...assets to accomplish some overall goal within a business entity. Finance is one of the key functions within any organization. Financial management involves three major types of decisions: long-term investment decisions, long-term financing decisions, and working capital management decisions, which are short-term in nature. These decisions concern the acquisition and allocation of resources among the various activities of a firm. Investment decisions typically affect financing decisions and vice versa. Although all these decisions are important, decisions are typically the most important because they affect a firm’s growth and profitability. There are two approaches that shape and influence the way managers prioritize and do things - the classical view and the socioeconomic view. The classical view "says that management's only social responsibility is to maximize profits", that "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 (1962, 1970) argued that managers' main responsibility is to operate the organization in the interest of the shareholders, the organization's true owners', by increasing financial returns. These additional costs would then be at the expense of the shareholders, resulting in lower profits. In theory, managers should operate...
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...Dr. Milton Friedman 1. The Social Responsibility of Business Is to Increase Its Profits." that business has a 'social conscience' and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution In 1970 Milton Friedman wrote that "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." That's the orthodox view among free market economists: that the only social responsibility a law-abiding business has is to maximize profits for the shareholders. The most successful businesses put the customer first, ahead of the investors. In the profit-centered business, customer happiness is merely a means to an end: maximizing profits. In the customer-centered business, customer happiness is an end in itself, and will be pursued with greater interest, passion, and empathy than the profit-centered business is capable of. 2. Friedman is careful to note that the corporate executive has direct responsibility to his employers, the shareholders. He is also careful to argue that this is not necessarily the manager's sole responsibility; there is, after all, the duty to conform to the basic rules of the society. It is not clear if the latter is a moral responsibility or a social responsibility--i.e., if it is a duty the manager...
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...I do believe that ethical training can help one make better decisions and more ethical decisions. He is correct when he says the purpose is not to get every question right on the exam but to make the right decisions. It would be great to get every question right on the exam, but that isn’t considered ethical training. I believe the best theory is the profit maximization theory because it’s the most simple and it concentrates on the main point of business. The goal of a firm is to maximize profits while making ethical decisions at the same time. There are both pros and cons of each theory but in profit maximization the Pros outweighs the cons. The primary focus is to maximize profits. Maximizing profits is more valuable than attaining social responsibility. I believe that the business is most successful when you maximize profits then everything else will follow. In the article social responsibility of business is to increase its profits, it talks about what happens when executives steal. I can relate this to my work at Rite Aid. We had a store manager who used to steal money from registers, which led to many employees being fired because of register shortages. I was the one who survived my register only came up short once with 10 dollars in which I saw the manager steal. Assistant managers and supervisors contacted the Loss prevention many times but they could not fire him because they did not have enough proof that he was the one stealing. Eventually the manager got fired...
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...Social Responsibility Views on Corporate Social Responsibility Abstract This dissertation examines R. Edward Freeman and Milton Freidman perspectives surrounding corporate social responsibility by summarizing their respective articles titled: “Stakeholder Theory and The Corporate Objective Revisited” and “The Social Responsibility of Business is to Increase its Profits”. By examining their articles, I will provide a personal opinion of which of their economic models should be the leading model when it comes to business and corporate social responsibility. Summary of Articles Author R. Edward Freeman’s article “Stakeholder Theory and The Corporate Objective Revisited,” emphasized a response to a piece put out by Sundaram and Inkpen titled “The Corporate Objective Revisited” by clarifying misconceptions about stakeholder theory and concluding that truth and freedom are best served by seeing business and ethics as connected (Freeman, Wicks, & Parmar, 2004). Freeman supports the above statement by providing the following three main critiques: 1) the mischaracterization of stakeholder theory; 2) the primacy of creating value for stakeholders, and; 3) the real issues of economic and political freedom (Freeman, Wicks, & Parmar, 2004). In response to social responsibility, Freeman clarifies that stakeholder theory claims that no matter what the ultimate mission of the corporations or any form of business activity, managers and owners must take into account the legitimate...
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...market capitalism through competition for scarce resources. The theory of the Invisible Hand states that if each consumer is allowed to choose freely what to buy and each producer is allowed to choose freely what to sell and how to produce it, the market will settle on a product distribution and prices that are beneficial to all the individual members of a community. 2. Two advocates of the “invisible hand” theory who are quoted in the article encourage a “deliberate amorality” in the executive suite. How do they justify this? They contend that this results in systemic morality due to the action of the invisible hand. 3. What does Milton Friedman see as the social responsibility of corporations? Milton Friedman is quoted saying, "There is one and only one social responsibility of business -- to use it 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 argues that corporations have no social responsibility, only a responsibility toward their customers and shareholders to maximize profits. 4. According to Bishop, what does Adam Smith say about laws or regulations proposed by those who live by profit? Adam Smith equates the interest of those who live by wages with the interest of society. However, the interest of this third order, which is those who live by profit or manufacturers, has not the same connection...
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...Milton Friedman in his article “The Social Responsibility of Business is to Increase its Profits” states that only people can have responsibilities, and that there is not such a thing like social responsibility of business. A corporation, according to Friedman, is an artificial person and, therefore, may have artificial responsibilities. The individuals who are responsible of the corporation are businessmen, which are individual proprietors or corporate executives. A corporate executive is employed by the owners of the business. And its responsibility is to conduct the business in a way that maximizes the profits while conforming to the basic rules of the society. A corporate executive, as any other person, may have many other responsibilities that he recognizes or assumes voluntarily, which can be referred as “social responsibilities.” These social responsibilities correspond to individuals, not to businesses. The main objective of corporate executives is to maximize the profits of all stockholders; therefore, they are to act in a way that is in the interest of those owners of the business. In this sense, a corporate executive shall not engage in social activities, unless they are done from an individualistic point of view instead of from a business point of view because, in the last case, he or she would be spending somebody else’s money, and not serving the interests of the employers. On the other hand, the situation of the individual proprietor differs because, if he reduces...
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...Ethics and Social Responsibility MGT/498 Strategic Plan, Ethics, and Social Responsibility Ethical values and social responsibility serve an important role in the strategic planning process. According to Milton Freidman, “[t]here 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” (Wheelen & Hunger, 2010, p. 72). With social media and the internet, it is difficult for companies only to focus on profits. Today, companies need to follow Archie Carroll four responsibilities of business. Those responsibilities include economic, legal, ethical, and discretionary. The priority starts with economic and ends with discretionary. According to Carroll, “a business firm must first make a profit to satisfy its economic responsibilities” (Wheelen & Hunger, 2010, p. 73). Once the company’s economic responsibilities have been met they can worry about the social responsibilities—ethical and discretionary. When a company decides to take responsibility for their actions by doing the right thing, this is called business ethics. In business a company or business has a social responsibility to the consumers and stock holders to make sure they are practicing proper business ethics to not only promote doing the right thing but to show that they are...
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...good business decision for the company. I have postulated some of my thoughts on the writings of Milton Friedman. While I have no objections to giving back to the community and doing social good, I do believe that a majority of the money, time and effort should come from employee contributions rather than corporate dollars used for funds, grants and scholarships. Companies should limit their direct involvement in these activities using just their brand and influence to raise public awareness to the cause, so long as it is consistent with the companies’ values and beliefs. I also believe it is the firm’s primary job is to focus on delivering the highest possible return of shareholder value. If a company cannot produce a profit, or sustain the shareholder’s appetite, then the possibility of promoting a Project Share cannot exist. Everything in the business revolution is predicated on returning value. I should clarify, that my statements above are based upon the fact the companies in discussion are publicly traded and not private entities. Private entities, which include partnerships, limited liability corporations and other non-traded companies with limited employees and owners who are the sole shareholders, can operate as the social responsibility doctrine as they see fit. 2) Milton Friedman’s, belief was that the one and only one social responsibility of a company is to” use its resources and engage in activities designed to increase profits so long as it stays within...
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...Social Responsibility of Business Introduction What is the social responsibility of a business? Is it to increase its profits as Milton Friedman affirms? Before starting any debate about this topic, first let’s see what its definition is. According to the Business Dictionary, social responsibility is an “obligation of an organization's management towards the welfare and interests of the society which provides it the environment and resources to survive and flourish, and which is affected by the organizations actions and policies. 1 ” Furthermore, according to the Dictionary of Finance and Investment Terms, social responsibility is the “principle that businesses should actively contribute to the welfare of society and not only maximize profits. 2 ”These two definitions are in total opposition to Friedman’s statement. Never the less, I do think that any corporation can be social responsible in terms of these opposing points of view at the same time. In this essay, I will first present a summary of the article of Milton Friedman; then I will express my personal reflection on the topic and tell why a corporation can comply with both positions simultaneously Milton Friedman in his article “The Social Responsibility of Business is to Increase its Profits” states that only people can have responsibilities, and that there is not such a thing like social responsibility of business. A corporation, according to Friedman, is an artificial person and, therefore, may have artificial...
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...The purpose of this research paper is to investigate whether Corporate Social Responsibility (CSR) is becoming a common standard in the Caribbean corporate financial community and the associated benefits as it relates to the business strategy and financial performance. Historically, corporations were expected to serve some public purpose as justification for the benefits and privileges they receive. However, since the 1970s, the view has become widespread that corporations exist solely to maximize profits and to increase shareholder’s wealth and for no other purpose Bartlett (2015). In a capitalist society it is rare to hear that one has gone into business for reasons other than to make as much money as possible. Based on this capitalistic...
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...did not know what to expect, learning about how company’s operate and how can a business be profitable while treating employees, suppliers, customers, and the community on a hold the way they should be treated. The answer that comes to mind is providing ethical as well as moral framework, which starts with managers. Remember that a company’s leadership starts at the top and one of the criteria’s in being a good leader is strategic planning. Strategic planning is a tool used by management to assist organization in doing a better job. The plan is used to develop the best way the organization will deal with environment circumstances, and ensure that the organization employees are working toward the same goals. There’s a question of rather or not decision makers should be responsible only to shareholders and increasing profit, or do they have a broader responsibility to society beyond the maximizing of profits (Wheelen & Hunger, 2006, p.56). According to Milton Friedman , “there is one and only one social responsibility of business to use its resource and engage in activities designed to increase its profits so long as it stays within the rules of the game, which to say, engages in open and free competition without deception or fraud” (Wheelen & Hunger, 2006, p. 57). It is however frustrating when addressing dilemmas which occur when ethical considerations appear to be tacked onto real business of organizational decision making-almost as an afterthought (The William Institute...
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...question today is do insurance companies make a profit off their customers? In this paper I will discuss Freidman’s goal of the firm. Milton Freidman felt as though the goal of the firm was to keep the shareholders at the front line of their decisions. When an insurance company decides what they are going to do to target their customers they make sure that they are going to have a profit so that the shareholders are happy. Another aspect of this paper is going to be on whether or not the government should have a role in the goal of the firm rights of those involved seem to be taken away. The Goal of the Firm The Friedman goal of the firm is that they take the shareholder into consideration when it comes to a profit. He believes that the sole purpose of the goal is to make sure that profits are maximized so that a portion of that profit can be provided to the shareholders, especially if there is a risk in the investment of the company. Not only does Friedman believe that the goal of the firm is to gain a profit for the shareholder but to not have any social responsibilities. In his book Capitalism and Freedom Friedman talks about totalitarianism, which is where the state has control over all aspects of the public and private sector. This is what happens when a company focuses on the "community" rather than the profits that can be made. The only way for a company to make a good profit is they need to make sure that the “proper pricing”...
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...Do Corporations Have a Responsibility to Society Beyond Maximizing Profit? Shravan Kumar M Under the direction of professor, Minnick, Marc D Corporate Social Responsibility beyond Maximizing Profit Growing concern of society on socio-economic and environmental issues has raised the thought of corporate social responsibility. Corporate Social Responsibility (CSR) is a “concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”, which means beyond the frame given by law – by World Business Council for Sustainable Development (WBCSD) in 2004. Growing needs in energy, especially in emerging countries, limited oil reserves (non-renewable energy will necessarily become more expensive and renewable energy will be more and more used), waste management, and demographic growth at the global level (Currently we are 7.2 billion population approx.) are factors requiring that we take care of the environment and natural resources, and that we modify our consumption modes. The decrease in natural resources, demographic pressure and climate change, the increasing volatility and high prices of energy resources are present and future constraints that put the emphasis on energy and environmental issues, and place them in the heart of companies’ sustainable development policies. Main Arguments of Robert D. Hay and Edmund R. Gray Robert D. Hay and Edmund R. Gray argument emphasizes...
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... The Role of Ethics and Social Responsibility in Developing a Strategic Plan Private corporations have a responsibility to society to do more than merely become a profitable organization. The strategic decisions of organizations are not made for the the benefit of the organization alone. Strategic decisions are also made to impact the community, consumers, and workforce of the corporation in a positive way. The strategic decisions made by a corporation are carefully made to reflect the mission and vision of the organization. Every decision includes the appropriateness of how the organization serves the community by keeping their needs and expectations in mind. The ethical interests of the organization must be well defined and all conflicts of interest or legal occurrences must be dealt with in a completely ethical manner. The stakeholder’s have the expectation of transparency from the organization so that their needs are taken into consideration during the course of developing the strategic plan for the organization. The question of what the ethical social responsibility requirements of an organization are can be answered in different ways depending on the view of the corporation. Milton Friedman and Archie Carroll have very different ideas of corporate responsibilities to society. Friedman believes in a more traditional view of corporate responsibility limiting the influence of government regulations that affect...
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...Task 310.2.1-05: Ethical Situations in Business Western Governors University Mary Lyles - ID 000389714 September 7, 2014 Recommendations for Company Q The main responsibility of a company is to make a profit for it's stakeholders, both the employees and the investors. Company Q has taken this priority to heart and has overlooked the benefits of the other responsibilities of their involvement in the retail business. The admission of not donating the day old food to a local food bank stems from an inherent distrust of their employees. The current distrust will become more tangible as the managers and employees are not treated with the respect they are earning and will certainly breed unhappy employees which will in turn result in lower sales. Another one of the issues regarding the public service of Company Q is the closing of the two unprofitable stores in high crime areas. If the closure was done without analysis of why the stores are unprofitable, the surrounding community would suffer in regards to availability of merchandise . Offering some high margin health conscious items without surveying the viability of these items is also an issue. Company Q can take some planned, simple steps in resolving these issues with a manageable, well thought out ethics program. Recommendation One Company Q could create a program to donate the expired day-old items to the local food bank. This program would become the responsibility of the store manager and include processes...
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