Corporate profits or the greater good: Why not both?
With weather this unseasonably warm, we must ask ourselves what matters most: the relentless pursuit of profits or the greater good, even when the greater good interferes with short- and medium-term profitability? Join us as we explore the need for corporate social responsibility through the critique of Milton Friedman’s highly influential essay, "The Social Responsibility of Business Is to Increase Its Profits.”
In his landmark essay, “The Social Responsibility of Business is to Increase its Profits," Milton Friedman develops his case for an extremely conservative view of corporate social responsibility (CSR), wherein the sole social responsibility of business is to increase its profits while “conforming to the basic rules of society, both those embodied in law and those embodied in ethical custom” (Friedman). Yet this extremely conservative understanding of corporate social responsibility encounters a variety of difficulties that call into question the veracity of Friedman's position. The changing nature of ethical customs, in particular, suggests the falsity of Friedman's central thesis since these changing ethical customs reveal that we value more than just profits; we also value the preservation of other pertinent social goods, over and above the maximization of profit within the “moral bounds” of society.
Consider the evolution of the environmental movement. When Friedman wrote his most famous defense of conservative corporate social responsibility, the modern environmental movement was still in its most nascent stages. Since the 1970's, however, the environmental movement has gained dramatic, mass consumer support, with tens of millions of Americans now identifying themselves as environmentalists (Gallup). Because of this movement, our "ethical customs” have shifted from a profits-only view of corporate social responsibility to a more environmentally-conscious view of corporate social responsibilitity. We no longer view the unbridled pursuit of profits as the supreme law of economics; we acknowledge also that the environment is an important social good worthy of protection through both government- and business-driven innovation. As the public becomes increasingly alarmed by the destruction of our environment and as raw materials necessary for the manufacturing of consumer goods become ever scarcer, it is also likely that the demand for companies to behave in an environmentally-sustainable fashion will only increase, as will the expectation that companies actually satisfy this demand. As such, the corporate social responsibility of environmental sustainability (or at least closer approximations thereof) only becomes stronger with the passage of time, a reality not adequately reflected by Friedman’s now four-decade-old short essay.
At this juncture, the conservative critic may nevertheless interject that a company's newfound commitment to corporate social responsibility reflects no more than thinly veiled self-interest, with Friedman arguing that such commitment often amounts to no more than “hypocritical window-dressing” (Friedman). Yet this criticism suffers from at least two major flaws. First, it seems to presuppose that a Kantian ethical approach adequately describes a company's corporate social responsibility, when, in fact, there exist competing moral theories, some of which have enjoyed far greater kudos in recent times. A utilitarian approach, now very much in vogue, suggests that lowering environmental harm is a worthwhile endeavor, separate from the intent by which this harm reduction is achieved. Unlike the Kantian prerogative, therefore, a utilitarian approach does not require the self-abasing deference to duty central to Kant's moral theory; instead, it recommends only the reduction of suffering and the promotion of happiness, demands which can be satisfied through the minimization of environmental harm. If Friedman's criticism is to hold weight against our foregoing analysis, then, he would need to provide a) a sufficient reason for endorsing Kantian over utilitarian ethics, b) a utilitarian justification for prioritizing intent over consequences in this particular case, or c) some other reasonable resolution to the dilemma before us. But if we are inclined toward utilitarianism and we moreover find no compelling utilitarian argument to bolster Friedman's analysis, we can simply reject Friedman's criticism for its reliance on Kantianism since Friedman has failed to supply us with a satisfactory reason for endorsing Kantian over utilitarian ethics.
Second, this objection discounts the very real possibility in which a board of directors willingly supports the adoption of various corporate social responsibilities as part of their social mission. Companies, such as Whole Foods, have successfully integrated fair trade, locally produced, and less environmentally-abrasive products into their business model, only to achieve billion-dollar revenue increases every year since 2011 (Whole Foods). Granted, many products may cost more at Whole Foods than elsewhere, but the financial success of such an enterprise demonstrates that companies can exercise social responsibilities while still remaining highly profitable. Indeed, Whole Foods’ profitability largely descends from its commitment to various social responsibilities, suggesting that economic benefits often do exist for companies who choose to embrace certain corporate social responsibilities. Even if companies have entirely customers. Even if companies have entirely self-interested reasons for integrating corporate social responsibilities into their mission, corporate social responsibilities can still benefit society while satisfying their role in profit creation, as well as whatever obligations to stock- and stakeholders obtain. For these reasons, we can reject Friedman's presentation of corporate social responsibilities as antithetical to our moral principles and wealth creation, embracing at least some corporate social responsibilities as a reasonable guidepost to ethical business conduct.
Works cited
Friedman, Milton. "The Social Responsibility of Business Is to Increase Its Profits, by Milton Friedman. University of Colorado Boulder, n.d. Web. 15 Nov. 2016.
Gallup, Inc. "Americans' Identification as "Environmentalists"" Gallup.com. Gallup, 22 Apr. 2016. Web. 15 Nov. 2016.
"Whole Foods Market Inc." WFM Annual Income Statement. MarketWatch, n.d. Web. 15 Nov. 2016. <http://www.marketwatch.com/investing/stock/wfm/financials>.
