The Contrasting Views of Milton Friedman and Ralph Nader on Corporate Social Responsibility

2452 Words Nov 9th, 2007 10 Pages
Corporation is a legal entity made of natural persons or other legal entities that holds legal identity within the society. Corporate social responsibility is the duty of a corporation to create wealth in ways that avoid harms to, protect, or enhance societal assets. The idea of Social Responsibility interrelates the obvious interrelationship between business corporations, government and American society, is based on the fundamental idea that the corporations have duties that go beyond carrying out their basic economic functions in a lawful manner because the overall performance of a firm is to maximize the social benefit.

Though economists could agree on the existence of corporate responsibility, they differ in
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Economists often do disagree, often based on their ideological positions. Milton Friedman and Ralph Nader, though they fundamentally differ, have long list of followers among economists and activists for their idea on Corporate Social Responsibility. In this section, we will analyze the rationale behind the differences in their views various general principles of Corporate Social Responsibilities.

Principal #1: Corporations are economic institutions run for profit

Friedman argues that thencorporations should be primarily and only be judged on economic criteria. The Corporate executives are appointed by the investors and are responsible for maximizing the profitability of their employers, the investors. Friedman argues that if a manager spends corporate funds on social projects, he or she is diverting shareholders' dollars to programs they may not even favor. Similarly, if the cost of social projects is passed on to the consumers at higher prices, the manager is spending their money. If the market price of a product does not reflect the true cost of producing it, but includes costs for social programs, then the market's allocation mechanism is distorted.

Ralph Nader, on the other hand, questions, "if the government is going to provide corporation with services, or give away its assets, is there any reason it
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