The Social Responsibility Of Business by Milton Friedman

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  • 1. by Milton Friedman The Social Responsibility of Business The Social Responsibility of Business Professor Hector R Rodriguez School of Business Mount Ida College is to Increase Profits
  • 2.
    • Society
      • The Corporation and Its Stakeholders
      • People for the Ethical Treatment of Animals
      • Corporate Citizenship
      • The Social Responsibility of Business
      • The Shareholder Primacy Norm
      • CSR, Citizenship and Sustainability Reporting
      • Responsible Investing
      • The Community and the Corporation
      • Taxation and Corporate Citizenship
      • Corporate Philanthropy Programs
      • Employees and the Corporation
      • Managing a Diverse Workforce
    • Environment
      • A Balanced Look at Climate Change
      • Non-anthropogenic Causes of Climate Change
      • Sulfates, Urban Warming and Permafrost
      • Conventional Energy
      • The Kyoto Protocol
      • Green Building
      • Green Information Technology
      • Transportation, Electric Vehicles and the Environment
      • Geo-Engineering
      • Carbon Capture and Storage
      • Renewable Energy
      • Solid, Toxic and Hazardous Waste
      • Forests, Paper and Carbon Sinks
      • Life Cycle Analysis
      • Water Use and Management
      • Water Pollution
    Course Map – Topics Covered in Course
  • 3.
    • The most provocative statement of the past half-century on the role of business in society came in an essay in the New York Times , written by Milton Friedman.
    • In a 1970 Times magazine article, the economist Milton Friedman argued that businesses' sole purpose is to generate profit for shareholders. Moreover, he maintained, companies that did adopt "responsible" attitudes would be faced with more binding constraints than companies that did not, rendering them less competitive.
    • It remains the basis for many companies' contention today that "corporate social responsibility“ or "sustainable business" are a distraction from their core obligation: to act in their shareholders' best interests. That is, acting "responsibly" risks reducing profits or forgoing revenue in the name of social good.
    Source: Milton Friedman, “The Social Responsibility of Business is to Increase its Profits,” New York Times Magazine, September 1970 A Provocative Statement
  • 4.
    • "What does it mean to say that the corporate executive has a 'social responsibility' in his capacity as businessman?" asked Friedman, “It must mean that he is to act in some way that is not in the interest of his employers.
      • 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.
      • Or that he is to make expenditures on reducing pollution beyond the amount that is in the best interests of the corporation in order to improve the environment.
      • Or that he is to hire 'hardcore' unemployed instead of better-qualified available workmen in an effort to reduce poverty.”
    • Friedman argued that such actions in effect turned executives into public employees or civil servants, levying "taxes" (in the form of corporate money allocated to social causes)
    Business and Social Responsibility Source: Milton Friedman, “The Social Responsibility of Business is to Increase its Profits,” New York Times Magazine, September 1970
  • 5.
    • We understand that ignoring environmental and social issues can be bad for business.
      • Companies that pollute their local communities risk poisoning their customers.
      • Ignoring the state of the local school system risks depleting the pool of qualified workers.
      • Abusing workers risks higher turnover and training costs, not to mention greater difficultly attracting the most qualified candidates.
    • In a globalized world however, companies are free to exploit or pollute a local community, then move on to the next place.
    • Unfettered markets and exploitation-friendly tax schemes reward companies for acting in their own interests in the name of economic growth and competitiveness.
    What We Know Now Source: Milton Friedman, “The Social Responsibility of Business is to Increase its Profits,” New York Times Magazine, September 1970
  • 6.
    • Friedman's philosophy is far from universally shared, even in the business community. In 1979, for example, Quaker Oats president Kenneth Mason, writing in Business Week , declared Friedman's profits-are-everything philosophy "a dreary and demeaning view of the role of business and business leaders in our society." Wrote Mason:
      • "Making a profit is no more the purpose of a corporation than getting enough to eat is the purpose of life. Getting enough to eat is a requirement of life; life's purpose, one would hope, is somewhat broader and more challenging. Likewise with business and profit.“ Mason went on:
      • "The moral imperative all of us share in this world is that of getting the best return we can on whatever assets we are privileged to employ; this means all the assets employed – financial, brains, labor, materials, and the land, air, and water employed.“
    • Note linkages to our Sustainability Management model
    Quaker Oats President Kenneth Mason