University of Northampton: Social Responsibility Essay Analysis

This essay critically examines Milton Friedman's influential essay, "The Social Responsibility of Business Is to Increase Its Profits." The essay begins by outlining Friedman's central argument: that the primary responsibility of a business is to maximize profits for its shareholders, and that engaging in social responsibility initiatives is akin to imposing taxes on shareholders. The essay then delves into a detailed discussion of Friedman's arguments, including the shareholder theory, the role of corporate executives, and the potential drawbacks of diverting resources from profit maximization. Counterarguments are presented, drawing on alternative perspectives such as stakeholder theory and the importance of corporate social responsibility for long-term sustainability. The essay explores the criticisms of Friedman's approach, including its potential to prioritize short-term gains over ethical conduct and long-term value. Furthermore, the essay discusses the evolution of corporate social responsibility, highlighting its increasing significance in today's business environment, with examples of how neglecting CSR can harm a company's reputation and financial performance. The essay concludes by summarizing the key points and emphasizing the importance of balancing profit maximization with social and environmental considerations for the success and sustainability of modern businesses.

Running head: SOCIAL RESPONSIBILITY AND IMPACT
SOCIAL RESPONSIBILITY AND IMPACT
Student’s Name
University Name
Author note

1SOCIAL RESPONSIBILITY AND IMPACT
Table of Contents
Introduction......................................................................................................................................3
Discussion and arguments...............................................................................................................3
Conclusion.....................................................................................................................................10
References......................................................................................................................................12

2SOCIAL RESPONSIBILITY AND IMPACT

3SOCIAL RESPONSIBILITY AND IMPACT
Introduction
In the famous essay by Milton Friedman, he argues that the business organizations must
concentrate on increasing profits rather than just focusing or exercising on social responsibility.
In his essay, Milton Friedman demonstrates that doctrine of social responsibility is a socialist
doctrine. The entire course of the essay is explains the ways in which the business organizations
must concentrate on focusing on the profits. The essay by Milton Friedman, states the main
responsibility of the business organization is to its shareholders. They are considered as the one
of the important aspect of the business organization and they are the only interest group to which
the business organization must be social responsible. Further stated by Milton Friedman in his
essay, the overall goal of any business organization is to maximize the return of the shareholders.
It has been further argued by Milton Friedman that the shareholders of the business organization
can take decisions to what social initiatives they choose to take part in. Milton Friedman
introduced the theory in the year 1970 (Backhouse 2017, pp. 103-131). He argues that a business
organization has no as such social responsibility to the soceity or the community; however they
are only responsible towards the shareholders. The purpose of this essay is to assess the
arguments stated by Milton Friedman in his essay 'The social responsibility of business is to
increase its profits'. The essay examines the main arguments and proposes counter arguments.
Lastly, it sums up the main points and concludes the essay.
Discussion and arguments
Milton Friedman argues in his essay 'The social responsibility of business is to increase
its profits' that spending the resources of the company on any “social causes” implies that the

4SOCIAL RESPONSIBILITY AND IMPACT
company is spending the shareholder’s money for their own selfish purposes. He further argues
that "The stockholders or the customers or the employees could separately spend their own
money on the particular action if they wished to do so." Thereby, Milton Friedman concludes
that the sole responsibility of the business organziation is to effectively utilize their own
resources and finances to boost their profitability and engage themselves in open and free
competition without fraud. The shareholder theory of has significant effect in the corporate
world.
In the essay, Milton Friedman argued about what he had titled the essay that is the overall
responsibility of the business is only to maximize their profits. Milton Friedman begins his
article by presented his claim about the social responsibility of the business that is “pure and
unadulterated socialism”. As per the opinion of Milton Friedman, the business organization is an
artificial person and cannot have the same responsibilities that an individual can as stated by
Boaz (2015, pp.89-100). As per his opinion, the people in the business organization that is the
corporate executives, the managers, and the leaders can have social and moral responsibility.
According to Bosch-Badia et al. (2013, pp.90-100), it is the legal responsibility of the managers
and the senior executives to have legal responsibility to manage all the levels of the business
organization and manage the best interests of the stockholders. In the opinion of Milton
Friedman, it is the sole responsibility of the managers and the leaders to maximize the profits of
the shareholders as stated by Carroll (2015, pp.87-96). The mangers and the executives of the
business organization are legally and morally obligated to the managers to concentrate solely on
serving the best interest of the employers. It implies increasing the profit of the business
organization. As further explained by Milton Friedman, if in case, the executives or the managers
feel like that need to fulfill some of the social and moral duties and responsibilities, it is more

5SOCIAL RESPONSIBILITY AND IMPACT
likely that they might waste some of their income into these activities (Backhouse 2017, pp. 103-
131). They are more or less acting as a principle rather than an agent. As argued by Ebenstein
(2014 pp.40-59), the core arguments by critical review of Milton Friedman's essay is that the
mangers and the leaders of the business organization are agents responsible towards their
shareholders and therefore, when the managers of the business organization spend their money
on other initiates which are non profit, they actual tend to impose taxes upon the shareholders. In
his opinion, the business organizations are free to practice corporate social responsibility if only
it positively impacts the shareholders wealth.
However, it has been criticized by Ferrero et al. (2014, pp.37-59), that Milton Friedman
doctrines is highly controversial, with the critics claiming that the concept proposed by him is
economically, socially and morally incorrect. It has been argued by left-wing social activist
Naomi Klein in her book ‘The Shock Doctrine’ that following the doctrines proposed by Milton
Friedman might impoverish majority of the citizens and might enrich the corporate citizens.
Moreover, it has been counter argued by Ferrero et al. (2014, pp.37-59), that it is actually
counterproductive and unhealthy for the business organization to practice the doctrines proposed
by Milton Friedman. It has been further argued by Fleming, Roberts and Garsten (2013, pp.337-
348), that distracting the business organizations from innovation, investments, and strategic
renewal might put the companies at the risks of activist shareholder attack. This might also
pressurize the leaders to deliver fast and predictable returns aimed towards meeting the future
requirements. It has been argued by Ferrero et al. (2014, pp.37-59), that a short term focus on the
shareholder value can end up becoming a license for bad conduct. There has been number of
critics on the shareholder theory including Jerry Useem on The Atlantic that the shareholder

6SOCIAL RESPONSIBILITY AND IMPACT
theory might increase the stock based compensation. This is considered to be highly detrimental
the companies that they work for. It has also been argued by Hack, Kenyon and Wood (2014,
pp.46-55) that this theory might divert the attention of the company from its existing funds from
more profitable or valuable avenues to other employees receiving stock based compensation..
Through the shareholder theory, Milton Friedman characterization of moral responsibility
towards the society has been questioned.
According to Hammond (2013, pp.325-332), CSR is considered to be an elusive concept
and characterized as an “ill-and incompletely defined” notion. As argued by Jahn and Brühl
(2018, pp.41-52), Milton Friedman had a narrow economic perspective of increasing shareholder
profits. Article of Milton Friedman, is exposed to larger audience in his position. It is deeply
rooted to neoclassicism, on moral foundation of social and business responsibilities. According
to the theory of Milton Friedman, the business organizations must have a social conscience
mining the foundation of free society. The business ethics has two different arguments that are
utilitarian and deontological arguments. As per Jahn and Brühl (2018, pp.41-52), the utilitarian
arguments mainly focus on the concepts of self interest. It is believed by Milton Friedman that
the market participants or the business professionals can pursue their own interest that is to
maximize their profits. According to the his theory, that the large publicly owned corporate must
have only one purpose that is to make profits and the ethical obligations that are imposed by the
advocates must not be complied by the business organizations. However, the stated arguments
and concepts provided by Milton Friedman where only convinced by few people while other
were not persuaded. The topic of Milton Friedman essay is social responsibility, however, his
essay mainly focuses on large and big corporations. The overall essay of Milton Friedman is
based on the large and publically held corporations.

7SOCIAL RESPONSIBILITY AND IMPACT
However, it has been argued by Mansell (2015, pp.40-52), that the primary purpose of
Corporate Social Responsibility in the business organization is to make corporate business
activities and culture of the business organization sustainability. It is directly contradictory to the
theory proposed by Milton Friedman. It has been stated by Moore (2014, pp.50-52), that paying
attention to economic social and environmental aspects is highly essential for the sustainability
of the business organization. However, as stated by Hammond (2013, pp.325-332), many
business organizations believe that the corporate social responsibility is an exterior part of the
business organization, whereas other considers corporate social responsibility as an irrelevant
issue. They believe that satisfying the needs and demands of the customers are more important
for them. However, it has been further analyzed by Moore (2014, pp.50-52), that customer
satisfaction is about service and price. Many business organizations are of the opinion that these
aspects of corporate social responsibility make them blindfolded towards more important aspects
of the business.
The corporate social responsibility has become highly essential in today’s competitive
business environment. The CSR issues are now rooted around the globe. However, it has been
argued that many hurdles are needed to be overcome during the process of implementation of
CSR strategies. It is believed by Mansell (2015, pp.40-52), that there are many advantages of
implementing CSR responsibilities; it can bestow the company concerning finances and the skills
and talent of the management. It can attract right people in the organization to work on the CSR
initiatives. Considering Nike Corporations had been deteriorating from its performance over the
past years, the reason behind the company’s resistance was because the company mistreats the
employees and workers of the business organization and they faced resistance from its
customers. Similarly Shell Company also suffered its reputation in the market as it attempted to

8SOCIAL RESPONSIBILITY AND IMPACT
dispose of Brent Sprat Oil rig in the North Sea (Orlitzky 2015, pp.50-70). The company had
failed to oppose the Nigerian Government execution of the human rights activists in Nigeria,
where are company had extensive operations. This ignorance had cost the company of its
reputation in the long run and failed to maintain sustainability in their initiative. Henceforth it
can be said, that failure to comply with the corporate social responsibility might be counter
initiative for the business organizations in the long run.
Research and survey suggests that 66% of the business leaders strongly agree that
corporate citizenship and maintaining corporate social responsibility is essential for the success
and sustainability of the business organization (Orlitzky 2015, pp.50-70). 64% of the business
leaders and managers are of the opinion majority of the health of the organization lies in its
brand image and reputation in the market; this might affect their decision as regulators and
legislations. As per the recent surveys, 42% of the leaders and the managers strongly agree that
corporate responsibility might affect the share prices in the future (Pheby 2015, pp.44-52). The
corporate social responsibility of the business organization might influence the decisions in the
future. Many surveys and research also suggests that the companies and the business
organizations have an obligation to undertake actions and initiatives to protect and benefit the
environment and the society. It is believed by Mansell (2015, pp.40-52), that all the business
organizations and the companies must operate their business activities in such as manner that
they achieve corporate social responsibility. According to the Millennial Impact surveys
undertaken by the research, it has been suggested that 72% of the millennials volunteer a
charitable cause in the past year; on the other hand, 95% of the survey takers enjoy using their
skills to support for a cause (Orlitzky 2015, pp.50-70).

9SOCIAL RESPONSIBILITY AND IMPACT
It is believed by Jahn and Brühl (2018), that business organizations must pay significant
attention to this trend for two main reasons that is to attract new customers and retain old
customers in the business organization. As per the cone communications survey, it has been
identified that almost 90% of the customers prefer the companies or the brand having efficient
corporate social responsibility and undertakes better CSR presence. It has been rightly mentioned
by Mansell (2015, pp.40-52), that ignoring environmental and social issues of the business
organization can be harmful for the business. The organizations polluting the local communities
might actually risks poisoning their own customers. This can be counter intuitive for the business
organizations. Ignoring the local school system might have the risks of depleting the employees
and workers of the business organizations. Ignoring the risks of the workers, might increase the
risks of high turnover and training costs. Hampered reputation of the business organization might
get difficult for the business organizations to attract the most qualified employee or workers.
The philosophy of Milton Friedman is not universally shared, including the business
community. Quaker Oats President Kenneth Mason in Business week’s articles termed, Milton
Friedman’s ‘profits are everything’ philosophy as “"a dreary and demeaning view of the role of
business and business leaders in our society" (Sumner 2015, pp.209-235). As further stated by
Mason, making a profit or maximizing profit of the business organization is no longer the
purpose of the business organization. It has been urged by the readers to encourage, evade
discussion of those problems which might arise when the organization faces conflicts with the
needs and the major concerns of the society.
There are various alternative perspectives to Milton Friedman's shareholder theory. The
arguments of Milton Friedman has been termed by unfair, unwise and violation to futile and trust
(Orlitzky 2015, pp.50-70). There has been a counter paradigm by Mulligan on Milton Friedman's

10SOCIAL RESPONSIBILITY AND IMPACT
paradigm, which indicates that Milton Friedman's have not provided his thoughts and arguments
from a realistic perspective as mentioned by Hammond (2013, pp.325-332). Mulligan’s counter
paradigm describes the idea of business strategy and the ways in which the stakeholders of the
business organization are involved in the business strategy, future mission, and objectives of the
business organizations. It has been argued Mansell (2015, pp.40-52), Mulligan has focused on
shareholder’s participation and act as legislators towards people and company. This theory
implies that any corporate social action undertaken by the business organization is because of the
goals and objectives of the business organizations.
Conclusion
Therefore, from the above discussion and arguments, it can be concluded that the
stakeholder theory proposed by Milton Friedman is mainly focused on increasing the profits of
the business organizations and the importance of stakeholders in large business firms and
organizations. The stakeholder theory can help the business organization in economic
standpoints that is to increase profits and reduce expenditure of the firm. However, it has been
argued that the theory of Milton Friedman are focused on the self interest and needs of the
company while ignoring the responsibilities of the firm towards, environment and communities
in which it works. It has been identified from the arguments that majority of the people supports
company and prefers brand having better CSR activities. The essay has provided examples of
ethical dilemmas faced by the organizations such as BP and Nike. They had a perspective of
increasing more profits while ignoring their responsibility towards community and environment.

11SOCIAL RESPONSIBILITY AND IMPACT
This reduced their reputation and affect long term sustainability and profitability of the business
organizations. Considering BP’s example, it had changed drastically by violating laws and
corporate social practices. This reshaped the company methodology by considering Milton
Friedman’s argument of ‘increase profits’ and satisfy the stakeholders. However, Milton
Friedman critique is powerful, but the theory has only one responsibility focusing on profits and
shareholders.

12SOCIAL RESPONSIBILITY AND IMPACT
References
Backhouse, R., 2017. The debate over Milton Friedman's theoretical framework: an economist's
view. In Economics and Language (pp. 103-131). Routledge.
Boaz, D. ed., 2015. The libertarian reader: Classic & contemporary writings from Lao-Tzu to
Milton Friedman. Simon and Schuster. pp.89-100
Bosch-Badia, M.T., Montllor-Serrats, J. and Tarrazon, M.A., 2013. Corporate social
responsibility from Friedman to Porter and Kramer. pp.90-100
Carroll, A.B., 2015. Corporate social responsibility. Organizational dynamics, 44(2), pp.87-96.
Ebenstein, L., 2014. The Increasingly Libertarian Milton Friedman: An Ideological Profile. Econ
Journal Watch, 11(1). pp.40-59.
Ferrero, I., Michael Hoffman, W. and McNulty, R.E., 2014. Must Milton Friedman embrace
stakeholder theory?. Business and Society Review, 119(1), pp.37-59.
Fleming, P., Roberts, J. and Garsten, C., 2013. In search of corporate social responsibility:
Introduction to special issue. Organization, 20(3), pp.337-348.
Hack, L., Kenyon, A.J. and Wood, E.H., 2014. A critical corporate social responsibility (CSR)
timeline: How should it be understood now. International Journal of Management Cases, 16(4),
pp.46-55.
Hammond, J.D., 2013. Milton Friedman [Ideological Profiles of the Economics Laureates]. Econ
Journal Watch, 10(3), pp.325-332.
Jahn, J. and Brühl, R., 2018. How Friedman’s view on individual freedom relates to stakeholder
theory and social contract theory. Journal of Business Ethics, 153(1), pp.41-52.

13SOCIAL RESPONSIBILITY AND IMPACT
Mansell, S., 2015. Book review: rejoinder to Veldman’s review of capitalism, corporations and
the social contract: A critique of stakeholder theory. pp.40-52.
Moore, C., 2014. Corporate social responsibility and creating shared value. Heifer International
Report. pp.50-52.
Orlitzky, M., 2015. The politics of corporate social responsibility or: why Milton Friedman has
been right all along. Annals in Social Responsibility. pp.50-70
Pheby, J., 2015. Methodology and economics: a critical introduction. Routledge. pp.44-52
Sumner, S., 2015. What would Milton Friedman have thought of the Great Recession?. American
Journal of Economics and Sociology, 74(2), pp.209-235.