Morally, It’s All About the Money
Milton Friedman’s views on the social responsibility of business
Brooklyn New York, 1912, Mrs. Friedman, a Jewish immigrant, gave birth to Milton. Forward to the age of 20, Milton Friedman earned his Bachelors from Rutgers University, then his Masters from the University of Chicago 11 years later, and finally a Ph.D. from Columbia University in 1946. Friedman’s field was economics, a subject he excelled so much so he received the John Bates Clark Medal honoring economists under age forty for outstanding accomplishments.
Friedman’s expertise was so much so that in 1967 Friedman served as the adviser to President Nixon, concurrently also serving as the president of the American Economic Association.
During 1970, Milton Friedman published a controversial piece, The Social Responsibility of Business is to Increase its Profits, shaking business understanding of ethics. Through this work, Friedman introduced his perspective of traditional business ethics and its respective social responsibilities. These principles introduced are currently the normative theory of corporate ethics known as the Friedman Doctrine or Stakeholder Theory.
Around this time, society was fervent. They were dissatisfied with war and politics and became more interested in themselves. This pressured businesses’ social responsibility as it raised awareness in:
- minority and women rights — there were significant levels of discrimination in the workforce
- environmental conservation —triggered by the industrial dumping (Love Canal, NY) and the nuclear power-plant meltdown (Three Mile Island, PA)
- consumer’s and employee’s well-being — health, safety, and wages
This new individualism movement forced businesses to acknowledge the physical, social, psychological, and environmental impacts in business practices.
Friedman explains that business has a social conscience that ensures that employment provision is taken seriously — discrimination and pollution are avoided at all costs.
A Corporation Can’t Have Social Responsibilities
A corporation doesn’t have social responsibilities, the people composing the corporation do. This is because a corporation is a collection of individual proprietors and corporate executives. In this regard, a corporate executive is an employee of the people who own a business. This executive has direct responsibility to the employees. Corporate responsibility includes conduct of business by respecting the desires of the employees, and also following the basic societal rules, both legal and ethical.
In general, Friedman states a corporate executive has the duty to ensure that the employees are kept happy, whether the main focus is making money or offering services to people with no profits. The corporate executive is the face of the people who own the corporation, and all he does should be in service to them. This, therefore, means that the actions of a corporate executive should contribute positively to the stakeholders, keep the employees satisfied and make sure that the business runs smoothly according to the way the principals require of them.
Any effort of business resources to causes other than financial gains is equivalent to unjustified taxation. Any attempts for social responsibilities is at the expense of the corporate profits, which results in indirect wage cuts and increased prices. These increased prices is analogous to taxation without representation as it was not approved by a constitutional political process.
In the words of Friedman,
“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, engages in open and free competition without deception or fraud.”
