Friedman csr. Milton Friedman and the Social Responsibility of Business 2019-02-18

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Milton Friedman Was Wrong About Corporate Social Responsibility

friedman csr

For example, that he is to refrain from increasing the price of the product in order to contribute to the social objective of preventing inflation, even though a price increase would be in the best interests of the corporation. In addition, as we have seen with the proliferation of 'new' technologies, the law usually follows advancements in technology and thinking. What it amounts to is an asser tion that those who favor the taxes and expenditures in question have failed to persuade a majority of their fellow citizens to be of like mind and that they are seeking to attain by undemocratic procedures what they cannot attain by democratic proce dures. Education financing patterns can partially be accounted for by the motives of corporations to voluntarily support education, pension and insurance schemes for the staff, and other socially important programs. There are other rules that businesses must adhere to if they wish to be successful; such as the obvious rules of the marketplace including supply and demand. The individual must serve more general social interest— whether that be determined by church or a dictator or a majority. It does not differ in philosophy from the most explicitly collectivist doc trine.


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Milton Friedman CSR: Corporate Social Responsibility

friedman csr

To illustrate, it may well be in the long run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community or to improving its government. For example, that he is to refrain from increasing the price of the product in order to contribute to the social objective of preventing inflation, even though a price increase would be in the best interests of the corporation. As a result Friedman is innocent until proven guilty and the opposition guilty until proven innocent. Due to the nature of American entrepreneurship, which is based on maximizing the freedom of participants, there are a number of self-regulating mechanisms in contemporary American society. By understanding the desires of consumers, a corporation can offer products and services that match their ethical thresholds, thereby adding value to both shareholders and consumers, thus avoiding marketing myopia as described by Theodore Levitt.


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Friedman doctrine

friedman csr

Maximizing shareholder value thus turned out to be the disease of which it purported to be the cure. If our institutions, and the atti­tudes of the public make it in their self-inter­est to cloak their actions in this way, I cannot summon much indignation to denounce them. Journal of the History of Economic Thought 25 2 : 133—143. A further question raised by his article is whether corporations should engage in socially responsible activities. Companies that operate exclusively for the sake of maximising shareholder return and thus do not engage in socially responsible activities are considered unethical in the utilitarian point of view. Consumers want and expect attributes from what they buy -- quality, safety, value - depending of course on the price they pay. Insofar as his actions lower the wages of some employees, he is spending their money.

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Corporate Social Responsibility (CSR), Milton Friedman, Excellence Models

friedman csr

But it helps to strengthen the already too prevalent view that the ptirsuit of profits is wicked and im moral and must be curbed and con trolled by external forces. In due course, they even came to view it as. The money took over… Sadly, as often happens with bad ideas that make some people a lot of money, shareholder value caught on and became the conventional wisdom. The social responsibility of smaller firms is just now entering the conversation. Here, as with price and wage controls, businessmen seem to me to reveal a suicidal impulse. Busi­nessmen who talk this way are unwitting pup­pets of the intellectual forces that have been undermining the basis of a free society these past decades. In each of these cases, the cor porate executive would be spending someone else's money for a general social interest.


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Corporate Social Responsibilty: Friedman's View

friedman csr

Not surprisingly, executives were only too happy to accept the generous stock compensation being offered. Either the present ones or those who take over when his actions in the name of social re sponsibility have reduced the cor poration's profits and the price of its stock. On grounds of political principle, it is intolerable that such civil ser­vants—insofar as their actions in the name of social responsibility are real and not just win­dow-dressing—should be selected as they are now. The socio-economic view claims that companies should maximise the good for the greatest number of people. It is neither efficient nor reliable to impose ill-defined social responsibilities that may be open to arbitrary interpretation by firm managers. The political principle that underlies the political mechanism is conformity.

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Milton Friedman Was Wrong About Corporate Social Responsibility

friedman csr

He argued that a utility company that does not cut off electricity to non-paying customers would perish as there is no reason for customers to pay their bills. Does this mean that directors can act in any way to increase profits? In a 1970 Times magazine article, the economist Milton Friedman argued that businesses' sole purpose is to generate profit for shareholders. As the Michael Douglas character in the 1987 movie, Wall Street, pithily summarized the philosophy, greed was now good. So clearly, therefore, a corporation can have legal, but also moral responsibilities. They are not just a means to the end. It differs only by professing to believe that collectivist ends can be attained without collectivist means.

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Milton Friedman CSR: Corporate Social Responsibility

friedman csr

Some may argue that goods provided to society in a time of need build further allegiance to a corporation and in theory, meet the stockholder theory's requirement to look in the best interest of the stockholder. For example, a company donating services or goods to help those hurt in a natural disaster, in some ways, may be considered not taking action in the best interest of the shareholder. Society is a collection of individuals and of the various groups they voluntarily form. It attracts critics as well as advocates from across the political spectrum. There is nothing that could do more in a brief period to destroy a market system and replace it by a centrally con trolled system than effective gov ernmental control of prices and wages. On the level of political principle, the imposition of taxes and the expenditure of tax proceeds are gov­ernmental functions.

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Freeman vs Friedman

friedman csr

Insofar as his actions in accord with his 'social responsibility' reduce returns to stockholders, he is spending their money. Yet, precisely the opposite occurred. Over the years it has published special issues in cooperation with a number of professional associations, including the Society for Business Ethics, the Markkula Center for Applied Ethics, the Australian Association for Professional and Applied Ethics, and the Canadian Society for the Study of Practical Ethics. He was arguing, even if such ideas seem counterintuitive at first blush, that single-minded profit maximization allied with an appropriate framework of law would be more likely to produce social good than exhortations that firms be socially responsible. How is he to know what ac­tion of his will contribute to that end? But nothing about his selection makes him an expert on inflation. Contributors include leading scholars in business and practical ethics from several countries.

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