Econ (Social Responsibility of Business)

What term does Fredman use to describe business and its responsibilities for providing employment, eliminating discrimination, avoiding pollution, etc?

"social conscience"

Beyond making a profit, what ethical responsibilities does Friedman say businesses have to society in general?

Friedman believes businesses have no ethical responsibilities to society in general except to follow the rules society expects businesses to follow.

What motives besides money does Mackey argue are important in understanding human nature? How might these motives be relevant in running a business?

Mackey focuses on Adam Smith's notion of moral sentiments that arise from mutual sympathy. Moral sentiments exist for self-interest and also for generosity and justice. Mackey argues that tapping into instincts for generosity and justice can also act as powerful motivators, creating loyalty in workers, suppliers and other stakeholders

Does Friedman's emphasis on maximizing corporate profits mean that he is not concerned with the welfare of society?

No.

Are Mackey's views on the social responsibility of business inconsistent with maximizing profits? Why?

Not necessarily. On the one hand, a company can have higher costs and lower profits by using revenue for socially responsible purposes.

Why does Friedman believe a corporate executive should be socially responsible as an individual but not in his or her corporate role?

The executive is an agent of the business owner and therefore is responsible only to the goals of the owner. This is the principal-agent system. The owner is the principal, and the executive is the agent. As an individual, the corporate executive has many responsibilities, but in these cases the executive acts as a principal, not an agent.

How is Friedman's emphasis on maximizing corporate profits, benefit the welfare of society?

The search for greater profits causes corporations to reallocate resources from low-value products to high-value products. If a product is earning a large profit, this signals to producers that consumers desire more of it and encourages producers to increase output and satisfy this demand. Profits also create incentives for firms to search for new products, technologies and inventions. Profits are an incentive to produce more efficiently. Competitive markets are dynamic. They meet society's need for efficiency, growth and freedom. Corporate executives benefit society more by responding to market signals than by indulging their own causes with shareholders' money.

According to Milton Friedman, what is the responsibility of corporate executives?

To conduct the business in accordance with owners' (shareholders') desires, which generally will be to make as much money as possible without violating society's basic rules and ethical customs

What is a shareholder?

an owner of shares in a company

What is a stakeholder?

any group or individual who can affect or is affected by the achievement of the organization's objectives