Ethics Essay

DO CORPORATIONS HAVE SOCIAL RESPONSIBILITIES?

Rutvik Pandya

250374345

2074F – Business Ethics

Prof. D. Proessel

Oct 20th 2009

Social responsibility, specifically for corporations, is a loaded term which could mean a number of different things. It also carries with it huge ethical undertones concerning fairness and equity. But the capitalist market system makes it hard to judge where exactly these ethics undertones fit in, if they do at all. This paper will reference articles by Milton Friedman, R Edward Freeman and John Boatwright will attempt to prove that corporations do not have any responsibilities beyond trying to maximize shareholder profit through fair and open competition while staying within the limits of the laws. By staying within the law, maximizing stockholder value and engaging in fair competition corporations are able to achieve many goals that would be considered “socially” responsible. The first part of this paper will examine the Stockholder theory as presented by Milton Friedman. Stockholder theory makes a strong case for itself by being the dominant model that all corporations are governed by. It simply states that the social responsibility of a corporation is to maximize its profits. Following that, the Stakeholder theory by R Edward Freeman will be analysed. The stakeholder theory is comparatively new. It claims a number of stakeholder makeup a corporation and that “profit making” is one of the goals of a corporation, but it is not the only goal. A corporation bears equal responsibility to all the stakeholder with whom it shares a direct relationship. After examining both theories it was clear that the stakeholder theory has flaws. The stockholder theory being the most prevalent and dominant will be used to critique the stakeholder theory and expose its shortcomings. The critique is based upon three main arguments. First is the argument of control and stockholder based corporate governance. Second argument addresses the issue and...