Critical Analysis of Milton Friedman and Bob Dudley Statements - Coursework Example

Critical Analysis of Milton Friedman and Bob Dudley Statements Student’s Name: Instructor’s Name: Course code: Date of Submission: Critical Analysis of Milton Friedman and Bob Dudley Statements As we live in this dynamic world the needs and goals of humans and corporate organizations keeps changing with the aim attaining the best. This dynamism has made the world to be a competitive place by both humans and organizations as they try to outdo each other. The world is also rapidly becoming a ‘global village’ whereby accessibility and communication across the world has become easy. The ‘global village’ status has also increased challenges whereby if one country (part of the world) engages in something that negatively affect the environment or economy the other parts of the world end up being affected. The interconnectedness of the globe has improved trade and human relations and has enabled small businesses to grow to become multinationals. As businesses operate across the world they attempt to juggle between economic drivers (profit orientation and fulfilling the duty owed to their stakeholders) and also showcasing altruism. Though the reason for businesses to engage in social responsibility is seen as altruism, the actual reasons are many (Berman et al., 1999). The statements of Milton Friedman and Bob Dudley confirm that the actual drive of social responsibility by businesses across the globe is not singular. Milton Friedman argues that business’ social responsibility is to increase its profits for its shareholders while Bob Dudley is on the idea that businesses have the role of promoting desirable social ends driven by social conscience of the society they operate in. Whereas differences in their perception are clear, Milton and Bob’s ideas are at four decades apart. The statement of Milton Friedman takes in the increasingly hesitant attitude that many Americans believe toward corporations operations. They wonder whether social responsibility perceptions of ‘giving back to the society’ are merely humane acts, a core of their operations or a side show off. The people concur with Friedman notions that the social responsibility of a corporation is maximization of profits for its owners. The people wonder whether the face put on the front side of what social responsibility by businesses apply anyway (Lee, 2008). A drive for the research queries for this essay is idealistic. It is based on the long-standing division between those whose views on one hand, such as Milton Friedman (late economist), alleged that companies should pursue only their shareholders’ economic welfare and those who envisage the business community as a combination of relations involving a range of stakeholders (suppliers, employees, customers and the neighborhood/community where the company operates) devoid of which strong shareholder value creation would be impossible. If only it could be widely accepted that corporations actually benefited fiscally from a social responsibility program designed to nurture such a collection of stakeholder relations, then the thinking of the latter school of thought (Friedman’s arguments) would be neutralized (Smith, 2005). The statement of Bob Dudley to the British Petroleum (BP) shareholders is written in a tone that the act of conscience was based on the circumstances at the time where the company decided to act way beyond what the law expected. Bob Dudley in his press brief states that ‘as a responsible party we knew we would face wide-ranging claims and potential fines’. In a move to save their image and probable damage of the company they swiftly started to engage the interested party so as to portray their concern on their livelihoods, and or environment. The company was in a fix and in any case the group chief executive knew too well that by acting before pressed to act they would save a substantial dent on their image. In a way the company acted on the fear of losing future business or the business going down the drain rather than conscience because they knew too well that claims and fines would be lodged. The company would be better placed in the eyes of the society due to their ‘humane’ act when the issue was once resolved rather than waiting for the concerned societal actors to act. Thus, the decision by the company to support local economies, research and workers was a long term calculation rather than a short term gain. In fact in the short run the company would lose as indicated by huge amounts of cash paid out and shareholder dividends cancellation which would count as ‘giving back to the society.’ In the context of BP, social responsibility is acting before the law does. From Bob Dudley’s statement it also clear that he was moved by his childhood memories to be socially responsible. In his statement he states “…part of the world that is very close to my heart. I grew up … spent summers …swimming and fishing in the gulf” meaning that he was moved by his childhood memories. Picturing the situation he reflected on the people who lived and worked there who were part of the larger society in which the company operated and benefited through sale of its products, in other words in a way BP’s clients had been affected. The numbers of the affected people would translate into building criticisms and fines. Therefore, social responsibility from this perspective is driven by the cycle of affected livelihoods which translate into low purchasing power in turn affect the sales of BP’s products. As much as BP’s move to assist the affected people, government and research could be could be considered as social responsibility, this could be seen as a cover up for financial performance. As indicted in his statement to the shareholders, the group chief executive is very cautious to balance between the interest of shareholders and the explosion and fire of Deep Water Horizon after act. In the statement Bob states that “…the BP had turned a financial corner when the incident happened” indicating the financial or profit goal was dominantly at the center of the company’s goals whereas the perception that the company wanted to portray is on the conscience of its care for humanity. When the explosion happened the company had made a lot of progress financially but all this was wiped out by the incident during that year. Loss of millions of dollars in the explosion, pay out to the society, dividends cancellation and likely reduction in sales. The group chief was highly concerned with the financial situation of the company that ‘social responsibility’ would bring about. Therefore, as Milton Friedman puts it, the social responsibility of a company is to maximize profits. The ‘after act” of the BP’s disaster is just a cover up of the main agenda of what the company is geared at (Margolis and Walsh, 2003). Portney (2008) puts his argument as “not every business embraces corporate social responsibility with philanthropic motives.” He explains that most of the times that a company finds itself in a corner of an event that its involved in it has no other option than to bail itself out of the situation by acting seemingly philanthropic. The company in this situation loses its immediate control and is driven towards where the weight of the society tilts to. He goes further to give the example of the BP corporate social responsibility after the Deepwater Horizon explosion and fire. A situation like this drove the company to be ‘social responsible’ at least in the circumstances (Berger et al, 2007; Seifert and Bartkus, 2003). Social responsibility by corporate bodies is also a strategy. As part of strategic planning corporate organizations undertake societal support programs in case of a disaster with an aim of strategic placement. This way they are at the center of the focus winning the hearts of the society and eventually growing their business (Porter and Kramer, 2006). In the case of BP it was no different just that it affected the company significantly. However, the company undertook the disaster as a damage control strategy that made the criticisms by the media and political scrutiny to die down. Although the company had suffered significant losses it was able to eventually redeem itself to a great extent through the act of humanity they portrayed, which is good for business. In similar situation with BP are fast food and pharmaceutical companies. Fast food companies have found themselves in a hot spot whereby they are being pushed to undergo a national discourse on obesity and nutrition whereas pharmaceutical companies are being driven towards helping in the HIV/AIDS epidemic in Africa. Established companies rely on responsive methods rather than rebuilding corporate focus from the down up. In the current times responsive social responsibility practices are aligned with an organization’s strengths and eventually build upon existing methodologies. For instance, DuPont is currently using the responsive model where it has saved over $2 billion in cutbacks of energy use. Another organization employing this method is the McDonald’s, which has cut down its solid waste emanating from use of wrappers by 30% while Microsoft has invested heavily towards the training computer technicians eventually supporting its workforce via local community colleges (Portney, 2008). In the recent times, most corporations ‘act’ social responsibility with a plan in mind discourse. These corporations go to an extent of advertising their products through social responsibility acts. Social responsibility is a form of advertising where corporations use it as a platform of products publicizing. Products advertisement during a social responsibility act is held in higher regard than difference the act would make. This would be interpreted to mean misuse of underprivileged human beings. In the view of this a question comes up “what difference does it make if a corporation turns to corporate social responsibility for capital, purely through an act of conscience or in response to social opinion?” (Berger et al, 2007). As many economists have argued, playing by the rules coupled with participation in the free market enhances the social cake for everyone in the society. Portney (2008) has always held this class of thought. In the same breadth he continues to explain that even corporations or businesses that do nothing further than observe all the existing regulations should be seen from the view of the very useful things they do which includes provision of goods and services to their clients, job and wealth creation. The social responsibility aspect is an enhancement on the practice upcoming in the global business, however at many times it is considered as cosmetic. In some instances the superficiality of corporate in social responsibility acts and the law is experienced when companies are fined or undertake giving back to the society initiatives after a disaster has already happened good examples include BP and fast food companies. In the United States fast food companies have been on the spotlight where the government has been hard-pressed to national discussion on obesity and nutrition. This is quite controversial because as the fast food companies are expected to undertake social responsibility as the consumers continue to take their foods which means that obesity challenges continues. The same case applies for the Deepwater Horizon explosion and fire in the Gulf where BP was involved. This brings about controversial questions as, to what level do they result to more problems than they claim to resolve? And are those modifications that prove more intricate than projected ever left discarded and unfinished? (Portney, 2008) As the situation is, company boards, chief executive officers, chief financial officers and upper echelon corporate executives are the guardians of corporate financial well-being and are expected to bear responsibility for the likely results of corporate social responsibility on the bottom line. Executives are called upon to justify that social responsibility programs are in line with the company’s strategies and are adequately financially sustainable (O’Sullivan, 2006). On the other hand, shareholders are extremely concerned with financial health and receptive to possible threats to executive’s priorities. Further, social activists are concerned since it is in their long term best interests if corporations can ensure sustainability of social initiatives the advocate for (Wheeler et al., 2003). In addition, governmental institutions care because they yearn to see businesses deliver social and environmental benefits in a more cost effective manner than they can via regulatory approaches. In the same breadth, consumers care because they want to leave behind a better world to their children as well as their purchasing to mirror their values (Zadek, 2000). According to Bunchua (1995) in his book "Foundation of Professional and Business Ethics" argues that in the view of the world we currently live in that business transactions ought to be undertaken in a way that in reasonable circumstances it results to real happiness for each party. Real happiness in realism would be achievable if, and only if, the overriding interests of all individuals concerned (persons, local and global society as well as the eco-system) are listened to. It would be widely accepted that, by nature, all human being actions aim at specified and unspecified ends as Aristotle concurs. Therefore, real happiness is the end, because this is precious in itself. This does not mean real happiness is to equal economic allocation. Differences that exist may be acceptable as long as the core happiness of community is maintained. The argument is based upon the nature of a business and the society. The relationship of the business to the society in which each member undertake a role while appreciating the fact that individual member is insufficient on their own but in harmony contributes to the excellence, continued existence and sustenance of the society as a whole. The undertakings ultimately contribute to one’s own happiness as well as for the others. In the light of the benefits that emerge from this harmony, the business community can apply it in its activities that is profit-making is not an end in itself, but a means to the final end which is real happiness (Weiss, 1994; Sorell and Hendry, 1995). This perspective does not overlook the crucial role of profit in companies; in fact profit making is a moral duty of company executives in a proper rate and manner. Finances invested in a business are by all means the private property of shareholders and it ought to be invested in order to create added value. If an investment does not contribute to added value in the light of corporate social responsibility burden it would be unethical extravagance. However, this does not translate to a license to abuse and dictate suffering to others. As Friedman puts that the primary function of a business is to gear towards achieving sustained as long as it’s consistent an economic system (Jennifer et al., 2008; Sorell, and Hendry, 1995). In the recent past corporations may have seen corporate social responsibility as a burden, however more recently executives’ perspective are viewing it as a cost-saving model keyed on sustainability (Wheeler et al., 2003). Corporations such as Toyota, Whole Foods, and Walmart are now audaciously footing their business plans on a model designed as competitive-eco-friendly investment. However, a point to note is that this trend in accountable behavior may paint nice picture of corporate in a country as caring for its clients but in most instances the results of such hard work might not align with what those customers had envisaged when opting one brand to another. The execution of socially and environmentally conscious initiatives can be extremely time consuming. Evidence shows that methods used in actualization of social responsibility policies show that the way corporations initiate, systematize, and monitor the course of action is just as significant as the outcomes they anticipate to achieve. This is a clear indicator of the maturing field of social responsibility in corporate, emphasize economic drivers as well as leveling Friedman’s censure of lofty policy objectives at companies attempts to fit in both corporate social responsibility and the fiduciary obligation owed to their shareholders. Corporate social responsibility does not exist in a vacuity. Corporate social responsibility is supposed to be a continuous process or at least a work in progress just like the efforts taken by orts taken by DuPont and Microsoft unlike the BP are pursuing. As fresh social issues crop up, it would be in a business’ best interests to undertake paths that both help out and update consumers concerning the state that exists in the world. At the end of the day it would not matter whether this corporation’s involvement is aimed at increment of utility prices and lessening resource stock accumulation, to attract new financiers/investors, or for the reason that the company’s owner(s) have an idealistic worldview are of little importance. The important aspect would be in understanding that by increasing its undertakings in the wellbeing of a consumer, a community/ society, or the environment, a business takes on real responsibilities. In addition, by expanding its fiduciary obligations to these stakeholders, a corporation piles up on the necessary amount of accountability. If corporations would voluntarily provide an annual social responsibility report would be a proper gesture of transparency on its part and would be in the best interest of the stakeholders. With the increasing expectations from the stakeholders, it does not mean that profit-making entities ought to shoulder the brunt of the social responsibility; public institutions and consumers could equally take their part through rule enforcement and joint action, respectively. However, corporate entities remain in a unique position in changing the condition of the market through responsible practices. This way business can easily change to better achievement of global sustainability as well as improving the quality of products available. References Berger, I., Cunningham, P and Drumwright, M 2007, “Mainstreaming corporate and social responsibility: developing markets for virtue,” California Management Review, vol. 49, no. 4, p. 132-157. Berman, S., Wicks, A., Kotha, S and Jones, T 1999, “Does stakeholder orientation matter? The relationship between stakeholder management models and firm financial performance,” Academy of Management Journal, vol. 42, no. 5, p. 490-495. Bunchua, K 1995, Foundation of Professional and Business Ethics, Bangkok, Assumption University Press. Jennifer, C., Chen, M. & Roberts, R 2008, “Corporate Charitable Contributions: A Corporate Social Performance or Legitimacy Strategy?” Journal of Business Ethics, p. 131-144. Lee, M 2008, “A review of the theories of corporate social responsibility: its evolutionary path and the road ahead”, International Journal of Management Reviews, vol. 10, no. 1, p. 53–73. Margolis, J and Walsh, J 2003, “Misery loves companies: Rethinking social initiatives by business,” Administrative Science Quarterly, vol. 48, no. 2, pp. 268–305. O’Sullivan, K 2006, “Virtue rewarded: companies are suddenly discovering the profit potential of social responsibility.” CFO, October, pp. 47–52. Porter, M & Kramer, M 2006, Making a Real Difference, Harvard, Harvard Business Review. Porter, M and Kramer, M 2006, “Strategy & society: the link between competitive advantage and corporate social responsibility,” Harvard Business Review, vol. 84, pp. 78–92. Portney, P 2008, The (Not So) New Corporate Social Responsibility: An Empirical Perspective, 2 Rev. Envtl. Econ. Pol’y 261. Seifert, B and Bartkus, R 2003, “Comparing Big Givers and Small Givers: Financial Correlates of Corporate Philanthropy,” Journal of Business Ethics, vol. 45, no. 3, p.195-211. Smith, T 2005, “Institutional and social investors find common ground”, Journal of Investing, vol. 14, no. 3, p. 57–65. Sorell, T and Hendry, J 1995, Business Ethics. 2nd Ed, Oxford OX2 8DP, Butterworth-Heinemann. Weiss, W 1994, Business Ethics: A Managerial Stakeholder Approach Belmont, London, Wadsworth Publishing Company. Wheeler, C., Colbert, B and Freeman, R 2003, “Focusing on Value: Reconciling Corporate Social Responsibility, Sustainability and a Stakeholder Approach in a Network World.” Journal of General Management, vol. 28, no. 3, p. 1-28. Zadek, S 2000, Doing Good and Doing Well: Making the Business Case for Corporate Citizenship. New York: The Conference Board Research Report, 1282-00-RR. Read More