An Executive Summary – The Social Responsibility of Business it to Increase its Profits

An Executive Summary by

Milton Friedman takes the position that corporations cannot be socially responsible, only people can have responsibilities. In continuing with this thought, he then suggest that social responsibility is then directed at the corporate executive of a business, not the business as a whole. The corporate executive has primary responsibility to his employers to conduct business as they see fit, and manage the business to create the most profit while following the “basic rules of society”.

We must also be aware that the corporate executive, as a person and acting in his own right, may have his own social responsibilities that do not always follow those of the owners of the corporation. If the corporate executive’s ethical values differ from that of the business and he chooses to act in his own right, one that is not in the best interest of the business, he is in turn “spending the customers’ money”. The stockholders, customers, or employees should be able to choose how they wish to spend their money. It is then seen that the corporate executive is acting as a “public employee,” rather than an agent of the corporation. This can lead to a loss of both customers and employees if the corporate executive’s actions reduce corporate profit and the price of its stock. Friedman believes, 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, engage in open and free competition without deception or fraud.”

In part I disagree with Friedman, I believe that a business can and should be socially responsible, but in doing so they should still be able to meet their objectives of making a profit and keeping stockholders, employees, and customers satisfied. For example, if a company as a whole causes pollution, then the company as a whole is socially responsible to make good for what they have done, even if it is costly. The company must examine its operations, make positive changes to reduce pollution, and have a strategic plan in place to function efficiently and make a profit. If a business cannot be socially responsible in society, then it shouldn’t be allowed to operate in society.


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9 Comments so far

  1. Roger Wehbe on October 9, 2007 2:15 pm

    Business has a goal to be profitable. Period… the watchdog for the business is the media.. that again has a goal to be profitable… and sell papers filled with bad stories about business… consumers have a goal to have safe products… they read about what isn’t safe in the media… if the media doesn’t do their job.. they don’t get paid because no one buys the paper or visits their news site…. if the business doesn’t make good products.. the media finds them.. if the consumer reads the media article.. and finds the product shoddy.. then they don’t buy the product..

    in essence.. it works out for everyone.. if they all do their job..

    where it fails is if the business pushes out crap.. the media reporting is crap.. and the consumers don’t read papers or news outlets.. that is a bad day.

  2. big d on March 17, 2008 1:03 am

    terrible attempt at breaking down a line of thought based on logic. dizzying at best.

  3. SGK2 on June 23, 2008 8:58 pm

    Nice summary. Made my paper a whole lot easier. Wehbe, you’re Lebanese right? Me too. :)

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  5. Is Friedman theory also dead? « Sales Ethics and Ethics in Selling on December 19, 2009 12:18 pm

    [...] a recent commentary on it on Business Ethics [...]

  6. T on July 26, 2010 6:45 pm

    you disagree, but you provide no quality counter arguments to his point.
    “If a business cannot be socially responsible in society, then it shouldn’t be allowed to operate in society”
    stop writing your opinions and add quality rebuttals please.

    terrible write

  7. cameron on November 20, 2010 11:00 pm

    I agree you dropped the ball on rebutting friedman though you explained his ideas very well.

    I disagree with friedman myself for three reasons(at least).

    Firstly Basic rules of society constantly change/fall behind as technological capability increases so new business avenues provide oppurtunities to make profit which do not break “basic rules” but still cause massive harm. IBM for example used telecommunications to secretly operate a shell company called Dehomag in Nazi germany, turning a massive profit but aiding the nazis in a variety of ways.

    Secondly Friedman claims that his hypothesis works in a “free” society.

    two problems with this.

    One. freedom is an illusion wrought by modern democracies to placate their populaces, many larger corporations in fact control the lives of people who live in the societies they operate within much more than those people’s governments while turning a morally acceptable profit.

    Thirdly. Globalisation which was growing in friedman’s day has expanded the moral obligation of larger corporate from just the borders of a single state.
    Company profits in one country which bring so much to the shareholder at the expense of sweatshop labour or ecological disaster in another country are at best a moral nullity and a worst crimes against humanity.

    We cannot eat money.

    If we continue to blunder blindly ahead we will destroy this world.

    Profit as a sole moral compass in business is morally abhorrent today and it was morally abhorrent in friedman’s time.

  8. bond on March 19, 2011 10:27 am

    this ins not rihgt, companies should be responsible

  9. Earl on July 16, 2011 9:58 am

    I agree with Friedman’s analysis and ultimate conclusion, and I find it terrifying.

    If an organization is chartered to produce profits, than any moral or ethical considerations made by that organization are in violation of their charter, in violation of the organization’s fundamental principle.

    If it is more profitable to produce pollution than to not produce pollution, than a for-profit corporation is obliged by charter to produce pollution.

    What’s more, I suspect that the for-profit corporate system produces an emergent system which enforces exactly this, and enforces it primarily for rate of profit generation (read: the short term).

    Organizations which exist to produce profit are going to attract the capital of people who are primarily interested in producing profit. These ‘for-profit’ individuals can be expected to employ their shares to enforce the corporation’s charter, to produce optimal profits without consideration. Their firms will then produce more profits, returning them more capital with which they will invest in more firms.

    In such a scenario, these ‘for-profit’ individuals can be expected to outcompete other individuals who would exercise moral or ethical considerations with their shares, becoming wealthier, faster and ultimately coming to dominate any given industry, enforcing a lack of ethics on each of them.

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