Milton FriedMan’s Argument

In the 1970s and 1980s, the convergence of a number of economic forces led some scholars to reexamine the notion of corporate social responsibility. Business was reeling from the one-two punch of rising energy costs and the expenses of complying with legislation designed to reduced pollution, protect consumers, and ensure equal opportunity. In addition, inflation and the national debt were soaring – a legacy of the Vietnam War, the Great Society programs of the 1960s and the shifting balance of trade. Many held that if businesses were to survive, they must be relieved of inappropriate social responsibilities and allowed to get back to basics: making money. This is not new idea. Its leading proponent in recent years has been the economist Milton Friedman, who argues that a business’s primary responsibility is to maximize profits.

According to Friedman, There is one and only one social responsibility of business: to use its resources and energy in activities designed to increase its profits so long as it stays within the rules of the game and engages in open and free competition, without deception and fraud. Friedman contends that corporate officials are in no position to determine the relative urgency of social problems or the amount of organizational resources that should be committed to a given problem. He also insists that managers who devote corporate resources to pursue personal, and perhaps misguided, notions of the social good unfairly tax their own shareholders, employees, and customer. In short, he argues businesses should produce goods and services efficiently and leave the solution of social problems to concerned individuals and government agencies.

Friedman’s views represent one extreme on a continuum that recognizes some division of social responsibility among the various segments of society, including government and the business community. Most managers and other people believe that both the government and the business community do have some responsibility to act in the interest of society. As the two most powerful institutions in the country, the sheer size of business and government obliges them to address problems of public concern. Both corporations and government depend upon acceptance by the society to which they belong.

For instance, businesses are subject to the regulations of the Occupational Safety and Health Administration (OSHA), the federal agency charged with ensuring safe and healthful working conditions. One of its projects was to prepare guidelines to eliminate repetitive motion disorders, the cause of half of all workplace illnesses and disabilities. It has considerable power: In one cases, OSHA chief Robert Scannell, former head of safety at Johnson & Johnson, levied fines of $7.3 million against USX for safety, health and record keeping violations, and pushed Ford Motor Co. to institute a company-wide program to reduce repetitive motion hazards on the assembly line.

Another way in which social responsibility issues can affect corporate pocket books is through lawsuits brought by employees or others, which can cost organizations a great deal of money. For example, Fiber board and its insurers approached settling their asbestos-litigation problems by setting aside a fund of $3 billion to pay for all pending and future claims brought by victims of asbestos injuries. This fund creates one of the largest single funds fir asbestos victims in American history. Another example comes from the Exxon corporation. In the wake of the 1989 Alaskan oil spill and the subsequent controversy surrounding Exxcon’s efforts to clean up the spill, Exxon has sued more than 250 insurers seeking to recover some of its $3.6 billion in expenses from the accident. At the same time, Lloyd’s of London and other insurers are suing Exxon in an effort to avoid paying claims related to the spill. The management of social responsibility can be a complex and challenging arena for companies.