The Social Responsibility Of Business by Milton Friedman


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The Social Responsibility Of Business by Milton Friedman

  1. 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. 2. <ul><li>Society </li></ul><ul><ul><li>The Corporation and Its Stakeholders </li></ul></ul><ul><ul><li>People for the Ethical Treatment of Animals </li></ul></ul><ul><ul><li>Corporate Citizenship </li></ul></ul><ul><ul><li>The Social Responsibility of Business </li></ul></ul><ul><ul><li>The Shareholder Primacy Norm </li></ul></ul><ul><ul><li>CSR, Citizenship and Sustainability Reporting </li></ul></ul><ul><ul><li>Responsible Investing </li></ul></ul><ul><ul><li>The Community and the Corporation </li></ul></ul><ul><ul><li>Taxation and Corporate Citizenship </li></ul></ul><ul><ul><li>Corporate Philanthropy Programs </li></ul></ul><ul><ul><li>Employees and the Corporation </li></ul></ul><ul><ul><li>Managing a Diverse Workforce </li></ul></ul><ul><li>Environment </li></ul><ul><ul><li>A Balanced Look at Climate Change </li></ul></ul><ul><ul><li>Non-anthropogenic Causes of Climate Change </li></ul></ul><ul><ul><li>Sulfates, Urban Warming and Permafrost </li></ul></ul><ul><ul><li>Conventional Energy </li></ul></ul><ul><ul><li>The Kyoto Protocol </li></ul></ul><ul><ul><li>Green Building </li></ul></ul><ul><ul><li>Green Information Technology </li></ul></ul><ul><ul><li>Transportation, Electric Vehicles and the Environment </li></ul></ul><ul><ul><li>Geo-Engineering </li></ul></ul><ul><ul><li>Carbon Capture and Storage </li></ul></ul><ul><ul><li>Renewable Energy </li></ul></ul><ul><ul><li>Solid, Toxic and Hazardous Waste </li></ul></ul><ul><ul><li>Forests, Paper and Carbon Sinks </li></ul></ul><ul><ul><li>Life Cycle Analysis </li></ul></ul><ul><ul><li>Water Use and Management </li></ul></ul><ul><ul><li>Water Pollution </li></ul></ul>Course Map – Topics Covered in Course
  3. 3. <ul><li>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. </li></ul><ul><li>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 &quot;responsible&quot; attitudes would be faced with more binding constraints than companies that did not, rendering them less competitive. </li></ul><ul><li>It remains the basis for many companies' contention today that &quot;corporate social responsibility“ or &quot;sustainable business&quot; are a distraction from their core obligation: to act in their shareholders' best interests. That is, acting &quot;responsibly&quot; risks reducing profits or forgoing revenue in the name of social good. </li></ul>Source: Milton Friedman, “The Social Responsibility of Business is to Increase its Profits,” New York Times Magazine, September 1970 A Provocative Statement
  4. 4. <ul><li>&quot;What does it mean to say that the corporate executive has a 'social responsibility' in his capacity as businessman?&quot; asked Friedman, “It must mean that he is to act in some way that is not in the interest of his employers. </li></ul><ul><ul><li>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. </li></ul></ul><ul><ul><li>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. </li></ul></ul><ul><ul><li>Or that he is to hire 'hardcore' unemployed instead of better-qualified available workmen in an effort to reduce poverty.” </li></ul></ul><ul><li>Friedman argued that such actions in effect turned executives into public employees or civil servants, levying &quot;taxes&quot; (in the form of corporate money allocated to social causes) </li></ul>Business and Social Responsibility Source: Milton Friedman, “The Social Responsibility of Business is to Increase its Profits,” New York Times Magazine, September 1970
  5. 5. <ul><li>We understand that ignoring environmental and social issues can be bad for business. </li></ul><ul><ul><li>Companies that pollute their local communities risk poisoning their customers. </li></ul></ul><ul><ul><li>Ignoring the state of the local school system risks depleting the pool of qualified workers. </li></ul></ul><ul><ul><li>Abusing workers risks higher turnover and training costs, not to mention greater difficultly attracting the most qualified candidates. </li></ul></ul><ul><li>In a globalized world however, companies are free to exploit or pollute a local community, then move on to the next place. </li></ul><ul><li>Unfettered markets and exploitation-friendly tax schemes reward companies for acting in their own interests in the name of economic growth and competitiveness. </li></ul>What We Know Now Source: Milton Friedman, “The Social Responsibility of Business is to Increase its Profits,” New York Times Magazine, September 1970
  6. 6. <ul><li>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 &quot;a dreary and demeaning view of the role of business and business leaders in our society.&quot; Wrote Mason: </li></ul><ul><ul><li>&quot;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: </li></ul></ul><ul><ul><li>&quot;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.“ </li></ul></ul><ul><li>Note linkages to our Sustainability Management model </li></ul>Quaker Oats President Kenneth Mason