Friedman -vs- Drucker

Only available on StudyMode
  • Download(s) : 360
  • Published : March 23, 2010
Open Document
Text Preview
Business ethics is a form of applied ethics that scrutinizes ethical principles and moral or ethical problems that occur in a business environment. In the more conscientious marketplaces of the 21st century, the demand for more ethical business processes and actions (referred to as ethicism) is mounting. In addition, pressures for the application of business ethics are being exerted through enactment of new public initiatives and laws (Cuizon, 2009).

Friedman Vs Drucker
Milton Friedman and Peter Drucker both were noted management authorities; Milton Friedman primarily was an economist and even won the Nobel Prize in economics in 1976 when the Nobel Prize held more honor than it does today. Both operated in a different time, however. Their views of ethical behavior and social responsibility cannot be seen as being complete in today's business environment.

Milton Friedman
Milton Friedman (2002) has maintained, since the 1960s, that the purpose of any business is to maximize profits and so return as much value for shareholders as possible. Friedman (2002) holds that the current trend toward greater corporate social responsibility is in direct opposition to this position: Woodbury (n.d.) quotes the 1970 article, "The social responsibility of business to increase its profits" that appeared in a compilation. In that article, Friedman (1991) states: 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 (p. 245). Friedman (1991) clarifies his position in saying that the pursuit of profits is not the game with no rules. Rather, it is the responsibility of the organization to engage "in open and free competition without deception or fraud" (Friedman, 1991; p. 245). A very different view of the organization as a profit machine only, but it still does not meet the needs even of the organization and certainly not of the shareholders for which it is supposed to be building value. Making "as much money for their stockholders as possible" (Friedman, 2002; p. 133) was a rather straightforward activity in the past. Coupled with the absence of "deception or fraud" (Friedman, 1991; p. 245), in Friedman's (1991) era there were few other considerations that needed to be made. Such is not the case in today's business climate or in the face of growing globalization. It is even a shortsighted view, one that reflects the time in which it was first made. Since that time, the global market begun and continues to emerge, and competition has increased beyond all levels considered possible only a generation ago. Corporate social responsibility (CSR) is good for business, and ultimately positively contributes to the bottom line in which shareholders have the greatest interest. According to, Professor Thomas Mulligan (1988) undertakes to discredit Milton Friedman's thesis that the social responsibility of business is to increase its profits. He attempts to do this by moving from Friedman's paradigm characterizing a socially responsible executive as willful and disloyal to a different paradigm, i.e., one emphasizing the consultative and consensus-building role of a socially responsible executive. Mulligan's critique misses the point, first, because even consensus-building executives act contrary to the will of minority shareholders. More importantly, because he assumes that the mandate of a shareholder majority brings legitimacy to efforts of corporate managers to utilize corporate wealth in solving social problems. It is the role of our democratic institutions to deal with national agenda issues such as inflation, unemployment, and pollution, not that of the private sector. Corporations and private individuals do have a role to play in enhancing the quality of the human environment, however, the author suggests a coherent...
tracking img