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Lecture 14

January 11 - Lecture 14 Includes all the notes from lecture 14, taken on January 11, 2011

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York University
Social Science
SOSC 1340
Keith Lehrer

January 11 – Lecture 14 Lecture Outline Milton Friedman (1912 – 2006) • Libertarian political philosopher and Nobel prize winner in economics (1976) – very influential among conservatives • Taught at the university of Chicago (1946 – 76) formed what came to be known as the Chicago school of economics Friedman’s Film • In whose interests should the corporation be run in a free enterprise system? • Inherence theory of the firm: it should be run in the interests of those who own it, the shareholders (property rights( • The pursuit of maximization is what shareholders desire (except for ‘eleemosnary’ or charitable institutions) • Managers (agents) are employees of shareholders (principals, employers), therefore, they should act to maximize profit CSR is a “fundamentally subversive doctrine” • “the businessmen believe that they are defending free enterprise when they declaim that business is not concerned “merely” with profit but also with promoting desirable “social” ends; that business has a “social conscience” and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else … in fact they are.. Preaching and unadulterated socialism.” • Friedman defines (and subsequently rejects as a threat to private enterprise and a ‘free society’) the following concept of social responsibility: - since only individuals can have responsibility, it is towards corporate executives that claims of responsibility are directed at - when an executive uses resources of the firm to satisfy general social interest, he is acting (wrongly) in the name of ‘social responsibility’ • note his ‘methodological individualism’ here: “society is a collection of individuals and the various groups” Maximizing Profit • “What does it mean to say… even in this vague sense.” (p. 162) • Managers (and private enterprise in general have a responsibility “to make as much money… and those embodied in ethical custom” (p. 162) It’s sometimes ‘profitable to be charitable’ • When a manager acts in his role within the corporation, he is an AGENT of the PRINCINPALS (shareholders); but in this private life, he is the PRINCIPAL – as an INDIVIDUAL, he is free to ‘do good’ at his own expense (private ethics) Private Profit vs. Social Objectives • What kinds of ‘social objectives’ does Friedman claim are not the responsibility of business? • Reducing inflation; reducing pollution beyond what is in the best interests of the corporation or what is required by law; reducing poverty (p. 163) • It is up to politicians to deal with these ‘social interests’, and up to citizens to elect them • Managers who try to do these things are, in effect, acting POLITCALLY – imposing taxes ‘Irresponsible’ Managers • If managers use profits for any other end than fulfilling shareholder’s desires, then this constitutes theft ( an ethical, not legal, argument) ‘Conforming to the Law’ • In maximizing profits, the only ethical obligation of executives is to obey the law (+ ‘ethical custom’?) • What kinds of activities, normally considered unethical would we considered ethical and legal in this view? • Insurance corps: delay tactics ‘tire out’ claimants • Economic espionage- acquire competitors secrets • Built-in obsolescence, withholding innovations • “cunning deception and concealment of ones strengths and intentions” (carr) • Justification? “We don’t make the laws” • Critique: this view is naively assumes that the legal system is independent of economic power - corporations use a variety of means to influence the regulatory environment • But EVEN IF it were true that compliance with the law when acting in its own self-interest to maximize profits is sufficient, what follows? • Premise of the film, the corporation: what kind of ‘person’ is the corporation? If it is an ‘externalizing machine’, the greater, not less. Regulation is needed • Monks: corporations treat conforming to the law as a business proposition • Corporate deviance and cost-benefit analysis: should we obey the law or break it? Don’t ask a philosopher, ask the emissaries of virtue: the lawyer, the accountant • If it costs more to comply with the law than you would expose yourself to in fines, discounted by likelihood of getting caught and convicted, then it :makes sense: from the profit- maximization perspective to deviate from the law Critiques of Friedman • Pro-business support of CSR: Sir Mark Moody Stuart, ray Anderson and Robert monks
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