The Ethics Emphasis: A Misallocation of Business Resources
The Ethics Emphasis: A Misallocation of Business Resources
“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.”
Milton Friedman, a Nobel-Prize winning economist and strong advocate of free markets, summed up his view on ethics and corporate responsibility with those few sentences. I agree with Dr. Friedman wholeheartedly and for the most part, support the notion that “Companies should not spend time and money on business ethics.”
What is a corporation? According to Webster’s, a corporation is “a body formed and authorized by law to act as a single person although constituted by one or more persons and legally endowed with various rights and duties including the capacity of succession.”[i] Within this definition lies the problem: the duties and rights of a corporation are loosely defined, and up to the interpretation of individuals.
The word corporation is often used interchangeably with “company,” which is defined as: “an association of persons for carrying on a commercial or industrial enterprise.”[ii] The word “business,” as a noun, is also used to describe the concept of a company/corporation, and can be defined as: “dealings or transactions especially of an economic nature.”[iii] With these several definitions, we can start to deduce what the core duties and responsibilities of corporations are: They must be economic and commercial in nature. Because economic dealings can usually be simplified into increasing, maintaining a certain amount of, or losing money, we can assume that anyone connected with economic and commercial dealings would prefer to above all else make money, assuming true the concept of rational self interest. Simply, nobody in business gets into business to lose money or to maintain the same amount.
“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.”
Milton Friedman, a Nobel-Prize winning economist and strong advocate of free markets, summed up his view on ethics and corporate responsibility with those few sentences. I agree with Dr. Friedman wholeheartedly and for the most part, support the notion that “Companies should not spend time and money on business ethics.”
What is a corporation? According to Webster’s, a corporation is “a body formed and authorized by law to act as a single person although constituted by one or more persons and legally endowed with various rights and duties including the capacity of succession.”[i] Within this definition lies the problem: the duties and rights of a corporation are loosely defined, and up to the interpretation of individuals.
The word corporation is often used interchangeably with “company,” which is defined as: “an association of persons for carrying on a commercial or industrial enterprise.”[ii] The word “business,” as a noun, is also used to describe the concept of a company/corporation, and can be defined as: “dealings or transactions especially of an economic nature.”[iii] With these several definitions, we can start to deduce what the core duties and responsibilities of corporations are: They must be economic and commercial in nature. Because economic dealings can usually be simplified into increasing, maintaining a certain amount of, or losing money, we can assume that anyone connected with economic and commercial dealings would prefer to above all else make money, assuming true the concept of rational self interest. Simply, nobody in business gets into business to lose money or to maintain the same amount.