Friedman vs Freeman

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This paper will have a detailed discussion on the shareholder theory of Milton Friedman and the stakeholder theory of Edward Freeman. Friedman argued that “neo-classical economic theory suggests that the purpose of the organisations is to make profits in their accountability to themselves and their shareholders and that only by doing so can business contribute to wealth for itself and society at large”. On the other hand, the theory of stakeholder suggests that the managers of an organisation do not only have the duty towards the firm’s shareholders; rather towards the individuals and constituencies who contribute to the company’s wealth, capacity and activities. These individuals or constituencies can be the shareholders, employees, …show more content…
Consequently, the model of stakeholder by Edward Freeman has broadly considered as the strongest theory regarding responsibilities of a company towards society where the company is located (Freeman 2008 pp. 162-165).
Nevertheless, Friedman pointed out that the profits has taken the firms in to the hand of business intellectuals by which Friedman recommend that the financial system by which the organisation run its business is in the restricted responsibility protection which makes the organisations to privatise their profits (Friedman 1970 pp. 177-184). Friedman also suggested that according to him the shareholder theory in terms of socially responsible can only increase the profit. But on the other hand shareholder theory of Edward Freeman completely support the theory of shareholder towards its role to be socially responsible in the society and maximising the profits for the benefits of shareholders within the firms and society as well (Freeman 2008 pp. 162-165).
According to Cosans (2009 pp. 391-399) with the taking of limited liability (restricted responsibility) Friedman must have taken the business in a way to be socially affiliated and well-established as well which also leads and supports the ethical and logical roots of CSR and for the re-establishment of the reliability to

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