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Business Ethics Assignment Question
What moral obligations do corporations have to the various stakeholders in a firm, including to society more generally? Answer this question with reference to the views of Milton Friedman, Evan and Freeman and Kenneth Goodpaster, making sure to explain the strengths and weaknesses of their competing positions. Which approach provides the most convincing account of the social responsibilities of business? Give detailed reasons for your answer.
Business Ethics Assignment Solution
Corporations or corporates as we refer to as in the simplest of terms, business units which aim to make a profit by the goods/services they promise to provide. In the pure sense of economics, businesses exist for profit earning which can be subsequently used for the benefit of its founders and people associated with it. Businesses function in a society, it derives its resources from society, and its endpoint is also in society. Though Prima Facie, the main objective of a business is to earn profits, there is a certain other responsibility that comes with it. This would be like not destroying the environment to fulfil the profit motive, ensuring that people who are directly and indirectly involved in running a business are benefiting from it. The point here in question is that is there anything other than profit earning that corporation are responsible for? Do they have a certain responsibility towards their stakeholders, towards the society? There is a term that has been coined for activities which go beyond the ambit of profit-making for business; it is called Corporate Social Responsibility (Bowie, N.E., 1999). Corporate Social Responsibility is an approach, which contributes, to the growth and development of its stakeholders by providing economic, social, moral and environmental wellbeing. Its basic purpose is to move society towards feasibility. In simpler words, Corporate social responsibility can be explained as the moral duty of a company which derives benefits from society to give something back to society. It is giving back a portion of what they achieve to have holistic development of society. In the given essay, there are basically three approaches to Corporate Social Responsibility that are being discussed. One from Milton Friedman, one from Goodpaster and the other from Evan and Freeman (Velasquez, M.G,2002).
There have been basically three approaches that have been used; one says that stockholders are the immediate beneficiaries and a corporation and business should be solely responsible for them. The next approach is that which says that there are shareholders who influence and are as much a part of business as any other and they should be accounted and taken care of. The third approach is somewhat of a middle ground which says that both of them should be accounted for. The approach that is being used in this essay is the third one, the one attributed to Goodpaster and which talks about understanding the moral obligation. This has been done in the context of understanding and analyzing the theories of Freidman and Freeman.
Milton Freidman – The shareholder theory
The theorist Milton Freidman’s basic argument is that the business owns it to the shareholders who believed in it and invested in the business; hence they should get the maximum benefit out of it. It is the choice of the shareholders how and on which social responsibility do they want to invest their share of the money. The approach that is adopted by Freidman is an approach which is oriented towards shareholders. According to Milton Friedman (1970) “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” (Friedman, M. 1970,254). He insisted on the free enterprise working. According to him, the main purpose of any company or entity is to earn profit and not to work for social welfare as it is against a free society. Further, the Corporate executive has direct responsibility to his employer, which means he has to work according to the needs and will of the employer, which is obviously earning more and more money. Ultimately, he has to work as per the guidance of the employer. On the other hand, that corporate executive must have some personal responsibilities that he has to accomplish. It can be towards his society, family, any club or community. He might be impelled by these forces and wish to accomplish personal social responsibility for the company’s responsibility which he can fulfil through his own personal time and money which is not the part of professional responsibility so; according to him, these social responsibilities are of individuals and not of the business. Friedman writes: “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 (Friedman, M. 1970).