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To What Extent Does Friedman's Efficiency Perspective Provide Foundation For Responsible And Moral International Management Behaviour?

3334 words - 14 pages

To what extent does Friedman's "efficiency perspective" provide foundation for responsible and moral international management behaviour? Need we have any concern if it fails to do so? Friedman concludes his article "˜The social responsibility of business is to increase its profits' (1970), in which he explains his efficiency perspective, with the following sentence: "There is one and only one social responsibility of business -to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." To be able to draw this conclusion, Friedman set ...view middle of the document...

In the case of a free enterprise, a corporate executive is an employee of the owners of a business, with direct responsibility to his employers. The manager of a business is seen as the agent of the individuals who own the corporation or establish the eleemosynary institution, and his primary responsibility is to them. As a person, the manager may have many other responsibilities that he recognizes or assumes voluntarily, but when it comes to his capacity as an agent for the shareholders he should act according to their wishes. From Friedman's perspective, managers have no obligation to act on behalf of society if it does not maximise the value of the return to shareholders, who are then free to spend, save, or donate their returns as they see fit. (Sundaram & Black, 1995) This brings us to the second building block where Friedman says that a manager who takes social responsible actions is spending someone else's money. In the case these actions reduce shareholders' value, the manager is in fact spending their money for a general social interest. In the case where the actions raise the price to customers, he is spending the customers' money. And when his actions lower the wages of employees, the manager is spending their money. In all these cases the corporate executive is spending someone else's money for a general social interest. According to Friedman this cannot be seen as moral and responsible international management behaviour.The third building block is that Friedman does not believe that a corporate executive can discharge his alleged "social responsibilities". As an example, Friedman (1970) mentions the case in which a manager is told to contribute to fight inflation. How is the manager to know what action of his will contribute to that end? The manager might be an expert in running a business, but this does not make him an expert on inflation.Besides these building blocks, Friedman uses two limiting conditions to make the foundation for his theory complete. The first one is that Friedman assumes that there is a free market. Velasquez (1998) defines "˜free market' as follows: "Within a free market system, individual firms -each privately owned and each desirous of making a profit- make their own decisions about what they will produce and how they will produce it. Each firm then exchanges its goods with other firms and with consumers at the most advantageous price it can get. Price levels serve to coordinate production by encouraging investment in highly profitable industries and discouraging it in unprofitable ones." DesJardins and McCall (1990) add to this that "in an ideal free market resting on private property, no individual can coerce any other, all cooperation is voluntary and all parties to such cooperation benefit or they need not participate". As a result of this free market assumption, Friedman rejects government intervention. He believes that "by allowing the market to operate with only the minimal restrictions...

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