On September 13, 1970, New York Times Magazine published Milton Friedman's article, "The Social Responsibility of Business is to Increase its Profits". Concluding his article with a quote from his book, Capitalism and Freedom, Friedman states, "there is one and only one social responsibility of business – to use it(s) 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". His statement connotes that anyone who does anything concerning the business that falls beyond the elements of profit is doing a disservice to the company owners because social service is not why companies put up business. He contends that companies' ultimate goal is to recoup its investment, add more to the assets, and come up with a sizable profit, and nothing more. I disagree with Friedman's notions about social responsibility. In this paper, I will argue that companies have social responsibilities, and some are even compelled to give back to society, by incorporating environmental concerns, charitable institutions, and health and wellness issues into their products and services to be able to serve the populace and the clients better.
Friedman supports his beliefs with several points of argument. First argument is how he views a business, that is, it has no responsibilities to anyone whether social or any other type of obligation. Friedman goes on to say, "What does it mean to say that 'business' has responsibilities? Only people can have responsibilities. A corporation is an artificial person and in this sense may have artificial responsibilities, but 'business' as a whole cannot be said to have responsibilities, even in this vague sense." (Friedman). For him, a business is not "human", thus, it cannot have any responsibilities towards others the same way most executives view corporate social responsibility (CSR). Therefore, any member of the company who intend to use the company's money to help others is abusive and goes against what the company really wants, that is, profit.
Second, he argues that the law treats businesses as an entity such as an individual that is why it is given simulated responsibilities. However, these responsibilities, according to Friedman, pushes a business into accepting the socialist point of view (Friedman), which means social responsibility is driven by political mechanism, and not by market and economic mechanisms. According to the article, an executive who is either "self-selected or appointed directly or indirectly by stakeholders-is to be simultaneously legislator, executive and, jurist. He is to decide whom to tax by how much and for what purpose, and he is to spend the proceeds-all this guided only by general exhortations from on high to restrain inflation, improve the environment, fight poverty and so on and on" (Friedman). For Friedman, the only appropriate method to determine a business' role in society is through improved company economics – ensuring that the profits a company makes is always increasing and is not tainted by any political colors. Therefore, any attempts at providing solutions to issues such as healthcare and environmental issues, for instance, means a company is allowing itself to be used through socialist strategies.
Third, a company's management team is composed of people, that is why they have responsibilities. However, what corporate managers must remember is that their responsibility is to the fulfillment of a company's financial goals and nothing more. It means management must ensure that their actions are always towards the betterment of the company's marketability and profit only. Thus, if companies want to dabble in national issues with the intention of helping the citizens, then they must "be elected through a political process" (Friedman).
Considering Friedman's stature in society – a well-respected economist and statistician, how can I refute his contentions about corporate social responsibility? However, in my opinion, Friedman's first argument directly place businesses in a bad light when he says that businesses do not have responsibilities to society, but only to its internal interests alone. It gives the impression that companies must act without a conscience, despite the fact that products and services offered by a company are all consumed by society in general. It just looks bizarre that a company produces products and offers services without regard to its consumer's welfare or the "supplier" of its resources.
His second and third arguments say companies are only given simulated responsibilities is false because how can a company act and pursue its goals without the people – the executives and the employees – running the business? Now, consumers are not only concerned about whether a company delivers the product or service they want. Customers are also becoming aware about social responsibility such that when a company shows support to certain causes that would benefit the majority or specific groups of disadvantaged individuals, customers also do their best to help.
Friedman's arguments are weak when viewed now considering that companies, apart from their need to recoup their investments, are heavily into corporate social responsibility. CSR programs "help businesses operate in ways that benefit society and help improve public perception" (Brooks). Companies are often looking after how and where the business is in society and how it they can respond to society's greater needs without sacrificing the market possibilities for their products. Firms are all exerting efforts at ensuring that they are behaving ethically by voluntarily committing to improving employees' working conditions, banning child labor practices, protecting the environment against usage of harmful chemicals, supporting various charities, and developing partnerships with non-government offices in providing support to those in need.
Consumers now do not only go for the cheapest brands, but rather consider whether what they are purchasing are organically grown or help protect the environment. This also goes for the type of employment and employer a prospective applicant decides to work for. If a company is known to take care of their employees' welfare, support equal opportunity measures, or a known eco-friendly company, then most likely, this company will be chosen over one that does not have support any CSR programs (Brooks).
On the other hand is Enron Corp. that filed for bankruptcy in 2001. Following Friedman's contention that companies' focus must always be on profit and nothing else, Enron is part Friedmanian as it also incorporates CSR on how it ran the company. The company enjoyed tremendous financial success and following. As a company, it built a cult culture that focused on charismatic leadership in managing the organization. This method gave the employees a vision of a successful and rich life that they cannot experience in other companies. Employees were often told how good they were and that the company valued them. Some employees began thinking they have the perfect kind of working environment and could never imagine themselves working at other company settings. Apart from ego stroking, the company also promoted a common culture (Tourish & Vatcha, p. 7) and behavior. Thus, those who went beyond the norm may soon find themselves fired or reassigned to other projects.
However, the company used power and influence to manipulate the minds of employees and restrained any exertions of individuality. As a result, anyone who voices his or her concerns about the company, including how company money is spent or invested, faced severe consequences. While the company earned so much, it did not adhere to social responsibility towards its employees. This simply shows that following Friedman's assertions about business and profit, the equation could fail especially when individuals do not adhere to ethical business practices.
In conclusion, Friedman's assertions are no longer applicable in this time and age as more company's thrust is no longer just on profit, but also ensuring that their company is doing its share in helping society.
Works Cited
Brooks, Chad. "Corporate Social Responsibility: Definition & Examples." Business News Daily. (2013). Web. 2 September 2013. <http://www.businessnewsdaily.com/4679-corporate-social-responsibility.html>.
Friedman, Milton. "The Social Responsibility of Business is to Increase its Profits." Web. 02 September 2013. <http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html>.
Liodice, Bob. "10 Companies with Social Responsibility at the Core." Adage. (2010) Web. 02 September 2013. <http://adage.com/article/cmo-strategy/10-companies-social-responsibility-core/143323/>.
Tourish, Dennis, & Vatcha, Naheed. "Charismatic Leadership and Corporate Cultism at Enron: The Elimination of Dissent, the Promotion of Conformity and Organizational Collapse." OpenAir. (2005). Web. 2 September 2013. <https://openair.rgu.ac.uk/bitstream/10059/187/1/Enronrevisedpaper.pdf>.
