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

Suggested Readings

Keith Davis. “Five Propositions for Social Responsibility.” In Tom L. Beauchamp and Norman E. Bowie, eds., Ethical Theory and Business. Englewood Cliffs, NJ: Prentice Hall, 1979.

Thomas Donaldson. Corporations and Morality. Englewood Cliffs, NJ: Prentice Hall, 1982.

Peter A. French. Collective and Corporate Responsibility. New York: Columbia University Press, 1984.

Milton Friedman. Capitalism and Freedom. Chicago: University of Chicago Press, 1962.

T. M. Jones, A. C. Wicks, and R. Edward Freeman. “Stakeholder Theory: The State of the Art.” In Norman E. Bowie, ed., The Blackwell Guide to Business Ethics. Malden, MA: Blackwell, 2002.

Kris Maher. “The Jungle.” Wall Street Journal, September 28, 2004.

John Micklethwait and Adrian Woolridge. The Company: A Short History of a Revolutionary Idea. New York: Modern Library, 2003.

A concise, excellent history of the corporation.

Richard W. Stevenson. “Do People and Profits Go Hand in Hand?” New York Times, May 9, 1996.

 

Websites

Find a tremendous number of useful resources on business and social responsibility at www.bsr.org

Visit the Corporate Social Responsibility Newswire at www.csrwire.com

Learn about current corporate social responsibility trends at https://www.forbes.com/sites/susanmcpherson/2018/01/12/8-corporate-social-responsibility-csr-trends-to-look-for-in-2018/#1a3f563140ce

Read a resolution passed by the U.S. Conference of Mayors against corporate personhood at http://reclaimdemocracy.org/personhood-conference-mayors-against/

Find a different take on corporate personhood at http://www.nationalreview.com/articles/288345/romney-right-corporations-jonah-goldberg

Access a free downloadable e-book about the increase in corporate power at http://www.gangsofamerica.com/

Learn about the documentary film The Corporation and watch a trailer and clip at http://thecorporation.com/

Find out more about the Mondragon cooperative at http://www.managementexchange.com/story/mondragon-cooperative-experience-humanity-work and http://www.guardian.co.uk/world/2013/mar/07/mondragon-spains-giant-cooperative

Read more about the Beech-Nut apple juice case at http://www.nytimes.com/1988/07/24/magazine/into-the-mouths-of-babes.html?pagewanted=all&src=pm

Back to top