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Should Firms Go BeyondProfits” Milton Friedmanversus B.docx
1. Should Firms Go “Beyond
Profits”? Milton Friedman
versus Broad CSR1
MARK S. SCHWARTZ AND DAVID SAIIA
ABSTRACT
When attempting to articulate the nature and scope of
corporate social responsibility (CSR), a variety of opin-
ions emerge. The primary CSR issue appears to be:
Should firms go “beyond profits”? In order to address
this normative question, this article will explore the theo-
retical underpinnings of CSR and its practical applica-
tion. Part one of the paper begins by discussing common
CSR definitions. Part two outlines the CSR debate in
terms of the “narrow view” of CSR (as represented by
Milton Friedman) versus the “broad view” (i.e., beyond
profits). Part three applies both the narrow and broad
approaches to CSR in analyzing two classic business and
society cases: (1) the Ford Pinto; and (2) Merck’s river
blindness pill. The article concludes with a proposed
synthesis of the CSR approaches discussed.
Mark S. Schwartz is an Associate Professor, Law, Governance
& Ethics, School of Adminis-
trative Studies, Faculty of Liberal Arts and Professional
Studies, York University, Toronto,
Ontario, Canada. E-mail: [email protected] David Saiia is an
Associate Professor, Strategic
Management & Sustainability, Palumbo-Donahue School of
3. ered. For example, when Google abided by Chinese law by
filtering
the content found through its google.cn search engine (e.g.,
“Tiananmen Square”), was Google acting in a socially
responsible
manner?3 When UBS Bank decided to spend shareholders’
money
to voluntarily cut its carbon emissions to address global
warming
when there is no legal obligation to do so, was this socially
respon-
sible, or socially irresponsible?4 Should a beer firm like
Heineken
provide expensive human immunodeficiency virus/acquired
immunodeficiency syndrome (HIV/AIDS) medication to its
African
employees and their dependents, when it is not expected to be
of
overall direct or even indirect financial benefit to the firm?5
Are
there some firms, such as tobacco giant Philip Morris, that
should
not even be selling a product that is regarded as both addictive
and
dangerous (i.e., when used as intended it can be deadly)?6 Is it
socially responsible for a publicly traded ice cream
manufacturer
such as Ben and Jerry’s (known for its explicit social mission)
to
refuse an offer by Unilever to buy its stock at a 25 percent
premium
by insisting that Unilever continue its practice of donating 7.5
percent of pretax profits to charity?7 Should a public company
be
commended or can it be criticized for donating funds to assist
victims following a natural disaster?8
4. 2 BUSINESS AND SOCIETY REVIEW
To address such practical questions and to provide a theoreti-
cal framework for resolving them, this article will discuss prin-
ciples that offer guidance about the nature and scope of CSR.
To
do so, part one of this article will provide and discuss several
definitions of CSR. Part two will outline the CSR debate in
terms
of the “narrow—neoclassical economic view” (as represented by
Milton Friedman) versus a “broad view” (i.e., beyond profits) of
CSR. Part three will apply both the narrow and broad
approaches
in analyzing two classic business and society cases: (1) the Ford
Pinto; and (2) the Merck river blindness pill. Based on an
analysis
of the two cases, the article concludes with a proposed synthesis
of the narrow and broad views of CSR to help business and
society academics as well as managers better navigate through
the often incongruous landscape of CSR.
While much has already been written on the CSR debate, and
in particular with respect to Milton Friedman’s position, this
article attempts to address a glaring gap in the CSR literature:
the
lack of application of Friedman’s theoretical position as well as
the broad version of CSR to actual business cases.9 It is argued
that only by applying both positions to actual business cases
and
observing the practical outcome of such an application can one
best determine a personal position on the CSR theoretical
debate.
5. PART ONE: CSR DEFINITIONS
An appropriate place to start to work through the discussion and
debate over CSR is to arrive at an acceptable definition.
Unfortu-
nately, most agree that there is no single established definition
for
CSR. Moreover, it is also commonly accepted that CSR should
simply be viewed as a social construction, particularly when
one
looks at definitions from around the world.10 For example, the
International Standards Organization has indicated that: “What
constitutes ‘social responsibility’ . . . is difficult to define . . .
there
is no single authoritative definition of the term ‘corporate/
organizational social responsibility’ . . .”11 Others go further
by
suggesting that: “. . . ‘corporate social responsibility’ is
inherently
vague and ambiguous, both in theory and in practice.”12 What
then are some of the definitions of CSR that have been
proposed?
Here is a sampling of CSR definitions to consider:
3SCHWARTZ AND SAIIA
• The idea of social responsibilities supposes that the corpora-
tion has not only economic and legal obligations but also
certain responsibilities to society that extend beyond these
obligations;13
• Social responsibility is the obligation of decision makers to
take
actions that protect and improve the welfare of society as a
6. whole along with their own interests;14 and
• The social responsibility of business encompasses the eco-
nomic, legal, ethical, and discretionary [i.e., philanthropic]
expectations that society has of organizations at a given point
in time.15
Due to the wide range of CSR definitions in existence, a search
for commonality can be potentially instructive. After examining
various definitions, Buchholtz suggests that there are five key
elements found in most definitions of CSR16:
1. Corporations have responsibilities that go beyond the pro-
duction of goods and services at a profit.
2. These responsibilities involve helping to solve important
social problems, especially those they have helped create.
3. Corporations have a broader constituency than stockholders
alone.
4. Corporations have impacts that go beyond simple market-
place transactions.
5. Corporations serve a wider range of human values than can
be captured by a sole focus on economic values.
In other words, virtually all attempts to define the social
respon-
sibility of the corporation include the notion that corporations
have
obligations toward society beyond their economic or fiduciary
responsibilities to shareholders. Others, however, argue that this
position distorts the purpose of the corporation and free-market
capitalism. For example, consider the following CSR definitions
that have been proposed that suggest a more narrow
7. interpretation
of CSR:
• In the end, business has only two responsibilities—to obey the
elementary canons of every day face-to-face civility (honesty,
good faith, and so on) and to seek material gain.17
4 BUSINESS AND SOCIETY REVIEW
• The fiduciary duty to [the] firm’s owners is the bedrock of
capitalism, and capitalism will wither without it.18
The Economist magazine in a special report on CSR relies on
such definitions to argue that broader CSR takes organizations
outside their proper role and essentially represents a waste of
shareholders’ money. Consider the following statement from the
report: “If efforts to do good become a distraction from the core
business they may actually be downright irresponsible. After
all, a
socially conscious but bankrupt business is no good to
anyone.”19
While the Economist recognizes the growth of the broader CSR
movement, it also states its concern: “The followers in the CSR
industry are many . . . their real motive is public relations and
the
telltale sign is that the person responsible for CSR sits in the
corporate communications department.”20
Thus, the definitions of CSR appear to fall under two general
schools of thought, those who argue that business is only obli-
gated to make profits within the boundaries of minimal legal
and
ethical compliance and those who argue that there are broader
8. responsibilities.21
PART TWO: THE THEORETICAL DEBATE
A more complete understanding of the seemingly binary
positions
on the CSR debate over whether firms should go “beyond the
bottom line” must be achieved to advance our analysis. For
those
teaching and studying CSR, as well as for business leaders, the
question of whether business firms should “go beyond profits”
is
a significant one. For example, it has been suggested that the
CSR
position established by business students and future managers
early on may be a determining factor in their most important
business decisions made throughout their careers.22 While there
are many different ways for the debate over CSR to be set up,
the
following article will address the debate question as “Friedman”
versus “Broad CSR.” The reason for setting up the debate in
this
manner is that almost all academics agree that the narrow
version
of CSR is best represented by the Nobel Prize-winning
economist
Milton Friedman,23 in contrast to those academic theorists,
man-
agers, and their firms who take a broader approach to CSR.24
5SCHWARTZ AND SAIIA
Friedman’s Position
9. So what is the narrow or neo-classical economic view of CSR?
And
why does Milton Friedman best represent the narrow view?
Milton
Friedman’s position was outlined in his famous article entitled
“The Social Responsibility of Business Is to Increase Its
Profits,”
published in 1970 in the New York Times Magazine. This
article
summarizes his views set out earlier in his less often cited book
Capitalism and Freedom published in 1962. The first key state-
ment on CSR, which can be found in Friedman’s book, reads as
follows: “[In a free society] . . . there is one and only one social
responsibility of business—to use its resources and engage in
activities designed to increase its profits so long as it stays
within
the rules of the game, which is to say, engages in open and free
competition without deception or fraud.”25 The second well-
known
quote found in Friedman’s 1970 New York Times Magazine
article
reads as follows: “[The responsibility of a corporate execu-
tive] . . . is to conduct the business in accordance with [the
owners’] desires, which generally will be to make as much
money
as possible while conforming to the basic rules of the society,
both
those embodied in law and those embodied in ethical
custom.”26
Taken collectively, Friedman’s position might thus be summa-
rized as follows: A corporation’s only social responsibility is
“to
make as much money as possible” (i.e., maximize profits) while
conforming to the “rules of the game” or “basic rules of the
society”
10. in which the firm is operating which include: (1) obeying the
“law”;
(2) conforming to “ethical custom” (i.e., business norms where
you
do business); and (3) acting “without deception or fraud.”
Actions
that are considered anticompetitive in nature (i.e., firms must
engage in “open and free competition”) would also presumably
be
considered reprehensible by Friedman, even if legally
permissible
in a given jurisdiction.
Misunderstanding Friedman: Make a Profit or
Maximize Profit?
Before assessing Friedman’s interpretation of CSR, some
aspects
of Friedman’s position require additional clarification. First,
Fried-
man’s claim that firms should “make as much money as
possible”
clearly means maximize profits, rather than just make a profit.
6 BUSINESS AND SOCIETY REVIEW
For example, a firm would be obligated according to Friedman
to
legally pollute as much as possible, assuming that this was the
profit maximizing alternative.27 Second, it is not necessarily
the
case that managers must maximize profit. The obligation is con-
tingent on stockholders’ “desires,” which are according to
Fried-
11. man “. . . generally will be to make as much money as
possible”28
[emphasis added]. It could be, for example, that shareholders of
a
given company will explicitly (e.g., through the company’s
Charter,
mission, or shareholder resolutions) or implicitly (e.g., by pur-
chasing shares of a company in which they are aware has a
mission statement indicating that maximizing profit is not the
priority of the company) give their managers authority to act in
ways that would not necessarily maximize profit. It is also not
clear whether the obligation only applies in countries that
possess
legitimately elected representative governments with a
legitimate
and functioning legal system, as opposed to rogue governments
(e.g., dictatorships).
Friedman’s Limits to Maximizing Profits
Some opine that the obligation of firms according to Friedman
is
to maximize profit, giving profits priority above everything
else.29
In other words, this interpretation suggests that Friedman does
not place any additional constraints on the firm relative to profit
maximization. However, this is an incomplete and misleading
reading of Friedman.
For example, Friedman makes it clear that firms cannot break
the law in order to maximize profit, or even to avoid
bankruptcy.
Although not explicitly stated, it might also be the case that
abiding by the law according to Friedman includes acting in a
12. manner that avoids lawsuits. Deception and fraud (even if not
captured by the legal system) would also not be considered
acceptable to Friedman, suggesting that firms have an
obligation
to act in a trustworthy (i.e., honest) manner.30
Friedman also indicates that firms must abide by “ethical
custom,” but unfortunately he does not define the concept:
“[Friedman] does not entirely spell out what he believes the
scope
of ‘ethical custom’ to be.”31 Some such as Grant suggest a very
narrow interpretation of “ethical custom” as being equivalent to
the law.32 Silver views “ethical custom” as simply
encompassing
7SCHWARTZ AND SAIIA
each of Friedman’s constraints (i.e., law, deception, and open
competition).33 Shaw, however, suggests that ethical custom
was
intended by Friedman as a broader constraint to include
“. . . truth-telling and promise-keeping, fidelity, fairness, and
doing no harm.”34 Cosans goes even further and based on
Fried-
man’s notion of freedom would also include Kantian ethics and
utilitarianism as being part of “ethical custom.”35 Our
interpreta-
tion falls between these extremes, in that “ethical custom” was
intended by Friedman to merely refer to the industry norms in
the
locale where one is doing business and in this respect might go
beyond the law in some instances. Any other broader interpreta-
tion of ethical custom (or “rules of the game” or “rules of the
society”) would render Friedman’s prescription to maximize
13. profits
meaningless, in that almost any corporate action that did not
focus on profits could be justified on the basis of such
additional
ethical principles.
After taking into account all of Friedman’s constraints (i.e.,
follow the law, abide by ethical custom/industry norms, and
avoid deception/fraud), it could be argued that Friedman may
not
in fact represent the end of the spectrum for the “narrow”
version
of CSR. One could imagine the argument being raised that firms
should be entitled to break the law (e.g., minor laws such as
municipal bylaws) under certain circumstances (e.g., to avoid
bankruptcy or when the law is never or rarely enforced or has
little community support). Friedman also appears to assume that
the law always has an ethical justification (or is merely amoral
in
nature), while in some cases, legislation, or the results of com-
plying with such legislation, might be deemed unethical,
thereby
ethically justifying its violation (e.g., Apartheid laws in South
Africa). It might also be argued that firms should be permitted
to
engage in deception in order to succeed in business (i.e., when
deception is the norm in business such as during
negotiations36).
Nonetheless, overall, Friedman can still be understood as repre-
senting one end of the CSR continuum.
It is important to realize that at no point does Friedman indi-
cate that business has no social responsibilities. The title to his
1970 article (“The Social Responsibility of Business Is to
Increase
Its Profits”) makes this quite clear. Rather, business (or really
14. the
managers of a business according to Friedman) has only one
responsibility: to maximize profit while still following the rules
of
8 BUSINESS AND SOCIETY REVIEW
the game or of the society in which it does business. This is
why
Friedman should more properly be described as representing the
“narrow” version of CSR. Despite this fact, several scholars
have
referred to Friedman when they argue that firms have no social
responsibilities, or just economic ones.37 As demonstrated from
the discussion above, however, Friedman recognizes constrained
corporate social responsibilities that go beyond the bottom line.
Friedman’s Logic
While numerous arguments and theoretical constructs38 support
Milton Friedman’s position, the following are arguably the most
critical:
• managers are agents of shareholders and thus spending
shareholders’ money in a nonprofit maximizing manner
imposes taxes upon them without their consent;
• companies pursuing profits ultimately leads to social utility
maximization;
• policy decisions are better left to government;
• shareholders or managers can still personally give to charity;
and
15. • firms can engage in so-called broader “socially responsible”
activity but only if it maximizes shareholder wealth.
These arguments will now be discussed. First, Friedman’s
primary argument with respect to his version of appropriate
CSR
is that managers are hired (and paid) to act as the fiduciary
agents of their principals (i.e., stockholders/owners) for the
purpose of increasing their wealth. This should be considered an
ethical argument, given that shareholders also have moral
rights,
captured as the moral right to “property” acquired through their
investment in the firm. This moral right then creates an
obligation
on directors and managers of the firm not to infringe this right
by
misappropriating or “stealing” from the shareholders’ property
(e.g., by giving to charity). This might be considered the
strongest
or most potent of Friedman’s arguments and the most difficult
to
argue against. He states: “The executive is exercising a distinct
‘social responsibility,’ rather than serving as an agent of the
stockholders . . . only if he spends the money in a different way
than they would have spent it.”39 Friedman states that spending
9SCHWARTZ AND SAIIA
shareholders’ money without their consent is a form of unautho-
rized taxation on shareholders: “But if [the executive spends
money in a different way than the stockholders would have
spent
it] . . . he is in effect imposing taxes, on the one hand, and
16. decid-
ing how the tax proceeds shall be spent, on the other.”40
Friedman
even notes the potential consequences of executives not acting
as
the stockholders’ agent: “. . . whether he wants to or not, can
[the
executive] get away with spending his stockholders’ . . .
money?
Will not the stockholders fire him?”41
There are several other important arguments supporting Fried-
man’s position on CSR. Friedman is ultimately taking a
utilitarian
approach42 (i.e., “the greatest good for the greatest number”)
and
seems to take into account the best interests of society in
addition
to the best interests of the firm. Similar to eighteenth-century
moral philosopher Adam Smith, who many consider the father
of
modern capitalism, it is only when business firms focus on their
own best interests that ultimately the best interests of society
(including customers and employees) are served.43 Despite the
many deficiencies leveled against utilitarianism, such an
approach
clearly broadens the potential appeal of Friedman’s position
(although Friedman would not support an action based on
utilitar-
ian arguments if it was not in the firm’s best self-interest as
well).
Friedman’s view that government officials, rather than execu-
tives, are the only legitimate parties to make social decisions
(e.g.,
regarding “pollution” or “training the hard-core unemployed”)
17. is
also attractive, in that society’s best interests are still protected
by
those most qualified to do so. In any event, according to Fried-
man, executives are always entitled to spend from their own
pockets if they wish to give charity to various social causes. For
example, when individuals like Bill Gates or Warren Buffet
decide
to give away billions of dollars of their personal wealth to char-
ity,44 this would be considered completely acceptable by
Friedman
(as opposed to when the firms they own, such as Microsoft or
Berkshire Hathaway, give to charity).
There is one final important misconception regarding Fried-
man’s position. Can a firm give to social causes (e.g., engage in
charitable giving) under any circumstances? The answer is
clearly
yes, but going back to our starting point, this would only be the
case when the firm or its executives can argue that by doing so
the firm is maximizing profits (e.g., through customer goodwill,
10 BUSINESS AND SOCIETY REVIEW
employee morale, recruitment, and retention).45 When this is
the
case, Friedman would not only permit such activity but mandate
it, with the caveat that such activity should not take place under
the “cloak” of CSR. For example, if a firm engages in
philanthropy
(e.g., community assistance) based on self-interest while
pretend-
ing to be “socially responsible,” this may violate Friedman’s
pro-
18. hibition against deception or fraud.
Beyond Profits: The “Broad CSR” Position
Contrary to Friedman’s views, another position at or near the
other
end of the CSR continuum is referred to here as the “broad
CSR”
position. This position on the CSR continuum is an amalgam of
evolving principles that have been a work in progress for
several
decades.46 The principles underlying and justifying the broader
CSR approach have been developed by theorists in several busi-
ness and society fields including business ethics, stakeholder
man-
agement, sustainability (i.e., triple bottom line), and corporate
citizenship.47 While broad CSR was popularized by firms such
as
The Body Shop (which has been criticized over the years as a
firm
that in fact was not socially responsible or ethical48) as well as
Ben
and Jerry’s Ice Cream, it has recently been reflected in a more
robust form by companies such as Patagonia, Stonyfield Farms,
and Interface Carpets. The position in essence is the following:
Business should do more than make money—companies have
additional ethical obligations (i.e., beyond Friedman’s ethical
crite-
ria) and/or philanthropic obligations (e.g., helping to solve
social
problems).49
The first aspect of the position is that firms have ethical obli-
gations that go beyond those suggested by Milton Friedman. For
example, Friedman’s ethical obligations as discussed above are
quite limited. The broad CSR position, however, would go
19. further
and require firms to take into account additional ethical con-
straints. While there is sure to be debate as to what these ethical
obligations should consist of, based on a review of the business
ethics literature,50 the following moral standards (i.e., ethical
values or principles) should also be taken into account:
1) universal core ethical values: (1) trustworthiness (i.e., in
addition to honesty, also promise-keeping, integrity, and
11SCHWARTZ AND SAIIA
transparency); (2) responsibility (i.e., accountability, accept
fault, fix mistakes, and apologize); (3) caring (i.e., avoid
unnecessary harm and do good when of relatively little cost
to oneself); (4) citizenship (i.e., in addition to obeying the law,
also assist the community and protect the environment);
2) utilitarianism (i.e., act in ways that lead to greatest net good
for all those who are affected, even if not in the best interest
of the firm);
3) Kantianism (i.e., put yourself in the other person’s shoes,
respect/do not exploit others);
4) moral rights (i.e., in addition to protecting the property rights
of the shareholders, also respect the rights to life, health,
and safety of nonshareholder stakeholders); and
5) justice/fairness (i.e., procedural justice in terms of unbiased
decision making, compensatory justice when others are
harmed, distributive justice in terms of distributing benefits
and burdens based on relevant criteria, and societal justice
in terms of ensuring the greatest benefit to the least
20. advantaged).
Of course, many difficulties remain in attempting to apply these
additional ethical constraints. For example, many of the moral
standards will conflict with each other, and it has never been
established which standard or standards should take priority.51
To somewhat assuage this concern, the broader CSR position
simply suggests that firms have an obligation to attempt to
respect such ethical values or principles as they pursue mission-
driven objectives including an adequate profit margin. Another
important feature of the broad CSR position is that theoretical
room is given for firms to engage in a range of philanthropic
activities, in other words, helping to solve social problems.
Firms
can and possibly should undertake such activities, even when by
doing so their profit margins are sacrificed for other mission-
driven CSR objectives.
What is important with respect to understanding the broad
CSR position is that even if one rejects the philanthropic
obliga-
tion, one is still in the broad CSR camp if he or she holds that
firms merely have additional ethical obligations beyond Fried-
man’s. In other words, if one is not completely and consistently
in
line with all of Friedman’s views, he or she should be
considered
12 BUSINESS AND SOCIETY REVIEW
to fall closer along the continuum toward the broad CSR
position.
This assertion provides a useful guidepost for business decision
21. makers attempting to navigate the straits between the theory and
practice of CSR.
Arguments Supporting the Broad CSR Position
The following summarizes the key arguments supporting the
broad CSR position, along the CSR continuum, supported by
many different theorists52:
• the “rules of the society” or the “rules of the game” have
changed (i.e., societal expectations for firms have increased
since 1970 as the relationship and the position of business in
society has evolved);
• corporations have made claims to citizenship within society
and must therefore consider their impacts on nonowner
stakeholders;
• shareholders’ desires often go beyond the bottom line;
• shareholders have moral obligations toward society;
• managers are engaged to make all manner of policy decisions
under uncertainty;
• corporations have the power and ability to make important
contributions toward solving societal issues; and
• society cannot rely solely on government to enact legislation
to protect their own citizens from all possible actions or harm
caused by corporations.
These arguments can be explained as follows. The first argu-
ment is that even according to Friedman’s criterion that firms
must follow the “rules of the society” or the “rules of the
game,”
firms now have additional ethical and/or philanthropic obliga-
22. tions. For example, corporations in many societies have been
granted rights akin to its citizens and must therefore consider
the
impacts of their actions on affected stakeholders. Paying
corporate
taxes is not sufficient to pay for all the negative externalities
(e.g.,
pollution, outsourced labor, and catastrophic failure such as oil
spills) that firms cause and for which they may not be held fully
accountable. Second, shareholders’ desires often go beyond
mere
bottom line considerations. Evidence for this fact is the growing
ethical and socially responsible movement, which takes into
13SCHWARTZ AND SAIIA
account corporate ethical and socially responsible (e.g., philan-
thropic or environmentally sustainable) activity.53 Third, share-
holders themselves have ethical obligations with respect to the
impacts caused by the firms they own through investment. Just
because the law may limit the legal liability of shareholders to
the
extent of their investment does not mean that shareholders bear
no moral responsibility for how the firm’s assets are used.54
Fourth, in terms of Friedman’s concern over the ability of man-
agers to make policy decisions, by the same logic one could
argue
that managers are required to make difficult decisions under
uncertainty, and therefore are qualified to make policy decisions
regarding the stakeholders their firms are affecting and, indeed,
often do.55 Fifth, because corporations have the power and
ability to make a difference within the society that supports the
firm’s prosperity, they have a responsibility to do so.56 Finally,
23. what if the government of the country a firm is operating within
is not able, willing, or knowledgeable enough to protect its own
citizens? In such cases, the particular firm arguably inherits
additional ethical obligations with respect to protecting its
stakeholders.
PART THREE: APPLICATION OF CSR TO CASE STUDIES
While there are many other classic critiques of Friedman (e.g.,
Davis,57 Stone,58 and Mulligan59), at this point, one might
attempt
to answer the following question: “Of the two positions,
Friedman
versus ‘broad CSR,’ which is more persuasive?” To further
parse
this question, it is instructive to analyze actual business cases to
see how each of the two positions translate into action. One
could
ask two questions: (1) How would Milton Friedman versus an
executive operating according to broad CSR resolve the
dilemma?;
and (2) Do I agree with the outcome based on my theoretical
position (Friedman or broad CSR)? While individuals may
initially
feel comfortable with their theoretical CSR position, once con-
fronted with the application of their position to actual case
studies and obliged to defend their position, individuals may
feel
morally compelled to shift their initial positions. The following
two
classic cases will be used in this manner to further explore the
CSR debate: (1) the Ford Pinto; and (2) Merck and river
blindness.
14 BUSINESS AND SOCIETY REVIEW
24. The Ford Pinto60
In the early 1970s, the Ford Motor Company faced intense com-
petition from German and Japanese small compact car imports.
In an effort to quickly develop a competing model, Ford
condensed
the typical period of time to develop its new car, the Ford Pinto,
from 3 1/2 years down to 2 years. As a result, a design flaw
occurred that was not recognized prior to the tooling and the
manufacturing plant set-up process. It was only during subse-
quent crash testing that Ford discovered that the Pinto’s fuel
tank
could rupture during a rear-end impact even at speeds under 25
miles an hour; leaking fuel could then possibly ignite, causing
an
explosion. To make changes to the design at that point in time
would cost Ford $11 per vehicle, with 12.5 million vehicles
needing to be recalled. Thus, the total cost to Ford would have
been $137.5 million to fix the Pinto. Changing the design would
also have resulted in less trunk space, which would have had a
negative effect on Pinto sales. Ford predicted that as a result of
the defect, 180 people could die, 180 people could suffer
serious
burns, and 2,100 vehicles could be destroyed by fire. Using
1971
figures from the US National Highway Traffic Safety
Administra-
tion, the cost of a life to society (i.e., someone killed in a car
accident) was estimated to be $200,000 (about $2 million per
life
today61), and for a serious burn, the cost estimate was $67,000.
These figures included elements such as future productivity
losses, medical costs, victim’s pain and suffering, and legal
costs.
25. Thus, the total cost to society of not recalling the Pinto was
$49.5
million (180 deaths ¥ $200,000 + 180 serious burns ¥ $67,000 +
2,100 vehicles ¥ $700). There was no legal requirement to recall
the Pinto, since despite the defect Ford was still in compliance
with all legal safety requirements, and the Pinto was
comparable
in safety to competitors’ vehicles. Should Ford recall and fix
the
Pinto? What would Milton Friedman say?
Friedman would argue that it would be socially irresponsible for
Ford to recall the vehicle. This would be based on the
assumption
that recalling the Pinto would cost Ford more than all of the
long-term direct and indirect impacts on the firm by continuing
to
sell its potentially dangerous defective vehicle. Friedman would
most likely not even apply the entire $200,000 figure, as this
includes additional costs to society. He would only include
those
15SCHWARTZ AND SAIIA
costs that directly or indirectly negatively affected the interests
of
Ford (e.g., lawsuits, diminished reputation, lost sales, and lower
employee morale). In terms of Friedman’s additional
constraints,
Ford was acting within the law and within ethical custom (i.e.,
within acceptable US automobile industry norms at that time).
The only issue would be acting without deception, which would
require Ford at a minimum to disclose the defect to the US
government if not to the consumers directly (although the con-
26. sumers would still be required to pay for fixing the vehicle).
One
might try to argue that according to Friedman, Ford might even
be required to spend its own money ensuring that its customers
were aware of the defect.
The broad CSR approach, on the other hand, would go beyond
mere disclosure and require a recall to be paid for by Ford.
Because Ford was responsible for the design flaw, it cannot sell
a
car knowing that there is an avoidable risk, especially one
includ-
ing the possibility of death, beyond what one would normally
assume at that time when purchasing a car. Ford must act in a
trustworthy manner and treat the customer with respect. In addi-
tion, by not recalling the car, Ford would clearly be violating
the
moral rights to health and safety of its customers.
What Happened?
Ford did nothing for 7 years until 1978 when under pressure
from
the media, government, and legal cases, the firm recalled 1.5
million Pintos built between 1970 and 1976. In total, 27 people
died from accidents involving the Ford Pinto. One commentator
suggests that when taking into account the millions of vehicles
that were produced, the Pinto was still just as safe a vehicle as
any other.62 Despite the legal costs and damage to its
reputation,
the decision not to recall and fix the Pinto, even in hindsight,
appears to have been the long-term profit maximizing decision
for
Ford and thus consistent with Friedman’s CSR position.
Merck and River Blindness63
27. In 1978, Dr. Roy Vagelos, head of research for the
pharmaceutical
firm Merck & Co., faced a difficult dilemma. One of his
research-
ers informed him that he believed he had found a cure to a
16 BUSINESS AND SOCIETY REVIEW
worldwide disease called river blindness. The disease was
caused
by a parasitic worm carried by tiny black flies that bite people.
Once a person was infected, the worm would reproduce,
releasing
millions of microscopic offspring that eventually travel
throughout
the body invading the eyes of its host, leading to blindness. It
was
estimated that the problem affected over 35 developing
countries
around the world, threatening blindness to about 85 million
people living mainly in Africa, the Middle East, and Latin
America.
In 1978, the World Health Organization estimated that about 18
million were infected by the parasite, with approximately
340,000
people already blind due to the disease. At that point in time,
Merck, a public company, was one of the largest drug
companies
in the world, with approximately $2 billion in sales and a net
income of over $300 million annually. Most of the firm’s
current
revenues came from two drugs whose patents were about to
expire, meaning that discovering new drugs through research
28. was
a priority for the firm. The expected cost to develop the river
blindness drug was in the tens of millions of dollars. The
problem,
however, was that few people who would use the drug could
afford
to pay for it. In addition, there was a risk that in developing the
drug, if any new side effects were discovered, the reputation
and
sales of Merck’s similar and profitable veterinary drug could be
negatively affected. Furthermore, if a human version of the drug
were developed and distributed as a philanthropic act, it could
easily end up on the black market and negatively affect the sales
of the veterinary drug. Merck could more effectively spend its
financial resources on other potential drugs that would actually
have a chance of making a profit (e.g., cancer drugs). Clearly,
developing a drug for river blindness, while potentially
benefiting
the company indirectly through the effect of the decision on its
employees (e.g., morale, recruitment, and retention), would not
be
a profit maximizing action for the firm. How would Milton
Fried-
man handle this dilemma? What about the broad CSR approach?
Because making the drug was not a long-term profit maximizing
decision, Friedman would obviously not condone making the
drug.64 Friedman might still allow for Merck to give away its
propri-
etary information on the drug to another company, nonprofit
orga-
nization, or government, which might then further develop the
drug, unless doing so would negatively affect the financial
interests
of Merck. However, clearly making the drug with all of the
financial
29. 17SCHWARTZ AND SAIIA
risks, versus spending the money on more financially promising
drugs, would not be the socially responsible decision as defined
by
Friedman. In fact, as a corporate philanthropic act, it might be
considered to be “stealing” from the shareholders. There is no
legal
obligation to make the drug, no deception or fraud is involved,
and
the ethical norm at the time was clearly not to develop drugs for
free. According to Friedman, should people therefore have to go
blind? No, but this has to be the responsibility of governments
or
nonprofit organizations, not that of a public company. If all
phar-
maceutical firms were obligated to develop promising drugs that
cannot be sold, very soon there would be no more
pharmaceutical
firms left to develop drugs for anyone. The only way Friedman
might justify making the drug is based on the firm’s unofficial
philosophy or motto, which apparently was stated by former
chair-
man George Merck, the son of the founder, in 1950 as follows:
“We
try never to forget that medicine is for people. It is not for the
profits. The profits follow, and if we have remembered that,
they
have never failed to appear. The better we have remembered it,
the
larger they have been.”65 According to this line of argument, if
Merck did not make the drug (especially when no one else was
willing or able to make it), the firm would be acting contrary to
30. its
motto, and thereby potentially in a deceptive manner to its
inves-
tors and employees. While Merck’s motto may cast some doubt,
Friedman’s position on this matter seems clear in that Merck
cannot produce and distribute this drug as an act of charity.
So what about the broad CSR approach? How would this
approach be different? From an ethical perspective beyond
Fried-
man’s ethical criteria, in terms of caring (e.g., doing good when
of
relatively little cost to oneself), the drug should be made. The
financial circumstances still need to be taken into account, but
Merck could afford to make the drug at this time. In terms of
utilitarianism, or the greatest good for the greatest number, the
saving millions of people from blindness substantially
outweighed
any cost to the shareholders. Indeed, the drug would save
numer-
ous communities from the huge cost of lost labor and the cost of
care for the blind. In terms of philanthropy, it might be argued
that as a pharmaceutical firm, there is an expectation that drugs
should sometimes be developed despite the lack of a financial
return. This expectation appears to exist, for example, in terms
of
HIV/AIDS drugs in Africa and other developing countries.66
18 BUSINESS AND SOCIETY REVIEW
This case can be problematic for followers of Milton Friedman.
Individuals faced with this situation may try to justify the
decision
to make the drug based on the presumed long-term indirect
31. financial benefits to Merck. While the argument for indirect
finan-
cial benefit can be made based on the facts of the case, the lack
of any direct financial return, in addition to the business risks,
makes it very difficult to support from a Friedman perspective.
For those who indicate that they are Friedmanites but would
nevertheless make the drug, they must struggle to defend their
position and may realize that they are not as committed to
Fried-
man as they previously thought.
What Happened?
Merck decided to make the drug. The firm believed other
organiza-
tions or governments would fund the distribution of the drug.
However, no one stepped forward, so Merck decided to also
fund
the distribution of the drug into the future, forever. Eventually,
millions of people were prevented from contracting river
blindness,
and it is no longer considered to be a worldwide disease.67 In
terms
of the financial return to Merck, the main benefit appears to be
the
recruitment of top research scientists over the years due to the
river blindness story, yet it is not clear that one could use this
indirect financial benefit to justify making the drug as a profit
maximizing decision.68
Table 1 summarizes the two cases regarding how Friedman
versus the broad CSR approach would apply based on the
criteria
articulated above.
An application of Friedman to the Ford and Merck cases may
32. demonstrate to some that his criteria are not completely accept-
able. Of course, the same could possibly be said regarding an
initial
preference for the broad CSR position.69 The point, however, is
that
it is indeed incumbent on business professionals and business
students to not only develop a personal position on CSR, but
also to
be able to defend it upon application to real business cases.
DISCUSSION AND CONCLUSION
It is a matter of choice whether instructors of business and
society,
business ethics, or CSR express their own personal views on the
19SCHWARTZ AND SAIIA
CSR debate, or even require their students to take and defend a
position. For example, Harvard Business School during its
manda-
tory MBA “Leadership and Corporate Accountability” course
holds
a debate over the narrow CSR approach (i.e., “the shareholder
maximization perspective”) versus the broad CSR approach
(i.e.,
“multiple stakeholder perspective”). Rather than require
students
to take a position: “The goal of the session is not to pigeon-hole
students, but rather to help them understand the strengths and
weaknesses, as well as the assumptions and limitations, of each
perspective.”70 There may be good reasons to hold back
expressing
an opinion, given that the instructor’s own personal views could
33. skew the debate in the classroom. Nevertheless, our own view is
that in addition to discussing the merits and concerns of both
sides
to the debate, students should ultimately be required to take a
CSR
position and defend it, particularly with respect to its
application to
real business cases. In addition, the instructor’s own personal
position should also be expressed, once students have been
given
an opportunity to debate the issue themselves. In this way,
people
have to confront the totality and, in some cases, the finality of
real
consequences that flow from their CSR position.
So where do we stand between Friedman and the broad CSR
approach? In many respects, there is much to be said in support
TABLE 1 Summary of Friedman versus the Broad Corporate
Social Responsibility (CSR) Approach
Criteria
Ford—No
Recall
Merck—Make
Drug
Friedman Maximize profit Yes No
Legal Yes Yes
Ethical custom Yes Yes
No deception Yes Yes
OVERALL Yes No
34. Broad CSR Core values No Yes
Utilitarianism Yes Yes
Kantianism No Yes
Rights No Yes
Justice No Yes
Philanthropy N/A Yes
OVERALL No Yes
20 BUSINESS AND SOCIETY REVIEW
of Milton Friedman. His argument that managers are fiduciary
agents of their principals, the shareholders, is his most compel-
ling argument about the proper interpretation of CSR. It is con-
sistent and fair that philanthropy is not an “obligation” for
public
corporations. Instead, philanthropy can only be considered an
obligation when it is based on economic (e.g., strategic philan-
thropy71) and/or ethically consistent reasons.72
Where Friedman can be questioned (and the source of our most
serious concerns) is regarding the extent of the ethical
obligations
he ascribes to the firm. Requiring firms to avoid deception and
fraud is certainly necessary but insufficient to match their
pivotal
role within society. A review of the Ford Pinto case above
demon-
strates the risks involved with such a position and the harm that
can result from such a narrow view. If certain actions would be
considered unethical for an individual citizen, they should also
be
considered unethical when enacted on behalf of a firm,
especially
because corporations have been granted the equivalent rights of
35. an
individual citizen by the US Supreme Court. Just as in law,
where
there are situations (e.g., fraud) whereby one can pierce the
“corpo-
rate veil” that typically grants protection for shareholders from
unlimited financial liability, one should be able to pierce what
might be called the “morality veil” (which typically protects
share-
holders, executives, and managers from moral responsibility) in
situations involving unethical activity by the firm. In other
words, if
a shareholder personally instructs their agent to only act in
ways
that will benefit themselves, but by doing so others are
intention-
ally harmed, the shareholder is morally accountable for the
actions
of the agent. The agent should have a professional moral
obligation
not to act unethically and should not be able to justify such
actions
on the basis of: “I did what was necessary to maximize the
interests
of my principal.” Following this line of reasoning, shareholders
should not expect managers of their companies to act in ways
that
they themselves would find unethical, and managers should not
justify unethical behavior based on some misguided notion that
the
business environment is a place where societal ethical standards
must be abrogated to serve the financial objectives of their
princi-
pals (or their own personal self-interest).
The more difficult issue to resolve then becomes: “What addi-
36. tional ethical obligations do firms possess?” As discussed
above,
and despite the potential difficulties and conflicts that may arise
21SCHWARTZ AND SAIIA
in their application, there are five primary moral standards as
identified in business ethics literature by which all business
firms
should attempt to abide (or at least not clearly violate): (1) core
values (i.e., trustworthiness, responsibility, caring, and citizen-
ship); (2) utilitarianism; (3) Kantianism; (4) moral rights; and
(5)
justice/fairness.
Friedman’s ethical criteria are consistent to an extent with
relativism (i.e., if based on the ethical norms of the industry)
and
ethical egoism (i.e., maximize the firm’s profit). In addition,
Fried-
man’s ethical criteria also conform to the honesty component of
trustworthiness (in terms of avoiding deception), utilitarianism
(although only when the overall greatest net benefit to society is
the result of focusing on the firm’s interests—which
theoretically
only works under conditions of perfect competition and
transpar-
ency), and the moral property rights of the shareholders. The
remaining moral standards, however, are not considered and
therefore would never be applied by Friedman, unless they
somehow ultimately contribute to the best interests of the firm
(i.e., egoism) or are specifically stated by the corporate charter
or
a shareholder declaration.
37. At a minimum, Friedman’s position certainly runs into difficul-
ties when one attempts to apply it to firms that are doing busi-
ness in countries with corrupt regimes, dictatorships, and/or
impaired abilities to enforce legal standards. In such countries,
one cannot rely on governments to protect their own citizens, as
these governments are typically focused only on the immediate
challenge of maintaining order and control. In such cases, com-
panies may have an ethical obligation not to enter or to refuse
to
do business in such countries, or to do so only when through
constructive engagement73 the firm can ensure that a mini-
mum ethical threshold of societal and human rights is being
maintained.74
Furthermore, in terms of the cases analyzed, Ford was morally
responsible for recalling its Pinto from the moment it
discovered
the fatal design flaw. As seen in the Merck case, however, it
could
be argued on the basis of the moral standards of utilitarianism
and/or caring, that Merck, especially as a pharmaceutical firm,
was morally obligated under such circumstances to develop the
river blindness drug, when it could afford to do so and no one
else
was prepared to develop and distribute the drug it had invented.
22 BUSINESS AND SOCIETY REVIEW
In the case of Ford, no consent was required from shareholders
to engage in our recommended actions. However, in the case of
Merck, there would need to be at least implicit authorization
from
shareholders to engage in such actions. The implicit consent can
38. be obtained in several ways, such as through a formal mission
statement (e.g., Ben & Jerry’s) that is publicized and easily
acces-
sible using current technology (e.g., via the firm’s web site). It
was
not clear, however, whether Merck’s motto (“Medicine is for
people, not for profits . . .”) was widely known by its
shareholders
at the time of the case.
Eventually, mechanisms may be established, whereby share-
holders can more directly be involved in decisions by their
firms
that would not necessarily maximize share value. In a sense,
this
process has already started via the increasing number of share-
holder resolutions that are now taking place.75 Another US
legisla-
tive development in several states (e.g., Maryland) has led to
the
possibility of “benefit corporations” being established, whereby
company directors who make reasonable business judgments
that
include social and environmental values (which can be an
explicit
part of the firm’s charter) are protected against legal action.76
While
not completely addressing Friedman’s concerns, by obtaining
shareholder approval, Friedman’s primary concern regarding
man-
agers acting as agents in the best interests of their principals
(i.e.,
the shareholders) is mitigated. At a minimum, even Friedman
would arguably support the use of nonfinancial reporting (e.g.,
social, environmental, and sustainability reports), despite their
expense, if such reporting is deemed to be necessary by market
39. and
nonmarket stakeholders to know what practices the firm is
engag-
ing in (i.e., for the firm to be acting in a nondeceptive manner)
and
to then be able to judge the firm accordingly.
In conclusion, while Friedman’s views on corporate philan-
thropy (especially when conducted without the explicit or
implicit
consent of the shareholders) have validity, his ethical
constraints,
while necessary, are insufficient for business to properly fulfill
its
responsibilities toward society. In other words, it is only when
firms are fulfilling their economic, legal, and ethical obligations
(i.e., beyond Friedman’s ethical constraints) that they can be
said to be “socially responsible.” As such, we would suggest
that
our theoretical approach is a reasonable synthesis between
Friedman’s narrow CSR approach and a broader CSR position.
23SCHWARTZ AND SAIIA
One might therefore call our position “FPME,” or “Friedman
Plus
More Ethics.”
Applying FPME (in an albeit cursory manner) to the cases ini-
tially presented above, Google should be prepared to remain
outside of China (e.g., based on moral rights). UBS Bank should
cut its carbon emissions (e.g., based on utilitarianism),
Heineken
should provide HIV/AIDS medication to its African employees
40. and
their dependents (e.g., based on caring), and Philip Morris
should
cease selling cigarettes (e.g., based on moral rights and
Kantian-
ism). Ben & Jerry’s or other public firms, however, would
require
shareholder consent (explicit or implicit) before engaging in
non-
strategic (e.g., noneconomic) philanthropy, including donations
fol-
lowing a natural disaster.
The “Friedman versus broad CSR debate” is an important one,
and one’s position on CSR, in particular for business
professionals,
can have significant consequences in terms of the positive or
negative impact of one’s business decisions on society. Boards
of
directors, chief executive officers, executives, and managers all
need to be cognizant of their own personal theoretical CSR
position
and how this may be affecting their business decisions on behalf
of
the firm or its shareholders. The debate over CSR will of course
not
disappear in the near future, and one should expect that the
notion
of CSR will certainly provoke further reflection and discussion
for
those most involved in shaping and making business decisions
in a
dynamic and increasingly global society.
NOTES
41. 1. This article is revised from “Should firms go ‘beyond
profits’?”
(ch. 3) in M. S. Schwartz, Corporate Social Responsibility: An
Ethical
Approach (Peterborough, ON: Broadview Press, 2011): 51–86.
2. See, for example: A. Dahlsrud, “How corporate social
responsibility
is defined: An analysis of 37 definitions,” Corporate Social
Responsibility
and Environmental Management 15 (2008): 1–13; and M. V.
Marrewijk,
“Concepts and definitions of CSR and corporate sustainability,”
Journal
of Business Ethics 44, 2/3 (2003): 95–105.
3. See “Google to end censorship in China over cyber attacks,”
The
Guardian, January 13, 2010,
http://www.guardian.co.uk/technology/
2010/jan/12/google-china-ends-censorship, accessed February 2,
2011.
24 BUSINESS AND SOCIETY REVIEW
4. See F. Oberholzer-Gee, “UBS and climate change: Warming
up to
global action?” 2007, Harvard Business School Case (9-707-
511).
5. See D. Barrett and D. Ballou, “Heineken NV: Workplace
HIV/AIDS
programs in Africa (A)” (2003), Harvard Business School Case
(9-303-063).
42. 6. See M. S. Schwartz, “The ‘ethics’ of ethical investing,”
Journal of
Business Ethics 43, 3(2003): 195–214.
7. See M. J. Schill, “Ben & Jerry’s homemade,” June 27, 2000,
Darden Case no. 1364, http://papers.ssrn.com/sol3/papers.cfm?
abstract_id=234691, accessed February 2, 2011.
8. See N. Hsieh, “Voluntary codes of conduct for multinational
corporations: Coordinating duties of rescue and justice,”
Business Ethics
Quarterly 16, 2(2006): 119–135. For an example, see P. Delean,
“Credit
card companies waive fees on donations to Haiti,” Canwest
News
Service (January 15, 2010),
http://www.canada.com/news/Credit+card+
companies+waive+fees+donations+Haiti/2447354/story.html,
accessed
February 2, 2011.
9. One of the few attempts was made by Cosans when he
applied
Friedman’s approach to Enron, Wal-Mart, and SUVs. See C.
Cosans,
“Does Milton Friedman support a vigorous business ethics?”
Journal of
Business Ethics 87 (2009): 391–399.
10. See A. Dahlsrud, “How corporate social responsibility is
defined:
An analysis of 37 definitions”; G. Thomas and M. Nowak,
“Corporate
social responsibility: A definition,” GBS Working Paper no. 62,
Perth,
43. Australia: Curtin University of Technology (2006).
11. See “Perceptions and definitions of social responsibility,”
Interna-
tional Institute for Sustainable Development (2004),
http://www.iisd.org/
pdf/2004/standards_definitions.pdf, at p. 1, accessed February
2, 2011.
12. P. R. P. Coelho, J. E. McClure, and J. A. Spry, “The social
responsibility of corporate management: A classical critique,”
American
Journal of Business 18, 1(2003): 15–24 at p.15.
13. J. W. McGuire, Business and Society (New York: McGraw-
Hill,
1963): 144.
14. K. Davis and R. L. Blomstrom, Business and Society (3rd
ed.)
(New York: McGraw-Hill, 1975).
15. A. B. Carroll, “A three dimensional conceptual model of
corporate
social performance.” Academy of Management Review 4
(1979): 497–505
at p. 500.
16. R. A. Buchholz, “Corporate responsibility and the good
society:
From economics to ecology,” Business Horizons (1991,
July/August):
19–31 at p. 19.
25SCHWARTZ AND SAIIA
44. 17. T. Levitt, “The dangers of social responsibility,” Harvard
Business
Review 36, 5(1958): 41–50 at p. 48.
18. P. R. P. Coelho, J. E. McClure, and J. A. Spry, “The social
responsibility of corporate management: A classical critique” at
p. 15.
19. The Economist, “The Next Question,” (January 19, 2008): 8.
20. The Economist, “Do It Right,” (January 19, 2008): 19.
21. For those who take a broader approach to CSR, see K. R.
Andrews, “Can the best corporations be made moral?” Harvard
Business
Review (May–June, 1973): 57–64; A. B. Carroll, Business and
Society:
Managing Corporate Social Performance (Boston: Little, Brown
and
Company, 1981); K. Davis and R. L. Blomstrom, Business and
Society.
(3rd ed.) (New York: McGraw-Hill, 1975); E. M. Epstein, “The
corporate
social policy process: Beyond business ethics, corporate social
responsi-
bility, and corporate social responsiveness,” California
Management
Review 29, 3(1987): 99–114; and J. W. McGuire, Business and
Society
(New York: McGraw-Hill, 1963).
22. For example, one might consider the case of Jeffrey
Skilling,
former CEO of Enron. See J. LeBoutillier, “From Harvard to
Enron”
45. (January 10, 2002),
http://archive.newsmax.com/archives/articles/
2002/1/10/162639.shtml, accessed February 2, 2011; and R. R.
Sims
and J. Brinkmann, “Enron ethics (or: Culture matters more than
codes),”
Journal of Business Ethics 45, 3(2003): 243–256.
23. See M. V. Marrewijk, “Concepts and definitions of CSR and
cor-
porate sustainability” at p. 96.
24. The best known firm (although also one of most
controversial)
that initially represented the broader CSR approach is The Body
Shop. See The Body Shop, “Values & Campaigns,” http://www.
thebodyshop.co.uk/_en/_gb/values-campaigns/index.aspx,
accessed
February 2, 2011. The Body Shop position was the result of the
views of
founder Anita Roddick. See
http://www.anitaroddick.com/books.php,
accessed February 2, 2011. Ms. Roddick passed away at age 64
in 2007,
while Milton Friedman passed away at age 94 in 2006, only
several
months before Ms. Roddick.
25. See M. Friedman, Capitalism and Freedom (Chicago:
University of
Chicago Press, 1962): at p. 133. This quote is referred to again
by
Friedman at the very end of his 1970 article “The social
responsibility
of business is to increase its profits,” New York Times
Magazine at
46. p. 126.
26. M. Friedman, “The social responsibility of business is to
increase
its profits,” New York Times Magazine, 1970 in T. L.
Beauchamp and
26 BUSINESS AND SOCIETY REVIEW
N. E. Bowie, Ethical Theory and Business (7th ed) (Upper
Saddle River,
NJ: Pearson/Prentice Hall, 2004) at p. 52.
27. Although based on the notions of “freedom of the
individual” and
“voluntary exchanges” Friedman in addition to disclosure of the
act
would also require the offering of compensation for such
pollution to
those negatively affected. See M. Friedman, Capitalism and
Freedom at
p. 30 and J. S. James and F. Rassekh, “Smith, Friedman, and
self-
interest in ethical society,” Business Ethics Quarterly 10
(2000): 659–674
at p. 668.
28. M. Friedman, “The social responsibility of business is to
increase
its profits,” at p. 52. See also C. Cosans, “Does Milton
Friedman support
a vigorous business ethics?” at p. 392.
29. For example, see C. Grant, “Friedman fallacies,” Journal of
47. Busi-
ness Ethics 10, 12(1991): 907–914 at p. 907; and S. McAleer,
“Friedman’s
stockholder theory of corporate moral responsibility,” Teaching
Business
Ethics 7 (2003): 437–451 at p. 437.
30. See P. Fleming and S. C. Zyglidopoulos, “The escalation of
decep-
tion in organizations,” Journal of Business Ethics 81 (2008):
837–850.
31. See C. Cosans, “Does Milton Friedman support a vigorous
busi-
ness ethics?” at p. 395.
32. See C. Grant, “Friedman fallacies,” Journal of Business
Ethics 10,
12(1991): 907–914 at p. 909.
33. D. Silver, “Corporate codes of conduct and the value of
autonomy,” Journal of Business Ethics 59 (2005): 3–8 at p. 4.
34. See W. H. Shaw, “Business ethics today: A survey,” Journal
of
Business Ethics 15, 5(1996): 489–500 at p. 542.
35. See C. Cosans, “Does Milton Friedman support a vigorous
busi-
ness ethics?” at p. 395. He also states that according to his
interpretation
of Friedman: “Any practice, which has a negative externality
that requires
another party to take a significant loss without consent or
compensation,
can be seen as unethical” (p. 395).
48. 36. See A. Carr, “Is business bluffing ethical?” Harvard
Business
Review (January–February, 1968): 143–153 at p. 46.
37. See S. McAleer, “Friedman’s stockholder theory of
corporate moral
responsibility,” who states that according to Friedman “a
business’s only
responsibility is to maximize wealth for its stockholders” (p.
437).
38. In terms of theoretical support, both laissez-faire capitalism
and agency theory support Friedman’s position. See: M. C.
Jensen, and
W. Meckling, “Theory of the firm: Managerial behavior, agency
cost, and
capital structure,” Journal of Financial Economics 3 (1976):
305–360;
27SCHWARTZ AND SAIIA
S. Ross, “The economy theory of the agency: The principal’s
problem,”
American Economic Review 63 (1973): 134–139.
39. M. Friedman, “The social responsibility of business is to
increase
its profits” at p. 52.
40. Ibid., p. 52.
41. Ibid., p. 53.
42. See J. R. Danley, “Polestar refined: Business ethics and
political
49. economy,” Journal of Business Ethics 10, 12(1991): 915–933.
Danley
states: “. . . I will argue that Friedman’s argument is utilitarian”
(p. 916).
43. For example, consider the famous quote from Adam Smith’s
Wealth of Nations: “It is not from the benevolence of the
butcher, the
brewer, or the baker that we expect our dinner, but from their
regard to
their own interest.” A. Smith, An Inquiry Into the Nature and
Causes of the
Wealth of Nations (London: J.M Dent & Sons, 1975 [1776]).
See also J. S.
James and F. Rassekh, “Smith, Friedman, and self-interest in
ethical
society.”
44. As of 2007, Warren Buffet had given away $40 billion of his
personal wealth to charity, and Bill Gates $28 billion. See C. J.
Loomis,
“Warren Buffet gives away his fortune,” Fortune (June 25,
2006), http://
money.cnn.com/2006/06/25/magazines/fortune/charity1.fortune/
,
accessed February 2, 2011.
45. See M. Orlitzky, F. L. Schmidt, and S. L. Rynes, “Corporate
social
and financial performance: A meta-analysis,” Organization
Studies 24
(2003): 403–441; as well as J. D. Margolis and J. P. Walsh,
People and
Profits: The Search for a Link Between a Company’s Social and
Financial
50. Performance (Mahwah, NJ: Erlbaum, 2001); B. W. Husted and
J. D. J.
Salazar, “Taking Friedman seriously: Maximizing profits and
social per-
formance,” Journal of Management Studies 43, 1(2006): 75–91.
46. See A. B. Carroll, “Corporate social responsibility:
Evolution of a
definitional construct,” Business & Society 38, 3(1999): 268–
295.
47. See M. S. Schwartz and A. B. Carroll, “Integrating and
unifying
competing and complementary frameworks: The search for a
common
core in the business and society field,” Business & Society 47,
2(2008):
148–186 for an overview of the major theoretical contributions
of each
dominant business and society field.
48. See articles by J. Entine that have been very critical of The
Body
Shop, http://www.jonentine.com/the-body-shop.html, accessed
Febru-
ary 2, 2011.
49. See The Body Shop web site, http://www.thebodyshop-
usa.com,
accessed February 2, 2011 as well as founder Anita Roddick’s
book
28 BUSINESS AND SOCIETY REVIEW
51. Business As Unusual: My Entrepreneurial Journey (2005),
http://
www.anitaroddick.com/books.php, accessed February 2, 2011.
50. For a complete review, see M. S. Schwartz, “Universal
moral
values for corporate codes of ethics,” Journal of Business Ethics
59,
1(2005): 27–44. See also F. N. Brady, “A Janus-headed model
of ethical
theory: Looking two ways at business/society issues,” Academy
of Man-
agement Review 10, 3(1985): 568–576; S. Klein, “Two views of
business
ethics: A popular philosophical approach and a value based
interdisci-
plinary one,” Journal of Business Ethics 4 (1985): 71–79; P. V.
Lewis
and H. E. Speck, “Ethical orientations for understanding
business
ethics,” The Journal of Business Communication 27, 3(1990):
213–232;
and J. Cohen, “Appreciating, understanding and applying
universal
moral principles,” The Journal of Consumer Marketing 18,
7(2001): 578–
594.
51. For example consider Shaw’s view that: “. . . among moral
phi-
losophers there is no consensus about which moral theory is
best.” W. H.
Shaw, “Business ethics today: A survey,” Journal of Business
Ethics 15,
5(1996): 489–500 at p. 495.
52. 52. See M. S. Schwartz and A. B. Carroll, “Integrating and
unifying
competing and complementary frameworks: The search for a
common
core in the business and society field,” who summarize at p. 156
the
different theoretical justifications for broader CSR which
include: moral
personhood or moral agency theory; social contract theory;
social power
theory; interpenetration theory; stakeholder theory; property
based
theory; utilitarian theory; and religious theory.
53. See M. S. Schwartz, M. Tamari, and D. Schwab, “Ethical
investing
from a Jewish perspective,” Business and Society Review 112,
1(2007):
137–161.
54. For more on the ethical responsibilities of shareholders, see
M. S.
Schwartz, M. Tamari, and D. Schwab, “Ethical investing from a
Jewish
perspective,” at pp. 146–147.
55. See T. Mulligan, “A critique of Milton Friedman’s essay
‘The social
responsibility of business is to increase its profits,’ ” Journal of
Business
Ethics 5, 4(1986): 265–269 at p. 267 and the response by W. H.
Shaw,
“Business ethics today: A survey” at p. 541.
56. This might be considered the “Spiderman” argument, based
53. on
the famous line in the movie that “with great power comes great
respon-
sibility.” For the original corporate “social power” argument,
see K. Davis,
“Five propositions for social responsibility,” Business Horizons
18,
3(1975): 19–24.
29SCHWARTZ AND SAIIA
57. K. Davis, “The case for and against business assumption of
social responsibilities,” Academy of Management Journal 1
(1973): 312–
322.
58. See C. D. Stone, Where the Law Ends (New York: Harper
and Row
Publishers, 1975).
59. T. Mulligan, “A critique of Milton Friedman’s essay ‘The
social
responsibility of business is to increase its profits.’ ”
60. For additional facts and background, see D. A. Gioia, “Pinto
fires
and personal ethics: A script analysis of missed opportunities,”
Journal of
Business Ethics 11, 5/6(1992): 379–390; and M. S. Schwartz,
“Ford
Pinto” in Encyclopedia of Business Ethics and Society (Vol. 2),
ed. R. W.
Kolb (Thousand Oaks, CA: Sage Publications, 2008): 923–925.
54. 61. See B. Marsh, “Putting a price on the priceless,” New York
Times (September 9, 2007),
http://www.nytimes.com/2007/09/09/
weekinreview/09marsh.html, accessed February 2, 2011, which
states
that the families of those killed on 9/11 were each compensated
about $2
million on average.
62. See “The myth of the Ford Pinto case,” G. Schwartz,
Rutgers Law
Review 43 (1991): 1013–1068,
http://www.pointoflaw.com/articles/
The_Myth_of_the_Ford_Pinto_Case.pdf, accessed February 2,
2011.
63. For additional facts on the case, see D. Bollier and S.
Weiss,
“Merck & Co. Inc (A),” (The Business Enterprise Trust,
Harvard Business
School Publishing, 1991); “Merck Mectizan Donation Program,”
http://
www.merck.com/corporate-responsibility/access/access-
developing-
emerging/mectizan-donation-riverblindness/, accessed February
2,
2011; and M. S. Schwartz, “Merck & Co. Inc.” in Encyclopedia
of Busi-
ness Ethics and Society (Vol. 3), ed. R. W. Kolb (Thousand
Oaks, CA: Sage
Publications, 2008): 1369–1370.
64. See: B. W. Husted and J. D. J. Salazar, “Taking Friedman
seri-
ously: Maximizing profits and social performance,” at p. 77.
55. 65. See D. Bollier and S. Weiss, “Merck & Co. Inc (A),” at p. 3.
66. See R. Amado and N. M. Gewertz, “Intellectual property
and the
pharmaceutical industry: A moral crossroads between health and
prop-
erty,” Journal of Business Ethics 55, 3(2004): 295–308.
67. See “Former Merck CEO Roy Vagelos to receive Prix
Galien
Humanitarian Award for role in eliminating river blindness”
(September
4, 2007),
http://findarticles.com/p/articles/mi_m0EIN/is_2007_Sept_4/
ai_n21026644/, accessed February 2, 2011.
68. See K. Collins, “Profitable gifts a history of the Merck
Mectizan®
Donation Program and its implications for international health”
(2004),
30 BUSINESS AND SOCIETY REVIEW
http://muse.jhu.edu/journals/perspectives_in_biology_and_medi
cine/
v047/47.1collins.html, accessed February 2, 2011.
69. For example, Malden Mills went bankrupt after CEO Aaron
Feuer-
stein decided to remain in Lawrence, Massachusetts rather than
moving
the firm’s operations overseas, while paying his employees tens
of mil-
lions of dollars in wages despite no legal obligation to do so.
56. Many
initially considered Mr. Feuerstein’s actions to be exemplary of
CSR. See
T. Teal, “Not a Fool, Not a Saint,” Fortune (November 11,
1996): 201–203.
70. S. M. Datar, D. A. Garvin, and P. G. Cullen, Rethinking the
MBA:
Business Education at a Crossroads (Boston, MA: Harvard
Business
Press, 2010) at p. 160.
71. See M. E. Porter and M. R. Kramer, “Strategy and society:
The link
between competitive advantage and corporate social
responsibility,”
Harvard Business Review 84, 12(2006): 78–92.
72. See M. S. Schwartz and A. B. Carroll, “Corporate social
respon-
sibility: A three domain approach,” Business Ethics Quarterly
13, 4(2003):
503–530.
73. See S. Mena, M. De Leede, D. Baumann, N. Black, S.
Lindeman,
and L. McShane, “Advancing the business and human rights
agenda:
Dialogue, empowerment, and constructive engagement,” Journal
of Busi-
ness Ethics 93 (2010): 161–188.
74. See T. Donaldson, “Values in tension: Ethics away from
home,”
Harvard Business Review (September–October, 1996): 5–12.
57. 75. See Social Investment Forum, “Advocacy and public policy:
Share-
holder resolutions,”
http://www.socialinvest.org/projects/advocacy/
resolutions.cfm, accessed February 2, 2011.
76. Washington Post (online). “M.D. lawmakers approve benefit
cor-
poration status,” (March 31, 2010),
http://www.washingtonpost.com/
wp-dyn/content/article/2010/03/30/AR2010033003924.html,
accessed
February 2, 2011.
31SCHWARTZ AND SAIIA
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without the copyright holder's express written
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The Discussion Board / Modeled Examples English 225
In any course, the Discussion Board represents an incredibly
58. important area of
engagement for students and faculty. At its best, the forum is an
engaging and active
space where students offer their views on key course concepts
and test those views with
rigorous responses to their peers. It also offers faculty the
opportunity to encourage
deeper levels of critical thinking through robust commentary
that can sometimes develop
into a sustained dialogue – in the specific forum, and
throughout the class!
With these points in mind, we have provided some exemplary
model discussion
responses. Note that the annotated student responses are actual
responses by students
– we’ve just added specific references to key areas.
Week Five Discussion 2: Film Analysis and Its Applications
[Student Post]
I gave this discussion board post assignment much thought, and
didn’t want to go with a
modern film that I had already discussed, or a film that another
one of my classmates
59. chose. [This shows the student’s attention to individuality in the
context of the
class] I decided to go with Frank Capra’s It’s a Wonderful Life
(1947). It’s so easy to
discount this film due to its popularity during the Christmas
holiday season; however, it
applies to any time of year if you think about it. The premise of
this film (what would have
happened had I never been born?) resonates deep within the
human psyche. I think
we’ve all wondered if our loved ones would have been better off
without us at some point
in time. This film illustrates that if just one person is missing
from the tightly woven fabric
of our lives, then it can have a huge impact on us all. This film
also teaches us to take
joy in the little things, and not get so wrapped up in material
possessions & money. It’s
the things that cost nothing, like the kiss on a cheek from a
child or a smile from a
spouse, that mean everything. [Here, the student does a great
job summarizing the
intention and effect of this film]
Material developed by Nate Pritts, PhD, and James Meetze.
60. In his article for The Huffington Post, Mark Redmond put it
beautifully when he said, “It's
a Wonderful Life is counter-cultural, because it's a film about
doing what is right in life,
even if it isn't glamorous or adventurous or exciting or wealth-
producing. It's a film about
loyalty to family and friends, even when money and other
temptations are dangled
before your eyes. It's a film about putting your whole heart and
soul into whatever task is
before you, even if you can't see the immediate results” (2011).
[Here, the student
incorporates outside research] I agree completely what he has to
say about this film
being counter-cultural in that it goes against the grain. In such a
greed-driven society
where aspiration is a virtue, we can be blinded by the glitz and
glamour of prosperity and
lose touch with what’s really important in life. It’s a Wonderful
Life instills family values,
morality, and genuine human emotion into its viewers. It is a
lasting life lesson that
transcends societal or cultural stigmas and our modern caste
61. system. We could all learn
a valuable lesson in humanity from this beautiful film.
References:
Goodykoontz, B. & Jacobs, C. P. (2014). Film: From watching
to seeing (2nd ed.). San
Diego, CA: Bridgepoint Education, Inc.
Redmond, M. (2011). Why ‘It’s a Wonderful Life’ is such an
important film for parents
and kids. Retrieved from: http://www.huffingtonpost.com/mark-
redmond/why-its-
a-wonderful-life-_1_b_1161938.html
Material developed by Nate Pritts, PhD, and James Meetze.
Film and Its Impact
on Society
2
I believe it’s through film that our culture and
63. • Discuss how film can affect society and how society may
affect film.
2.1 Film: Beyond Entertainment
Since their inception, movies have provided inexpensive mass
entertainment; cinema is an
incredibly popular medium. As we have already seen, audiences
spent more than $10 billion on
movie tickets in 2013. People obviously enjoy going to the
movies. It is clear that movies have
had a profound impact on society. And not only are audiences
influenced by what they see at the
movies; audiences influence what is shown in theaters as well.
Whether it is in appearance, fashion, or behavior, films
romanticize a certain lifestyle that is
eagerly imitated by audiences. Fashion magazines promise that
we can “Get Angelina’s Look” if
we follow the tips inside. Celebrity gossip publications keep
readers up to date on the comings
and goings of seemingly everyone who has appeared in a movie.
The Internet and social media
are practically choked with chatter about film—box-office
results, reviews, gossip, and more.
Beyond these shallower aspects, film can influence how we live,
our morality, and our behavior.
What is open to discussion, however, is the direction of the
influence—do films influence culture
or do they reflect it? Or is it both?
Yes, we go to the movies to be entertained; as
Steven J. Ross says in Movies and American
Society, we go
to laugh, cry, boo, cheer, be scared, thrilled,
64. or simply to be amused for a few hours.
But movies are something more than just
an evening’s entertainment. They are also
historical documents that help us see—and
perhaps more fully understand—the world
in which they were made. (Ross, 2002)
Movies, in other words, have something to say,
often beyond their literal meaning. Even bad mov-
ies, silly movies, pornographic movies, when taken
as a whole, serve as a sort of pop-culture barome-
ter that often measures more than just the fleeting.
It takes longer to produce a feature-length movie,
Courtesy Everett Collection
▲▲ Howard Beale’s mad rant in Network was given new
currency in the 2010 electoral campaign: “I’m as mad as
hell and I’m not going to take this anymore.”
Social Media Chapter 2
after all, than it does an episode of a television show (the other
most popular visual medium).
Filmmakers who have something to say about society, then, are
better off with subjects that have
lasting impact, rather than trying to capture flavor-of-the-month
subjects that quickly become
dated and soon seem silly.
For example, George Clooney could write, direct, and act in the
film Good Night, and Good Luck
in 2005 and expect that its subject matter—CBS television
reporter Edward R. Murrow’s disman-
65. tling of U.S. Senator Joseph McCarthy in the mid-1950s—would
be relevant to contemporary
audiences. It was a modern recreation and interpretation of an
era more than a half century in the
past and will likely live on as an effective historical drama. On
the other hand, Breakin’ 2: Electric
Boogaloo, a 1984 film that attempted to cash in on the then-
current craze of break dancing, was
dated practically the day it was released. Such a film may have
little relevance or appeal to audi-
ences of later generations, yet it can serve as a valuable time
capsule documenting a popular cul-
tural element and attitude of the period in
which it was created. Not every film can be
timeless; most are not even designed to be.
Some blockbusters exist as profit machines
for studios, as we have discussed. But the
better, more challenging films speak to
audiences of their times and long afterward.
Certainly, movies are not made and released
in a vacuum. The government and special-
interest groups have tried to police and cen-
sor film at seemingly every turn. Experts
debate the effect that films have on the
behavior of society—for example, whether
violent films encourage violence in the
members of their audiences, and whether
promiscuous sexual behavior on the screen
results in audience imitation. Movies are a
constant and easy source of debate because of their ubiquity and
their popularity. There are
movies made about almost everything, so naturally opposing
sides have no trouble finding a film
that represents their side of the argument on culture wars, often
taking their examples out of the
66. context in which the films were made and intended.
In this chapter, we will discuss this impact—how movies at
least attempt to shape society and
how society shapes movies. Both topics are fluid, as the ever-
growing Internet and social media
become increasingly powerful elements in discussion of films
and what’s in them.
2.2 Social Media
In seemingly no time, online services that at first appeared to be
nothing more than niche prod-
ucts for young people have become essential tools for marketing
and journalism. In particular,
Facebook, which has more than 1 billion users, and Twitter,
which has more than 550 mil-
lion users, are an increasingly important part of everyday life.
Personal Web logs, or blogs, are
another popular form of self-expression and social interaction,
as are numerous Internet discus-
sion forums, some devoted exclusively to online discussions and
others that are part of informa-
tional sites such as IMDb or Blu-ray.com. Even though their
missions are different, they can all
Courtesy Everett Collection
▲▲ Stanley Kubrick’s 2001: A Space Odyssey has become an
enduring classic. As robotic intelligence becomes a reality and
astronomers discover planets in distant galaxies, the themes
of this film and the questions it raises are more relevant
than ever.
Social Media Chapter 2
67. be lumped under the category of social media. How long they
will remain popular is anyone’s
guess, but the major services have shown no sign of decline.
Social media has plenty to do with movies. As the number of
professional film critics dwindles,
thanks in part to the poor outlook for traditional newspapers and
magazines, many movie fans
take to social media to register their feelings about a film
instantly. Some comments and cri-
tiques are silly or promotional in nature; however, the sheer
volume of responses to a movie (or
television show, CD, book, or any other form of entertainment
media) means that they cannot be
ignored. It’s almost like an instant poll, conducted in real time,
by average people. Or, perhaps,
like the world’s largest bar, with patrons all over the country,
sometimes all over the world, com-
menting on what they see as they watch it, and commenting on
other people’s comments.
However, the true effect of social media on the popularity and
profitability of a movie remains
a hotly debated topic. In 2009, the movie Bruno, starring Sacha
Baron Cohen, enjoyed a profit-
able opening day on Friday, the traditional opening day for
films. But by Saturday attendance
had dropped steeply—36% in a single day. Why? Immediately,
the media began pointing to the
“Twitter effect.” Millions of people, it seems, tweeted (the verb
used for posting an update on
Twitter) negative responses to the film. While they, like
everyone else, were limited to 140 char-
acters per post, there’s no limit to how many posts a user can
make. Soon, carried along by an
68. excitable media eager to report on anything related to social
media, the Twitter effect was a full-
on social phenomenon.
Until, one day, people decided it wasn’t. In a widely circulated
story in July 2010, Daniel Frankel
wrote in The Wrap, an online publication, that the effect of
Twitter was in fact overstated when it
came to Bruno and other films that suffered sharp, fast drop-
offs in business in 2009: “One year
later, the social media trend that was going to revolutionize
word-of-mouth hasn’t demonstrably
done so. There are few movies this summer where you can point
to Twitter causing a huge box
office bump, or drop” (2010). However, there is no question
that—as Facebook and Twitter users
can attest—movie studios are fully immersed in the world of
social media, seeing it as a marketing
opportunity, a way to spread good word of mouth more quickly
than almost any other method
of delivery. And what about the bad word of mouth? Well, some
things can’t be prevented. As
consultant Gordon Paddison told The Wrap, “People say Twitter
causes a movie to bomb. I say a
bad film causes people to trash it on Twitter” (Frankel, 2010).
Whatever the case, social media shows no sign of going away
anytime soon, and its importance
can also be evidenced by the increasing number of filmmakers
and stars who use it. Studios have
their own elaborate websites for individual film releases, but
they also create YouTube, Facebook,
and Twitter accounts for their films, hoping people will follow
them for information and updates
(and, of course, recommendations to see the film). Twitter
users, however, may decide to follow
69. a hashtag movie title rather than the studio’s movie title
account, thus seeing every tweet in
the world that mentions that film, favorable, neutral, or
unfavorable. Often—perhaps always,
really—there are promotional considerations. But there is still
value. Ron Howard, for instance,
for months before the release of his Formula One racing film
Rush, tweeted pictures from the set
and the editing room, giving us a peek behind the scenes of the
making of a hotly anticipated film
from an Oscar-winning director, while at the same time
allowing Howard to build anticipation
for the movie’s release. In early 2013, director Robert
Rodriguez even solicited online fan partici-
pation in a short movie project called Two Scoops that he
created especially for the Internet.
Following Twitter and Facebook accounts or hashtag topics can
be an easy way to keep up to
date on a favorite film, filmmaker, or star. It can indicate what
topics are trending at any given
moment. But this can also distract from the topic in which one
is originally interested. The most
Movies and Escapism Chapter 2
heavily discussed topics show up on the side of a Twitter feed
as “trending,” and people can
instantly see the changing interests of those using the service
regionally or worldwide, whether
trivial entertainment, natural weather disasters, or serious
newsworthy activities. In mid-2013,
trending topics included the ongoing protests and revolution in
Egypt, several days before it was
70. reported in the traditional Western news media outlets. Thus,
social networks like Twitter can
both distract their users from real-world issues and draw their
attention to those issues while
they are unfolding.
2.3 Movies and Escapism
There is little debate that Americans have endured tough times
in the first decade of the 21st
century. The national dialogue has revolved around a lingering,
increasingly unpopular military
intervention in the Middle East; partisan politics that seemed to
divide the country; and an eco-
nomic crisis the like of which has not been seen since the Great
Depression. A national discontent
developed that threatened at times to turn to panic. During all of
this, what movies were people
going to? The answer might really surprise you. Then again, it
may not.
The year 2012 was the most lucrative year at the box office in
the history of the movies, and the
top five movies were The Avengers, The Dark Knight Rises,
The Hunger Games, Skyfall, and The
Hobbit: An Unexpected Journey. Briefly, we have a film with a
group of superheroes, a movie about
a superhero, a futuristic killing game, a James Bond thriller,
and an adaptation of a novel about
an imaginary creature. Meanwhile, Argo, a fictionalized
retelling of the escape of six Americans
during the Iran hostage crisis, won the Academy Award for Best
Picture but was only the 22nd
most popular film of the year, according to box-office returns.
The most seen films of 2013 were
Iron Man 3, The Hunger Games: Catching Fire, Despicable Me
2, Man of Steel, and Frozen.
72. harshest critics of Hollywood suggest that there are too many
films that may be nothing more than a profitable exercise in
mindless entertainment.
Movies and Escapism Chapter 2
However, as Waters observed, “[w]hen you reflect that back to
the movie . . . it allows people to
have hopefulness and excitement and the possibility of ultimate
victory” (Goodykoontz, 2007).
Jon Favreau, the director of the first two Iron Man movies,
argues that we have needed escapism
more than ever since the terrorist attacks of 9/11. For Favreau,
it is unsurprising that a period of
“good-vs.-evil escapist fantasies, with very simple, operatic
paradigms of good and evil playing
it out in some alternate worlds, allowed us to feel very simple
emotions” (Goodykoontz, 2007).
Bear in mind, however, that box-office numbers reflect the
audience’s point of view, taking
into account what they wanted to see. This does not mean that
filmmakers have avoided the
troubles of contemporary life. In addition to The Hurt Locker,
an intense film about a bomb-
disposal unit in Iraq that won Best Picture in 2010 but barely
earned back more than its mod-
est $15 million production budget, In the Valley of Elah (2007)
was a critically acclaimed film
dealing with the effects of war in Iraq on the father of a soldier
killed there. Yet In the Valley of
Elah couldn’t find an audience and made less than $7 million at
the box office. Brothers, about
73. a woman who believed her husband was killed in Afghanistan
but who returns, fared better,
taking in more than $28 million, but it still barely cracked the
top 100 of the most popular
movies of 2009.
In many ways, this trend can be traced back well into the past.
Hollywood chose to release few
films about the Vietnam War during that conflict, for instance,
because it seemed that war hit
too close to home, with its daily television presence of violence
and death beamed into our living
rooms. John Wayne’s Green Berets (1968) was one such attempt
to buck the trend, but its disas-
trous reception by both critics and audiences discouraged any
further attempts. Interestingly,
however, a few years after the war ended, films such as Coming
Home (1978), The Deer Hunter
(1978), Apocalypse Now (1979), and Platoon (1986) showed
that audiences, with the passage of
time, were ready to explore what happened during the war. Note
that a healthy box-office show-
ing does not make a movie good or important. We use it here
simply as the easiest measure of a
movie’s popularity among audiences; we are strictly going by
the numbers.
Audiences may or may not be receptive to films whose directors
have made them primarily to
explore social issues. Mexican director Guillermo Del Toro’s
Pan’s Labyrinth (2006) and The
Devil’s Backbone (2001) both dealt with the terrors of the
Spanish Civil War in the 1930s by incor-
porating escapism and telling a fairy tale-like story through the
eyes of children, with a fantasy
creature in the former and a ghost in the latter. While both films
74. were critically acclaimed, Pan’s
Labyrinth found favorable audience numbers at the box office,
but The Devil’s Backbone (argu-
ably the better film) was not a financial success, especially in
the United States, where it got little
distribution. David Cronenberg’s Cosmopolis (2012) dealt
heavily with modern social-economic
concerns in an unusual, stylized way, eliciting mixed, though
generally positive, critical responses
but a disastrous reception from general audiences.
People like to be entertained and may prefer mindless escapism
to thought-provoking drama
about current social problems or past political conflicts. As
we’ve seen already, and will see from
another perspective in Chapter 4, it is not impossible for films
to fulfill audience expectations at
the same time they’re expressing underlying societal concerns,
questioning or reinforcing estab-
lished values, or reflecting contemporary issues. Highly
successful films such as The Dark Knight
and Iron Man managed to deal with issues of personal
conscience and social responsibility while
also allowing the audience to escape. The former explored
themes of vigilantism in the face of
pervasive urban crime and the latter looked explicitly at the war
in Afghanistan and its relation-
ship to greedy corporations supplying military arms to both
sides. But at the same time, both had
appealing heroes whom audiences could enjoy watching triumph
over evil. Even a family-oriented
Censorship and Hollywood Chapter 2
75. animated sci-fi fantasy like WALL-E could
depict a bleak future world devastated by
past wars and pollution, while the survivors
became dependent upon machines to sur-
vive. The hero was himself a machine, but
too cute to be threatening to viewers.
These films may appear to be escapist fun on
the surface, yet all have a depth that’s able
to express ideas the filmmakers want to get
across. Generations from now, they will be
valuable documents of the early 21st cen-
tury, reflecting both what people enjoyed
watching and what issues they were think-
ing about in their daily lives. Fortunately,
movies are a big enough cultural phenom-
enon that there is room enough for both
what audiences want to see and what soci-
etal issues need to be explored. Indeed,
movies became so popular so quickly after the invention of the
medium that many people wor-
ried about what audiences were seeing and what they should be
allowed to see.
2.4 Censorship and Hollywood
As far back as ancient Greece, philosophers such as Plato
argued that art forms such as poetry
and theater could be dangerous influences on the public and
should be used only to provide inspi-
rational or uplifting experiences. In fact, he called for the
banning of works that did otherwise.
Others such as Aristotle argued that depicting tragedy and
realistic events could be cathartic
for audiences, allowing them to purge pent-up emotions safely
at the theater and go on with
their normal lives. Virtually identical debates continue about
![Should Firms Go “Beyond
Profits”? Milton Friedman
versus Broad CSR1
MARK S. SCHWARTZ AND DAVID SAIIA
ABSTRACT
When attempting to articulate the nature and scope of
corporate social responsibility (CSR), a variety of opin-
ions emerge. The primary CSR issue appears to be:
Should firms go “beyond profits”? In order to address
this normative question, this article will explore the theo-
retical underpinnings of CSR and its practical applica-
tion. Part one of the paper begins by discussing common
CSR definitions. Part two outlines the CSR debate in
terms of the “narrow view” of CSR (as represented by
Milton Friedman) versus the “broad view” (i.e., beyond
profits). Part three applies both the narrow and broad
approaches to CSR in analyzing two classic business and
society cases: (1) the Ford Pinto; and (2) Merck’s river
blindness pill. The article concludes with a proposed
synthesis of the CSR approaches discussed.
Mark S. Schwartz is an Associate Professor, Law, Governance
& Ethics, School of Adminis-
trative Studies, Faculty of Liberal Arts and Professional
Studies, York University, Toronto,
Ontario, Canada. E-mail: [email protected] David Saiia is an
Associate Professor, Strategic
Management & Sustainability, Palumbo-Donahue School of](https://image.slidesharecdn.com/shouldfirmsgobeyondprofitsmiltonfriedmanversusb-221108134748-636e6ee8/85/Should-Firms-Go-BeyondProfits-Milton-Friedmanversus-B-docx-1-320.jpg)
![Business, Duquesne University,
Pittsburgh, PA. E-mail: [email protected]
Business and Society Review 117:1 1–31
© 2012 Center for Business Ethics at Bentley University.
Published by Blackwell Publishing,
350 Main Street, Malden, MA 02148, USA, and 9600
Garsington Road, Oxford OX4 2DQ, UK.
INTRODUCTION
M
ost people today, whether they are students, manag-
ers, or employees, have heard something about the
notion of corporate social responsibility (CSR), whether
in the business community, the media, or even within popular
culture. For example, the most popular movie of all time,
Avatar, focuses on the purpose of the corporation and its obli-
gations toward society with respect to the displacement of
indig-
enous people in order to extract valuable resources. A search in
2011 on Google revealed over 12 million hits for the term “cor-
porate social responsibility.” However, despite the ubiquity of
the
CSR term, what CSR means and whether it has relevance in the
business world elicits varied responses. There are a multitude of
different definitions for CSR and, not surprisingly, a
correspond-
ing range regarding the appropriate scope and nature of a firm’s
social responsibilities.2
The appropriate definition and scope of CSR becomes much
more problematic when real business case examples are consid-](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)