The Concepts of Ethics and Social Responsibility

866 Words4 Pages
The concepts of ethics and social responsibility, in business, are whatever the company wants them to be. There is no fixed definition, so the company must make its own determination. Schulman (2006) notes that ethics and social responsibility factor into strategy because, like strategy, they cut to the essential core of the organization. Questions like "What do we stand for?", "What is our purpose?", and "What values do we have?" are central to both the ethics of the organization and its business. The most basic understanding of organizational ethics is that of Milton Friedman (1970), who famously argued that the social responsibility of business was to increase its profits. His only constraint was that the organization needs to work within the laws of the land in order to pursue those profits. Any other activity, however, is fair game. The argument stems from the idea that business managers especially of public corporations are agents of the shareholders. The shareholders, as rational investors, are only investing for the specific investment returns. Therefore, the pursuit by the managers of any activity that does not maximize shareholder wealth violates the agency agreement. There are flaws in the Friedman argument, however, most specifically that shareholders are not perfectly rational. People invest in irrational ways all the time, and sometimes that includes ethics, a good example being ethical mutual funds. Yet, even Friedman's argument does not discount that
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