Critique of The Social Responsibility of Business is to increase its Profits by Milton Friedman

- Dharavath Ashok Naik (0124/51)

We may disagree with Friedmans famous claim that the social responsibility

of business is to increase its profits. But we cant deny this it sounds simple

and straightforward. In this article he says There is one and only one social

responsibility of business to use its resources and engage in activities

designed to increase its profits so long as it stays within the rules of the game,

which is to say, engages in open and free competition without deception or

fraud. Same will happen with the theories of corporate governance that it

inspired. Any other theory of how business have to behave will be irrelevant

in comparison, though it is closer to being the right one. His argument remains

the basis for many companies contention today that corporate social

responsibility, sustainable business and other such things are a distraction

from their shareholders best interests. Acting responsibly risks reducing

profits or revenues in the name of social goodness.

When Friedman asked about the meaning of corporate executive have

a social responsibility in his capacity as businessman, in each of these

situations the corporate executive would have spent someone elses money

for social good. As his actions in accord with his social responsibility reduce

returns to stockholders, he is spending their money. Friedman believes that

only people can have responsibilities, not businesses, and the employees hired

by business owners have a responsibility primarily to their employers to meet

their desires which in most cases is profits.

Friedman recognized that an individual have perceived responsibilities

out of from the businesses also. He makes valid points during his

deconstruction of the personification of a business, however he forgets the

main attribute that is CSRs strength and that is the will of the general public.

He may have seen the business in the factual manner in which he presented

as employees lined up to work for the owners benefit, but the public do not.

They view the company as a whole representative and if one mans mistake

leads to an error is social judgment, the public will judge the whole company,

not just the one man. It has been proven time and again whilst CSR has yet

to be harnessed to create a significant positive difference to profits, a negative

policy can destroy profits.