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Matias Bravo
Dr. Joe Cotter
Business Ethics
November 23, 2014
Business Ethics Case Analysis
Milton Friedman in his article "The social responsibility of business is to increase its
profit" published on September 13, 1970 in The New York Times Magazine develops its whole
theory. In this article, Friedman explains and analyzes the steps that lead him to that claim,
among which include: who can take responsibility for the society in general; who holds
responsibility for the company and what kind of responsibilities will be; finally, he analyzes the
social responsibility of the company from a political point of view, based on its principles and
consequences.
Milton Friedman believes that the social responsibility of business is to increase profit in
compliance with the law and ethical custom. The reasons are referred to, on one hand the theory
of agency, and other tax effect theory.
The last theory consists that the amount of money used to carry out the inherent actions to
its social responsibility, came either to distribute a lower dividend to shareholders, to increase the
selling price, or to reduce the wages of their workers. Whereby a tax equivalent effect occurs
because money is deducted from some social group, and that collected and distributed efforts
does not belong to the business, but to the government.

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Now, in my opinion, Friedman was wrong in having an overly narrow view of what a
company is. First, Friedman was wrong to think that shareholders are the owners of the company,
and from there to conclude that all the decisions that managers make, must be exclusively
directed to satisfy the interests of shareholders. The shareholders are the owners of financial
capital, and as such have a number of rights and obligations; but to think that by the fact of
owning the financial capital, I own the company, is to mistake the whole part. In the company
there are others capitals, with rights and duties, to which the managers also must respond.
Secondly, it is wrong to think that the benefit is a reliable sign that the company is doing
things right. When a company has no profit is a clear sign that something is not right. But the
converse is not true: I can make a profit and still be doing things wrong, sometimes acting well
within the law and custom. I do not think managers should set only on the income statement to
determine if things are done well in the business or not.
Thirdly, Friedman was wrong to assume that the chain of creation of value in the
company was linear and simple. It is not that "up to here I generate value, and from here I
distribute it," but there are a number of synergies that makes everything relates to everything.
Today it is well accepted that these actions have an impact on the reputation of the company, in
creating brand value, and as such fall within which Friedman defines as management
responsibilities. In today's terms, it is what is called the "business case" for CSR, which means
conducting CSR actions for purely economic reasons.
But besides the "business case," there is the "moral case", and this is also wrong. In his
view, the discourse of CSR involved changing the market mechanisms for political mechanisms,
and consequently, it implied the emergence of a socialist vision in the world of business. Indeed,
today we can also meet with bids that from both, the business environment and other

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stakeholders (NGOs, trade unions, media) see CSR as a weapon to keep alive the debate between
supporters and opponents of the dominant economic system. It would be a shame to convert CSR
in this, when CSR is essentially an opportunity to question a business paradigm that both sides
accept uncritically. From this paradigm of the company, as a more or less perfect gear that makes
money, Friedman's position would be perfectly consistent and acceptable. However, the idea is to
precisely question this paradigm, and open up a view of the much more complex and
comprehensive enterprise.
I think that if we understand the company as a community of persons, each one with their
own interests, they can put their effort to contribute to the achievement of a common objective of
improving the communities in which they operate, in a work environment that promotes
development of those involved in this project, we will begin to understand that the social
responsibility of business goes beyond what Friedman proposed.
A company whos product do not appeal to me but the company as a whole does a very
good job acting on CSR is Coca-Cola. In 2010 they introduced a program to promote
entrepreneurship for young women. Dubbed as 5 x 20, the program aims to make five million
women in the developing world to integrate, until 2020, the company's business in the areas of
distribution and as local bottlers of its products. That investment in female labor is having a
multiplier effect that is resulting not only in higher incomes but also more labor to the business
of the company. As well as healthier families and better educated and, possibly, even more
prosperous.
Ahmet Muhtar Kent, Chairman and CEO of The Coca-Cola Company, said during a
conference in 2013 Since the launch of our 2020 Vision at the beginning of 2010, weve
increased daily servings by more than 225 million, also he said, We have lifted global volume

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and value share to the highest levels since 2003, and more than $48 billion have been added to
the Coca-Cola Co.s market capitalization
Also, the company is very concerned about the Code of Business Conduct, and specifies
on their website: The Companys commitment to do business free of any form of corruption is
foundational to our core compliance policies and governance framework. Our Code of Business
Conduct defines these expectations. All employees receive training on these requirements when
hired and regularly throughout their employment. In addition, employees who interact with
government officials receive detailed training on our anti-bribery policy. We offer both online
and in-person training. Our Code of Business Conduct for Suppliers also includes similar
expectations regarding bribery for business partners.
In conclusion, there have been more than forty years since the publication of the article
by Friedman and the debate remains open. Largely because the dominant paradigm has proven to
be more efficient than others, but largely also because we have not dared to go "outside the box"
and think about the company in an innovative way. CSR, beyond the more or less successful
initiatives, gives us the opportunity to do so.

Bibliography:

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Th. "Codigo De Conducta Empresarial." Cdigo De Conducta Empresarial (n.d.): n. pag.

The Coca-Cola Company, Aug. 2012. Web.

"Code of Business Conduct - The Coca-Cola Company." The Coca-Cola Company. N.p.,

n.d. Web. 18 Nov. 2014.

"#5by20." The Coca-Cola Company. N.p., n.d. Web. 18 Nov. 2014.
Jenkins, Beth, Kara Valikai, and Piya Baptista. "The Coca-Cola Companys 5by20
Initiative." The Coca-Cola Companys 5by20 Initiative (n.d.): n. pag. Harvard Kennedy

School. Web.
Schroeder, Eric. "Coca-Cola Cracking the Code to Achieve Sustainable Growth | Food
Business News." Coca-Cola Cracking the Code to Achieve Sustainable Growth | Food

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"Las Empresas Integran La RSC a Su Actividad Diaria - Universia
Knowledge@Wharton." Universia Knowledge@Wharton. Wharton University of

Pennsylvania, 13 June 2013. Web. 18 Nov. 2014.

Friedman, John. "Milton Friedman Was Wrong About Corporate Social
Responsibility." The Huffington Post. TheHuffingtonPost.com, 12 June 2013. Web. 17

Nov. 2014.
Krause, Martin. "Milton Friedman Escandaliza: La Responsabilidad Social De Los
Empresarios Es Aumentar Sus Ganancias." Blog El Foro Y El Bazar. N.p., 30 June 2014.

Web. 18 Nov. 2014.

Coleman, Thomas S. "Becker Friedman Institutefor Research in EconomicsThe
University of Chicago." Corporate Social Responsibilty: Friedman's View. The

University of Chicago, 16 Aug. 2013. Web. 18 Nov. 2014.

Friedman, John. "Milton Friedman Was Wrong About Corporate Social
Responsibility." The Huffington Post. TheHuffingtonPost.com, 12 June 2013. Web. 20

Nov. 2014.
Hennessey, Ray. "Why Milton Friedman Could Love Social
Entrepreneurship." Entrepreneur. N.p., 16 Sept. 2013. Web. 20 Nov. 2014.