In his article The Social Responsibility of Business is to Increase its Profits, economist Milton Friedman argues that the main responsibility of corporate executives is to use the resources available to them to maximize profits, as long as it is within the “rules of the game,” which he defines as “free competition without deception or fraud.” Friedman claims that the presence of “social responsibilities” in corporate culture is detrimental to the shareholders, as corporate social conscience contradicts the inherent nature and function of capitalism and corporations. Friedman states that because corporate executives are simply agents of the shareholders who carry out the operations of the corporation, their main objective should be to meet the desires of the shareholders, which he believes, is profitability. When social responsibilities are introduced and corporate executives begin to make decisions with them in mind, Friedman believes that the managers are effectively imposing a tax on the shareholders, as they are spending money/foregoing additional profits to achieve a general social interest. Such behaviour defies the employer-agent relationship (becomes more of a public servant), as they are acting against the interests of his/her employers. In addition, Friedman states that managers are often ill-equipped to be making decisions regarding social interests as they lack the necessary expertise to do so.
b. Two key advantages of the corporate form over other forms of business organization are unlimited liability and limited life. c. A corporation is a legal entity that is generally created by a state; its life and existence is separate from the lives of its individual owners and managers. d. Limited liability of its stockholders is an advantage of the corporate form of organization, but corporations have more trouble raising money in financial markets because of the complexity of this form of organization. e. Although its stockholders are insulated by limited legal liability, the corporation's legal status does not protect the firm's managers in the same way; i.e., bondholders can sue its managers if the firm defaults on its debt, even if the default is the result of poor economic conditions.
Economic Goals of Business and Government VS Social Goals of Consumers Milton Friedman suggests that the social responsibility of a business is to increase its profits (Boardman, Sandomir and Sondak 221). While increasing profits is certainly one of the most important factors in a successful business, is it considered a social responsibility, or better yet, the only social responsibility of a corporation? Friedman seems to think so. But why is increasing profits a corporation’s social responsibility? According to Friedman, “A corporate executive is an employee of the owners of the business.
Gore to screen the best acquisition targets for its business without threatening its own unique culture. From a financial perspective, mergers and acquisitions can be costly mistakes for companies who pursue aggressive or large deals. Academic literature has shown with empirical evidence that the most successful transactions, as measured by excess returns, are done when a company acquires private business units or companies, within the same industry as the acquirer and are financed through cash. Large deals, which involve public acquisitions that are financed by equity often, result in financial overinvestment and burden on the part of the company and shareholders. It is important to note that W.L.
The most common word used in the transaction of merging or acquiring companies is ‘synergy’. This explains how two companies combine their core business activities so as to increase an overall performance and at the same time reducing their transaction costs. The main reason as to why companies merge or are taken over is mostly based on financial purposes. Often, firms are unable to perform to a required or to their desiring
Challenges of Managing a Non-Profit Organizations There are different challenges a non-profit organization face, although I believe that those same challenges are faced on for profit organization either at the same level or very similar. Trust is an issue that both non-profit and for profit organizations will encounter at some point in their business and therefore they would need to be as transparent as possible. Transparency entitles you to provide clear statements of where your money goes, how it is utilized in your organization, and how it is making your organization accomplish their goals. It is not the only thing that is necessary to make the stakeholders, other business, employees or anyone interested in other business to trust in your organization. For a non-profit organization trust is a key element to engage volunteers, donors and other business; without trust chances are that the organization might fail to achieve their mission.
Red Cross Contrasted Against PepsiCo When organization is formed, it is set forth with specific goals and values. Some may call these a set of ethical guidelines or business ethics. Whether you are a Not For Profit Organization, that seeks to provide a service or product to the public, or an organization whose goal is For Profit, you will face ethical standpoints in your business journey. The Red Cross is a Not For Profit Organization that has been built upon many values and ethics. PepsiCo was once a small corporation that has blossomed into a massive corporation through out their decades in existence.
The corporation is built on a substance that gives it a competitive advantage and a business strategy that is coherent, flexible, and specialized. McDonald’s vocation bazaar would be the general public. According to the case study, people are the company’s most important asset and its success depends on the satisfaction of its customers which begins with workers who have the attitudes and abilities required to work efficiently and provide good customer service. McDonald’s warrant both patrons and employees know just how beneficial they are. They make a populace assurance to the employees.
Skill: AACSB: Ethics 3) In the socioeconomic view of organizational social responsibility, maximizing profits is not a company's only priority. Answer: TRUE Diff: 2 Page Ref: 93 Topic: What Is Social Responsibility? Skill: AACSB: Ethics 4) Socially responsible businesses tend to have less-secure long-run profits. Answer: FALSE Diff: 3 Page Ref: 95 Topic: What Is Social Responsibility? Skill: AACSB: Ethics 5) One argument against businesses championing social responsibility issues is that businesses already have too much power.
Within this model, the rich elite are the ones that control businesses at the expense of the average person. The Countervailing Forces model shows the BGS relationship as a complex exchange between many major elements of a society. These forces are stronger or weaker depending on many factors such as “the subject at issue, the power of competing interests, the intensity of feeling, and the influence of leaders.” (Steiner & Steiner, 2009, p. 14) This model differs from the market capitalism model because businesses can be