Essay on Milton Friedman, Capitalism and Freedom
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, engagesin open and free competition without deception or fraud.
Milton Friedman, Capitalism and Freedom, 1962
Write an essay critically examining this statement: Do you agree or disagree with Friedman’s claim that the only social responsibility of businesses is to generate profits? Why or why not? Defend your argument, drawing on relevant examples from the course materials.
In the corporate world, businesses exist with two main objectives of generating profits and maximizing shareholder’s wealth. In order to achieve these objectives, businesses use various strategies. From the corporate governance perspective, managers of the organizations are bestowed with the mandate to foresee the growth and development. After shareholders invest their monies, managers are required to use skills and knowledge to turn the capital into earning. Investors want to generate dividends. Therefore, due to pressure by organizational owners to deliver, managers tend to operate unethically and without morals. Business ethics remain water the bridge. In simple terms, according to Gustavson (2009), managers forget to incorporate ethics and morals in their operations because they are only motivated by the need to make profits to meet the shareholders’ requirement. This is the position of Friedman that the only social responsibility of an organization is to generate profits as long as it remains within the rule of the game. However, over the last decade, social responsibility has been perceived as an important tool. Social responsibility of an organization connotes application of business ethics and morals in the operations (Duarte, 2010). It also refers to the concept of giving back to the society. The role of the business is far much more than just to make profits. The society around the premise becomes imperative as far as growth and prosperity are concerned. Therefore, I disagree with Friedman’s position that the only social responsibilities of the company are to use resources and engage in activities designed to maximize profits. The essay is purposed to discuss the importance of social responsibility.
Social responsibility organization improves public image. This means that members of the public view the company as a solution-oriented as opposed to only make profits out of the resources. While this is the case, stakeholders such as customers and employees become attracted to the organization’s endeavours. Customers develop the urge to purchase from organizations which they perceive as social responsible while employees are proud to work in working for such organizations. This improves the organization’s customer base as well as its reputation. For example, due to the social responsibility of Apple Company through promoting employee welfare programs, business analysis and activists posit that Apple has been an attractive brand. Apple is committed to paying its employees equally without discrimination. Therefore, the act of social responsibility has long-term impacts other than making profits.
Business is regarded resourceful. This means that a business is well placed to tackle social problems in the bid to help the community grow. With resources invested in the business including capital, expertise, and labor, the business can use its position to give back to the society. This way, the business objectives extend from making profits to helping the community within which it operates. As such, tackling society problems such as building healthcare facility would improve the members of the community standards of living. As a result, the community members reciprocate by purchasing the company products. This way, the company stand a better chance to grow even much more.
Businesses have ethical obligation to remain committed to operating with an application of morals and ethics (Vallaster, 2017). This should be their conscience. As mentioned earlier, organizational managers have a mandate to operate ethically in order to attract customers. This means that by becoming socially responsible, it benefits the company more than the society. For instance, supporting relief efforts by Google Company in September 2008 after an earthquake struck Western China in support of 18,184 elementary and high school student to return to the classroom. This form of CSR was beneficial to company’s reputation. Therefore, social responsibility by a company is for its benefits.
Engaging in social responsibility is a strategy to discourage the government from further regulation. Ideally, government regulations through policy formulation can be a source of company downfall. In this regard, by becoming socially responsible, government restrictions and regulation are lessened because the government perceives the company as helping it accomplish its mandates. For example, suppose a company builds a school to support education programs in the community, the government would view the company as supporting its objectives and therefore the company can expect less regulation and control from the government.
Social responsibility is the source of company growth and development through stockholder interest (Michelon, Boesso & Kumar, 2012). In essence, a social responsibility company is perceived as less risky and less open to public attack. In this case, based on Friedman’s position that the main purpose of the company is to make profits, future growth is also imperative. A company’s growth is obtained from capital injection to fund projects. Investors are concerned about the reputation of the company from the “public eye” where a company that engages in social responsibility program attract more investors. Therefore, becoming socially responsible is a tool for attracting stock investors for future growth and development.
Business is part of the society. In essence, business is a subset of society as the system. In other words, the business operates in the society. For the society to function well, subsystems such as business and other institutions must collaborate with one another. As such, as it strives to make profits, a business should also work towards the betterment of the society. In this case, business is responsible for the society’s welfare. In relation, a business has moral justification which asserts that a business should give back what has taken from the society as inputs (which includes labor, information, materials, and money). Through fulfilling social requirements, the business stands a better chance of meeting social justification.
In conclusion, as much as Friedman’s position holds that organization social responsible is to mobilize its resources in order to make profits, minding about the larger society should also feature as the larger objective of the company. Absolutely, social responsibility helps the company to attract customers and skilled employees. In this case, by company becoming socially responsible, it attracts future growth and prosperity. Therefore, I support the social responsibility of the business as a tool to growth and development.