Social Responsibility

The major themes and objectives of Milton Friedman’s “The Social Responsibility of Business is to Increase its Profits” is pretty self evident given the title. Milton does not believe that a business has a social responsibility for only individuals can have responsibilities. He makes the distinction between the corporate executive acting on principal and the corporate executive acting on agency. The very simple distinction comes down to whose money he/she is spending. For instance, a corporate executive may devote part of his income to charities or organizations he supports. In this case, he is acting as principal and spending his own time and money. However, when a corporate executive refrains from following his employer’s directions/interests in justification of a “greater social good” then the corporate executive is acting as agent. It is this particular agency that Friedman is opposed to. In his opinion, the exact meaning of a corporate executive who has a social responsibility is a corporate executive who fails to act in the best interest of his employer; the corporate executive who acts more like a public servant than a well-paid executive. 

Friedman further goes on to highlight the behavior of some corporations to use “social responsibility” as way to rationalize results that benefit their company. In other words, Friedman does not see “social responsibility” to belong in business. He states: “the doctrine of ‘social responsibility’ taken seriously would extend the scope of the political mechanism to every human activity.” Thus, in order to safeguard the personal liberties, one can revert back to the title: the social responsibility of business is to increase its profits in a manner that does not involve fraud or deception.

Individualism - Friedman believes that businesses acting in their own best interest, to make profits, will be ultimately beneficial for all. He argues against collectivism and sees  “social responsibility” as a subversive doctrine because it seems to imply that “collectivist ends can be attained without collectivist means” which he doesn’t find to be true.  A business “looking out for the needs of society” will not necessarily lead to benefiting this society. Moreover, he says that in taking this theory seriously, it will cause  the government to be so actively controlled that political mechanism will monitor every human activity. 

Monochronic Time: Friedman sees time as a precious commodity, at least time in regard to business. He acknowledges that what a corporate does on his/her own time is his/her prerogative. However, while under the pay the clock, their attention should be focused on working in the best interest of their employer, not “society.’ 

Directness: Friedman detests businesses who communicate their business aims in cloaked truth. For example, those businesses that try to restore faith in corporate America by crediting social responsibility for their business motives when in all actuality it’s for their profitability. Clearly, Friedman believes direct communication with the public is best.

I think there is a conflict between business and social responsibility; however, I do not think it is as black and white as Friedman makes it out to be. I lean toward Adam Smith’s philosophy that company’s acting in their own self interest will end up being better for the economy and the consumer, as one can expect more competition and as a result higher quality and innovation. Yet there are obvious holes in this theory. Businesses, feeling the pressure to compete with other companies, may find ways to save money by not properly disposing of their waste, which is not beneficial for society. 

Clearly, my thought process is rather scattered in trying to form an opinion. I suppose I’m torn. I do believe that businesses need to act in their own self interest and maximize profits; these factors are dependent on their own survival and do have greater benefit on society as a whole. However, I also think that businesses have a social responsibility to give back to the community and instill public change. I look to corporations like Pepsi who take on projects to help communities/causes around the country. I think that when a company is so public and successful, it has a duty to do something positive. I suppose this goes back to Friedman’s concept that this “good” that the company does is only because it will positively reflect their company, and in return their profit margins potentially. While this may be true, it is certainly not always true.