"The social responsibility of business..." - A position paper on Milton Friedman

Term Paper (Advanced seminar) , 2004 , 11 Pages , Grade: A- = 1-

Business economics - Business Ethics, Corporate Ethics

In the aftermath of recent business scandals such as Enron, Worldcom, and Parmalat the discussion about ‘Ethics in Business’, which was not exactly a hot topic during the last 20 years or so, has been inflamed anew. However, ethical corporate governance, the catch line of countless discussions in recent times, is only one but many aspects to ethics in business. This paper will focus on the aspect of corporate social responsibility rather than the issue of corporate governance. Although not as hot as corporate governance, corporate social responsibility is certainly no less important as incidents like the Exxon Valdez accident in 1989 clearly demonstrate. In fact, corporate social responsibility even covers the t opic of corporate governance since governance failures as observed at companies like Enron do not only hurt a company’s shareholders but to a large extent also most of a company’s stakeholders - which in the end often make up a considerable part of society. Milton Friedman’s (in-)famous 1970 article “The social responsibility of business is to increase its profits” will serve to represent the libertarian view which assumes great credibility to concepts like ‘Agency Theory’ and the ‘Invisible Hand’. After elucidating Friedman’s ‘classical’ liberalist approach, which in itself makes perfect sense, this paper will point towards the deficiencies of Friedman’s argument. By applying a broader understanding of how corporate social responsibility is to be derived i t becomes obvious that Friedman is telling only part of the story. This consideration will then serve as a foundation for the attempt of developing a framework of corporate social responsibility which goes beyond increasing profits only. [...]

Table of Contents

• INTRODUCTION
• CLARIFICATIONS ON THE TERM ‘BUSINESS' IN THE CONTEXT OF SOCIAL RESPONSIBILITY
  • Friedman's approach
  • A more complete approach
  • Positive vs. negative rights
  • The social contract
  • The fulfilment of the social contract
  • The costs of social responsibility
  • Taxation without representation?
  • The problem of representation
  • The problem of taxation
  • The extent of social responsibility
• CONCLUSION

Objectives and Key Themes

This paper examines the controversial notion of corporate social responsibility, particularly in relation to Milton Friedman's assertion that the social responsibility of business is solely to increase its profits. The author critiques Friedman's approach, arguing for a more comprehensive understanding of corporate social responsibility that extends beyond shareholder interests.

• The nature and scope of corporate social responsibility
• The role of corporations in society and their obligations to stakeholders
• The relationship between business, government, and society
• The ethical implications of business decisions
• The social contract as a framework for understanding corporate responsibility

Chapter Summaries

• INTRODUCTION: The paper sets the stage by highlighting the contemporary relevance of the debate surrounding corporate social responsibility, citing recent business scandals as evidence. It introduces Milton Friedman's viewpoint as the starting point for exploring the broader implications of corporate social responsibility.
• CLARIFICATIONS ON THE TERM ‘BUSINESS' IN THE CONTEXT OF SOCIAL RESPONSIBILITY: This section delves into the nuances of defining "business" in the context of social responsibility. It examines Friedman's narrow interpretation, focusing on corporations and their executives, and contrasts it with a more comprehensive perspective that considers the wider social context and the potential for different kinds of responsibilities.
• FRIEDMAN'S APPROACH: This section analyzes Friedman's approach, emphasizing his reliance on Agency Theory and the idea that executives' sole responsibility is to maximize shareholder profits. The author argues that Friedman's approach fails to adequately account for the complex social and ethical dimensions of business.
• A MORE COMPLETE APPROACH: Here, the author proposes a more complete framework for understanding corporate social responsibility, emphasizing the role of the social contract and the inherent responsibilities that corporations have towards society. This section also discusses the concept of positive and negative rights, arguing that corporations do have positive obligations to society.
• POSITIVE VS. NEGATIVE RIGHTS: This section elaborates on the concept of positive rights and how they apply to corporations. It highlights the role of government in supporting businesses and the implicit social contract that arises from this interaction.
• THE SOCIAL CONTRACT: This section delves deeper into the social contract framework, arguing that businesses have an obligation to contribute to the well-being of society, even if this goes beyond simply maximizing profits. It uses the example of corporations outsourcing jobs to illustrate the potential for corporations to violate this implicit contract.
• THE FULFILMENT OF THE SOCIAL CONTRACT: This section examines how corporations can fulfill their social obligations by maintaining jobs and contributing to the economic and social well-being of the societies they operate in. The author argues that such actions not only benefit society but also contribute to the long-term sustainability and success of the businesses themselves.

Keywords

The paper explores the key concepts of corporate social responsibility, business ethics, shareholder value, stakeholder interests, the social contract, positive and negative rights, and the ethical implications of corporate decision-making. It critically examines Milton Friedman's influential argument regarding the sole responsibility of business to maximize profits and proposes a more comprehensive framework for understanding corporate responsibility in a broader social context.

• College: International University in Germany Bruchsal (Department of Sciences and Liberal Arts)
• Grade: A- = 1-
• Author: David Federhen (Author)
• Publication Year: 2004
• Pages: 11
• Catalog Number: V26773
• ISBN (eBook): 9783638290142
• Language: English
• Tags: Milton, Friedman