Social responsibility of business has been a subject of intense controversy and interest over the past four decades (Jamali 2008). The purpose of this paper is to critically analyze the two different views of social responsibility of business among scholars and business practitioners. The first is the shareholders view of Milton Friedman and another one is the stakeholder view of Bob Dudley, Group Chief Executive of BP Corporation. I will outline key arguments and point out drawbacks of the two perspectives to clarify the underlying principles of business responsibility to society in theory and practice. These analyses will facilitate my recommendation of a mixture model of the two theories so that business not only obtain profits but also maintain sustainability development in the long term.
Review of the literature
The academic literature has highlighted the lack of consensus and the prevailing confusion in defining social responsibility of business (Ramachandran 2010). Levitt (1958,) in his article ‘The Danger of Social Responsibility’, emphasized that social issues are the function of government, not job of business. Until between 1960s and 1970s, this period witnessed a significant expansion of academic interest in literature of corporate social responsibility. The theory was discussed and examined in depth, which lead to many debates on business managerial implications as well as introduction of related concepts of business ethics (Kakabadse et al. 2005). The literature has been presented in various ways from the narrow economic perspective of maximizing shareholders’ wealth (Friedman 1970) or economic, legal and ethical aspect of responsibility (Carroll 1979) to a wider stakeholder perspective which involves other parties such as suppliers, customers and employees besides company shareholders (Freeman 1984). In the past ten years, social responsibility of business has been considered long term development of organization in term of corporate sustainability (Marrewijk, cited in Jamali 2007) or engagement of business in society as a good corporate citizenship (Hemphill 2004). According to the Commission of the European Communities (cited in Cheers 2011), business is responsible to society when its operations activities are incorporated with social and environment issues as well as interact with stakeholders beyond legal obligations. These differences stem from various fundamental assumptions about what social responsibility entails. However, the interaction between business and society is a complex issue. It is more and more important to examine this relationship to define an effective model for each organization (Ramachandran 2010).
Critical reflection and analysis of the theory
Milton Friedman, the representative of modern capitalism, won the Economics Nobel Prize for his big contribution in monetary history and theory, consumption analysis as well as stabilization policy in 1976 (Schwartz & Saiia 2012). Although Friedman shows little interests in social responsibility of business (Jones 2007), he presents a strong voice against social responsibility with his disputing statement, ‘The social responsibility of business is to increase its profits’ in his article published on the New York Time Magazines in 1970. This statement followed his similar but less cited views mentioned earlier in his book ‘Capitalism and Freedom’ published in 1962. He describes that business has no responsibilities to society beyond that of maximizing profits for shareholders providing that these activities are complied with law and ethical rules (Friedman, cited in Jones 2007). Friedman’s view has had a significant influence on the theory of social responsibility. He is considered a prominent representative for shareholders perspective, which almost the major articles or research on social responsibility of business at least referenced or challenged his view (Feldman 2007)....
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