Friedman’s view of individual freedom in relation to the stakeholder’s theory contract theory
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Friedman was an American economist and a believer in the free market system; he believes a sole corporate responsibility was to maximize profits for its shareholders whole had the individual’s freedom to utilize their profit share as they so wished. Furthermore, he believed the company could work best with no external interventions, such as government regulations, thus this famous shareholder theory of capitalism. However, this theory has been criticized for violating consumers’ rights and has led to other theories, such as stakeholder theories that foster corporate social responsibility and inclusivity. Today, it is essential that corporates adhere to their corporate social responsibility towards the public. This paper seeks to expound on Friedman’s view on individual freedom concerning stakeholder theory and social contract theory.
According to Friedman’s, the shareholders’ theory focuses on the company and its shareholders where the company is compelled to maximize on making n profits for its growth and the satisfaction of its stakeholders; however, the stakeholder’ theory focuses on not only the company stakeholders but inclusive of the company it’s surrounding. While the shareholders’ theory focuses more on individual freedom, the social contract views the corporate environment as one big ecosystem whereby all the parties’ needs need to be satisfied to enhance company success and longevity. Friedman’s deontological argument is more to the profit maximization rather than corporate social responsibility. He argues that those in the corporations’ management position are fiduciaries of the stakeholder; thus, their only reason is to maximize profits while satisfying the stockholders’ expectations.
Therefore, those in management are likely to minimize profits if they engage in other unrelated activities that do not project profit maximization. His view on capitalism and freedom describes the company not having any obligation to the public since its only priority profit maximization; thus, the stakeholders should on any form of corporate under their own decision. However, Friedman’s views on corporate social responsibility have been put under scrutiny and often referred to as being incoherent and lowkey unethical for those in leadership. Friedman emphasizes individual freedom whereby those in leadership, for essence, manager share responsible for fulfilling stakeholders’ expectations coupled with the deontological norms. His approaches to stakeholder theory. The shareholder’s model is more inclined to privatize their gains, and in return, externalizing losses.
Notably, Friedman advocated for businesses to engage in open and free competition without engaging in fraud in the process of making profits. Additionally, they should follow the law and customs outline to buy society but not be responsible for their well-being. Friedman vies corporate social responsibility as subversive and socialistic he feels CSR allows for the extension of power to the state or society that will eland to the redistribution of wealth and goes against his norms of the property being social call and whatever one does iht it is his or her responsibility more than being his or her real responsibility of another party could be the state or society. In is vie the acts of social responsibility, firstly, will lessen the profits of a business for essence through acts of corporate charity being one of the social responsibilities. Secondly, CSR means that those in the leadership position will be more committed to social responsibility and in violating the contractual obligations of being more social responsibility more than doing what they are hired to do in the corporations,
To make his concept acceptable, Friedman must distance his concept from the limited liability doctrine and accept the social reusability embedded in corporate that they have to fulfill to express consistency and modify his business’s shareholders’ model. Stakeholders’ theory differs from Friedman’s. Corporates should be brought to account by the law to repair any damages caused by their entities in today’s world. Friedman’s proactive theory that argued the importance of profits as the real deal in business manifest itself in today’s economic realm as business people go the extra mile to maximize profits at the expense of society; with the enacted of las and police, they have come in handy to regulate the performance of the company and ensure that they fulfill their social responsibility.
Friedman’s view of corporate social responsibility belittles the ethical standards for leadership, emphasizing individual freedom. On the other hand, the stakeholder theory, according to Edward freeman, emphasizes son the positivity of transparency of the people around the company when considering their needs and interests. These include the employees, suppliers, customers, future potential customers, company owners, government entities involving taxation and regulation and even their competitors, and collectively. Additionally, consider building public relations among stakeholders, building local parks for the neighbor, or cleaning the environment. This will eventually be resulting in a long-haul success. Stakeholder’s theory focuses on the productivity of the CSR.
Therefore, corporates responsibility has an obligation beyond just generating profits by including society by complying with the economic entities, ethical, philanthropic obligations, and legal aspects. This will facilitate sustainability and profits in the long overhaul. Proponents of the stakeholder’s theory criticized Friedman shareholders theory claiming that the doctrine was insisted in matters of corporate social responsibility as the shareholder’s theory as more focused on the individual freedom ore that taking ingot account the other people that are affected by the decisions and means through which they made the profits. Friedman failed thought for motive to individual’s which focuses on profit beyond the ethics. In his argument, Friedman claimed that a corporation was not a person, thus is not liable for responsibility; however, for the stakeholder’s theory, corporations have ethical legal and moral responsibilities to fulfill. Therefore, corporations should conform to society’s basic rule and the embodied laws while considering the ethics that define corporate social responsibility.
Conclusion
Milton Friedman’s doctrine believes the sole responsibility for a corporation is to maximize profits, which has since been criticized as not catering to the people around. The stakeholder’s theory is focused on the outside, as they believe in pleasing the outside will bring more returns on the inside. Therefore, stakeholder’s theory advocates for corporate social responsibility that as far from what freedman championed. Today, the corporate field has numerous conflicts as dilemmas organizations from corporations, and external factors attempt to win in the very competitive business field. Proponents of the stakeholder’s theory criticized Friedman shareholders theory claiming that the doctrine was insisted in matters of corporate social responsibility as the shareholder’s theory as more focused on the individual freedom ore that taking ingot account the other people that are affected by the decisions and means through which they made the profits.
References
Francés-Gómez, P. (2018). Social contract theories. In The Routledge Companion to Business Ethics (pp. 96-112). Routledge.
Neiman, P. (2013). A social contract for international business ethics. Journal of Business Ethics, 114(1), 75-90.
Johannes Jahn & Rolf Brühl, 2018. “How Friedman’s View on Individual Freedom Relates to Stakeholder Theory and Social Contract Theory,” Journal of Business Ethics, Springer, vol. 153(1), pages 41-52,
