PP247 Lecture Notes - Lecture 5: Corporate Social Responsibility, Stakeholder Theory, Product Liability

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Milton friedman (cid:858)the so(cid:272)ial esponsi(cid:271)ility of business is to in(cid:272)rease its profits(cid:859: manager is responsible to the owners of the business. In publicly traded companies stockholders: responsibility = serve interests and max profits, ma(cid:374)age(cid:396)s should (cid:858)(cid:373)ake as (cid:373)u(cid:272)h (cid:373)o(cid:374)ey as possi(cid:271)le" fo(cid:396) (cid:272)o(cid:373)pa(cid:374)ies (cid:449)hile (cid:272)o(cid:374)fo(cid:396)(cid:373)i(cid:374)g (cid:858)to the (cid:271)asi(cid:272) rules of s(cid:272)oeity". Friedman dismisses idea that managers should try to fight inflation, protect the environment, or help the unemployed (unless doing so, is profit maximizing) This is a violation of fiduciary obligation, involves spending the stockholders money w/o consent. Form of taxation w/o consent social welfare should be left to the realm of politics and democracy (to gov) Corporate charity can serve as a self-i(cid:374)te(cid:396)ested ta(cid:272)ti(cid:272) fo(cid:396) ge(cid:374)e(cid:396)ati(cid:374)g good(cid:449)ill, (cid:271)ut the a(cid:272)(cid:272)epta(cid:374)(cid:272)e of (cid:858)so(cid:272)ial (cid:396)espo(cid:374)si(cid:271)ilit(cid:455)(cid:859) pa(cid:448)es the way for socialism. Critique of friedman thomas mulligan: f(cid:396)ie(cid:373)da(cid:374) (cid:449)(cid:396)o(cid:374)gl(cid:455) takes a (cid:858)lone ranger(cid:859) (cid:448)ie(cid:449) of so(cid:272)ial (cid:396)espo(cid:374)si(cid:271)le (cid:373)a(cid:374)age(cid:396) sees him acting alone, in opposition to interests of owners.

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