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.
The corporation’s money magically becomes the stockholders’ money” (Denning). What the author failed to realize is that the shareholders bought into the company, and are now owners of the company. That is how the corporation’s money somehow became the shareholder’s money. Making money will always be a corporation’s primary goal whether they want to admit it or not. But that does not necessarily mean they will ignore their social responsibility.
Policymakers in the government can respond to the monopoly problem by trying to make industries more competitive, regulating the behavior of monopolies, turning some private monopolies into public enterprises, or do nothing. Price discriminate means the exactly same product could sell to different consumers for different prices, even though the costs of producing for the products are the same. Price discrimination is impossible when product is sold in competitive markets. For a firm to price discriminate, it must have market power. There are three lessons to be learned about price discrimination are price discrimination rational strategy for a profit-maximizing monopolist, price discrimination requires the ability to separate customers according to their willingness to pay, price discrimination can reduce the inefficiency inherent in monopoly.
An obstructive company does not make social responsibility an effort, instead making profits the most important aspect of its business. Some people view obstructive businesses as immoral since they may exploit their employees, pollute natural lands or deceive customers. Joseph Smith Student ID 61755 Defensive In most cases, companies that take a defensive stance towards social responsibility are not particularly responsible. These companies may consider themselves neutral, and they make profits a more important motive than performing actions in a socially responsible way. These companies make a point of following the law to ensure that others cannot take legal action against them.
Merck – River Blindness An Ethical Analysis of Corporate Responsibilities By: Manuel F Lastimosa April 17, 2011 Ethics "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 (Friedman, 6).” Introduction and Situational Analysis: The debate concerning corporate social responsibility has gone on for decades and will most likely continue well into the future. On the one hand, proponents of CSR argue that corporations, like individuals, being part of society are morally obligated to contribute to the society that sustains them. That is to say, profit maximization is but one pursuit of a corporation and ought to be pursued in parallel with goals put forth by various other stakeholders including customers, suppliers, local communities, the general public, etc. as described in the stakeholder approach to social responsibility (Pearce and Robinson, 45). On the other hand, opponents of CSR such as capitalist Milton Friedman would argue that a firm’s duty is to its shareholders and as such is bound by fiduciary obligations to fulfilling shareholder interests—namely profit maximization.
To illustrate: a shopkeeper can only profit if others pay for his stock, and similarly, a conman depends on the honesty and trust of others if he is to succeed. A second reason for thinking that, even if we don't explicitly agree, we have duties to a social contract, is John Rawls' theory of 'hypothetical' consent. Rawls illustrates this with 'Original Position', an imaginary circumstance in which people don't know their gender, sexuality, ethnicity, ability (etc.) and are asked what kind of society they'd like to live in. This 'veil of ignorance' means their deliberations are completely impartial, so the fundamental principles established would be what rational, self-interested people would agree to- firstly, we would allow individuals as much freedom as is compatible with equal freedom for all, and secondly, individual wealth would be distributed in a
Why do entrepreneurs play a central role in free markets? Entrepreneurs play a central role in a free market because without the entrepreneur there is no business/firm. Also they have to ensure that resources that have been purchase have been used efficiently in order to receive maximum profit. 5. Identify two areas of government regulation and explain why this can be seen as a bad thing for businesses.
As mentioned previously, Adam Smith, a highly regarded economist, demanded that in order for economic success, the”invisible hand of the market” must be in control, rather than the government. This notion involves the establishment of free enterprise and greater openness to international trade and investment (e.g the abolition of tariffs). Free enterprise results in the value of various goods and services being determined by supply and demand meaning that suppliers are unable to manipulate prices. It also encourages investment as people can see the potential to make a return – without the government capping prices. On the other hand, this idea of free trade is highly disadvantageous, and even harmful, to the Global South with the Global North dictating prices.
While the traditional accounting methods are good to measure past performance and financial stature, it does not allow for managers to see the impact or value that marketing has on the bottom line. For a manager to evaluate the impact of marketing they will need view the current marketing expenditures, sales, and profits to make a conscious decision on what methods are working. While I think placing marketing as an investment is a good concept, determining the value is too biased without a common measurement between all companies in a similar industry. Without understanding the current value of marketing, the marketing budget will be one of the first items cut when the business is in a downturn. Technology in all industries has increased dramatically over the past 10 years so being able to understand the current value of marketing methods should not be as strenuous as it has been in the past.
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. 3. Which of the following statements is CORRECT? a. In a regular partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business.