Do you agree with Milton Friedman’s (1970) claim that: “the only responsibility of business is to increase its profits”?
Today we live in a world were companies are major actors and influence society on many levels. This is why ethics were brought into the business world. Ethical enterprises follow certain values and moral beliefs and were created with the supposed intention of using that influence in a positive way and protect what surrounds them, whether it is the people who work for the company, the rest of society, the environment etc. Ethics helps companies distinguish what’s wrong or right in a certain situation and act upon it. It bases itself on the idea that a corporation is somewhat responsible for how it affects others, hence the term ‘corporate responsibility’. (Banerjee, 2007) But with time and experience it seems that ethics, although created for a noble purpose, can and are actually used by companies for purposes other than just helping others. The economist Milton Friedman believed that all this social work is the state’s responsibility and a political matter, and that it can induce losses in profit for a company, going against the essence and purpose of a business. He argues we might be better off without it. (1970) This rather negative portrayal of something that was created to do good, although quite realistic, can be discussed and hopefully re-arranged so there is hope that a company can be both socially responsible and profitable.

According to Bakan (2004), “if a corporation can do good only to help itself do well, there is a profound limit on just how much good it can do”. The reasons for which a company decides to be more responsible are indeed important and play a key role in how it functions. Many theories argue that it can only truly work if they have the interest of who they’re helping at heart and believe in what they do. The German philosopher Jonas argues that a man making any kind of decisions should take into consideration how it will affect the future generations. (J. Gabriel, 2013) And while this principle may seem utopic for some, it has been successfully adopted by many companies today, not with the purpose of increasing profits but trying to commit to doing good just to benefit others. But it goes beyond that. If a company tried to be socially responsible just as a marketing ploy, it would loose all credibility and the consumer’s trust. “Responsible CSR behavior is based on being fair, respectful, and honest.” (Öberseder et al., 2013)
Voted in Forbes’ world’s most ethical companies list, the apparel brand H&M is the leader in ethical fashion and a great example of a company doing good to benefit others. A whole part of the H&M web page is dedicated to ethics, with an in-depth interview of the CEO Karl-Johan Personn in which he talks about his hopes for the future of the company and society in general, mentioning their “great opportunity to improve the lives of hundreds of thousands of people and help develop entire communities”. And although it is clear that being ethical brings the brand serious advantages which he recognizes - economic growth, strong partnerships with suppliers, etc.-, the importance of helping others shines through and seems to be of real importance.
Many people perceive the brands that they look up to as actual people, with defined characteristics, and the decisions that the brand takes will contribute to building that image. (Bakan, 2004) It influences everyone, from kids to teenagers to moms, who admire those brands and what they represent for them. This is why setting a good example for everyone to look up to is so important. Many cosmetic brands like Lush or The Body Shop chose to ban animal testing and adopt a ‘cruelty free’ policy that doesn’t harm anyone during testing. The Body Shop even took it a step further by having the same testing that is usually practiced on animals done to a volunteering actress in the window of one of their shop to try and sensitize more people to the situation. (The Body Shop, 1992) The company used the influence it had to promote a cause that was important to them and raised awareness on the subject.
This is why the installment and promotion of positive values is important. Managing by values was created to help incorporate those in the way the business is run, and benefits a company in many ways. Not only does it promote a healthy view of the brand but it also helps tie up different departments together and builds up the employee’s attachment and loyalty to the company. And although managing by values isn’t the same as corporate ethics, they are both linked, and the improvement of one helps the establishment of the other. This form of management proves that companies are not the evil they can sometimes be portrayed as. They can be humane, do the right things and project a positive image. (Dolan et. Al., 2006)
But this is not always the case. Many debate on the true intentions of socially responsible businesses and question the necessity of involving ethics into the business world.

One of the world’s first multinational corporation was the East India Company, and like any other it became confronted to the problem of the use and application of ethics. Mentioning this example, the First Baron Thurlow asks us: "Did you ever expect a corporation to have a conscience, when it has no soul to be damned, and no body to be kicked?". (Almeder, 1980) This idea goes along with Milton Friedman’s analysis of socially responsible businesses. He believed the concept, albeit admirable, is wrong because it portrays companies as humans with actual feelings, which is far from being true. He states that “only people can have responsibilities”, and that a company is just an ‘artificial’ person with only artificial responsibilities. He argues that taking care of others like that is of the political domain and should not interfere with any business. By doing so, the manager who controls all of it becomes not a corporate representative anymore but a public employee, which is the role of a government. Besides, that person has his own personal responsibilities to fulfill and that might get in the way. It is not a business but a person taking those actions. He also discusses the fact that the money used to be social responsible comes from stakeholder, employees and customers, and that they all should have the ability to use it only if they want to and to help the cause of their choice. These socially responsible actions could also potential hurt those who provide the money and the business itself which is quite paradoxical. It might be wiser to help and protect those who are investing and caring about the company before worrying about the rest of society. And the easiest and most important way to help them is to keep the company working and earning profits. The only exception is that of independent businesses that, because they are only responsible for themselves within the company, can decide in socially responsible actions without hurting anyone.
But perhaps Friedman’s most striking idea is that a large majority of socially responsible company use ethics as a way of attracting more customers, promoting a selfless and trustworthy image to the masses. But influencing people like that harms our free society. Without socially responsible actions, there are no deception and no fraud, and those who need it are helped by other actors outside of the business world. To Friedman, this is the wisest option. (1970)
Aneel Karnani also shares Friedman’s point of view on ethical companies, calling the idea of being socially responsible a ‘grand illusion’. He divides the case in two situations: if there is a market failure than there is a trade-off between profit and the interest of society, and social responsibility because less important. If the market on the contrary is efficient, than there is no need to appeal customers with some very vague and undefined social duties. In both cases, companies are better off not focusing on ethics. (2011)
Another author, Joel Bakan, had a similar point of view in his book on corporations. He believed that companies have a selfish and profit seeking nature that keeps them from truly being socially responsible. But he goes a step further than Friedman and introduces externalities, describing the third parties –whether it is people, communities or environment- who are affected by the judgments and decisions of companies. Using the metaphor of companies as psychopath, he suggests that they will stop at nothing or no one to achieve their goal –profit maximization-. They have influencing powers over society as a whole and use ethics only as a way to gain more customers and increase profits. Bakan uses the example of General Motors: the company chose to place one of their car’s fuel tank too close to the rear bumper to save costs, knowing that it might cause accidents but deciding that the sum of the lawsuits that could potentially occur was smaller then the extra costs to separate them more from each other. This caused serious car accidents, simply for a matter of saving costs. The company felt increasing its profit was more important than being socially responsible. (2004)
If all of those theories are true than the previous example of The Body Shop and cruelty free brands in general has to be rethought. There has to be a way to make the distinction between companies that really care and truly want to help and those that just want publicity. The question of motives and ends also rises: does it really matter what motives a company has as long as the results are positive?

Ethics are often seen as something very nice and noble in theory but not truly viable in practice. Friedman is one of many to denounce the numerous flaws of socially responsible businesses that make them hard to function properly. Norm Bowie, an ethics professor disagrees. Basing himself on Kant’s theories, he argues that doing what is morally required is not always unprofitable, but that no matter what it remains what should be done. An non-negligible 71% of the British population believes that the business industry doesn’t pay enough attention to their social responsibilities. (Smith, 2002) This shows that even if choosing ethics may mean a little loss in profits, it is still worth it to give customers what they want. Bust most of the time this is not the case. Most of the time a business can be profitable and socially responsible.
Porter and Kramer discussed the important and often under-estimated competitive advantage of corporate philanthropy. They believed, like many others, that being ethical solely for strategic purpose only was almost never successful. Taking a new look at things and focusing more on long-term basis, the use of ethics to reinforce its competitive advantage could “align social and economic goals and improve a company’s long-term business prospects”. (2002) Following Friedman’s doctrine would be unprofitable in the long run. And although it may be hard to think about the future and long term plans, this brings us back to Jonas’ ideas on protecting next generations. As Robert Almeder observed, “the trick is to provide for the future without living in it, and that requires being moral”. (1986) And changing a company in becoming more ethical shows results and rewards even in early changes, encouraging companies to keep on the socially responsible path.
There are indeed many examples of successful business which promote profitable and ethical programs. 3M instaured a pollution prevention program that was eco-friendly and allowed the company to save over 500 million dollars in the first fifteen years of the program, by finding new ways of manufacturing that were less harmful to the environment. Delta Airlines treated its employee in such a exceptional way that they were more motivated to work effectively and perform multiple tasks, allowing important savings on hiring and personnel remuneration. All the workers were so grateful to the company they even all chipped in and bought Delta a passenger jet. Sears started worrying about potential inappropriate sales practices and invited its associates to not push the warranties on customers. This unexpectedly resulted in an important increase in warranty sales. The pharmaceutical corporation Merck invested millions of dollars in creating and distributing a drug that could cure river blindness, a disease appearing in poorer regions of underdeveloped countries. This resulted in an incredible increase in consumer trust, and ultimately in profits. So whether a company is being socially responsible towards the environment, its employees, its customers, or a portion of society that really needs it, there is always a way of doing good and profiting from it. (Lunday, 1996)
Many other scholars believed in those programs. Patrick Primeaux directly attacks Friedman’s analysis of ethics and claims loud and clear that yes, a business can be both ethical and profitable. He argues that Friedman’s view of profit is too focused on accounting profits and is too rational. He thinks a broader understanding of profit maximization should be introduced, one that takes a step back for mathematical and numerical term and considers others factor like people as valuable resources. (1995) Maybe the key in all of this is to redefine ethics, give it a new perspective that is compatible with the business world, allows profit and still comes from genuine good intentions, like the One-Minute Moralist. In the form of a tale, Robert Solomon introduces this business man, who believed that everyone misunderstood social responsibilities. According to him, ethics is “the art of mutually agreeable tentative compromise”, and that by definition a good business in itself is ethical. By simply taking contracts seriously, agreeing what is a fair exchange, reimbursing debts, etc. which are part of any good business is a form of ethics.

Like many themes in business, the opinions on ethics vary from one scholar to another. Some believe that being ethical and truly meaning it is important no matter what the economic results are. Others like Friedman are opposed to it, and believe it can endanger a company by reducing its profit, and that enterprises are better off without it because they don’t have the feelings and therefore sense of responsibility humans have, but absolutely need to maximize revenues. Perhaps the most accurate and realistic view on the subject is that a business could be both profitable and socially responsible, and that ethics are too beneficial in many ways to ignore. Many example have proven that this is true. And although it takes a while from time to time, the results are always worth the effort. By taking a step back and adjusting the ethics definition, any successful profit-seeking business could benefit from it. After all, the world would be a difficult place to live in if no one helped each other.

Bibliography

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http://about.hm.com/en/About/Sustainability/HMConscious/CEO-Message.html