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.
One ethical rule is the Utilitarian Rule. The basic principle of this rule is to provide the greatest good for the greatest number of people. So in applying this rule you could ask if the executives of Enron, Jeffrey Skilling and Ken Lay, made their choice to hide the company’s debt and fool investors into believing the company was thriving based on what would help the greatest number of people. The obvious answer is “no”. This choice was made to benefit themselves at the expense of the 21,000 employees that lost their jobs and the numerous other stakeholders that suffered financial losses.
That’s greed. The incentive to do these things is to be as successful as possible. That is the “American Dream.” That is why the US is the way it is today. Capitalism does have its strengths and weaknesses but the strengths outweigh the weaknesses. For example, greed causes businessmen to compete with other businessmen, thus, keeping prices reasonable and forces them to keep up with consumer demands.
Disharmony might arise when people felt the system was not fair, for example, when large bonuses are paid to bankers during a recession. Parsons and inequality Parsons developed Durkheim’s ideas and said that: In industrialised societies stratification, and therefore inequality, exists on the basis of which roles are agreed by the most important, and therefore the most functional for society. The agreement occurs because people are socialised into the shared norms and values for society, initially by the family, and subsequently by education and the other agents. The value consensus that results is what holds society together and it gives it social order.
Executives are hired to act as fiduciary agents of their stockholders for the purpose of increasing wealth (Smith, 2003). He argued that CSR amounted to spending the stakeholder’s money that clouded decision making by reducing the firm’s focus on maximizing profits, thereby placing the firm at a competitive disadvantage (Smith, 2003). Friedman’s approach is practical and takes into account the interests of both firms and society. However, it is not realistic to think that a firm can separate business and social responsibilities. According to Mintzberg "the strategic decisions of large organizations inevitably involve social as well as economic consequences, inextricably intertwined...there is no such thing as a purely economic strategic decision."
He is very critical of those who hoarded their surplus riches while living and only wait until their death to allow their amassed fortune to be used for public goods. Ultimately, it is his belief that the wealthy have a responsibility of utmost importance to society in making sure that the community also get the benefits of a continuously improving society. It is their responsibility, for they are the best equipped and have the means to do so. This stems from Carnegie’s acknowledgment of a justified inequality because of social Darwinism. That’s
One thing is to be a good employee and do the job as you’re expected to do, and another thing is to be a sponsor, which normally is a political company decision of the CEO. One of the main reasons why people are searching for a meaning at their work could be because they obviously think that they are paid too well. Analysis: In the beginning of the article Lucy speaks with a man who until recently was a government minister. The purpose of the communication was to find out, how his self-image was about his earlier job situation. She asked him if he was missing his power as a government minister to which he answered that government ministers didn’t have any power at all.
If a company fails to implement this strategy there the disaster happens. While implementing this strategy the employees must be treated equally according to their level of performance if, the employee feels it is an unfair treatment the reward system will be tricky (Holmes and Carvalho et al., 2 August 2010, p. 2). During technology blooming decade 1990S, Microsoft gave the opportunity for its employees to own and make huge sum of money. But when technology crash happened in the 2000 and share values went down, Microsoft had to revaluate the strategy. In 2006 Microsoft system came into action.
As Milton Friedman said, the social responsibility of a business is to increase profits, then Union Carbide Corporation’s decision to approve the cost-cutting plan seems appropriate and acceptable. Friedman’s view, however, is far from universally accepted. Many believe that corporations’ responsibilities to their shareholders, employees, customers and communities extend past fiduciary and enter the realms of ethics and Corporate Social Responsibility. Egoism fully applies to Union Carbide because to them no one else matters except for their happiness and profit . What Union Carbide failed to see was without the employees and the local community , there will not be profit because how can a corporation run without people to help it function or run .
Computed by deducting the cost of capital from the after-tax profit, it is said to be the best measure of the true profitability of an enterprise because it is tied to cash flow and not earnings per share. Many analysts would agree that EVA is more positively associated with a company’s stock price than ROE or EPS. Keith confirmed his findings with an industry analyst, which posed him with the decision of whether of not to implement this calculation into OSI accounting practices. Furthermore, would it be a beneficial tool to be used for evaluating the new manager’s incentive compensation plans? The EVA trend seems to be almost mandatory for the larger companies, but there is no reason that it shouldn’t work just as well for their smaller firm.