Milton Friedman’s Views on CSR
Corporate Social Responsibilities, also known as CSR is the integration of corporate regulations in the business model to perform activities in proper compliance with the social, legal, ethical, national and international norms. Corporate social responsibilities help the businesses to increase their profits in the long-term by establishing positive relations with the customers and the stakeholders that ultimately enables them to reduce business risks and raise the ethical standards (Blowfield and Murray 2014). The CSR also helps the companies to function without causing any negative impact on the society as well as the environment that ultimately indicates a healthy economy. The essay critically analyzes the views expressed by Friedman that deviates from the common notion of the CSR. It evaluates the idea with varying perspectives and highlights the different aspects that serve to be the loopholes for Friedman’s concept. The study on the alternative perspectives denotes the importance of CSR and connote that companies today engage themselves in performing the CSR to proceed with their business renderings in an effective way.
Milton Friedman’s essay on Corporate Social Responsibility is a very famous one that completely deviates from the generally considered notion of every organization who has some responsibilities to perform for the society. It argues that an organization, unlike a person cannot have responsibility for the society. The essay is very simple and straightforward in its portrayal, expressed in Friedman’s book Capitalism and Freedom, publishes in the year 1962. The essay reached the larger population when it came as an article in the New York Times Magazine in 1970 (Orlitzky 2015). The onset of the essay clearly highlights the chief idea of the entire article, which shows the utmost use of resources and aim of profit making to be the sole concerns of any industry. Thus, according to Friedman, the only social responsibility of the operating industries is to incur and increase profits in the businesses.
Through his essay, Friedman wants to persuade every reader that socialism is necessarily unethical and evil in all its forms. It is not something to be performed and justified for profit-making companies (Bosch-Badia, Montllor-Serrats and Tarrazon 2013). Friedman wants everyone to accept that responsibilities are something that the people have, be it legal, social, moral, or ethical. He establishes that the only responsibility surfacing in the industries is the one of the executive or managerial head towards the employees and shareholders. He strongly claims in the essay that any industry is operational for getting economic returns that stands in sharp contrast to the social returns. Friedman stresses that any company needs to deviate from deception and focus more on the competition prevailing in the free market system that makes it more profit-oriented. He views the concept of corporate social responsibilities to be irrelevant considering the market structure of the various economies. He elevates the responsible attitude of the businesses to adhere by the rules of the market in which it is operating and adopt new technologies for greater production.
Arguments Against Friedman’s Views
Friedman claims that a corporation can have responsibilities since it is viewed as an artificial person. That automatically makes the responsibilities artificial. However, he calls it a vague idea to consider businesses to have any responsibility. He says that it can be the business operator and corporate head who can have certain responsibilities, which necessarily does not impose that the entire business ahs any social responsibilities to perform. The corporate head have responsibilities towards his employers since all his actions at work are in accordance to their desires. He imbibes the connotation of making more profits as the only desire that any business owner can have (Orlitzky 2015). He however, also hints at the other motives that can be a driving force of many entrepreneurs as to serve the society through their business, as in the case of schools and hospitals. In these cases too, the managers are only responsible to the entrepreneurs who function according to their direction and orders, without performing any responsibility towards the society. He in his analysis of the corporation head or the manager claims that all the responsibilities that he performs towards his family or his will to choose industry for working fall under his individual responsibilities that has nothing related to CSR. Friedman argues that any business would make huge recruitment to eliminate unemployment, decrease emissions from business to make a pollution free environment or decrease the prices of their products with no profits in order to be socially responsible. He claims that the executive would be engaging in performing such responsibilities with someone else’s money by lowering wages of the present employees, reducing returns to stockholders, which together indicate a total collapse of the business. He also addresses the taxation system of businesses and portrays the corporate head to be the legislator, executive and jurist of his/her own business who can levy tax according to will. He draws a parallel situation of the corporate executives with the political machinery in order to distinguish the responsibilities that they both perform in respect to the society. Friedman persuades the readers by bringing in the example of the unions in U.S who have restricted the Government to interfere in the market scenario. He also says the Government imposes rules on pollution control measures or use of resources that the businesses are bound to follow. However, this does not coincide with the social responsibility of the companies. He finally asserts that incorporating CSR seriously in businesses would lead to a greater integration of political mechanisms in the business processes. Such connotation to the doctrine of collectivism would harm the business in the long term with negligible or no profits. Thus, Friedman identifies the CSR to be the garments that justify the actions of the businesses without incurring anything that is productive for the industries.
Importance of CSR
Having an elaborate idea of the main arguments that Friedman makes in his influential essay, some parts of it are found to be unpersuasive. His claim of social responsibilities to be unfair for businesses has not been properly proved. The essay has areas that are rich with questionable paradigm that cannot be justified to the topic. It lacks logical efficacy in certain claims that often make the entire essay disrupted. Friedman suggested that a business could perform its operations adhering to the codified laws. However, he fails to assert their role in cases where there is a lack of legal norms. In that case, he fails to address the ethical considerations that even businesses are supposed to perform in order to sustain their position in the market (Hartman, DesJardins and MacDonald 2014). Conforming to the sole legal limits would keep the businesses out of legal issues but being accountable to the ethical norms would help them to have a good will in the market. With the profit motive that Friedman claims to be the sole aim of the businesses, he overlooked the need of them to adapt behaviors and manners to meet the demands of the stakeholders. Friedman’s views also fail to assert that employees in any company have various other requisites than the salary for their work. Is was found that the Walmart shareholders voted against their leaders because of the poor working conditions in the factories and the supervisors found to be holding bribery charges (Cbsnews.com, 2018). Thus, Friedman overlooks the ethical responsibilities that the business operators have towards the society that helps them to have good employees and retain their position in the market. The communities also seek greater considerations from the successful business organizations that help the society in various ways (Fleming, Roberts and Garsten 2013). Thus, it is expected that the businesses have something to give back to the society. However, Friedman only emphasize on business renderings and profits that completely deviate from the roles that businesses play as being socially responsible. Thus, the basic aspects that are unacknowledged by Friedman make his essay often diverged and unconvincing for the readers.
The essay by Friedman was written decades ago but it never fails to attract the readers from its extraordinary concept. However, the essay is often found to be vague and inconsiderable. He portrays his ideas in a way that cannot be related with the present market conditions in which the businesses operate. The essay is often connoted to be fictional that does not pertain to the economic processes in market. The applicability of the main theme of the essay is not found to be practiced by the businesses in the recent times (Golob and Podnar 2014). The concepts seem to be focused on businesses that have a limited status. It is expected only in communities where the society has no expectations from the business, which cannot be true for the successful businesses. Customer loyalty and customer relations serve to be a very important aspect for any business to be successful (Martínez and Bosque 2013). Thus, the businesses need to perform certain responsibilities that would aid the society in some way influencing the customers to a good extent. Friedman’s essay addresses to the competitiveness in market that emphasize on their being solely profit driven. However, he fails to acknowledge the basic requirement of businesses, which is to have a customer base that can be attained only if the business performs some social responsibilities (Tai and Chuang 2014). Thus, Friedman’s essay can have its application only in a changed market situation at a time that is completely different from the present market scenario.
Conclusion
Friedman asserts that businesses are not meant to perform any social responsibilities towards the communities in which it is functioning. He considers profit maximization to be the sole concern for a business. However, the essay by Friedman has been criticized on various grounds that claim it to be unacceptable. Thus, there are different alternative perspectives that make the essay on Corporate Social Responsibility by Friedman to be vague and undesired for the success of any business. Considering the basic concept of CSR that all the businesses follow, it is seen that there are four obligations that the companies follow to sustain their position in the markets (Grayson and Hodges 2017). Starting from economic responsibility to make money that stands to be the basic motive of the businesses, the companies need to follow some legal, ethical and philanthropic responsibilities as well. The companies are bound to promote general welfare in some ways, being responsible to the society for all the actions that they perform. The theory of triple bottom line is another form of CSR that guides the businesses to be operational in a sustainable way (Alhaddi 2015). Along the responsible attitude towards the economy and environment sustainability, the businesses are also expected to perform in a way so that they also consider social responsibilities to bridge the inequalities that prevail in the societies where the rich get richer and the poor, poorer (Savitz 2013). The essay by Friedman also stands in sharp contrast to the alternative Stakeholder theory. The stakeholder theory clearly affirms that every individual or group of individuals who are affected by the functioning of any operating business have the right to participate in directing it (Andriof et al. 2017). It connotes the stakeholder ethics where profit making does not ascribe to money making but to human welfare (Deng, Kang and Low 2013). Thus, there are many alternative theories and views that validate the need for businesses to perform certain responsibilities for the society, besides being a profit-oriented business that clearly oppose the views of Friedman as expressed in his essay.
In recent times, there is an essential need to have a good customer relation between the companies and their customers. This acts as a very effective way to render greater business outcome and sustain the good impression of the business in the market. Companies like Coca-Cola and Amazon have been able to expand their business globally, well known for the tremendous customer loyalty they have achieved by developing effective customer relations (Bowen 2013). These companies are equally known for the CSR activities that they are performing to show their concern towards the society that has been leading to their glory and success all round the world. Instead of being purely profit-oriented, companies are supposed to work for the welfare of the society as well. It is very important for business to perform all its activities free of any social obligation that helps it to achieve success. Along with the economic and legal connotations that even Friedman points out in the essays that the businesses follow, the philanthropic responsibility of them enables to participate in contributing to the projects of the society (Flammer 2013). The businesses according to the CSR must be driven according to the needs of the surrounding community that represent their generosity, which has been completely overlooked by Friedman (Deegan and Shelly 2014). Working on the basis of rendering social sustainability also promotes a balance between the working of the companies and the lives of the people. For any development, there must be a good parity between the business processes and the people in the area of their functioning. If a company works in a way that is negatively affecting the people residing in the society, it can invite chaos and disorder leading to the total collapse of the companies. Friedman’s concepts clearly eliminate the fact that not just the legal laws, but society acts as a driving force for all the businesses operational in the market. Thus, there needs to be a compatibility between the people and the business operating that would lead to a complete development of the economy (Hack, Kenyon and Wood 2014). The alternative concepts to Friedman’s essay logically depicts that all the companies have different obligations that include the larger society apart from generating greater profits. They have the legal, social, ethical and other aspects to address that help them to accelerate their business in the long-term (Fernando and Lawrence 2014). A company cannot perform affecting the lives or creating negative consequences to the society (Servaes and Tamayo 2013). It must perform the basic corporate responsibilities and work in collaboration with the people. This would enhance their relation with the customers, promoting greater business and leading to a complete development of the entire society.
The essay clearly envisions the view of Friedman on Corporate Social Responsibilities that is unique in its own way, differing from the commonly considered concept of the theory. His simple and straightforward idea of discarding the notion in businesses to have certain social responsibilities has been very famous. However, his ideas have been criticized on various grounds to be unjustified and vague and have been opposed with other perspectives on CSR as well. The views that Friedman expressed in the essay are not spoken of in the markets in recent times and mostly all the corporations engage themselves in performing certain responsibilities for the societies. Thus, it can be concluded that no matter the strong statements that Friedman has made in the essay, corporate social responsibilities are something that has turned out to be crucial for the better functioning and development of the businesses. It aids to incur greater profits with a huge customer base and helps them to attain success in the future.
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