Example research essay topic: Critical Analysis Of “the Social Responsibility Of Business” From Milton Friedman – 1,502 words

… to their relative incompetence to make moral
decisions about the use of the firms resources.
From Friedmans perspective, managers have no
obligation to act on behalf of society if it does
not maximise the value of the corporation for the
shareholders. Only within the boarders of the law,
managers should consider the social
responsibilities of the firm. Friedman does not
give further explanation to ethical custom in his
essay, most authors believe that what Friedman
means is that ethical custom is implied
specifically within the law, and not applied next
to the law. This means that Friedman considers
only the first two dimensions of social
responsibility, namely economic and legal. The
ethical dimension and certainly the philanthropic
dimension are totally left out of his argument.

D.L. Swanson formulates it; Friedman stance is a
contemporary articulation of neoclassical economic
utilitarianism. Jeremy Bentham founded
utilitarianism in the eighteenth century. He
argued that only pleasure and the absence of pain
are valued for their own sake. John Stuart Mill
proposed happiness rather than pleasure as the
ultimate human good. According to Mill, happiness
ads a qualitative dimension to human well-being
that is missing in mere pleasure and the absence
of pain.

Their type of thinking is often presented
as teleological; i.e. rightness or wrongness
depends on the consequences of the action. It is
contrasted with deontological theory, which
emphasises the action itself or its purpose. The
teleological theory can be divided into two main
philosophies, Egoism and Utilitarianism. Egoism
defines right or acceptable behaviour in terms of
the consequences for the individual.
Utilitarianism, as Egoism, is concerned with the
consequences, but looks at the greatest good for
the greatest number. Deontologists believe that
equal respect must be given to all persons and
that some things should never be done to maximise
utility (profits).

As said previously, Friedman is
associated with the utilitarianism approach;
achieving the greatest benefit for all those
affected by a decision. R.M. Green says that
Friedman is wrong to believe that managers ethical
responsibility can be limited to profit
maximisation. He suggests that both in terms of
contractual obligations and the needs of society,
managers cannot avoid paying attention to the
ethical implications of their decisions. Similarly
A.K. Sundaram and J.S.

Black characterise that
managers responsibility is not just to maximise
shareholder returns, because shareholders are not
the only ones responsible for the firms existence.
They say an alternative is the stakeholder model.
Stakeholders are individuals or groups whose
welfare can be seriously affected by corporations
actions and therefore have a stake in managers
decision making. Keith Davis, 1967: requires the
individual to consider his or her acts in terms of
a whole social system, and holds him or her acts
anywhere in that system. Raymond Bauer, 1976:
seriously considering the impact of the companys
actions on society. Stakeholders include the
corporations financiers, its employees, customers
or clients, suppliers, competitors, governmental
bodies, the various communities and society at
large, from the local to national to
international, in which it operates. Whereas
Friedmans shareholder theory concentrates on only
one line of social responsibility, which is the
responsibility from the manager to the
shareholders (with the board in between), Green
involves a whole network of relationships with the
manager in the middle of this network. This
network recognises the different social
responsibilities of the managers towards the

What it also recognises is the
social responsibilities of the stakeholders
towards the manager. Moreover firms use
stakeholder analysis to identify societies
expectations, such as wealth and job creation, and
exterior responsibilities like sponsoring. When
looking at Figure 4, Friedmans efficiency
perspective is shown. When both Shareholders and
Society are hurt (Cell 1), no conflict arises from
the mistakes. Also when both the shareholders and
the society benefit (Cell 4) from the decision
made, there is only a low possibility for
conflicts to arise. Though when according to
Friedman, the shareholders hurts and the society
benefits (Cell 3), the manager made a mistake and
is managerially responsible.

According to a report
released by the Business Roundtable in 1981, this
means that according to the stakeholder model, the
manager is socially responsible. Cell 2 represents
Managerial responsibility according to Friedmans
efficiency perspective, at the same time the
stakeholder model would argue that the manager is
acting socially irresponsible when society is
hurt. The Business Roundtable opinion is that:
Business is to serve the public interest as well
as private profit. Its opinion is underlined by
saying that managers should weight the conflicting
demands of all stakeholders and that customers
have a primary claim. Besides these models there
are two more theories on social responsibility:
The Corporate Natural Rights Theory and Business
Benefits Theory. Looking at CNRT theory, Den Uyl
(1984) argues that there is no necessity for
companies to seek to maximise profits and that
owners do not seek maximum profitability, but
rather wish only a certain rate of return.

theory says that managers responsibility to
shareholders is to achieve a certain rate of
return on their investments, can be seen as
natural or moral responsibilities. Furthermore in
pursuit of profits, companies should consider the
rights or moral space of individuals. The business
benefits theory is a rather new theory; it
emphasises that social responsibility creates
distinctive business (organisational) advantages.
This theory says that a respectable greater value
of corporate social responsibility leads to
improved business performance. This can be
achieved by higher employee involvement, cutting
waste, not making tests on animals, etc. The
business benefits theory sees social
responsibility as an investment not as a cost.
However there are some concerns with this theory;
it weakness lies in that this theory is not such a
coherent theory, it relies on, the often failing,
performances of companies which use(d) social
responsibility to their advantage. Concluding
Friedmans efficiency perspective, we must first
look at the basis of this perspective.

The basis
that Friedman has taken for his perspective is a
free market environment. This is Friedman first
mistake; there is no such thing as a free market.
Friedman also stresses democratic processes. 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
see that when investing in local communities it
can generate the greater purpose of easing
recruitment problems, improving work behaviour at
work, etc.

According to Friedman, such actions are
entirely justified while the companies do it for
their primary interest, which is making as much
profit as possible. As Friedman acknowledges
himself, businesses do have impact on society and
they have responsibilities towards not only
shareholders, but also consumers, suppliers,
society as a whole, etc. However according to his
theory corporate environmental expenditures are
viewed only as a cost or tax to conduct business
in society, and never as an investment in
developing a competitive advantage. Moreover
corporate laws exist and thus corporations and
organisations can be held responsible for their
actions. The Stakeholder perspective does have
some drawbacks as well; the responsibilities to
the stakeholders generally conflict with one
another. Therefore the decision making is a
complex process; managers should firstly define
the various (moral) obligations owed to the
stakeholders and how they can resolve the
conflicts among them.

Looking at the corporate
natural rights theory, it says that a certain rate
of return is wished for the corporations and that
this is their moral obligation to the
shareholders. The question nevertheless is what
happens with the remaining investments of the
shareholders. However together with the Business
Benefits theory it puts everything in place;
distinct business (organisational) advantages are
met by putting the investment in the right places,
which generates competitive advantages. Still I
think Friedmans efficiency theory provides enough
moral and responsible behaviour, businesses are
always looking for processes that makes them more
efficient and profit making. One way could be to
introduce social responsible actions, however
businesses should not pursuit these actions if
they will not increase their profits. BIBLIOGRAPHY

Strategic Innovation and Change. New York: Oxford
University Press BLACK, J.S., SUNDARAM, A.K.,
year. The International Business Environment, Text
and Cases CANNON, T., 1994. Corporate
Responsibility. London: Pitman publishing
DESJARDINS, J.R., McCALL, J.J., 1994. Contemporary
Issues in Business Ethics.

2nd ed. Belmont:
Wadsworth Publishing Company FERRELL, O.C.,
FRAEDRICH, J., 1997. Business Ethics, Ethical
Decision Making and Cases. 3rd ed. Boston:
Houghton Mifflin Company FREDERICK, R.E., 1999. A
Companion to Business Ethics.

Oxford: Blackwell
Publishers FRIEDMAN, M., FRIEDMAN, R. 1962.
Capitalism and Freedom. Chicago: University of
Chicago Press GREEN, R.M., 1994. The Ethical
Manager, a New Method for Business Ethics. New
York: Macmillan College Publishing Company
JOHNSON, G., SCHOLES, K., 1999. Exploring
Corporate Strategy.

5th ed. Harlow: Pearson
Education Ltd..

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