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.
PART ONE: CSR DEFINITIONS
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.
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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