The core business for different organizations differs from one to another. However, the majority of businesses engaged in corporate social responsibility activities and events frequently. Friedman stated that “the social responsibility of business is to increase its profits,” (1). At the time he made the statement, businesses were giving money to support different courses as well as institutions especially universities. The idea argued by Friedman was against socialist practices which he presented as being unfair. Over time different businesses have adopted different forms of corporate social responsibility and engage in them to different degrees. Increasing profit has always been the driving force for all for-profit businesses and it can be expected to remain at the center even in the future. The paper looks at the extent to which the argument presented by Friedman is still relevant in the business world today.
The idea is not relevant today because engaging in corporate social responsibility provides the organizations with a valuable marketing proposition. The desires and preferences of consumers have not remained the same, in fact, they are continuously evolving over the years. Consumers today display favoritism towards products and services that make the claim of social responsibility. The consumers today are not satisfied that the product has been developed and placed in front of them. They want to know more about the company they are buying from as well as the processes and activities that are involved in the development of the products and services that they are consuming. An example is how businesses hold different activities in favor of different charities and in the process also improve their public image perception among the public. Companies can reap some benefits when they include social responsibility on product labels. Sometimes even gain a competitive edge against their competitors.
The argument is also not true today because there is a significant portion of investors who are pro ethical investments. The idea presented by Friedman suggests that corporate social responsibility is ultimately detrimental to any business (Friedman, 2). Furthermore, shareholders will normally be inclined to avoid making investments in companies that engage in social responsibility. Although investors are inherently interested in making a profit, a good portion does not mind the organizations they are involved with undertaking corporate social responsibility. Some investors even prefer firms that do not seek and push for profit maximization. Depending on the control they have over the business, the investors even impose ethical constraints that provide guidance to businesses operations. Indigo.ca is a publishing giant that allows educational and athletic groups to participate in fundraising for the programs that matter the most to them and their communities. The company gives 15 – 20% of every sale to the campaign of the buyer’s choice (Payseno, 1).
The argument presented by Friedman is also not as relevant today because of environmental problems. In the past, companies did not put much consideration of the impact that their activities had on the environment. Today, however, environmental concerns are a serious consideration and it has even led to the development of laws to emphasize environmental protection. When companies do the bare minimum to remain compliant to the set rules and regulations, they are not acting socially responsible. However, any organizations that go above and beyond are socially responsible. The action taken by such companies are not only beneficial to society, but they are also beneficial to the shareholders and the business in the end. An example of a company going far and beyond is Method, a cleaning product company which creates uses plastic recovered from the ocean to create its packaging. The company’s plants are also powered using wind energy.
The argument is also not relevant today because of cultural changes and expectations. In the past, companies had a tendency to focus on the well-being of their shareholders rather than focusing on the total social-economic welfare of society. The situation has evolved over the years and companies that only focus on maximizing shareholders returns without any engagement on social responsibility are considered unethical. Companies have to seek a balance between doing what is best for society while providing their shareholders with the most returns possible. The participation of almost all large companies across different industries in corporate social responsibility is almost a requirement. In fact, society almost always expects companies to participate in one way or another and are even surprised when they do not. The ways that the companies implement social responsibility differs from one organization to another. Examples include TOMS which provides a pair of shoes to a needy person for every pair that they sell and Coca-Cola which has set up a foundation to help communities in need of clean water as well as empowerment of youth and women (Payseno, 1).
The argument is also not relevant today because it does not distort economic freedom as was thought at the statement was developed. One of the supporting arguments aimed at steering corporations away from engaging in corporate social responsibility was that the shareholders should have a say on how their money is spent. Friedman was of the opinion that organization leaders should focus on the responsibilities given to them by the shareholders specifically generate revenue (Dunn and Brian). Based on the argument, leaders would be expected to avoid charitable activities because they do not generate revenue, at least not directly. Shareholders have a say on how their money is managed or spent. They can control the types of corporate social responsibility activities the companies they have invested in are undertaking.
Regulations are another reason why the Friedman argument is not relevant today. Regulators only require companies to toe the legal line. However, cutting the line too close and having sloppy paperwork can be costly to the firms. An example is emission related regulations. Although the company can meet the bare minimums and still be legally safe, maintaining such levels will result in deeper and frequent investigations. The company will lose resources such as time and money during such investigations. Engaging in corporate social responsibility activities regarding the issues in question will allow the company to place a safety margin. It can be viewed as a way of being proactive and not reactive to the company’s perspective. Safeguarding against issues before they become concerns that will warrant costly enforcement actions. When regulators identify that a certain company is already doing more than they are required to, they are less likely to launch detailed investigations and more likely to focus on companies displaying cunning behavior.
Another reason why the idea might not be relevant today is because of the employee’s expectations. Employees are a crucial part of any organization. In fact, the ability of an organization to recruit and maintain qualified personnel directly influences their performance. In the current market, employees have more work opportunities compared to the past. The change has allowed them to have more choices when selecting who to work for as well as companies to avoid. Companies are forced to make adjustments because employees want more than a paycheck (Dunn and Brian). Companies sometimes choose to do things that they are legally not required to as a way of being socially responsible. The companies have to provide safe working environments as well as support their employees according to the set rules and regulations. Some of the extra actions also attract potential employees, as well as help, maintain those already working for the company. An example is Spotify which offers parents 24 weeks of paid leave which can be divided in any way over the first three years of the baby’s life.
In conclusion, the argument put forward by Friedman is less relevant today than it was at his time. At Friedman’s time, things were simpler and more straight forward compared to today. It is true that any business that wants to remain sustainable must remain profitable. However, they must do so in a manner that satisfies the needs of the stakeholders as well as adjusts to the needs in the marketplace. Businesses have to adapt their activities and actions accordingly if they wish to survive in the changing world. The companies have to consider what their consumers want and deliver it to them. People are now more than ever more concerned about product and service attributes such as safety, quality, and value.
Conforming to the acceptable legal limits is enough to keep businesses out of court, but all companies know that holding themselves accountable to higher standards is what will give them an edge. The companies have to do what they are legally not required to do when it comes to their customers, communities, suppliers, and regulators. The firm’s primary responsibility to the shareholders is making returns for their investments. However, some shareholders are concerned by more than making profits and the companies have to deliver accordingly. It is common for boards to vote out chief executive officers whose ways of doing things are not in line with the expectations of the boards and the shareholders. Corporate social responsibility has evolved to become part of almost all business types.
Dunn, Craig, and Brian, Burton. “Friedman’s “The social responsibility of business is to increase its profits”: A critique for the classroom.” Proceedings of the International Association for Business and Society, vol. 17. 2006.
Friedman, Milton. “The Social Responsibility of Business is to Increase its Profits.” The New York Times Magazines, 13 Sep. 1970, pp, 1-6.
Payseno, Kaya. “Top 20 Corporate Social responsibility Initiatives of 2018. “ https://www.smartrecruiters.com/blog/top-20-corporate-social-responsibility-initiatives-of-2018/ Accessed 3 Mar. 2019.