Shareholder V Stakeholder

Topics: Ethics, Economics, Stakeholder Pages: 2 (570 words) Published: April 10, 2013
Debate Introduction
Milton Friedman wrote, “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 did not support firms acting illegally, unethically, or immorally; he believed the goal of firms was to maximize shareholder wealth within the legal boundaries of society. Government and citizens should assume their rightful roles by setting and maintaining those limits. Several concepts prove why the ethical responsibility of a corporation should be placed internally, on producing profit, rather than addressing social issues. Friedman’s philosophy supports the rights of shareholders and says that the primary duty of corporations is to maximize profit. Shareholders are owners of the corporation and by investing their money into the corporation, they deserve to be properly valued. This illustrates an underlying philosophy known as property theory. A business should attempt to benefit its owners by increasing shareholder returns. Shareholder theory also has roots in Adam Smith’s Wealth of Nations ideology. An economy will grow by using the most productive methods possible. If all companies work in their own self-interest of maximizing profits, the society at large will benefit from a successful economy.

Corporations are not like people. Though they are financially and legally constituted, they do not have a moral conscience. The people within a corporation are in fact people, but the corporation itself does not qualify as a real person. Therefore, the only legitimate and valid purpose of a corporation is to try to earn profit and the only limits on a corporation should be determined and enforced by the law. Consumers and investors are also very self-motivated. There is very little space to assess the ethical implications of a corporation....
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