Business Ethics: Milton Friedman - Coursework Example

Business Ethics Introduction Milton Friedman was regarded as the most prominent advocate, economist and of free markets in the twentieth century. One of the famous article of Milton Friedman is the social responsibility of business is to increase its profit. The article of the author is often used by people for counter argument, who would eschew the notion that shareholders are not the prime factor for any corporation to ponder. There are certain aspects which makes the article remarkable. The article was incredibly short and the way in which Milton Friedman crystallized and incorporated many themes in one minor package that makes the editorial noteworthy. The prime purpose of the report is to provide vivid explanation and illustrations to support specific challenges to the argument of Milton Friedman on social responsibility of any corporation. Furthermore, the author viewpoint and opposition viewpoint on the argument is explained. Discussion The article “the social responsibility of business is to increase its profit” was published in The New York Times Magazine. The major discussion of Milton Friedman is focus on corporations and their agents like shareholders. The organizations should not be concerned about their agents and should put emphasis on increasing their effectiveness and productivity. Corporate Executive has ethical and legal relationship with the shareholders. This is mainly due to the fact that they are trusted and commended with the duties for the assets of shareholders. The author suggested that the foremost responsibility of corporate executives towards their stockholders, principals and employees is to maintain the maximum financial intake. Furthermore, Friedman also stated that executives should act within the boundaries and restrictions of the social customs laws. Social agendas of executives should not be continued with the finances of the corporations. Milton Friedman also believed that the beginning of pandering to the notions, needs and desires of society by corporate executives can corrupt the economy of free market and lift the socialist principles. The desires of society include evading pollution and elimination of social discrimination (Friedman, 1970). The claim of Friedman is that involvement in free and open market competition deprived of any fraud is the only one responsibility of a corporation or business to engage and use its resources to upsurge the profits. Likewise, the author believes that the enhancement of profits would be maintained extensively until the social responsibility of business remained within the rules and regulation. Stakeholders are the exact responsibilities of business. The concepts of agency have been emphasized by Milton Friedman and argue that the foremost direct obligation of managers is look upon the desires of shareholders. The author also believed that the direct responsibility of corporate executive is the betterment of the employers and conduct the process of business in accordance towards the desire of employees. According to Albert Carr, business people have different social roles in their private and business life. In the business life, business people are followed by set of ethical norms and rules. In the private life, they follow ethical rules which are familiar to every people. This different social role of business people is similar to game of poker. The philosopher Robert E. Frederick argues that the role of ethics in corporations is mistaken by Milton Friedman and Albert Carr (Paeth, 2007). Frederick agues to the fact that businesses uses in depth code of ethics. Friedman tries to state that pivotal part of corporate social responsibility is to enhance the profit of organization by engaging in activities and effectively using its resources. It is vital to ensure that businesses are adherence towards ethical standards, international social norms and laws. According to Archie Carroll, there are four responsibilities of business firms rather than stakeholders. This responsibility includes legal, economic, discretionary and ethical. It is vital for any organization to produce goods that may repay to stockholders and creditors. Furthermore, it is also responsibility of business firm to follow general beliefs to act in society and charitable commitments. Carroll also believes that social responsibility of corporation is extended beyond revenue generation. The contribution towards community is vital for organization which signifies that corporate social citizenship is real. Ethical dilemmas and motives on conscience-oriented are ignored by Friedman (Jennings, 2014). Ethical dilemmas has been effectively presented by Albert Carr on famous article named is business bluffing ethical. Several examples of ethical dilemmas are incorporated by Albert Carr in the article. There are something which is common in every business is the violation of the ideals of ethics. But this harm of ethics does not mean that business principles are being violated. Ethical dilemmas can hamper the productivity of organization. Albert Carr argued the issues of dilemma by providing example of well-known manufacturing firm of mouth wash. “The manufacturing firm was accused of using cheap form of alcohol in mouth wash which is harmful for health” (Carr, 1968). The author wanted to prove that violation of ethics does not mean the violation of principles of organization. The author provided vivid explanation of other aspects of social corporate responsibility of an organization. Archie Carroll tries to present the challenges that are posed by labour outsourcing to the argument of Friedman. Milton Friedman created smoke-screen theory which swept the moral ethics. Moreover, in the process maximization of profit, the employees are outsourced to under privileged labours. Friedman never tried to enhance the domestic job market by implementation of change management. Furthermore, Friedman stated that organization must look for cheaper labour markets for the enhancement workplace and profit maximization. The responsibility of corporation to the community is abandoned by smoke-screen theory. It also specifies that corporation can only work with labour market when certain condition is fulfilled. The demands of the requirements are needed to be fulfilled to start work. These sorts of activities states that the theory of Friedman is made for companies that are fickle (Vilcox, 2007). Additionally, these practices are regarded as backstabbing approaches to work with the national labour market. Arie De Geus, European writer on management stated that managers tend to forget the true nature or organization and put emphasis on the economic action of production of goods. The effect of global outsourcing on rise of national unemployment is immense. The booming of shoring industry has created huge progressive impact on the Asian countries like India. In this era of globalization, it is vital for American companies to drive towards availability of low-cost labour from countries like India and China. This vast pressure of profitability and productivity has upsurge the prospect of concentrating on low-cost outsourcing. There are many factors which influenced the foundation of outsourcing to move production to India and China are cheap raw materials, low transportation cost and low labour cost. According to Trefler and Liu, the probability of rate of local unemployment is amplified through international outsourcing (Elms, 2013). The rate of probability is augmented to 0.9%. Kreichkemeier and Egger also believe that the rate of domestic employment will be decreased. Milton Friedman believed that, outsourcing can help to reduce cost and benefit corporation to maintain sustainability. Moreover, the negative aspects of outsourcing such as increase of domestic unemployment are being overlooked by Friedman. These negative aspects undermine the argument of Milton Friedman. One of the prime challenges which weaken the argument is providing corporate executive can misinterpret the trends that are discussed on the flat-world thesis and could make severe tactical blunders. Milton Friedman stated that organization would focus on cheaper market for search of labour for betterment of the business. The author wants to present that outsourcing can benefit organization. But reality is totally different and diversified. The fragile connection between employers and employees is weakened by outsourcing. The continuation of job loss can create huge adverse impact on reduction of productivity of an organization. This is mainly due to the fact that large amount of time is being spent on lessening of employee issues. According to Roberts, companies in United States markets are changing their requirement policy from expensive United States labour to cheap labour. Foreign workers are getting better paid than that of local workers. Moreover, it has also been found that outsourcing can result in many issues such as poor employee workplace and reduced standard of environment (Ferrell, 2009). The argument of Milton Friedman failed to recognize that the permission of low-cost labour outsourcing is not ethical. Short term solution of outsourcing has been applied by numerous companies. One of the prime examples is Harley-Davidson. The company always enjoys rise in their revenue without outsourcing. The unionized workforce has been formalized by the company to enhance their growth and maintain sustainability. The argument of Milton Friedman is based on dropping the overall cost. The author did not provide any thought on impact of local community. The possible outcome of low-cost labour outsourcing has been ignored in the theory of Friedman. The viewpoint of author is primarily based on short term basis. The long term outcome of the theory and argument is not revealed. Just for the reason that the laws of the land provide authority for the acceptance of cheap labour, these process and activities are non-ethical. Outsourcing in not a primary factor for the upsurge of productivity, investment is required in the people, tools and technology. The image of corporate is totally overlooked by Milton Friedman. According to Per Henderson, the rate of turnover is dependent upon the reputation of an organization. Outsourcing is often viewed by many writers and economists as negative part which can weaken the reputation of corporation. These challenges undermine the argument of Milton Friedman (Flynn, 2008). Conclusion This can be concluded that challenges posed by labour outsourcing undermine the argument of Friedman. The author argued that the best interest of society and organization is to pursue cost-effective decision that can enhance the productivity. Furthermore, the author failed to recognize the importance of social, legal and legal norms. These norms are not persistent all over the world. Additionally, sole focus on lowest line can lead to the ignorance of intangibles. This can directly influence the morale, labour satisfaction, profitability, channel relationship and productivity of a corporation. When low priced labour is outsourced, certain consideration has to be taken by corporation in case of occurrence of actions such as labour strikes, lawsuits, product boycott and picketing. It is pivotal for organization to predict the possible outcome of selecting incorrect partner for outsourcing. This can often lead to disclosure of trade secrets of technology, loss control over the market and industry flooded with products that are counterfeit. References Carr, A. (1968). Is business bluffing ethical? New Jersey: Prentice Hall. Ferrell, O. (2009). Business ethics. Stamford: Cengage Learning. Flynn, G. (2008). Leadership and business ethics. New Jersey: Pearson. Friedman, M. (1970). The social responsibility of business is to increase its profit. New York: Chapman & Hall. Jennings, M. (2014). Business ethics. London: Routledge. Paeth, S. (2007). International perspectives on Business ethics. London: Sage. Vilox, M. (2007). Contemporary issues in business ethics. New York: Springer. Elms, D. (2013). Global value chains in a changing world. London: Sage. Read More