Milton Friedman had said that the social responsibility of business is to increase profit. According to him the only aim of the business executives should lie in the maximizing the profit of their organizations and the most important measure of profit is undoubtedly the amount of money which the business makes. More the money produced through the business more is the profit achieved by the business. Friedman is of the opinion that, “there is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” (Friedman, September 13, 1970)Thus Friedman was of the opinion that as long as a business activity is kept away from fraud it is absolutely justified that it works to enhance its profits.
Friedman has said that the corporate executives of business organizations are responsible to their higher authorities and hence should carry on business according to their desires and the desires of the owners of the business are obviously fulfilled by maximizing profit of their organizations and therefore it is the responsibility of the corporate executives to work in such a manner that it increases the profit of the business to the maximum. Friedman was of the opinion that once the idea that profits is related to immorality creeps into the business activity the government will start the price levels and wages of the organization and Friedman says that such a bureaucratic nature of the business is in fact suicidal for the business. (Friedman, September 13, 1970)
This is true that business cannot run on merely philanthropic grounds but at the same time profit cannot be the only motive of a business organization. Rather a business organization should adopt a middle path that is it should try to maximize profit but at the same time try to bring about a positive change in the society. This is because according to Carol Stephenson society is an integral part of any business activity as the society has an important impact on the business activity. Stephenson in his article wants to say that to bring about maximum development of a business it is necessary that there is close interdependence between the society and the business.
A business flourishes maximum in a situation where there is higher quality of life among the people because higher quality of life is synonymous with high purchasing power and if the purchasing power of the people in a society increases it is certain that the business in the society will receive a boost because the products or services of the business organizations will be more in demand.
Therefore Stephenson is of the opinion that the business organizations should bring about such changes in the society that it increases the purchasing power of the society. With these both the ends are served in the way that society benefits from the business organizations and vice versa. Example of such an effort was evident in the Moga district of India where Nestle had brought about certain changes like they had started training programmes for the dairy farmers in the district and they had also set up a number of veterinary clinics in the place. Due to all these the purchasing power of the people of Moga increased because they were well equipped with technology and could participate in the skilled labor. This in turn expanded the market of Nestle products in Moga. (Stephenson, 2008) Thus we can say that business organizations will be able to make more profits if they contribute to the development of the society because a developed society is bound to give a positive impetus to a business activity.
- Friedman M, (September 13, 1970), “The Social Responsibility of Business is to Increase its Profits”, The New York Times Magazine, available at,http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html, (accessed on 01/07/2009).
- Stephenson C, (2008), “Creating Shared Value: The Inseparability of Business and Society.”Ivey Business Journal, available at: http://www.iveybusinessjournal.com/article.asp?intArticle_ID=772, (accessed on 01/07/2009).
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