Debate 1: Is Increasing Profit the Only Social Responsibility of Businesses?
Kelly Dearborn
1,416 words
Corporations began playing a major role in the economy of the United States in the
1790s. The original model of corporations allowed stakeholders a more active role in the
management and operations of a company and charters for corporations were more specific and
expired after a certain number of years1. Starting in the 1830s businesses began separating
ownership and management and became Berle-Means corporations, so shareholders did not have
an active role in selecting corporate leadership which led to a rise in corrupting and eventually
stricter regulation from the government under presidents like Theodore Roosevelt. The Great
Depression in the 1930s lead to a decrease in the power of corporations, but they recovered after
the manufacturing successes during World War II. Beginning in the 1980s corporate leaders
began shifting away from the idea of stakeholder interests and towards stakeholder value,
meaning to essentially maximize the returns, i.e. profits of the business. At the same time
theories of corporate social responsibility and conduct were being drafted by the United Nations
and other organizations2. As corporations moved to becoming more profit driven, the public
became more aware of corporate disasters such as Shell’s connection to assassinations in Nigeria
and there was even a greater push towards more regulation of businesses. The stakeholders in the
debate of social responsibility of businesses are the corporations themselves including their
stakeholders, employees, and management, the environment, the economy, global citizens, and
the government. Some of the sub-issues for the debate include determining the role of
government regulation, what other social responsibilities business should be accountable for and
what impact on the economy cutting profits would have.
The article entitled “The Social Responsibility of Business is to Increase its Profits” by
Milton Friedman takes the position that businesses themselves are not in a position to take on
social responsibility3. He supports his argument by pointing out that businesses themselves are
artificial people and cannot be held accountable, but instead the leaders of the business are the
ones who should act in a socially responsible manner. He also compares business acting in a
manner that reduces profit to stakeholders or increases the price consumers pay as imposing a
tax, something that is the responsibility of the government. He supports this idea by questioning
the capability of business to correctly identify a social issue and then being able to come up with
the correct solution. Again this is an issue better addressed by the government. Milton Freidman
was an American economist in the twentieth century who was a champion of free market
economics and an advisor to President Regan. It is clear that he comes from a more conservative
ideologies and his conclusion from his article in the New York Times is in line with that school
of thought.
One of the issues with Freidman’s argument is that his first claim that corporations are
artificial people hangs on a technicality. Although it is true that corporations are not people in
fact, they can still be tried as a person under law. Considering this fact it does not seem
Debate 1: Is Increasing Profit the Only Social Responsibility of Businesses?
Kelly Dearborn
1,416 words
unreasonable that society could hold a corporation accountable for acting in a more responsible
manner. He also puts too much responsibility in the hands of individual consumers and
shareholders to make socially responsible decisions. Individuals cannot make these kind of
choices if there are not socially responsible products provided by businesses and cannot
effectively create a demand for these products until they are on the market. Although his point
that business cannot always identify what societal issues are important it is not a fool proof
argument as to why businesses can avoid any kind of social accountability.
The second article by Joe DesJardins and entitled “Business and Environmental
Sustainability” asserts that business is capable of acting in a socially responsible manner and that
it is in the corporation’s best interests. He believes there needs to be a shift from economic
growth to “economic development” which is built upon three pillars; economics, ecology, and
ethics4. The article gives many examples of sustainable practices in business such as cradle-tocradle analysis and closed-loop manufacturing both which can be cost saving as indicated in the
example of Interface, Inc. Becoming more sustainable also gives businesses an advantage in the
future as it is very likely that government will start increasing regulation and it will be less costly
for business who have started the initiative on their own to comply. He also makes the point that
business plays a role in consumer demand and cannot place the blame for lack of demand for
socially responsible products on consumers and uses the example of at-home computers. Another
argument for business responsibility is that they make the decisions about where to get their
supplies and it is too hard for consumers to try and inform themselves about where their products
come from. DesJardins concludes his article with various directions for sustainable business in
the future. Joe DesJardins is a philosophy professor and his ideology is similar to those of
environmentalists, especially ecological economics and industrial ecologists.
One example DesJardins gave in his article was one of his weakest points. He described
the efforts of a textile company to produce more environmentally friendly products, which was
eventually fruitless because they could not find non-toxic dyes. The story was meant to illustrate
the issues in the supply chain when not every company is making an effort to act socially
responsible but really it served no purpose other than to show how difficult it is to make
corporations act more responsible. The article could have also benefited from more description
about the role of government in the process of creating sustainable business and other more clear
plans for implementation. In general the article still relied too heavily on corporations having the
foresight to understand why cutting profits now would be beneficial in the long run and did not
give realistic strategies for reaching a widespread development economy.
The article “What Are the Social Responsibilities of Business” by C. V. Rajan compares
the various social expectation of an individual to the equivalent expectation for business5. For
example an individual should not act in a way that creates nuisance for society and business
Debate 1: Is Increasing Profit the Only Social Responsibility of Businesses?
Kelly Dearborn
1,416 words
should not act in a way that creates nuisance either (i.e. pollute the environment). The essential
argument is that businesses are not exempt from the same expectations society places on
individuals regardless of if there are laws regulating the specific behaviors. This article best
supports negative side of the debate. It is less technical than the article by DesJardins regarding
corporate social responsibility and instead relies more heavily on sociology and philosophy than
economics. The article helps humanize corporations and their responsibility and adds a simpler
argument to the debate. The article also challenges the idea presented by Freidman that it is
impossible to treat corporations like people.
I believe that corporations do have social responsibilities that extend beyond increasing
their profits. Corporations are in a place of power that makes them the most efficient and logical
locus for change in our consumption and production patterns. I do not; however, believe that
corporations on a global scale will make these changes without incentives. I think better
education in tandem with global government initiatives will make a more sustainable and
socially responsible future a reality. Education consumers on the importance of choosing the
right products and education business on the advantages of using the “triple bottom line” will
help push the demand for socially responsible products. Government will then have a role in
making sure that these goals are actually reached and companies are not just “green washing”
consumers. In general if businesses believe that they are going to continue making money in the
next 50 years it is impossible for them to avoid adopting more socially responsible practices. If
these practices are not adopted then increasing profits will be the least of our worries.
1. Gomory, Ralph, and Richard Sylla. "The American Corporation." Daedalus: A Journal of the
American Academy of Arts and Sciences (2013): 102-18. Web.
2. "What's Wrong With Corporate Social Responsibility?: The Evolution of CSR." Corporate
Watch. Corporate Watch, n.d. Web. 06 Mar. 2014.
3. Freidman, Milton. "The Social Responsibility of Business Is to Increase Profits." New York
Times 13 Sept. 1970: n. pag. Web.
4. DesJardins, Joe. "Business and Environmental Sustainability." Business and Professional
Ethics Journal 24 (2005): 35-59. Web.
5. Rajan, C. V. "What Are the Social Responsibilities of Business." Inside Business 360. N.p., 25
Mar. 2008. Web. 06 Mar. 2014.