Social Responsibility of Business Is To Increase Its ProfitsMilton Friedman • For Market to Be Free It Must Be Open (Competition without deception or fraud) • Corporation is an artificial person therefore cannot have responsibility • CEO acts as an agent not a principal
The primary function of the Executive is creation of wealth for stockholders, employees, and customers • CEO is responsible to owners • CEO who spends money on socially responsible activities • Spends stockholders dividend • Spends employees wages • Spends customers money
If A CEO Acts on Social Objectives • They need to be elected • They need to become expert in public policy • A market when everyone acts in own self interests keep other people’s action in check • The market forces conformity to the will of society
TEST ONE Page 1 Through 159
CRITICAL QUESTION? Will Society Pay a Premium to Socially Responsible Firms? If So How Much?
Can Socially Responsible Firms Survive in a Competitive Environment?Robert H. Frank • Response to Milton Friedman • Evolutionary Biology • Higher payoff at certain times for altruism • Commitment when may not be viewed as serving self interest • Will act altruistically if perceive other person will • Over time altruism pays
Reasons Socially Responsible Firms Prosper • Able to solve shirking problem with employees because of trust • Able to solve customer problems • Avoid Subcontractor Holdups, Assure Quality, and Maintain Confidentiality • Attract Customers • Attract Employees
CRITICAL QUESTION Why Are American Managers Unable or Unwilling to Discuss Ethical Behavior in the Workplace?
Moral Muteness of ManagersFredrick B. Bird and James A. Waters • “There is a disinclination of American business people to admit they acted altruistically even if they did” Alex de Tocqueville (1800) • Norms: • Standards of behavior that are sufficiently compelling and authoritative that people feel they must either comply with them, make a show of complying with them, or offer good reason why not
MORAL NORMS • Moral norms are established through “moral expression.” This creates reality in the organization. • Quadrants of moral action and speech • Talk about moral behave morally • Talk about morals but behave immorally (moral backsliding, moral fatigue, hypocrisy) • Don’t talk about moral behavior and don’t behave morally • Act morally but do not talk
CAUSES FOR MORAL MUTENESS • THREAT TO ORGANIZATIONAL HARMONY • Whistle blowing, lack of candid performance appraisals, creates finger pointing • THREAT TO EFFICIENCY • Takes away from problem solving discussion • Moral analysis doesn’t solve problems • Removes flexible, informal and amendable relationships (rigidity, rules, and regulations) • THREAT TO IMAGE AND POWER • Viewed as idealistic and utopian. May reveal “ethical illiteracy”
CONSEQUENCES • Moral Amnesia - • Creates the caricature that management is moral • Narrowed Conception of Morality • Maintain neutrality by “stonewalling” moral discussion • Neglect of Abuses • Organization will not recognize and deal with problems • Decreased Authority of Moral Standards • Lack of dialogue creates lack of support of moral behavior
HOW TO FIX THE PROBLEM • Create environment that legitimizes dissent • Remove blame, criticism and punishment for expression of views. • Teach people how to dissent • Teach people to incorporate moral discussion into regular expressions and arguments