The Ethics of Profit: Unpacking Corporate Social Responsibility
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Understanding Free Market Systems
In a free market, such as that of the United States, Milton Friedman asserts that the primary duty of businesses is to utilize their resources to maximize profits, provided they operate in a competitive environment devoid of deceit or fraud. This perspective, articulated in his 1970 New York Times piece, resonates with my views, emphasizing that while organizations must establish clear values and uphold ethical standards, their principal goal remains profitability.
Friedman’s assertion that businesses cannot possess social responsibilities is pivotal. He characterizes a corporation as an "artificial person," suggesting it can have only artificial responsibilities. However, it cannot bear genuine responsibilities like a human being.
Defining Business
Various definitions of 'business' exist, with two notable ones being: 1. A commercial venture undertaken as a means of earning a livelihood, and 2. Trade evaluated by its volume or profitability. Notably, none of these definitions incorporate the term Corporate Social Responsibility, although many emphasize either livelihood or profitability.
Friedman further clarifies that a corporate executive's primary accountability lies with the owners or board of directors, not an ambiguous duty to society. Consequently, businesses should not be expected to fulfill obligations beyond those owed to shareholders.
The Social Responsibility Debate
It is a distinctly socialist viewpoint to advocate that business operations should prioritize "the greater good." While numerous companies engage in humanitarian and philanthropic efforts, they often do so because such actions can positively impact their market position and enhance profitability.
It is essential to recognize that if an organization chooses to adopt "social responsibilities," it may incur costs that affect its bottom line.
In a competitive free market, fair business practices are incentivized, and employees have the autonomy to select employers whose values align with their own. As long as companies maintain ethical standards—free from deception or fraud—profit generation remains their only obligation, and they should not be compelled to undertake social responsibilities.
What are your views? Should corporations embrace social responsibilities, or is profit the paramount objective?
Stay informed,
Chappy
Chapter 2: The Historical Context of Free Markets
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