Freeman vs. Friedman

1866 Words Oct 5th, 2014 8 Pages
Freeman vs. Friedman In their theories of how a business should operate, R. Edward Freeman and Milton Friedman hold virtually opposite beliefs as to what businesses’ responsibilities should be. In favor of the Stakeholder theory, Freeman believes that any person or organization that has a “stake” in the business should also play a role of participation in the business’s actions and decisions. In the other corner of the ring stands Milton Friedman, who holds the belief that said business is only responsible for those that actually own stock in the business – the owners, or stockholders. A strong believer in his reconceptualized Stakeholder Theory of the Modern Corporation, R. Edward Freeman believes the key to success in business is …show more content…
Nowadays, after the passing of several bills constraining the actions of corporations, acting in a similar manner would pose several legal and ethical issues. This is why, Freeman argues, this ancient idea of managerial capitalism is no longer effective. After bashing the old idea of managerial capitalism, Freeman starts explaining why his reconceptualized stakeholder concept is much more logical. Freeman modestly articulates a stakeholder theory using the “narrow definition” of a stakeholder, which includes those who are vital to the success and survival of a corporation. Specifically, these stakeholders include owners, management, suppliers, employees, customers, and the local community. As well as being directly connected with the corporation, Freeman argues that the stakeholders are also interconnected with each other as well, and that each stakeholder is vital to the survival of the corporation, and vice versa. Employees rely on the business to give them a paycheck; the business provides their livelihood. Employees return the favor because they run the business on a day to day basis. Suppliers are vital to the firm’s success because the quality of the raw materials purchased will determine the quality and price of the final good produced by the firm. As a result, the firm is a customer of their supplier, and is therefore vital to their supplier’s success. The next stakeholder, customers,

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