Essay About Milton Friedman Theory And Social Responsibility

Milton Friedman
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Milton Friedman theory states that businesses has only one social responsibility that is to use all their resources and participating in activities that will gain profit for the business. The only rules of business ethics is that to follow the law and engage in the open and free competition without conducting bad activities such as fraud, stealing competitor’s product, harm others business such as burning down their buildings, etc. Sometimes, business owners tend to make the wrong business decisions that may cause harm to some people while making their own business profitable.         However, Friedman’s theory had missed a very important part which is the social responsibilities part.  Social responsibility is a duty that we need to act so that we can benefit the society we live in. Also, we must behave sensitively and ethically towards cultural, social, environmental and economic issue. The example of social responsibilities duty are helping the poor, creating strong connection between employees, bettering community, and to engage in non-profit causes. Although all this action is ethical and helpful to the society, but Milton Friedman believes that social responsibilities is the duty of the government.        They create their own moral constrain of business and they must act within the constrains. They prohibit business from doing something that will cause harm to the society. Therefore, their business activities must act in such a way that will allow the free market to function without any businesses commit fraud.        According to Milton Friedman, he argue that social responsibility activities would distort economic freedom because the money spent is not decided by the shareholders. Corporations should always stay focus on things that could generate profit for the corporations which does not include activities that do not directly generate revenue. Although social responsibilities activities sounds ethical, but in Milton Friedman view, a company should not undertake activities just because they are ethically sound, but they need to be economically viable as well.        Milton Friedman argues that directors and corporate executives starting a social responsibility programmes is inappropriate because they are spending money owned by shareholders through dividends. Also, spending money in social responsibility programmes brings too little incentives for prudent expenditures.        Also, Milton Friedman argues that a corporation main purpose and moral responsibility is to only maximize shareholders returns. Employees, directors, and executives are employed mainly to meet this objectives. Thus, the moral responsibilities for employees, directors, and executives is to maximize return of investment to meet shareholders expectation.