The Friedman View of Corporate Social Responsibility - Coursework Example

Corporate Responsibility Student’s Name: Course Code: Tutor’s Name: Date of Submission: Introduction Corporate social responsibility (CSR) can be viewed as the process that aims to embrace company’s actions responsibility as well as encourage a positive impact through its activities on the employees, stakeholders, environment and consumers among others (Smith 2008) slide 9. In this case therefore, it is vital to note the inimitable role borne by the pharmaceutical industry is one of its kind in terms of duality of the roles it is meant to play, developing and distributing life saving products in a profit making model. Concerns about the safety of products have resulted in a high level of regulation of the sector to ensure utmost ethical standards (Wood 1991). Talking points often emerge from these two seemingly two conflicting mandates coupled with the giant size, financial strength and influence wielded by these companies. Luckily, as these multinationals grow public awareness of businesses’ role to better the society they operate on has equally grown. Despite heavy criticism, this sector has managed to participate actively in Corporate Social Responsibility (CSR) activities. This report will explain and evaluate the broad maximal view of CSR, explanation of the socioeconomic view of CSR including the moral minimum and affirmative duty to prevent harm within Kew Garden Principles and finally, the explanation and evaluation of the case in relation to Milton Friedman’s view of CSR. The Friedman view of Corporate Social Responsibility (Narrow View of CSR) Friedman opened a debate that still continues to date after his article for New York Magazine claiming that the core role of businesses is to make profits slide 14. It sounded rather insensitive to all those who perhaps depended on companies as employees and beneficiaries of charitable activities by businesses at the time (Glassdoor 2013). Nevertheless, there was a critical point he made that CSR activities could distract companies from their core activities and turn them into non-profit making entities which only make enough money to survive rather than grow (Friedman 1970) slide 14-18. In the context of pharmaceuticals, a company that seeks too much public good today risk ignoring research and development of tomorrow’s solutions. This point is often ignored by critics of Friedman’s article but Friedman had a point. Secondly, there is a risk in letting pharmaceuticals deviate too much from their core mandate and it stems from their size of annual turnover (Friedman 1970). A large pharmaceutical could easily turn into a political organization which could even hold people for ransom owing to the sensitivity of their activities. Regulations are for that reason of importance paramount in the sector (Smith 2008). Milton Friedman in the same article (1970) claimed that the core social responsibility is to make profits but in an honest manner slide 14-18. To Friedman, a business that was not involved in fraud could be regarded as socially responsible. The inherent responsibility on pharmaceuticals therefore is to guarantee the best quality possible for their products and reasonable pricing for the same. It is therefore sickening to note the kind of insane profit margins made by the pharmaceuticals on drugs while people in Africa are dying since they cannot afford them. While patents are important in guarding intellectual property and ensuring that inventors enjoy their reward for years of research, they are prone to misuse if the proper regulations are not in place. Friedman was a classical economist who believed in leading industries be. However, there is a contradiction between the doctrine of honesty and abstinence from fraud by pharmaceuticals and their pricing of drugs. Markups of up to 30,000 percent on prescription drugs over their cost of ingredients are far from reasonable (Miltenberg 2013). Perhaps the time taken to develop them is a contributing factor to the high pricing but followers of Kew Garden Principles would beg to differ. Friedman (1970) used the words ‘rule of the game’ to mean that businesses were within their right to operate freely so long as there was no deception in the quality of products, advertising and all other matters. However, it would be safe to say that the rules have changed a bit (Watrick &Cochran 1985). Society’s expectations of the role of businesses have changed as the profits of companies increase. Businesses today are expected to play a role to better the environment, workers' welfare as well as be aware of the possible dangers their products could pose to consumer and avoid such from happening through labeling and other after-sale services. The KGP view of CSR (Socioeconomic View) The Kew Garden Principles (KGP) view of Social Responsibility of pharmaceutical companies could be summarized by simply highlighting the resources, and proximity of these companies to health problems around them. As earlier mentioned, the role of pharmaceuticals is dual but their primary role is provision of drugs to not only the willing and able buyers but everyone who is in need (Solomon, 1992). The resources controlled by these companies are enough to do that in situations where they are the last resort for patients in poor countries (Watrick & Cochran 1985). It would be morally wrong for these companies watch people die for lack of the very drugs they are meant to provide. In some European countries, citizens who are in a position to help others in dire situations are expected by law to do so if the situation is such that it does not jeopardize their safety (Smith 2008). The citizens must also be in a position to help and they are the last resort for the victim. Failure to do so is an offense punishable by a fine. It is therefore possible to inculcate a caring culture despite the fact most countries are capitalists. Pharmaceuticals would not jeopardize their immediate future by giving and subsidizing drugs for poor patients. If anything, Smith (2008) argues that it serves to secure their long term future in the long term through a positive image. Milton Friedman (1970) might have argued that corporations are artificial and not human beings and as such have no corporate responsibility. However, their managers cannot plead in the same manner (Watrick &Cochran 1985). There exists an agency relationship between shareholders and managers of corporations where the latter is supposed to act in the best interests of the former. CSR activities involves cost, time and resources but morality too has weight in matters of life and death. Company executives are expected to strike a balance between the two paths of action which are often seen as conflicting. Adam Smith however noted that the long term benefits reaped from engaging in CSR far offset the costs involved (Kitzmuler 2010). The Broader Maximal view of CSR The broader society expects that business conduct operations in a manner that maximizes social benefit slide 48. This in principle contradicts the capitalist view of how business should be carried out. Pharmaceuticals would thus be expected to demonstrate concern for society in matters to do with pricing and distribution of drugs. In addition, there would be nothing such as necessary evils. A necessary evil would mean things such as acceptable levels of pollution. This obviously sounds impossible in a capitalist society but perhaps a critical look at a giant in the pharmaceutical world-Pfizer would shed more light (Kitzmuler 2010). The disagreements between the broader society and the narrow view of CSR represents unresolved disputes in the understanding of CSR roles of corporations. Corporations with enormous economic power and the society expects that power to bring with it equally big responsibility (Carroll, 2000). That is the root of the broader society view on CSR. The interrelation between the activities and the society around them is undeniable and thus a responsibility is put on corporations to reciprocate the goodwill of the people who let the business operate peacefully in their community. Pfizer’s CSR activities Like any other pharmaceutical, Pfizer prides itself in providing medical solutions to the needs of the world. It is clear from the onset that they consider drug provision as the major social responsibility they have as a pharmaceutical. Their C.E.O points out 4 angles of pursuing responsibility to the world; care of their immediate community, the world at large, the environment and finally and perhaps most eye-catching, their stakeholders (Pfizer 2013). Let us pursue that further in view of the fact that Friedman insisted that businesses owe the most loyalty to the stakeholders. In that responsibility report of 2011, the C.E.O talks about the importance of sustainability as part of their CSR duty. The various strategic partnerships with world governments and foundations of billionaires such as Bill and Mellissa Gates are clear signals. The question then arises on the rationale behind the partnerships which are said to put money into research for the cure of diseases in Africa. After years of research, will the drug be patented and sold for markups of up to 5,000%? (Milternberg 2013). This is not mentioned in that report. The issue of the motivation behind CSR activities is discussed further later in this paper. Pfizer scores quite highly in terms of benevolence. It has in place a robust mechanism of ensuring that people in need actually access drugs. A savings plan is operational that helps American citizens get drugs at a cheaper price while in grim situations, Pfizer actually gives drugs for free (Pfizer 2013). Therefore, in terms of a societal view, Pfizer gets the nod for exhibiting a greater level of benevolence. One gaping hole in Pfizer’s CSR activities is the absence of employee welfare programs in their CSR report. Other companies would obviously put out the employees’ benefits as social proof or testament to their mindfulness for staff and their families’ well being. Is it an honest omission or non existence at all? As Friedman stated, sometimes engaging in CSR activities may distract companies from their duty to those within-employees and stakeholders (Smith 2008). In 2008, Pfizer which is the largest drug maker in the world was forced to fork out 975,000 dollars after it emerged that they had violated anti-pollution laws at one of their firms (New Jersey News 2013). Conclusion In conclusion, it is important to recognize that provision is itself a great deed in furthering greater societal good. Demonizing pharmaceuticals is akin to cutting a hand that feeds you (Wood 1991). Their innovations over the last century have helped raise life expectancy levels in most countries including the United States from 47 to 78. Any person who understands finance understands the complexity of the agency relationship between shareholders and business owners. Expectations of the world on the role of business in society have changed as compared to 1970 and managers must interpret them to the benefit of their principals-shareholders. As Adam Smith contended, the long-term benefits of CSR outweigh the costs involved. 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