Example research essay topic: Critical Analysis Of “the Social Responsibility Of Business” From Milton Friedman – 1,490 words

In this essay I evaluate Milton Friedmans essay:
The Social Responsibility of Business Is to
Increase Its Profits in 1970, on the Social
Responsibility of a business and his theory, which
is called the Efficiency Perspective. In every
article and book that I have read about social
responsibility, Friedmans Efficiency Perspective
is placed centrally. During my research I found
that Friedman is often criticised for being too
classical. Friedman believes that managers
foremost objective or even moral obligation to the
firm should be to maximise profits always. There
is however one condition that makes his
perspective more complicated, not only for me, but
also for several well-known authors. According to
Friedman, the managers obligations should be
carried out: while conforming to the basic rules
of the society, both those embodied in law and
those embodied in ethical custom.

This leads to
one of the main questions of my essay: To what
extent does Friedmans Efficiency Perspective give
foundation for responsible and moral international
management behaviour? And need we any concern if
it fails to do so? To fully answer the questions,
I first need to explain the two different parts of
the first question: responsible international
management behaviour and moral international
management behaviour. In businesses nowadays they
combine these two parts, respectively responsible
and moral becomes social responsibility in
international management. The second question
anticipates the other theories and models we need
to consider when Friedmans efficiency perspective
does not give foundation for social responsibility
in international management. However before I go
in further detail to answer these questions, I
first explain more about the concept social
responsibility. After this I explain Friedmans
full theory, and how it related to these different
models of social responsibility, and finally I
will draw a conclusion. Business ethics
compromises moral principles and standards that
guide behaviour in the world of business (Ferrell
& Fraedrich).

Individuals or groups of
individuals evaluate this specific behaviour. The
judgement of this evaluation can be right or
wrong, ethical or unethical, internal or external
from the firm. The outcomes of these judgements
influence the societys acceptance or rejection of
activities within the business. Social
responsibility refers to a firms obligation to
maximise its positive impact on society and to
minimise its negative impact (Ferrell
&Fraedrich). As we are talking about
international management behaviour, A.K. Sundaram
and J.S.

Black add to this definition: across
national borders. There are four kinds of social
responsibility (Figure 1): economic, legal,
ethical, and philanthropic. Ethics as part of
social responsibility has its focus on the firms
duty to maximise its positive impact on society
and minimise its negative impact. Business ethics
and social responsibility are closely linked. The
first part of social responsibility is economic;
it relates to how resources for the production of
goods and services are distributed within a social
system. Two parts within the economic dimension of
social responsibility are regarded the foundation
of social responsibility: the impact of the
economy and competition.

When relating social
responsibility to economy, it looks at how the
economy is affected by competition, stockholders,
customers, employees, communities and the physical
environment. Competition in social responsibility
arises when businesses rival for customers and
profits. Issues in social responsibility and law
arise when businesses compete unfairly to obtain
these customers and profits. The legal dimension
of social responsibility relates to obeying the
law and standards that are written by governments
to set a minimum of responsible behaviour. Society
(including consumers, interest groups,
competitors, and legislators) believes that
business can not deal with social responsibility,
such as environmental and consumer protection.
Therefore laws establish the basic ground rules
for responsible business activities. The ethical
dimension of social responsibility concerns
operations and behaviours that are expected or
restricted by members of an organisation, its
community and society, although these operations
and behaviours are not put into laws.

Social
responsibilities that involves ethics reflect a
concern of major stakeholders, including
shareholders consumers, employees, and the
community. Their concern involves what is right
with respect or protection of the stakeholders
moral rights. The fourth dimension of social
responsibility is the philanthropic dimension. The
philanthropic dimension of social responsibility
refers to the expectation that businesses also
contribute resources to the community and improve
quality of life. Consumers want business to act
environmental responsible, they want sophisticated
communication systems, good working conditions and
times to improve their quality of life, and so on.
The economic and legal dimensions are found as the
most important elements of performance: If this is
well done, say classical theorists, profits are
maximised more or less continuously and firms
carry out their major responsibilities to society.
Ferrell & Fraedrich say: Some economist
believe that if firms take care of economic and
legal issues, they are satisfying the demands of
society and that trying to anticipate and meet
ethical and philanthropic needs would be almost
impossible. The execution of corporate strategy is
influenced by the value systems of the corporation
and its stakeholders.

Common business criticism
says the role of ethics in business strategy has
been time and again ignored. According to Ferrel
& Fraedrich if we accept these two statements:
Business strategy must reflect an understanding of
the values of organisational members and
stakeholders and secondly Business strategy must
reflect an understanding of the ethical nature of
strategic choice, then ethics becomes a core
decision in business strategy. Friedman has been
quoted saying that: the basic mission of business
[is] thus to produce goods and services at a
profit, and in doing this, business [is] making it
maximum contribution to society and in fact, being
socially responsible. Friedman presents his
efficiency perspective of social responsibility
clear and simple, according to Friedman the
business of business is business. His perspective
is based on a free market environment. In
Friedmans essay his first argument states that a
corporate executive is an employee of the owners
of the business.

The separation of ownership
(shareholders) and the control of the organisation
(managers) characterise the corporate form of an
organisation. Above all, his primary
responsibility is to the owners of the business.
Friedman: the manager is the agent of the
individuals who own the corporation or establish
the eleemosynary institution, and his primary
responsibility is to them. However Friedman does
anticipate that providing charity to local
communities may serve the greater purpose of
easing recruitment problems or improving behaviour
at work. Such actions, though, are one way for a
corporation to generate goodwill as a by-product
of expenditures that are entirely justified in its
own self-interest, despite it is approaching
fraud, to disguise social responsibility clearly
harms the foundations of a free society. This
strategic approach to environmental performance
attempts to maximise stockholders returns by using
an environmental strategy that creates a
sustainable competitive advantage. Businesses
should therefore not make social responsibility a
consideration, they are the job of the government
and managers have already a responsibility towards
the shareholders.

Adam Smith was one of the first
economists who presented this approach. Smith
reasoned that to place resources in the hands of
the individuals and to allow the market forces
effectively allocate these scarce resources, this
would satisfy the demands of the society. If
society thinks that it is important for products
to have certain environmental and safety
standards, the manager would improve its profits
if he acted according to those needs. In his essay
Friedman describes managers who misuses corporate
resources to exercise a distinct social
responsibility, are actually imposing tax on the
stockholders. Moreover Ronald Green said in his
evaluation: But actually his argument is really
far more pointed. Ordinarily, we call a person who
appropriates others goods without permission a
thief .

Then he argues that only people can have
responsibilities, and not the business, although
businesses can have artificial responsibilities,
such as to pay taxes. Friedman follows with his
main argument, as I stated earlier, that the
managers first obligation to the shareholders is
that they should conduct business in accordance
with [owners] desires, which will generally be to
make as much money as possible while conforming to
the basic rules of society, both those embodied in
law and those embodied in ethical custom.
According to Friedman, to demand that managers
exercise responsibility to society at large is to
ask them to violate their obligations to the
shareholders, which puts the company at a
competitive disadvantage. This process raises
political questions on two levels: principle and
consequences. On the level of political principle,
the imposition of taxes and the expenditure of tax
proceeds are governmental functions. Behind this
argument lies a distinctive confidence that every
social institutions should perform a particular
function. He feels that social responsibility is
the job of the government.

Friedman: On the
grounds of consequences, can the corporate
executive in fact discharge his alleged social
responsibilities? What Friedman means with this
argument is that it makes decision making more
complex and irrelevant. Moreover that managers
should not be bothered with these social
responsibilities, due ….

Research essay sample on Critical Analysis Of the Social Responsibility Of Business From Milton Friedman