New directions in corporate social responsibility

Abstract

Theorists must consider reciprocity and moral pluralism if they are to help managers practice social responsibility. A mong phim losophers writing in business ethics, something of a consensus has emerged in the past ten years regarding the social responsibility of business. Mthough these philosophers were critical of the classical view of Milton Friedman (the purpose of the corporation is to make profits for stockholders), the consensus view had much in common with Friedman, so much so that I referred to my own statement of this position as the neoclassical view of corporate responsibility (Bowie 1982). The heart of the neoclassical view was that the corporation was to make a profit while avoiding inflicting harm. In other formulations the corporation was to make a profit while (1) honoring the moral minimum or (2) respecting individual rights and justice. Tom Donaldson arrived at a similar neoclassical description of the purpose of the corporation by arguing that such a view is derived from the social contract that business has with society (1989). The stakeholder theory made popular by Ed Freeman does seem to represent a major advance over the classical view (Freeman 1984; Evan and Freeman 1988). It might seem inappropriate to refer to the stakeholder position as neoclassical. Rather than argue that the job of the manager was to maximize profits for stockholders, Freeman argued that the manager 's task was to protect and promote the rights of the various corporate stakeholders. Stakeholders were defined by Freeman as members of groups whose existence was necessary for the survival of the f i rm--stockholders, employees, customers, supphers, the local community, and managers themselves. Despite the vast increase in scope of managerial obligations, a Friedmanite might try to bring stakeholder theory under his or her umbrella. Of course, the managers must worry about the rights and interests of the other corporate stakeholders. If you don' t look after them, these other stakeholders will not be as productive and profits will fall. A good manager is concerned with all stakeholders while increasing profits for stockholders. In the Friedmanite view, the stakeholder theorist does not give us an alternative theory of social responsibility; rather, he or she reminds us how an enlightened Friedmanite, as opposed to an unenlightened one, is supposed to manage. The unenlightened Friedmanite exploits stakeholders to increase profits. Although that strategy might succeed in the short run, the morale and hence the productivity of the other stakeholders plummets, and as a result long-run profits fall. To protect long-run profits, the enlightened manager is concerned with the health, safety, and family needs (day care) of employees, a no-question-asked return policy, stable longterm relations with suppliers, and civic activities in the local community. In this way, long-run profitability is protected or even enhanced. In the classical view, the debate between Milton Friedman and Ed Freeman is not a debate about corporate ends, but rather about corporate means to that end. Moreover, some classicists argue, the neoclassical concern with avoiding harm or honoring the moral minimum does not add anything to Friedman's theory. In Capitalism and Freedom (1962) he argues that the manager must obey the law and moral custom. The quotation goes like this: