STRM075: Review of Friedman's Social Responsibility Essay

This essay provides a critical review of Milton Friedman's influential essay, 'The social responsibility of business is to increase its profits.' The essay examines Friedman's core argument that a business's sole responsibility is to maximize profits within the bounds of fair play, and that pursuing social responsibilities is a misallocation of resources and potentially a socialist practice. The review delves into Friedman's reasoning, including his perspective on the role of corporate executives and the limitations of business entities in assuming social responsibilities. The essay then evaluates Friedman's arguments against the backdrop of modern business practices, including sustainability, stakeholder theory, and the concept of shared value. The author discusses the Triple Bottom Line (TBL) theory, which challenges Friedman's focus on profit, advocating for consideration of people, planet, and profit. The review also explores the stakeholder theory, which emphasizes the importance of considering the claims and rights of various stakeholders, and the shared value approach, which highlights the potential for businesses to address social problems while enhancing their competitive advantage. Finally, the essay considers criticisms of Friedman's arguments, including the role of executives in fulfilling social responsibilities and the impact of social responsibility on business decisions.

Running head: SOCIAL RESPONSIBILITY AND IMPACT
Social responsibility and impact
Name of the student
Name of the university
Author notes

SOCIAL RESPONSIBILITY AND IMPACT
Introduction
The essay by Milton Friedman's, named- 'The social responsibility of business is to
increase its profits', is consider to be an important text in the literature of corporate social
responsibility. The main cause of the essay being famous is it’s out of the box approach to the
idea of corporate social responsibility. This essay speaks of the CSR in respect of the
weakness of shareholder model of capitalism. The text of Friedman’s work speaks of the
importance of profits in business over any other social responsibilities that is imposed on the
business enterprises. According to the title of the essay, the sole responsibility of a business is
to gain profits by fair means. Therefore, spending resources for the “social responsibilities” is
not the right thing to do in the business decisions. The author of the essay tries to prove that
the use CSR in the business if unfair and a socialist practice. The responsible person for
decision making in the business are the one who must only concentrate on increasing the
profits for the company and nothing else.
Discussion
The argument of the essay by Friedman starts with the statement that most of the
businessman wants to show their business endeavour to be more about the “social
conscience” and less about the profit making. According to Friedman, “The businessmen
believe that they are defending free enterprise when they declaim that business is not
concerned "merely" with profit but also with promoting desirable "social" ends; that business
has a "social conscience" and takes seriously its responsibilities for providing employment,
eliminating discrimination, avoiding pollution and whatever else may be the catchwords of
the contemporary crop of reformers.” He states that CSR or social responsibility is a
completely wrong approach, as the main purpose of any business is to gain profits. The
businessmen who claim such things are actually depending the free enterprise to declaim that

SOCIAL RESPONSIBILITY AND IMPACT
the business is not “merely” to gain profits. The essay further talks about how the intellectual
forces make businessmen to think about such propositions. The aim of socialistic approach is
to prove that the social conscience and social responsibilities are higher than any other thing
in this world. The next argument of the author is quite vague. Friedman says that business
cannot have responsibilities as it is not a person. When it comes to the question of
responsibilities, only the people can be responsible. The “business” cannot be said to have a
responsibility for the same reason.
The author than states his main arguments by saying that the individual properties are
out of the context here as these are operated by an individual. Here the question is of
corporations that have the responsibilities to the customer and all other stockholders. The
corporate executive is the employee that has been appointed by the employers. Therefore, the
min responsibility of the executive is not for the society but for the company itself. In such
cases, if the company executive choses to make decision in favour of the social
responsibilities over the business factors, this will be the wrong thing to do at any
circumstances. The essay says that the corporate executive is the responsible person to spend
the money at the right place. If they are spending the money of the business in filling some
social responsibilities than it is the waste of resources. The investments in doing something
good to the society is plausible if one is doing it from his or her own money.
The essay can be evaluated from multiple point of view. One of them is the
sustainability issue. The companies that operates in the modern market are concerned of their
CSR policies to give their business a sustainable growth (Font, Guix and Bonilla-Priego
2016). The idea of sustainability is associated with the overall growth of the company and
environment. The sustainable business is one that executes its operations not only to gain
profits but to have a long term growth. This part of CSR has been neglected by the author. He
only talks about the profit making aspects. The primary purpose of business in no doubt

SOCIAL RESPONSIBILITY AND IMPACT
financial profit making. But this does not imply that considering the social and environmental
issue will decrease the credibility of the business (Quarshie, Salmi and Leuschner 2016). The
concept of long term development is essential in context. The business that is sustainable
have the greater scope to stand the challenges of the market and gain competitive advantage.
This is the part of the CSR that is no less than the financial profit gaining.
The fulfilling of the CSR means, the person needs to execute some work that is nor
solely for the interest of his business or employers. The executives are employed by the
employers. Therefore, the sole responsibility of the executive is towards the employer. Each
if the cases the executive would be spending the money of someone else. As opined by
Petrenko et al. (2016), this will reduce the returns to the stockholders as the executive is
spending their money. The socialists have designed the framework for the businessmen this
way so that they would spend their money in social causes. The writer also condemns the
government and their lack of responsible behaviour in this respect. This statement of
Friedman is critically opposed by many experts. The TBL or Triple Bottom-line theory of
CSR is one of the part where this statement is countered.
Triple Bottle-line Theory
According to the TBL theory, the companies has the commitments towards the society and
environment other than mere profit making. This theory states that the company need to
invest in its people, environment and profit at the same time. This is for the further profits
only. If the company invested in the betterment of its people, the social cause would be
served. According to Clegg and de Matos (2017), the community causes are as important as
profit making. Again, the environment and its protection is another important aspect for a
business. The companies that concerns of these triple bottom-line rather than mere one

SOCIAL RESPONSIBILITY AND IMPACT
bottom-line of profit making, are usually ten to gain more success (Albuquerque, Koskinen
and Zhang 2019).
This theory goes against the proposition of the Friedman essay. The theory states
social and environmental responsibilities as the bottom-line and an asset of the business.
According to the theory the full cost of the business can be measured only by the triple-
bottom reporting. There is no socialist angle to the concept of social and environmental
wellbeing (Hopkins and Payne 2017). This is associated with the business sustainability and
cannot be ignored simple for profit making.
Stakeholders Theory
The stakeholder’s theory advocates the need of asking the questions to the business bodies
that what kind of claims the stakeholders have on the business. What are their rights in
respect of company actions? According to the essay of Friedman, the business must not think
about the environmental or social responsibilities while doing business. This argument can
been challenged by the stakeholders theory. For example, if a company only thinks about its
profits while manufacturing, that might not be interested in the wastes that is produced in the
process (Ferrell et al. 2019). These wastes can have an effect on the company stakeholders
like the society, people and environment. This might not have any stock on the company, but
the company should not neglect the effect of it. Therefore, the decision making process of the
company must involve some ethical aspect for the “social responsibilities”. [Referred to
Appendix 1]
Shared Value
The shared value is a philanthropic approach to CSR that believes that leaders have the
responsibilities to solve the social problems and gaining competitive edge from it. This is the
new concept of social corporate responsibility which actually opposes all the statements in

SOCIAL RESPONSIBILITY AND IMPACT
the Friedman essay. The first thing the essay talks about is – to concentrate on the profits is
the main aim of any company. Therefore, to spend business money in social responsibilities
is actually the waste of time and money at the same time. According to Hopkins and Payne
(2017), the shared value theory concentrates of increasing the company profit by solving the
social issues around an enterprise. This theory believes that the society and the business has a
shared value of their own. The sustainable business practices can actually increase the profit
margins of the organisations.
In order to understand the shared value aspect of the business one can take the
example of how the modern business enterprises are using their CSR policies to attract the
attention of the customers and investors. Having a strong CSR policy is actually instrumental
in increasing the trust and ethical base of a company (Flammer and Luo 2017). Investors
show their interest in investing in the companies that are doing sustainable business. The
governmental rules are another compelling factor in the CSR implementation. Some of the
companies are trying to have their CSR sorted by reconceiving the product are markets.
Changing the practices in the value chain, these companies are actually increasing their
customer base. The active participation of the employees and the leaders are making the
business grow in rapid pace. Therefore, it can be said from this discussion that “social
responsibilities” are not the burden in the business finance as opined by Friedman. The CSR
can be used cautiously to increase the profits and investors number. This negates the basic
proposition of Friedman’s essay.
Many critic argue that Friedman was not able to establish the argument of his influential
essay. His argument that the CSR or the social responsibilities are unfair and socialist
approach for the nature of business (Petrenko et al. 2016). In the course if the essay,
Friedman argues that, the exercise of the social responsibilities should not be done by the
company executives. He states that social responsibility fulfilment by the executives are

SOCIAL RESPONSIBILITY AND IMPACT
unfair, undemocratic, futile, unwise and violation of trust. The research and statement of
Ferrell et al. (2019), shows that there are scopes that the executives perform the social
responsibilities without the participation of any other stakeholders of the company. In that
case this is unfair, but at the same time, this does not mean that it goes completely against the
welfare of the employer. There is no diminishment in the social responsibility if the employee
and the employers both understand the mutual interest of the CSR programs.
“The executive is exercising a distinct "social responsibility," rather than serving as an agent
of the stockholders or the customers or the employees, only if he spends the money in a
different way than they would have spent it.” (Friedman 1970)- This statement of the essayist
shows that he thinks the job of the executive in decision making is distinct to him only. This
is why, the person has to be responsible of what he is spending. So that he is not unfair to his
employers (Schinckus, Akbari and Clarke 2019). Business is a collaborative venture that
incorporates the participation of the stakeholders in any serious business decisions. The
stakeholders do serious critics of their business analysis related to the financial growth of the
company. Therefore, to participate in the decision making process is also collaborative. The
certain amount of decisions making power is conferred to the stakeholders according to their
stake in the company (Lee 2017). Therefore, to assume that the employees do not have the
right to take decision for the employers is not true altogether.
Another strong argument of Friedman in his essay is related to the socialism context.
The essayist said that the doctrine of social responsibility is based on the socialism influenced
by the political totalitarianism. According to him. The idea of social responsibility is imposed
upon the organisational by the political mechanisms and not the market mechanisms. Some of
the critics argue that this is not the right definition of socialist approach (Zamagni 2018). The
criterion that the essayist is talking about is hardly the part of socialism. Having a strong CSR
policy is actually instrumental in increasing the trust and ethical base of a company. Investors

SOCIAL RESPONSIBILITY AND IMPACT
show their interest in investing in the companies that are doing sustainable business. Again,
the environment and its protection is another important aspect for a business. The criterion of
socialism is too grand and putting social responsibility of the organisations in to its context
would not be an appropriate approach.
Business can exercise the social responsibility without having any kind of loss in their
financial statements. Rather this would be helpful in building the base of their business. The
idea of sustainability directly opposes the arguments presented in the essay of Friedman. The
organisation and executives that are taking decisions in favour of having an ethical and
socially responsible workforce are getting more financial supports than the one not doing so
(Jahn and Brühl 2018). This would not be the scene if the companies do not get profits
because of CSR. The argument of Friedman is based on some principle objectives that has
already considered the executives associated with CSR making decision (Argiolas 2017). The
other stakeholders of the companies are also associated with the decision making process.
Hence, if a company executive decides to take the CSR aspects active in the organisation,
than it has to be approved by the authorities and all other stakeholders. This mean that
claiming the CSR as an unfair business part is not the right.
Conclusion
To sum up the whole arguments of the essay of Friedman, the idea of social
responsibility is imposed upon the organisational by the political mechanisms and not the
market mechanisms. Some of the critics argue that this is not the right definition of socialist
approach. The governmental rules are another compelling factor in the CSR implementation.
Some of the companies are trying to have their CSR sorted by reconceiving the product are
markets. Having a strong CSR policy is actually instrumental in increasing the trust and
ethical base of a company. Investors show their interest in investing in the companies that are

SOCIAL RESPONSIBILITY AND IMPACT
doing sustainable business. Again, the environment and its protection is another important
aspect for a business. The companies that concerns of these triple bottom-line rather than
mere one bottom-line of profit making, are usually tend to gain more success. All these
theories about CSR weakens the arguments of the essay. The counter discussions are aimed
to get a critical review of the famous essay. This can be concluded from this study that the
arguments of Friedman are not quite relevant to the modern business and sustainability
aspects.

SOCIAL RESPONSIBILITY AND IMPACT
References
Albuquerque, R., Koskinen, Y. and Zhang, C., 2019. Corporate social responsibility and
firm risk: Theory and empirical evidence. Management Science, 65(10), pp.4451-4469.
Argiolas, G., 2017. Corporate Social Responsibility. In Social Management (pp. 43-59).
Springer, Cham.
Clegg, S. and de Matos, J.A., 2017. Linking CSR with Business Operations. In
Sustainability and Organizational Change Management (pp. 59-66). Routledge.
Ferrell, O.C., Harrison, D.E., Ferrell, L. and Hair, J.F., 2019. Business ethics, corporate
social responsibility, and brand attitudes: An exploratory study. Journal of Business
Research, 95, pp.491-501.
Flammer, C. and Luo, J., 2017. Corporate social responsibility as an employee
governance tool: Evidence from a quasi‐experiment. Strategic Management Journal,
38(2), pp.163-183.
Font, X., Guix, M. and Bonilla-Priego, M.J., 2016. Corporate social responsibility in
cruising: Using materiality analysis to create shared value. Tourism Management, 53,
pp.175-186.
Friedman, M., 1970. The Social Responsibility of Business is to Increase its Profits. The
New York Times Magazine
Hopkins, M. and Payne, A., 2017. Practical implementation of strategic CSR. In CSR and
Sustainability (pp. 396-419). Routledge.
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.
Lee, D., 2017. Corporate social responsibility and management forecast accuracy.
Journal of Business Ethics, 140(2), pp.353-367.

SOCIAL RESPONSIBILITY AND IMPACT
Petrenko, O.V., Aime, F., Ridge, J. and Hill, A., 2016. Corporate social responsibility or
CEO narcissism? CSR motivations and organizational performance. Strategic
Management Journal, 37(2), pp.262-279.
Quarshie, A.M., Salmi, A. and Leuschner, R., 2016. Sustainability and corporate social
responsibility in supply chains: The state of research in supply chain management and
business ethics journals. Journal of Purchasing and Supply Management, 22(2), pp.82-
97.
Schinckus, C., Akbari, M. and Clarke, S., 2019. Corporate social responsibility in
sustainable supply chain management: An econo-bibliometric perspective. Theoretical
Economics Letters, 9(01), p.247.
Zamagni, S., 2018. The Idea of Corporate Social Responsibility and the Responses of
Economic Theory. In Art, Spirituality and Economics (pp. 195-214). Springer, Cham.

SOCIAL RESPONSIBILITY AND IMPACT
Appendix 1: CSR policies
(Source: https://greatpeopleinside.com/csr-growing-importance/)