This essay builds upon Milton Friedman's (1970) famous statement that "the social responsibility is to make a profit".
It analyses four dimensions of corporate social responsibility - economic, legal, ethical and philanthropic - and discusses arguments for and against each of them.
The study concludes that there is need as well as justification for CSR, not only in a strategic manner, but also in an altruistic/philanthropic way.
Table of Contents
Introduction
Discussion
Conclusion
Objective and Core Topics
This paper aims to critically evaluate the traditional profit-maximising view of business, as famously stated by Milton Friedman, and explores the broader, legitimate scope of corporate social responsibility (CSR) beyond mere legal compliance.
- The theoretical rationale behind pure profit-maximisation in corporations.
- Critique of business-society separation and the necessity of ethical responsibility.
- The role of strategic CSR vs. purely altruistic CSR.
- Arguments for philanthropic responsibilities based on "capability responsibility" and power dynamics.
- The impact of global operations on corporate accountability.
Excerpt from the Book
Discussion
If asked for the raison d’être of businesses many managers and scholars will answer, businesses exist to make a profit (Friedman, 1970; Levitt, 1958; Sundaram and Inkpen, 2004). Taking this notion even further Milton Friedman argued in 1970 that pursuit of any other goal than profit maximisation is tantamount to stealing shareholders’ money. Moreover, he put forth that corporate managers lack the competence of appropriately identifying and addressing social issues and problems and that corporations’ support of social issues would provide no greater benefit compared to individual efforts. Hence, this domain should be left to the government and the individual citizen respectively. Friedman further contested that only human beings can assume moral responsibilities for their actions. Since corporations are not human beings themselves, it is the individual employees who have to take responsibility for their actions (Friedman, 1970; Friedman, 1970 cited in Crane and Matten, 2004).
Extending this latter argument Albert Carr contents that the morality of managers’ private life has to be separated from their morality in the business context. From Carr’s point of view business undoubtedly has to obey the law, however, in terms of morality he compares it to a game with a lower standard of ethics than that existing in society. Someone deciding to enter business has to be aware of the “special rules” of the game which comprise making impersonal decisions and excluding personal feelings (Carr, 1968).
Adherent to Carr’s argumentation, there are however two severe flaws, both related to his proposed detachment of one’s business and private life. First of all, the attempt to develop two sets of moralities and values can cause mental-health problems, e.g. by producing multiple personalities. Secondly, and perhaps more convincing, is it virtually impossible to separate business and society as these are closely interrelated. In contrast to Carr’s view, participation in business is not a matter of decision, but in many cases involuntary (Lantos, 2001).
Summary of Chapters
Introduction: This chapter defines the scope of the study, sets out to critically examine Friedman’s view on profit-maximisation, and introduces the concept of CSR, including Carroll’s pyramid and the distinction between strategic and altruistic approaches.
Discussion: This section evaluates the arguments for and against profit-centric business models, addresses the flaws in separating business and societal morality, and provides a framework for why corporations must adopt both strategic and altruistic responsibilities.
Conclusion: This chapter synthesizes the arguments, rejecting the notion of business as an isolated "game" and affirming that due to their immense power and resources, corporations have a clear obligation to engage in philanthropic activities.
Keywords
Corporate Social Responsibility, CSR, Profit Maximisation, Business Ethics, Strategic CSR, Altruistic CSR, Shareholders, Philanthropy, Capability Responsibility, Stakeholder Theory, Globalisation, Corporate Governance, Sustainability, Moral Responsibility.
Frequently Asked Questions
What is the central focus of this paper?
The paper explores the scope of corporate social responsibility (CSR) and challenges the narrow view that a corporation's only responsibility is to maximise profits for its shareholders.
What are the primary themes discussed?
Key themes include the moral obligations of corporations, the distinction between strategic and altruistic philanthropy, and the evolving role of multinational enterprises in a globalised society.
What is the core research question?
The study investigates whether philanthropic corporate actions are only legitimate when they serve a corporation's strategic goals, or if purely altruistic behaviour is also justifiable.
Which methodology is applied?
The author uses a qualitative literature-based approach, critically evaluating existing theories such as Friedman's profit-maximisation view and Carroll's "Pyramid of Corporate Social Responsibility".
What is covered in the main body of the text?
The main body critiques the separation of business and societal morality, discusses the dangers of short-term profit obsession, and provides arguments for why corporations must assume wider ethical and philanthropic responsibilities.
Which keywords characterise this work?
The work is defined by terms such as Corporate Social Responsibility, Business Ethics, Capability Responsibility, and Shareholder Value.
Why does the author cite Milton Friedman’s 1970 article?
Friedman's article is the primary reference point representing the "pure profit-maximising" viewpoint that the author seeks to critically evaluate and counter throughout the study.
How does the author interpret the concept of "capability responsibility"?
It is framed as an argument for CSR; because businesses possess immense financial resources and influence, they have a responsibility to address social issues that other institutions in decline no longer adequately support.
What role does globalisation play in the author's argument?
Globalisation is used to highlight the shift in power toward multinational enterprises, leading to the conclusion that with increased power comes an increased responsibility to solve societal problems that exist outside of a firm's immediate strategic scope.
- Quote paper
- Jens Hillebrand (Author), 2006, The social responsibility of corporations, Munich, GRIN Verlag, https://www.grin.com/document/80664
