Friedman, “The Social Responsibility of Business is to Increase Profits” philo 230 chapter 14

Explain Friedman's three arguments against corporate social responsibility (CSR): Argument 1:

Incoherence Argument- advocates of CSR speak of social responsibilities of business. -However only a person can have responsibilities. -Therefore it makes no sense to speak of business as a whole having responsibilities. -Advocates of CSR may point out that, in legal terms, a corporation is an artificial person. -And they may claim that this artificial person the corporation could have artificial responsibilities. -The problem: a corporation does not have a mind -therefore a corporation cannot have responsibilities and cannot be deserving of moral praise or blame. -Finally perhaps the advocates of CSR will claim that its the people in charge of running the corporation who have the responsibilities: the corporate executives -However corporate executives are human individuals they are not the corporation

Explain Friedman's three arguments against corporate social responsibility (CSR): Argument 2:

The agent principal argument: A corporate executive is a person in her own right -As a person, the executive may view herself as having responsibilities that she recognizes or has voluntarily assumed. -We can even call some of these social responsibilities -However in the case of those responsibilities she is acting as a principal on behalf of herself rather than as an agent on behalf of someone else -In carrying out these responsibilities, she is expending her own money, time, and energy; NOT the money of her employer nor the time or energy she has contracted to devote to her employer -Thus if these are social responsibilities they are the responsibilities of the individual as a person in her own right; NOT the responsibilities of the corporation. -In the individuals role as corporate executive she is an employee (an agent) of the owners of the corporation (The principals) -this means the corporate executive has direct responsibility to her employer -The employer is the owner of the corporation: the stockholders -the desire of the employer or owner is to make as much money as possible within the laws and customs of society -Therefore the responsibility of corporate executives to make as much money as possible within the laws and customs of society (and not fulfill any supposed social responsibilities)

Explain Friedman's three arguments against corporate social responsibility (CSR): Argument 3:

The taxations argument:if the advocates of CSR claim that a corporate executive has social responsibilities in her capacity or role as a corporate executive, this would mean she has responsibilities to act in ways that are NOT in the interest of her employer. -In other words when exercising social responsibility the corporate executive is NOT acting as an agent any time this involves spending the stockholders the consumers or the employees money in a way different than they would want it spent. -Instead she is imposing a tax on these people and deciding how the proceeds of that tax will be spent. -Therefore CSR amounts to unjust taxation

Explain the two political issues that Friedman believes are raised by CSR: issue 1:

An issue of process: We have established governmental processes for imposing taxes and spending the tax revenues. -These processes are democratic and they are set up to assure that taxes are imposed in accordance with the preferences of the public, and the proceeds are spent in a way the public desires. -If corporates executives acts to fulfill social responsibilities this is NOT democratic she alone is deciding whom to tax by how much for what purposes and how the proceeds will be spent -When CEO spends money for social or public purposes she is acting as a public employee -If CEOs are going to act as public employees then it is not acceptable for them to be selected by stockholders but instead should be elected by democratic process that ensures taxes are imposed and spent according to public preference. -This reveals that the idea of CSR is a socialist concept because political mechanisms should be used to allocate scarce resources.

Explain the objections to Friedman's position and his responses: (1)

Objection 1: Many social problems are too urgent to wait for our slow political process to solve them. -The exercises of social responsibility by corporate executives is a quicker and sure way to solve these problems Response: This objection simply means that people who favor expenditures on certain social problems have failed to conceive their fellow citizens top democratically support expenditures through the political process -So they now seek to attain their unfavored expenditures through an un-democratic means (CSR)

Explain the objections to Friedman's position and his responses: (2)

Objection 2: Some corporations do provide amenities to the community and other socially beneficial expenditures. -This shows that there are actual examples of corporations meeting their social responsibilities. Response: We might be strongly tempted to label these expenditures by corporations as an exercise of social responsibility. -However this is usually just a way for corporations to generate good-will which is entirely justified by their self interest -Therefore these expenditures on social responsibilities are actually an effort to maximize profits for stakeholders and not attempts to fulfill social responsibility Conclusion: in an ideal market system no individual can coerce any other and all cooperation is voluntary -In such a system there are no social responsibilities other than the responsibilities of individuals and the responsibilities of voluntary groups that individuals may choose to form. -The only social responsibilities of a business is to increase profits within the rules of the game.

Explain the two political issues that Friedman believes are raised by CSR: issue 2: consequences

Part (i) Ignorance of consequences: corporate executives have expertise in running corporations NOT expertise in solving social issues (such as pollution inflation unemployment) -therefore corporate executives do NOT know how to produce the consequences that are supposed to be achieved by fulfilling social responsibilities. Part (ii) Bad consequences:If a corporate executive acts to fulfill social responsibility then one or more of the following bad consequences will result: -She will be fired by stockholders -She will be deserted by customers -She will be deserted by employees