Scenario: Company X, A Multinational Manufacturing Firm

La 1scenariocompany X A Multinational Manufacturing Company Based I

Scenario: Company X, a multinational manufacturing company based in the US, produces and sells boxed cereals. X grows some of the grain used in its cereals, and buys the other ingredients for its products from suppliers in the US and overseas. X has an existing Corporate Social Responsibility (CSR) program called Breakfast First through which it donates cereal products to homeless shelters, and to the Red Cross for distribution to areas where needed; . X is considering spending even more money to create one or two new CSR programs. Assume the role of Milton Friedman addressing top management and the Board of Directors for Company X.

Friedman’s role is to recommend against the new CSR programs for X; he must explain and justify his theory that the “business of business is business…†and the primary focus of a business is maximizing profits is also ethical. You might want to write your response in the form of a memorandum to management and the Board of Directors from Friedman OR simply write your response in an essay/speech type format.

Paper For Above instruction

In the realm of corporate responsibility, the leadership of Company X faces a critical decision regarding the expansion of social initiatives through new CSR programs. As Milton Friedman, I firmly argue that the primary and most ethical focus of a corporation is to maximize shareholder value within the boundaries of legal and ethical standards. Additional CSR activities, though seemingly virtuous, often distract from this core objective and complicate the role of a business in society.

Friedman’s economic perspective emphasizes that the main responsibility of business is to generate profits for its owners and shareholders. Engaging in expansive CSR efforts, especially of significant financial outlay, risks diverting resources from productive activities that create economic value. When a firm spends money on social programs not directly linked to its business objectives, it essentially transfers profits from shareholders to others under the guise of social good. This approach raises ethical concerns because it conflates corporate purpose with social activism, which Friedman considers outside the scope of corporate responsibilities.

Furthermore, Friedman asserts that businesses do not possess social responsibilities in the broader societal sense. Instead, their responsibilities are confined to obeying the law and engaging in open and free competition without deception or fraud. When a company dedicates resources to CSR initiatives, it may be seen as using shareholders' funds to pursue social goals that should rightly fall under the domain of government or civil society. This blurs the separation of powers and can undermine the principles of a free-market economy.

Critics of CSR often argue that corporations have ethical obligations beyond profit maximization, including contributing to social welfare. While such intentions are commendable, Friedman contends that voluntarily engaging in social activism reduces profits unnecessarily and imposes decisions that may not align with the interests of shareholders or the market. This proliferation of social programs can lead to an erosion of clear corporate purpose, ultimately harming the long-term viability of the firm.

Additionally, CSR initiatives of the magnitude contemplated by X could create a precedent that encourages other companies to follow suit in a competitive landscape, driving costs upward and possibly leading to inefficient resource allocation. If every company invests heavily in social programs, the firms’ focus on operational excellence might diminish, ultimately harming economic productivity and consumer welfare—outcomes contrary to the very social benefits CSR aims to promote.

To illustrate, the existing Breakfast First program already demonstrates a socially responsible effort that aligns with the company’s core mission—producing and providing nutritious products. Expanding CSR beyond this scope risks diluting their focus and posing questions about where corporate responsibility ends and social responsibility begins. It is more ethical and efficient for society to rely on government and civic institutions to address broader social issues while businesses concentrate on their economic roles.

In conclusion, Friedman advises Company X’s management and board to reconsider the pursuit of additional CSR programs that do not directly contribute to the company’s profit generation. While social responsibility is important, it should be balanced with the fundamental principle that the primary responsibility of business is to maximize profits within the legal framework, thereby fostering economic growth and societal wealth in the long run.

References

• Friedman, M. (1970). The Social Responsibility of Business is to Increase its Profits. New York Times Magazine.
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• Friedman, M. (1970). The Social Responsibility of Business is to Increase its Profits. New York Times Magazine.
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• Bowen, H. R. (1953). Social Responsibilities of the Businessman. University of Iowa Press.