Chapter 5 Summary

Chapter 5 explains what sorts of moral responsibilities we can attribute to businesses (if any), and why.

Famed economist Milton Friedman launches the chapter with his argument that “the social responsibility of business is to increase its profits.” For Friedman, the market represents free choices persons make and profit is the expression of those choices. Accordingly, maximum profits mean maximum good in a market society. For business to involve itself in “doing good” would be contrary to its purposes and would interfere with the structure of the free market (and why that business was there in the first place). Christopher D. Stone distinguishes four separate arguments as to why businesses should not be held socially responsible: (1) the promissory argument, (2) the agency argument, (3) the role argument, and (4) the “polestar” argument (this last is most like Friedman’s argument). Stone concludes that none of these arguments supports the conclusion that businesses should only seek profits.

Peter A. French discusses the broader notion of corporate moral agency, explaining why we might think that things other than persons might have moral responsibilities, and how we could ground and analyze those responsibilities. He is particularly concerned with showing how corporations make their (morally salient) decisions.

Nobel Prize–winning economist Kenneth J. Arrow responds specifically to Friedman’s piece and explains why there must be certain regulations in place for the free market foundation of Friedman’s argument to work (a wholly unregulated free market will not produce the maximum good effects from maximum profits that is at the heart of Friedman’s argument). Arrow goes on to argue that business could increase its efficiency and thus benefit from a professional moral code, much as doctors and lawyers have professionally benefited from their (strenuously taught and strictly enforced) moral codes.

Richard Parker discusses the timeliness of Berle’s The Modern Corporation and Private Property, published in 1932, at the height of the Great Depression. In this book, Berle discusses corporate and government responsibility in times of crisis, an analysis that probes the question, “Will democracy rule the corporations, or will the corporations rule democracy?”

Alexei M. Marcoux discusses three major problems he sees with stakeholder theory and argues for an alternative business ethics that recognizes the values of honesty, integrity, and fair play while supporting a traditional shareholder-oriented view of business.

In this chapter’s final reading, Paul A. Argenti discusses how millennials, a growing segment of consumers and the workforce, are influenced by corporate social responsibility commitments, and how corporations should take millennials’ interests in CSR into account.

By the close of Chapter 5, you should:

Understand the difference between shareholder and stakeholder theories
Understand the basic arguments of stakeholder theory
Understand the argument that “the only social responsibility of business is to increase its profits” and several responses to this argument
Understand the relationship between economic efficiency and economic (and social) responsibility
Understand what it might mean for a corporation to be a moral agent
Understand how corporate social responsibility (CSR) initiatives influence and are influenced by millennial consumers

Chapter 5 Summary

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