One of the most contentious debates among scholars has centered on the proper ro
ID: 366623 • Letter: O
Question
One of the most contentious debates among scholars has centered on the proper role for a corporation in the pursuit of its business. In large measure the debate has crystallized around two points of view. On the one hand, some believe that a corporation’s chief responsibility role is to make and maximize profit. This belief has often been referred to as the Friedman Approach in homage to the economist, Milton Friedman. Friedman espoused the view that as long as a corporation stayed within the rules, its only responsibility was to return the maximum profit to its shareholders. On the other hand, other scholars have asserted that the social responsibility for a corporation extends beyond just making a profit and includes a responsibility to act in a manner that promotes and supports the welfare of society at large. What do you think about this so called “Shareholder vs. Stakeholder” debate? Do you have any personal experiences where you have observed the effects of this debate in terms of corporate actions? On which side of the argument do you come down on and why?
Explanation / Answer
There is a regular debate on Shareholder Vs Stakeholders view or we can say corporate social resposibility and profit maximisation view, this discussion prevails in the corporate world as well as in the academics also this is regularly debated. "Friedman espoused the view that as long as a corporation stayed within the rules, its only responsibility was to return the maximum profit to its shareholders".
When discussing on this view it seems that Friedman thought that social responsibility lies somewhere in the mid of expenses and investments. Expenses are the cost which a corporate incurs for earning revenue eg. bills of enengy, water, telephone, internet, salaries etc. When thinking of profit maximisation a corporate will try to cut the possible expenses to maximise its profit.
Moving further in this discussion investments are different from expenses which are taken with a future expectation of generating income e.g., a new set of vehicles to be purchased by a transporter for new areas of operation.
Every corporate social responsibility is a sort of investment in the business eg. increasing pay considering it a social responsibility will motivate the employee to work hard and thus resulting in more revenue for the coporate.
The other point of view says that pumping in some money from the business profits to the upliftment of the society will improve the society and will enhance the standard of living which is very very important when we talk of ethics.
An uplifted society will produce better citizens and thus helping the corporates to move at a faster pace in near future making more profits so in short term it may be felt by the corporates that helping society is just reducing profits but in long run it means building a better road to run faster and easier.
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