Rather, self-interest and profit-seeking is what brings humans to accomplish things, produce goods and services and thus benefit each others. It is false to think that profit-seeking fails to serve and advance the public interest, and that something else needs to be given back to the society to compensate for this profit-seeking.
Keith Davis advances several arguments against the so called Corporate Social Responsibility. First of all, as per Freidman, the business function is an economic one, and the manager is the agent of the stockholders and has thus to maximize their profits.
The second argument given by Davis is the costs of the social involvement. Indeed, many social goals do not have any economic outcome.
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Any business must spend with great caution its scarce resources, although sometimes very substantial, or it will sooner or later cause financial distress. Indeed, scarce resources will never self-renew, and must thus be spent in a way that guarantees at the minimum their recovery, if not gaining some premium. The author here cites some example metal foundries which could not meet the high costs of new pollution equipment and closed their doors. Another argument advanced by Davis is the lack of social skills of many businessmen.
The author questions whether those businessmen, who are experts at generating profit, are well qualified to deal with social and public interests. Furthermore, if a business spends resources in social programs, then these resources must be recovered, generally by increasing prices to the final consumer. If the business is operating in international markets with other firms that do not have to support such additional costs, the socially responsible ones will have a competitive disadvantage.
Another argument is that the businesses that would support social activities will have additional social power. This lack of agreement among the public may result in a lack of broad support for the businesses and thus social frictions and disagreements. Finally, one of the most relevant arguments given by Keith Davis is probably the fact that businessmen are not accountable to people, but only to their stockholders.
This idea of non-accountability of businessmen and managers is also used by Michael C. Jensen According to Freedman, as stated by Jensen p. Adopting the stakeholder theory brings businesses to be socially responsible. He thinks that the stakeholder theory must be inline with the long-term objective of value maximization.
Only by keeping in mind that the value needs to be maximized that managers will find the good trade-offs between the different stakeholders. In a less extreme position than Freidman and the other authors cited above, Patrick Primeaux and John Stieber , as well as Josie Fisher believe that social responsibility and long-term profit are not incompatible, and that being socially responsible could be converted into business opportunities. The results are confusing.
Bryan W. Rather, great overall social and financial output can be achieved only when businesses adopt a strategic approach, than an altruistic approach. As far as people are used as a means for those businesses to maximize their own profit, they are not ethical. The less extreme approaches suppose that it is possible to conciliate social activities and profit maximization, but the latter must remain the primary goal of any business. Keith Davis, in his call for a social responsibility of businesses, puts forward the arguments that acting socially would serve the long-run self-interest of the business, enhance the public image and the viability of the business, avoid any government regulation, serve the stockholders interest and prevent any future social problems, thus before all maximizing the long-term profit for the shareholders.
The whole issue of ethics and business ethics is a complex one.
Companies are made up of people. Multinationals are made up of many different nationalities. Companies, especially multinational ones, do have responsibilities in the world and have to be a positive influence.
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If a company is not ethical, then it will not survive as a company. Indeed, she argues that the shareholders are in effect not financing the public corporations. The money that a shareholder invests in a public company does not go to the company itself but rather to other speculators. Such investments go to the public corporation only when new common stock is sold, which is a rare event.
Actually only the founders, entrepreneurs and initial investors are bearing the risk associated with a business. So in effect, an established business is not getting any money from the shareholders, who are rather exchanging their stocks and gambling on several fields. They are thus not the legitimate owners or funders of the business which in turn does not have to care about their desires more than those of other stakeholders and the community in general.
Freidman, in his argumentation, states that only individuals in a business can have moral responsibility, but every business is made up of the decisions freely taken and approved collectively.
Social responsibility, maximising profits?
The responsibility in such a decision process is thus not reduced to an individual, but rather it is a collective and shared responsibility among all the individuals who drive a business. As soon as the decisions are freely chosen and approved by the collection of individuals who run the business, they are all responsible for the outcomes of those decisions and are subject to moral evaluation. Furthermore, by seeking solely the profit maximization, some managers might allow or induce actions which may be illegal but are for sure immoral, like aggressive selling techniques or untrue publicity.
They are, for this, acting in an immoral way and are responsible for that. Social responsibility refers to the obligations businesses have toward society. These are obligations that ought to be fulfilled; which indicates a normative use of the term Josie Fisher, The author opposes to the classical economic view of Freidman and Levitt, the socioeconomic view that offers a broader account of social responsibility. Boatright , as cited by Fisher , p. The social responsibility of a business is then to comply with the behaviours and norms that society expects business to follow.
Social responsibility, maximising profits?
Yet the social responsibility thereby incumbent on business is one which is by no means universally acknowledged by the decision makers, some of whom maintain that such policy decisions must centre primarily on the strictly economic consideration. The purpose of this article is to examine the arguments of Milton Friedman and to refute them. Liechty, D. Please share your general feedback. You can start or join in a discussion here. Visit emeraldpublishing. Abstract Product availability, product price, product safety, wage levels, pollution levels and many more issues directly affecting the social community are the results of policy decisions made by business.
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