Milton Friedman on CSR

One of the most fundamental views proposed by Milton Friedman is that a business manager has to make sure that profits are maximized. This is supposed to be conducted in such a way that promotes the objectives of shareholders. These views, while quite important for the achievement of business goals, have been criticized because of the belief that Friedman basically aims at narrowing the moral attitude of a business manager to concentrate on profit maximization instead of applying the virtues of management practices. In this paper, there will be an analysis of the criticisms leveled at Friedman and the manner through which his stance can be defended.

One of the criticisms leveled at Friedman’s stance is that it promotes the idea that profit should be the motivating factor of business managers. An argument that has been made in response to this stance is that managers should always seek to make sure that they are able to advance the ideals and ideas affecting their enterprises rather than seeking to achieve profits (Wight & Calkins, 2008). Profit maximization does not necessarily account for the motivation of the manager towards the achievement of business objectives. Instead, it promotes a situation where there is a drive towards profit maximization without considering the consequences of their actions. Under such circumstances, the manager does not have the behavioral motivation aimed at not only promoting the interests of the business, but also those of the people that contribute to it; especially its stakeholders (Arrow, 1973). Another criticism that has been made concerning Friedman’s stance is that it fails to consider that there are a number of motives, other than making profits, which inform the desire of individuals to participate in business. The achievement of a successful business is not just based on the making of profits, but also ensuring that there is the advancement of inspirational sentiments as well as the motivation that is brought about within the institution. A result of this situation is that it becomes possible for an organization to achieve success without concentrating only on profit making.

Another criticism of Friedman’s model is based on the fact that there are a large number of alternatives to it. Therefore, rather than being perfect, it is a model that essentially has a considerable number of alternatives that could work better than it. When it comes to entrepreneurship, managerial motivations are not necessarily the only determinants of the success of a business (Wight & Calkins, 2008). This is because success often involves a situation where there is the advancement of such ideas as risk taking and the desire to build the business in such a way that it is able to achieve its goals. The actualization of management objectives is fundamental in bringing about a successful business, but it cannot be the only motivation because without such input as risk taking and the protection of stakeholder interests, a business cannot hope to thrive. Moreover, there is also a need to develop means through which rivalries can be handled and this is in such a way that ensures that there is the creation of tactics that keep the business ahead of others (Arrow, 1973). This is especially the case where there is a need to make sure that the business is successful through keeping ahead of rivals, because staving off rivalries helps businesses come to terms with themselves, especially their strengths and weaknesses. Through such knowledge, they can work towards the improvement of products so that they can remain competitive. This is a situation, it is argued, that is not factored in by Friedman’s model.

Moreover, Friedman is also criticized for not factoring in the inspirational components of business practice. This is especially considering that while Friedman explains that motivated self-interest is an essential factor when among managers when it comes to maximization of profits. However, this factor can also end up being a mask for the greed that the managers have because profit alone as an aim can end up making managers make some very unethical decisions (Wight & Calkins, 2008). Therefore, under such circumstances, managers could end up promoting the corporate social responsibility (CSR) not because they are motivated to do so, but because they would likely to make sure that there is the advancement of the reputation of the business. This is especially considering that a manager could make use of corporate social responsibility as a mask for the organization so that it can end up aiding in an increase in productivity, customer loyalty, and finally, profitability. There is, under such circumstances, a failure to consider the ethical responsibility that the business has towards its stakeholders because managers only consider CSR as a means towards an end rather than as an end in itself (Arrow, 1973). Such a failure can end up being disastrous for a business because it only inspires profit making while not really caring about the welfare of stakeholders who actually make the contributions to its profits.

Despite the arguments above, there are cases where Friedman’s views can be defended. One of the most significant aspects of businesses is that they often undergo pressure from shareholders to make sure that they make profits. This is especially the case when it comes to meeting set profit targets because managers are often under considerable pressure to perform. Therefore, an organization ends up developing a culture of profit maximization using any of the means that are available to it. A result is that the business ends up being able to ensure that it undertakes those initiatives aimed at making it more successful through the advancement of profit making for the sake of securing the welfare of all its members. Moreover, it becomes possible to make sure that there is the advancement of means to ensure a positive outcome from its activities because without profits, organizations end up not being considered successful and are at risk of collapse. Friedman is therefore correct because he proposes that the making of profits should be the ultimate goal of any business and managers should be geared towards making this objective become a reality.

In conclusion, Milton Friedman has been criticized for promoting a model that pushes managers towards profit maximization. These criticisms are based on the argument that businesses should do more to ensure that they protect the interests of all stakeholders rather than only shareholders. While this ethical argument is pertinent, Friedman can be considered to be correct in his assumption that the main purpose of business is to promote the making of profit. Shareholders often hold managers responsible for making profits, meaning that it is essential for them to make sure that they make the businesses as profitable as possible through any means necessary, including the use of CSR.

References

Arrow, K. J. (1973). Social responsibility and economic efficiency. Public Policy, 21(3), 303-317.

Wight, J. B., & Calkins, M. (2008). The ethical lacunae in Friedman's concept of the manager. Journal of Markets and Morality, 11(2).