CORPORATE SOCIAL RESPONSIBILITY AND MILTON FRIEDMANS MANTRA
CORPORATE SOCIAL RESPONSIBILITY AND MILTON FRIEDMAN’S MANTRA
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Table of Contents
TOC o “1-3” h z u HYPERLINK l “_Toc376284965” Abstract PAGEREF _Toc376284965 h 3
HYPERLINK l “_Toc376284966” Introduction PAGEREF _Toc376284966 h 3
HYPERLINK l “_Toc376284967” Milton Friedman’s theory PAGEREF _Toc376284967 h 4
HYPERLINK l “_Toc376284968” Milton Friedman’s Theory and CSR Analysis PAGEREF _Toc376284968 h 4
HYPERLINK l “_Toc376284969” Economic and Legal Responsibilities of Business PAGEREF _Toc376284969 h 8
HYPERLINK l “_Toc376284970” Corporate Social Responsibility Matters PAGEREF _Toc376284970 h 9
HYPERLINK l “_Toc376284971” Conclusion PAGEREF _Toc376284971 h 11
HYPERLINK l “_Toc376284972” Bibliography PAGEREF _Toc376284972 h 12
AbstractThe underlying public perceives that business managers make decisions solely to maximize profits though they most perceive the behavior to be wrong. Examining the role of business organization in regard to generation of profit maximizing, structurally centered decisions making procedure rather than socially responsible, human centered view, which is fundamental. An unconventional characterization of business is aimed at maintainable organizational performance and places social responsibility on stakeholders and on managers. CSR is accepted by numerous modern companies as one of a significant section of the business strategy thus acknowledging the benefits that normally comes along with adoption of the corporate social responsibility activities. Moreover, it is ranked the escalating pressure for the social concern as the greatest significant business challenge to the modern companies. Corporate social responsibility is considered as variants in regard to citizenship and sustainability is the new business mantra. Introduction Corporate Social Responsibility had been taken for a relatively longer period as a tendency that reached when the current Generation X arrived the labor force and becoming a sturdier consumer occurrence within corporate America. The underlying arguments concerning the role of business within society have erupted as companies that are normally subscribe to searching for suitable methods to lessen the dare necessity for CSR or for methods to turn social responsibility into the corresponding factor of profit making (Godet, 2006, 123). Whereas populace normally believes that corporate social responsibility is an interruption that ceases business performing to their probable and crippling the economy. Efficient and effective Corporate Social Responsibility and corresponding effectual marketing and business strategy are capable to aid a business grow to relatively bigger profits whilst promoting the society at large (Orts, 2013, 112). CSR has been accepted by numerous modern companies as a significant section of the business strategy thus acknowledging the benefits that normally comes along with adoption of the corporate social responsibility activities. Moreover, it is ranked the escalating pressure for the social concern as the greatest significant business challenge to the modern companies.
Milton Friedman’s TheoryIn the year 1970 an economist Milton Friedman summarized that underlying social responsibility of business in regard to utilization of resource and activities is mainly designed to escalate its profit (Flynn, 2008, 237). He asserts the main purpose of any business is making profit (Porritt, 2007, 453). Nevertheless, this perception of business responsibility that is challenged via stakeholders and corresponding political consumers, which put pressure on the underlying companies to manufacture their products and service through means that conforms with national and intercontinental standards and demand. The literature on the underlying corporate social responsibility provide no solitary designation of CSR and diverse definitions are utilized within maintain able growth, corporate citizenship and corresponding the threefold bottom line are normally instantaneously utilize in the description of CSR. The underlying common features the charitable perspective meaning that companies go yonder the preparation in an exertion to meet community encounters encrustation the creation. Social challenges are seen as massive significance since CSR efforts mainly depend on the way social challenges are apparent by society (Godet, 2006, 124).
Milton Friedman’s Theory and CSR AnalysisMilton Friedman is the main designers of the association alongside the prevailing social responsibility by taking into consideration numerous influential pieces of work disapproving Corporate Social Responsibility, and corresponding business organizations that promoted CSR credentials. He asserted that prevailing business persons who practice CRS are the main puppets of knowledgeable forces that undermine the underlying foundation of the free society in the previous decades. Friedman’s believed that only populace can possess responsibilities but not the business organizations and that the populaces that have been employed by the companies have responsibility primarily to their corresponding workers in regard to accomplishing the requirements of attaining profits (Godet, 2006, 226). He acknowledges that an individual is capable of having responsibilities in other places apart from business, but the responsibilities such as social responsibilities ought to be accomplished as a foremost and not an agent by spending own resource, time and energy. Moreover, social responsibilities ought to be business.
Milton Friedman’s method is disassemble in regard to the personification of the underlying businesses within corresponding specific businessmen but rather than presenting them as collectives of an individual s who normally remunerated to work at the request of the vendors. Thus, workers ought to be only motivated in order to accomplish their underlying responsibility to generate profit for the owners hence should not be a concern with the role of the company in regard to benefiting society (Porritt, 2007, 457). This can be conversely being perceived as the craving to function with the underlying social conscience possesses no place within the free market. Whilst there is little concurrence with the Friedman’s arguments, populace feels that Friedman understands in regard to Corporate Social Responsibility to be extremely narrow. This is because it decently focused on the underlying business and its role within a free market, which have become outdated for the prevailing contemporary culture (Flynn, 2008, 237). Milton Friedman makes valid points on the deconstruction of the underlying personification of the business; nevertheless, he mainly forgets the major attributes that are the prevailing CSR’s strengths and benefits to the general public. Friedman perception of the business is mainly in a factual manner that depicts workers working to get the owner of the business profit but not the corresponding public (Goodman & Hirsch, 2010, 265).
Milton Friedman argument of business enterprise social responsibility entirely depends on making of profit within the modern business. The main aim of operating business is to realize a profit without which the business cannot survive. Friedman’s theory does not support the idea of social responsibility to the underlying society. This is because the increase of revenue within any company normally leads to the development of the economy which subsequently benefits the populace. He thought that social responsibility ought not to be compelled by the prevailing administration. Whereas numerous economists concur with Friedman’s point of view as the underlying companies can still uphold their underlying efficacious path whilst in an attempt to shadowing numerous diverse methods in regard to the social responsibility. Moreover, responsibility to the corresponding investors can be accomplished in the process of strengthening the society. There are numerous means that any organization can be socially responsible and they solely foster social responsibility to the environment, society and underlying workers. These means are normally in line with Friedman’s theory.
The underlying perception of the company as an entire representative and in case an individual makes nay mistake within it results to an error which is social judgment as populace normally judge the entire company but not the individual. CSR can be harnessed to generate important positive change to the underlying profits; negative strategy can destroy profit within a company (Godet, 2006, 125). For instance, an individual agent operating with Friedman is supported by Nike since the manager opt to operate within countries where child labor is acceptable in order to reduce cost thus making Nike company to increase their profits. Friedman’s theory made a mistake was in the separation of the public from the corresponding customers within his evaluation thus neglecting the understanding of the customer base of the company that could be influenced by broader public (Flynn, 2008, 241-2).
Researchers believe that Friedman’s main focal point in regard to the business ought to focus on escalation of profits that will correspondingly benefit a society best. Moreover, the main responsibility of business in retard to economic performance is making a profit. This is business that normally realizes minimal profit that equate to its underlying cost of capital is considered to be socially irresponsible (Sandbu, 2011, 146). Nevertheless, economic performance is not normally considered as the sole responsibility of prevailing business enterprises since power ought to balance by responsibility. Moreover, Corporate Social Responsibility as a strategy is normally seen as cost-effectiveness as espoused by Friedman. The best CSR strategy that ensures profitability is normally marketing based. Significant issues associating with every CSR dimensions are not exclusively marketing associated. For instance, pollution control at the chemical plant is a manufacture associated matter; standard background for the supplies is mainly procurement connected topic while the background of the fair reimbursement is normally a human resource issue. Significance of marketing mainly regard to developing a CSR approaches cost-effective (Goodman & Hirsch, 2010, 266).
The concept against the CSR basically commences with the classical economic argument mainly articulated forcefully by Milton Friedman who held the opinion that the organization has the responsibility of maximizing the profits of its underlying owners and shareholders (Sandbu, 2011, 149). Moreover, social issues are not the main concern of the business populace and that these problems ought to be resolved by the unencumbered workings of the free markets system. TH objection of adoption CSR normally put business into the fields’ endeavor that is not associated to the underlying suitable objectives (Orts, 2013, 118).
Economic and Legal Responsibilities of BusinessThe underlying remarks pertaining to the economic and legal responsibilities of business economic responsibilities and concerns the production of good and service that is desired by the profit. Companies normally accomplish their primary responsibility as pecuniary units within society. Nevertheless, the underlying standard transformed to profit maximization. The doctrine of profit maximization is sanctioned by the underlying classical economic interpretation led by Friedman. Lack of any conclusive business case concerning corporate social responsibility is the center of debate over the corresponding business in disentangling community and corresponding environmental problems. Even though the connection amidst Corporate Social Responsibility activities coupled with company financial performance depicts that association relies on the CSR initiative implemented (Godet, 2006, 128-9). Decision by the company to assimilate CSR into its prevailing corporate approach incorporates numerous things. The elements that are normally taken into consideration are reliant on the underlying company’s production and location operation that makes selective activities and corresponding programs to be more suitable as compared to others. Moreover, stakeholders and customers’ demands are taken into consideration in the process of initiating CSR by companies. According to Godet (2006, 128-9), companies that manufacture products within developing states ought to center on certifying appropriate working circumstances by further engaging within the underlying local community and finding means of aiding meeting of social challenges. Big industrial company’s utilization of treacherous chemicals within their productions might look at options and execute supply chain.
Corporate Social Responsibility MattersPopulace is currently skeptical of the underlying positive impacts of executing CSR. The fundamental argument pertains to venturing money within CSR. Nevertheless, solid reasons for execution of CSR into the corresponding business strategy. Ethically correct making of income rather than the underlying fundamental human rights can never be vindicated. Appropriate communiqué the exertions can be outlined as a massive in aiding the company to brand in regard to the constructive coupled with character among customers. As asserts Sandbu (2011, 148-9), good CSR performs can entice social venture. Inclusive, CSR matters might attract social investments coupled with consumers who require a product that are not manufactured rather than other populace’s health, security and human rights.
The impacts of social responsibility in regard to the environment mainly focus on safeguarding environment. This purely entail careful disposal of the wastes to the environment and following outlined regulation by the government. Companies that are normally aware of the prevailing space purely share within the local community their accomplishment. Moreover, companies ought to strategize new advancements via taking into consideration local pecuniary and corresponding social outlines. Business normally promotes. Workers that promote escalated benefits and corresponding better working situations are extremely important for any company. Caring about the employees by the company’s is healthy fir the development of community. Conversely, poor relations within underlying relations can make members of the community to stop cooperating with the company thus leading to poor performance and low turnover.
Milton Friedman asserts that sole business of the underlying managers of an overtly held corporation is mainly to maximize the prevailing value of its outstanding shares (Kinley, 2009, 26). Effort of utilizing corporate resources for purely altruistic purposes is normally equated to the act of socialism. Friedman projected that the underlying corporation law ought to preclude prevailing managers from straying off the arrangement to join the altruists, authority currently unanimously given by the state legislation (Flynn, 2008, 236-7). It is cumbersome to differentiate a profit motive from a benevolent motive in any specific corporate action, a strong regulation against corporate selflessness in regard to the Friedman’s assertion thus inviting judges to assess the respectability of a significant set of administrative decisions.
Corporate Social Responsibility concept possesses dual different focuses namely internal and corresponding external. Main social challenges are increasing quantity of the underlying resident getting communal welfares and corresponding fear pertaining to the social marginalization that is relatively expensive for the entire society. In the context of CSR internal mainly focus on the workers who are in vulnerability of dropping their prevailing employment opportunities due to the reduction capability to work for diverse reasons such as downheartedness, anxiety and work calamity (Goodman & Hirsch, 2010, 262-3). The administration ought to present variety of strategy mechanisms that enhance and aid companies in keeping employees at their respective company special terms such as working duration and hefty labor where the management would fund companies that might loss workforce. The internal emphasizes extremely associated to the Human Assets thus not rampant and broadly connected with the Corporate Social Responsibility. Nevertheless, it is a section of the Corporate Social Responsibility and ought to continue. The common understanding of the CSR is associated with external focus. Within a progressively globalized universe commodities are manufactured in developing countries where the salaries are reasonably lower and the laws on working circumstances are less severe and less subject to the mechanism by the underlying government examinations (Sandbu, 2011, 144). Efforts of making a income and for the corporate to endure, companies might concession transnational recognized standards on fundamental human rights and utilize production procedures which destruction the environment. In the present universe human rights defilements and the setting are depicted as chief worldwide social challenge (Orts, 2013, 116).
Ethical approach to CSR according to Henry Mintzberg
Mintzberg states that the corporate management demands its underlying executives to sign directive 20.5 that explicitly forbade price fixing and any other violation of the antitrust laws. This opposes the Friedman theory that say that companies ought to strive to make profit without considering society. Conversely, severely managed system of reward are subjected to punishment since they require annual advancement in regard to earnings, return and market share, which is applicable indiscriminately to all divisions. Thus, forces within a diversified firm tend to strip away economic fat and corresponding social tradition from the underlying management aspects of the entire issues facing the division management. Without responsible and ethical populace within significant positions then the society can never survive. Seven organizational blocks ethical approach to CSR allied with Henry Mintzberg strong role models, strict lines of command that discourage questioning of such practices, task group cohesiveness and ambiguity concerning the priorities.
According to Freeman, and Liedtka in the stakeholders theory assert that corporations ought to take into consideration the impacts of their underlying actions upon the prevailing customers, suppliers, general public, workers and other personalities having stake or interest within the corporation (Donaldson, Werhane, & Cording, 2002, 178-9). They also reason that by offering for the needs of stakeholders, corporations ensure their continued accomplishment. Freeman also asserts that the responsibility of business entails more than its primary economic duty to shareholders; business has a duty to other stakeholder. Thus, the narrow sense of stakeholder mainly refers to any identifiable group or corresponding individual on whom the organization is dependent for its continued survival (Goodman, & Hirsch, 2010, 125). This is completely in contrast to the Friedman’s perception that business organization only ought to make its own profit without giving back to the society.
CSR scholar Carroll (2004) asserts that companies have ethical and moral obligations to the society. Moreover, stakeholder theorists argue that while there are normative, ethical elements to the corresponding stakeholder theory yonder its managerial, social science application that are separate and distinct (Flynn, 2008, 93). CSP model is deemed to be not important since it partially solved by integrating underlying stakeholder perspectives in those traditional approaches (Carroll, 1991, 2004). Freeman and Liedtka suggest that CSR appears exclusively to grant a human face to capitalism but with a complete separation pertaining to economics and ethics (Flynn, 2008, 88).
According to Freeman and Liedtka the prevailing idea of corporate social responsibility has its roots in the writings of the Andrew Carnegie (Flynn, G. 2008, 89). The dual principle was essential for capitalism to work. The first principle of charity demanded more fortunate members of the prevailing society to support its less fortunate members including the jobless, the disabled, the sick and the elderly. Moreover, the less fortunate can be supported either directly or indirectly via institutions such as churches, settlement houses and other corresponding community groups (Goodman, & Hirsch, 2010, 128). Stewardship principle demands that businesses and wealthy individuals to focus on the stewards of their property. Nevertheless, it is a function of business to multiply society’s wealth by increasing its own via prudent investments of resources.
ConclusionUnfortunately for the Milton Friedman in regard to CSR has persisted for considerable longer time to be considered as a movement but a self-sufficient approach fundamental to a business that normally desires to accomplish within the fashionable socio-economic weather. In areas which are widely believed that Philosopher Karl Marx’s biggest blunder was ignoring the natural human predisposition to concur, Milton Friedman’s appear to have bargain-basement the natural requirement to endure by sticking with the underlying herd. Thus, Friedman decided to explore the prevailing opportunities that Corporate Social Responsibility depicted in regard to aiding a company generates solutions to social issues devoid affecting its underlying profit performance at the expense of striving to stifle the development on one of the most fundamental corporate policies of the last part of the twentieth Century. The argument offer rational justification for the CSR initiatives from a primarily corporate economic and financial perspective. There exist tension amidst the need for business to make profits and the corresponding requirements of the society, but the issue has been intensive in the past times. Consumers’ lack of trust in main companies such as Enron normally avoids goods and services from particular companies when the companies do not act at the interest of the society. There is escalating pressure from society on companies to take relatively more responsibility.
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