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Social responsibility
1)Milton Friedman’s approach:
Friedman argued that a company should have no social responsibility to the public or society because its only concern is to increase profits for itself and for its shareholders. He states that when companies concern themselves with the community rather than focusing on profits, it leads to totalitarianism. A corporation is an artificial person and therefore cannot be socially responsible.
The pros of friedman’s concept:
1) Reduce profits in short run.
2) Possibility of discord with shareholders.
3) Increase cost of products.
The cons of friedman’s concept :
1) Lost opportunity to build goodwill.
2) Hurt’s corporate image.
3) Create cognitive problems.
The idea of the stockholder theory does not matches with the idea of corporate social responsibility at the cost of the stakeholder. Some may argue that goods provided to society in a time of need builds further allegiance to a corporation.
2) Freeman’s approach:
His theory views that both the stockholders and stakeholders have a right to demand certain actions from management because all have a vested stake in the corporation.Freeman’s points are given below:
1) Freeman supports the names and faces approach. The company must accept to negotiate with stake holders.
2) Freeman considers that there must be no absolute decision principles. The company must accept to challenge each of its opinions, in order to really take its stakeholders' needs into account. Company should ask for relevance.
3) Freeman believes that an agreement is always possible. If there are quarrels about interests between stakeholders, the company must not choose one over the other but must find a compromise, a third way which will satisfy both interests. Therefore CSR encourages innovation because it opens the door to a world of possibilities and ideas.
1)Milton Friedman’s approach:
Friedman argued that a company should have no social responsibility to the public or society because its only concern is to increase profits for itself and for its shareholders. He states that when companies concern themselves with the community rather than focusing on profits, it leads to totalitarianism. A corporation is an artificial person and therefore cannot be socially responsible.
The pros of friedman’s concept:
1) Reduce profits in short run.
2) Possibility of discord with shareholders.
3) Increase cost of products.
The cons of friedman’s concept :
1) Lost opportunity to build goodwill.
2) Hurt’s corporate image.
3) Create cognitive problems.
The idea of the stockholder theory does not matches with the idea of corporate social responsibility at the cost of the stakeholder. Some may argue that goods provided to society in a time of need builds further allegiance to a corporation.
2) Freeman’s approach:
His theory views that both the stockholders and stakeholders have a right to demand certain actions from management because all have a vested stake in the corporation.Freeman’s points are given below:
1) Freeman supports the names and faces approach. The company must accept to negotiate with stake holders.
2) Freeman considers that there must be no absolute decision principles. The company must accept to challenge each of its opinions, in order to really take its stakeholders' needs into account. Company should ask for relevance.
3) Freeman believes that an agreement is always possible. If there are quarrels about interests between stakeholders, the company must not choose one over the other but must find a compromise, a third way which will satisfy both interests. Therefore CSR encourages innovation because it opens the door to a world of possibilities and ideas.