Should Firms Go “Beyond Profits”?

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Should Firms Go “Beyond Profits”?
Milton Friedman versus Broad CSR

When trying to articulate the nature and scope of corporate social responsibility (CSR), a variety of opinions emerge. The primary CSR issue appears to be: Should firms go “beyond profits”? Part one of the paper begins by discussing common CSR definitions. Part two outlines the CSR debate in terms of the “narrow view” of CSR (as represented by Milton Friedman) versus the “broad view” (i.e., beyond profits). Most people today, whether they are students, managers, or employees, have heard something about the notion of corporate social responsibility (CSR), whether in the business community, the media, or even within popular culture. There are a multitude of different definitions for CSR and, not surprisingly, a corresponding range regarding the appropriate scope and nature of a firm’s social responsibilities.

An appropriate place to start getting into the discussion and debate over CSR is to arrive at an acceptable definition. Unfortunately, most agree that there is no single established definition for CSR. Moreover, it is also commonly accepted that CSR should simply be viewed as a social construction, particularly when one looks at definitions from around the world. Here is a sampling of CSR definitions to consider:

* The idea of social responsibilities supposes that the corporation has not only economic and legal obligations but also certain responsibilities to society that extend beyond these obligations; * Social responsibility is the obligation of decision makers to take actions that protect and improve the welfare of society as a whole along with their own interests; * The social responsibility of business encompasses the economic, legal, ethical, and discretionary [i.e., philanthropic] expectations that society has of organizations at a given point in time. Due to the wide range of CSR definitions in existence, a search for commonality can be potentially instructive. After examining various definitions, Buchholtz suggests that there are five key elements found in most definitions of CSR: 1. Corporations have responsibilities that go beyond the production of goods and services at a profit. 2. These responsibilities involve helping to solve important social problems, especially those they have helped creating it. 3. Corporations have a broader constituency than stockholders alone. 4. Corporations have impacts that go beyond simple marketplace transactions. 5. Corporations serve a wider range of human values than can be captured by a single focus on economic values. While there are many different ways for the debate over CSR to be set up, the following article will address the debate question as “Friedman” versus “Broad CSR.” The reason for setting up the debate in this manner is that almost all academics agree that the narrow version of CSR is best represented by the Nobel Prize-winning economist Milton Friedman, in contrast to those academic theorists, managers, and their firms who take a broader approach to CSR.

Friedman’s Position
Milton Friedman’s position was outlined in his famous article entitled “The Social Responsibility of Business Is to Increase Its Profits,” published in 1970 in the New York Times Magazine.The first key statement on CSR, which can be found in Friedman’s book, reads as follows: “[In a free society] . . . 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.The second well-known quote found in Friedman’s 1970 New York Times Magazine article reads as follows: “[The responsibility of a corporate executive]...isto conduct the business in accordance with [the owners’] desires, which generally will be to make as much money as possible while conforming to the basic rules of the society,...
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