open and free completion without deception or fraud’’ and by taking on the burden of social cost, the business becomes less efficient (Milton Friedman, 1962).

Do you agree or disagree with the following quotation: “There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say engages in free and open competition, without deception and fraud.” Milton Friedman, a Nobel Prize winning economist. In other words, the social responsibility of business is to make a profit.

Milton Friedman was an American economist, statistician and writer, who had a massive impact on the research agenda of the economics profession. His famous words “the only responsibility of business is to increase its profits” (Friedman, Milton. 1970) led to many controversial debates on whether businesses should have ethics or if profit should be their main goal. Corporate social responsibility has many definitions, as its interpretation is quite loose, so I have chosen one that relates the most to this essay, given by the World Business Council for Sustainable Development, in 2000: “Corporate social

Is the deception of consumers worth making a profit? The Ford Pinto, popular car of the 1970s, made a profit off of a vehicle that endangered the lives of hundreds of people. In his essay “Pinto Madness” Mark Dowie, author and Pulitzer Prize nominee, exposed the unethical decisions made by Ford Motor Company. When it came to their customer’s safety and profit for the company, Ford made a decision that led to consequences their customers had to pay the price for. Should the business be held accountable for these actions? In his essay “The Social Responsibility of Business Is to Increase Its Profit” Milton Friedman, powerful economist, discusses what a business should prioritize in the economic system. Friedman declares what a business is responsible for and the guidelines they must follow. Due to Friedman’s view, he would not have condoned the actions and decisions that the executives at Ford Motor Company took.

John Friedman begins his text with mentioning the misquotation of Milton Friedman’s famous sentences, “There is one and only one social responsibility of business to increase its profits." John Friedman says, “In fact they are misquoting and simplifying just one part of Mr Friedman's more than four decades' old statement. The complete statement is rather broader and brings in a few elements of what is today considered to be integral parts of corporate responsibility -- ethics and integrity.” In the complete statement, Milton Friedman says, “There is one and only one social responsibility of business -- to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to