Do Corporations Have a Responsibility to Society Beyond Maximizing Profit?
Shravan Kumar M
Under the direction of professor, Minnick, Marc D
Corporate Social Responsibility beyond Maximizing Profit
Growing concern of society on socio-economic and environmental issues has raised the thought of corporate social responsibility. Corporate Social Responsibility (CSR) is a “concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”, which means beyond the frame given by law – by World Business Council for Sustainable Development (WBCSD) in 2004.
Growing needs in energy, ...view middle of the document...
2. Trusteeship Management:
This phase recognized the importance of enlightened management towards all the people who interact with the company, not only stockholders, but also employees, customers, suppliers, banks, and the community.
3. Quality of Life Management:
In this most recent phase, in addition to their enlightened management, companies are expected to solve major society issues.
Main Arguments of Milton Friedman
According to Milton Friedman, "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 say, engages in open and free competition without deception or fraud."
A corporation is an artificial person and in this sense may have artificial responsibilities, but “business” as a whole cannot be said to have responsibilities. Friedman says, as a corporate executive, the manager is the agent of the individuals who own the corporation or establish the eleemosynary institution, and his primary responsibility is to them. In his words, if a corporate executive has a “social responsibility”, then it must mean that he is to act in some way that is not in the interest of his employers. Moreover, he feels there he is acting as a principal, not an agent. According to him, the doctrine of “social responsibility” involves the acceptance of the socialist view that political mechanisms, not market mechanisms, are the appropriate way to determine the allocation of scarce resources to alternative uses. On the grounds of consequences, “social responsibility” doctrine is brought into sharp relief when the doctrine is used to justify wage restraint by trade unions. In US, union leaders have objected to government interference with the market far more consistently and courageously than have business leaders.
Three Main Areas of Disagreement
1. Friedman’s argument suggests that because businesses are not moral persons, they cannot therefore have responsibilities. This argument lacks rigor in that since he never carefully distinguishes between moral and social responsibility.
2. Friedman makes an interesting claim that social responsibility necessarily comes at the expense of the interests of employers, or shareholders. This is a fairly common belief that economic returns and social returns are inherently at odds with one another. But, this is not...