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Though philosophers have discussed abstract ethical dilemmas for most of recorded history, there appears to be no universal answer to resolve ethical problems. The varied works of philosophers have led to the development of ethical frameworks that may be applied to any particular situation.
The answer to an ethical question may differ depending on which moral framework is used.
For this reason, taking complex and abstract ethical theories and applying them to the decision-making processes of company directors can lead to unresolvable arguments in boardrooms, restaurants, shareholders meetings, scholarly journals and, of course, the media.
Milton Friedman proposed a guiding principle for business ethics in a New York Times article, provocatively titled: This statement raises the question of whether directors can act in any way to increase profits. Although Friedman is clear that directors as agents of the business have to play within the rules of the game, this still leaves room for unethical behaviour.
Does this mean that directors can act in any way to increase profits? A further question raised by his article is whether corporations should engage in socially responsible activities. It will be argued that directors cannot act in any way to increase profits and that corporations should engage in socially responsible activities as it can be shown that they at least have an indirect positive effect on organisational performance.
Milton Friedman and Corporate Social Responsibility Friedman argued for a direct form of capitalism and against any activity that distorts economic freedom. Friedman thus argues that corporations should focus on those activities that are causally related to company profit, effectively excluding charitable activities that do not directly generate revenue: Such giving by corporations is an inappropriate use of corporate funds in a free-enterprise society.
Another principle expressed by Milton Friedman is the need to stay within the rules of the game, explicitly avoiding deception and fraud.
This principle is further clarified when he writes: This quotation implies that Friedman does not proclaim that directors can act in any way to maximise profit as they have to abide by the law and follow ethical custom.
He, however, excludes explicitly charitable activities as they do not directly contribute to profit. Friedman argues that it is not appropriate for a corporate executive or director to embark on socially responsible programmes because there is little incentive for prudent expenditure, mainly when one is spending money owed to the shareholders through dividends.
Directors and executives of a corporation are employed to achieve this sole objective. The only moral responsibility of directors and executives is to meet shareholder expectations, which is to maximise their return on investment.
Friedman interprets this principle as the corporation with the highest return to shareholders. When the issue of an electric company that cut supply to a customer for non-payment upon which the customer died as a consequence was presented to Friedman, he applied the Kantian view to justify their actions.
He argued that a utility company that does not cut off electricity to non-paying customers would perish as there is no reason for customers to pay their bills. He considers this as ethical because the directors have a moral duty to ensure the survival of the corporation. The socio-economic view is a utilitarian argument as Frederick Companies that operate exclusively for the sake of maximising shareholder return and thus do not engage in socially responsible activities are considered unethical in the utilitarian point of view.
Following the utilitarian adage of providing the greatest good for the greatest number of people, 10 companies are ethically obliged to participate in socially responsible activities that maximise the total welfare of all stakeholders. There is, however, a problem with applying standard consequentialist theories where we are required to maximise agent-neutral value.
A deontic constraint is a principle that assigns a value to individual agents over others 12and in the case of corporate social responsibility, it could be argued that the rights of the shareholders should be protected in preference of the rights of the whole of society.
What would Milton Friedman say about Fair Trade? Analysis If corporate social responsibility is detrimental to business, as suggested by Friedman, then shareholders will tend to avoid investing in companies that act socially responsible.
There is, however, empirical evidence that this is not the case. Firstly, Friedman fails to acknowledge that acting ethically can be a valuable marketing proposition.
By understanding the desires of consumers, a corporation can offer products and services that match their ethical thresholds, thereby adding value to both shareholders and consumers, thus avoiding marketing myopia as described by Theodore Levitt.
Meijer and Schuyt examined the role of Corporate Social Responsibility in purchasing behaviour and found that for Dutch consumers, corporate social performance serves more as a Hygiene Factor than as a Motivator.
Interestingly, this behaviour was not related to household income. Executives and directors that behave unethically create significant shareholder dissatisfaction, as demonstrated by the many recent examples or corporate misbehaviour.
He took the Kantian view that directors must look after the interests of shareholders, which seek wealth maximisation.IN WATCHING the flow of events over the past decade or so, it is hard to avoid the feeling that something very fundamental has happened in world history.
Abstract. The main arguments of Milton Friedman's famous and influential essay are unsuccessful: He fails to prove that the exercise of social responsibility .
RESPECTED HISTORIAN RALF GEORG REUTH ARGUES THAT HITLER may have had a ‘real’ reason to hate the Jews. Noted for his breadth of knowledge on World Wars I and II and its prominent figures, German historian Reuth has enjoyed much acclaim for his numerous books covering the World Wars era.
Drawing. Milton Friedman, “The Social Responsibility of Business is to Increase Profits” In the article, “The Social Responsibility of Business Is to Increase Profits,” Friedman states that “businessmen believe that they are defending free enterprise when they proclaim that business is not concerned merely with profit but also with promoting desirable social ends.”.
Milton Friedman published famous essay explained the idea that a business had any responsibility other than to maximize its profits within legally and ethically acceptable margins, arguing that ‘a corporate executive is an employee of the owners of the business.
He has direct re¬sponsibility to his employers. Milton Friedman Essay. Milton Friedman There are series of Milton Friedman’s videos—“Free to Choose”, talking about that how the United States authorities to develop excessive regulations, implement excessive regulation, establish excessive administrative agencies and spent more money and resources, in the end to reduce the social wealth of the people of the United States.