Milton Friedman Analysis

Milton Friedman bases his opinion on businesses and profit maximization on the foundation of free enterprise. “The free market theory believes that business managers have only one primary responsibility, which is to maximize profit; also, the theory tells that government should not involve in economic matters, except to prevent fraud and coercion” (p. 7) Mr. Friedman argues that a corporation, unlike a person, cannot have responsibility. I disagree with this notion. I don’t think that anyone would engage in a business contract with a corporation if they thought that a corporation was not responsible to pay its bills. So therefore, a corporation can have legal, and moral responsibilities. Milton Friedman uses what, to me, is the key phrase 'as long as it stays within the rules of the game ' but does not define the phrase in terms of the legal system. My question is what about the rules of the game that are not so much as even suggested in the law? There are other rules that companies have to follow if they want to be successful; such as the obvious supply and demand rules in the marketplace. Also, as we have seen with the production of new ideas and technologies, the law follows progressions in technology and thinking. But the principle of responsibility leads the legal cases being decided. Being compliant with the law may keep them out of court, but companies know that holding themselves accountable to a higher standard will keep them in a good place with their customers,

How can we best understand Milton Friedman’s objection that only persons, not businesses (i.e., corporations), have responsibilities?

In this essay we are taking a look at the famous Milton Friedman's essay "The Social Responsibility of Business is to Increase Profit ". The following paper is an attempt to critically evaluate the article in consideration of Freeman Stakeholder Theory.

Friedman’s argument that a companies only social responsibility is to make money is extremely flawed and immoral. Most people would agree that the main goal of a company is to turn a profit, and to be sustainable, this Friedman is correct in saying. Where he starts to be mislead is when he does not think that there are any social obligations of a company. Friedman says that businesses must “increase its profits so long as it stays within the rules of the game” (Milton Friedman 65). What are the rules of the game, many would say it is the law, correct? Would child labour be considered within the rules of the game for a North American based company? Most people would agree that child and slave labour is wrong and against the law for these companies. What if child and slave labour was used in a different country? If a company had product made in a foreign country and imported back to North America, this would be okay because it is legal in the manufacturing countries? This is something that Friedman overlooked when coming up with his argument, saying that you must stay within the rules. This situation would be considered in the rules but is it morally and ethically correct? They are maximizing profit, but are supporting slave labour and also moving North American jobs into other countries. An executive must have the power to intervene in this situation

Companies are ought not to be treated as persons because they are solely created to fulfill the purpose of generating profits and indeed have no extra responsibilities to the society. To achieve democracy, corporation involvement in politics must be avoided. “Corporate responsibilities to the public are better addressed in the democratic process than inside corporate boardrooms.” (Reich, 668).

In Friedman’s article, The Social Responsibility of Business is to Increase Its Profit, he gives two arguments for what, if any, social responsibilities a business has and why they have it. In his arguments, he presents a businessman in charge of running the business on behalf of the owner. The first point he raises in dictating what responsibilities the businessman should fulfill involves defining the businessman’s purpose. He was hired as an agent of the shareholders, the owners of the business, etc. to make the business profitable. Barring some eleemosynary functions, as Friedman states, such as hospitals and schools, the general purpose of a business is to make money, therefore, the responsibilities of an agent of the business would be to increase said profits. To do otherwise would be to fulfill a purpose other than the one he was hired for and betray the owners.

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.

In the article, “The Social Responsibility of Business Is to Increase Profits,” Friedman states that “businessmen believe that they are defending free enterprise when they proclaim that business is not concerned merely with profit but also with promoting desirable social ends.” This social responsibility is defined as Corporate Social Responsibility (CSR), which is the belief that “corporations owe a greater duty to their communities and stakeholders” by having a “social conscience.” This, among other things, includes being environmentally responsible, contributing to non-profit organizations, and eliminating discrimination.

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,

Today I read an article by Lane Wallace in The Atlantic. She titled it “Liberal Arts and the Bottom Line.” It was a critique of Milton Friedman’s business philosophy that decreed, “the business of business is business.” The implication seems to be that anything that drives the profit down (i.e. all ethical business practices–fair wages, environmental impact, etc.) was antithetical to the definition of business. Numbers, Friedman said, were the ultimate measure of the success of the business and of individual employees as well. Wallace points out that this model has serious flaws. A singular focus on ‘the bottom line’ can have an incredibly detrimental effect on workers’ lives, the economy, and the environment. She attributes the recent economic downturn and BP oil spill in large part to this philosophy.

Milton Friedman advocates the classical theory of business, which essentially holds that businesses should be solely devoted to increasing profits as long as they engage in open and free competition devoid of fraud. Friedman was an advocate of free market forces, he would recommend that let the market forces operate freely and the executive compensation will reach the right levels. The high performing executives will command higher salaries and poor performing executives will receive lower salaries or simply become unemployed. If

The ethical issues presented in this case are the different views that each individual has on how the idea of corporate social responsibility (CSR). This dispute is between Mr. Milton Friedman, John Mackey, and T.J. Rodgers; all of which has a different outlook on CSR. The definition of CSR refers to the responsibilities that business has to the society in which it operates and to those actions that a business can be held accountable. Most philosophers have come up with three different types of responsibilities that corporations can be held accountable for. The first and most important of the three is a corporation’s duty to not cause harm. If a corporation can

It says that you cannot look at any one of those stakes / stakeholders in isolation. Their interest has to go together, and a job of a manager or an entrepreneur is to figure out how the interest of customers, suppliers, communities, employees and financiers go in the same direction. Each of these groups is important for the business to be successful and if one of the groups is having problems to associate with the rest then it has a negative impact to all the rest.

Friedman, M. (1970, September 13). The social responsibility of business is to enhance its profits. The New York Times Magazine.

For a long time now, there has been much debate over the social responsibility of a business. Friedman is one of the most influential