Business

CASE 1 : BUSINESS - Public or Profit?

Indian big business firms, such as Reliance, TISCO, L&T, Grasim, ITC etc., are admired for their size and industrial muscle. In 1993, Reliance ranked second in the super 100 corporate bodies in India. Production of goods and services by such industrial giants has led to better jobs, which in turn have raised standard of living of the people. Not only the business has raised the incomes but also, while competing for profits, it has contributed to the development of industrial climate.

Of course, the large growth of business in India has produced some undesirable side effects. For example, social costs are imposed when wastes are dumped into the air and water; or when the earth is defaced by strip mining. In addition there is a tendency for power to become over centralized in the hands of giant corporations. Because of the increasing number of mergers and takeovers in the past few years, moreover, some people fear big business power and are skeptical and distrustful of corporate India. These people feel that business is profit-mad and will stop at nothing in its pursuit of money. They feel that business is not working for the public good; instead, business seeks only to maximize profits.

Is profit maximization the serious problem that some think it to, be? Is there another side of the story?-

According to Professor Milton Friedman, "Business has one and only one social responsibility-to make profits (so long as it stays within legal and moral rules of the Game established by society). Few trends could so thoroughly undermine the very foundations of our free society as acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible".'

Why does Friedman feel that the public good is served better if a business focuses on profit maximization that if business focuses instead on social responsibility?

In order to maximize profits, business must...