Friedman vs. Drucker, Murphy Compare and Contrast: Ethical Perspectives Jennifer Mags Social responsibility and business ethics are contentious issues widely debated by many scholars, business executives, political figures and average citizens. Three perspectives that examine social responsibility and business ethics are Peter Drucker, Milton Friedman and Patrick Murphy. Each author explores the purpose behind ethical behavior and social responsibility by stakeholders and corporations, debating on the relevance and implementation behind it. Milton Friedman – The Social Responsibility of Business is to Increase its Profits
Milton Friedman provides an article portraying the social responsibility of business.
He believes in social responsibility of business as a matter of “resources and engaging 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” (1970). He begins with explaining how a business cannot have responsibility, “only people can have responsibilities…a corporation is an artificial person and in this sense may have artificial responsibilities” (1970).
Friedman explains how it could be presumed that the individual with responsibility could be referred to as the corporate executive (1970). The corporate executives main responsibility is to “conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom” (1970). Friedman clarifies how a corporation’s social responsibility in the capacity as a businessman possibly means “that he is to act in some way that is not in the interest of his employers” (1970).
In regards to stockholders and customers, Friedman claims “the whole justification for permitting the corporate executive to be selected by the stockholders is that the executive is an agent serving the interests of his principal” (1970). In this regard the corporate executive ends up being a person in his own right with his own social responsibilities that may not follow those of the owners of the corporation (1970). Friedman argues in cases where the ethical values of the corporate executive differ from that of the business he is in turn “spending the customer’s money” (1970).
In this case the social responsibility of the executive is breached in turn making him a civil servant or public employee, rather than an employee of a private enterprise (1970). The result of this could potentially lead to a loss of both customers and employees and a decrease in company stocks and corporate profits (1970). Friedman examines the usage of conformity and its relation to social responsibility. He believes conformity is an unavoidable entity, in which he states “conformity appears unavoidable, so I do not see how one can avoid the use of the political mechanism altogether” (1970).
In a free society, Friedman claims “there is one and only one social responsibility of business – to use it 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” (1970). Peter Drucker – What is “business ethics”? Peter Drucker explores “business ethics” and the struggle with different approaches and conclusions being drawn towards business ethics (1981).
He explains business ethics and social responsibility from the moralist of the Western tradition, in which they believe “there is only one ethics, one set of rules of morality, one code, that of individual behavior in which the same rules apply to everyone alike” (1981). However, he argues certain circumstances warrant an individual to break the rules. For example, Drucker contests clemency might be granted to violators of the code under certain circumstances (1981). For example, he accepts a “poor widow who steals read to feed her starving children deserves clemency…and a more heinous offense for the bishop to have a concubine” (1981). Drucker examines casuistry, and that the Western philosophy believe “rulers, because of their responsibility, have to strike a balance between the ordinary demands of ethics which apply to them as individuals and their “social responsibility” to their subject, their kingdom – or their company”, making business ethics a close parallel to casuistry (1981).
To the Casuist, the social responsibility of the ruler is “someone whose actions have impact on others –is by itself an ethical imperative” (1981). Drucker argues the rules of ethics and social responsibility, from the perspective of casuistry, is that ethics is a cost benefit calculation “involving the demands of individual conscience and the demands of position – and that means that the “rulers” are exempt from the demands of ethics, if only their behavior can be argued to confer benefits on other people” (1981).
In regards to Drucker’s examples under casuistry and extortion, he strongly objects the new business ethics which emphasize acts viewed as immoral or illegal by private citizens somehow become immoral or illegal if done by a business organization (1981). Drucker discusses the ethics of prudence which is a major tradition of ethics in Western Culture (1981). The “Ethics of Prudence do not spell out what “right behavior is…they assume that what is right behavior is clear enough – and if there is any doubt, it is “questionable” and to be avoided” (1981).
According to “business ethics” in relation to “Ethics of Prudence”, an individual’s title does not matter, the “executive set examples, whatever the organization…they “set the tone”, “create the spirit”, “decide the values” for an organization and for the people in it…they lead or mislead” (1981). As is stated in his example of Harry Truman, a U. S. Senator, gave the advice, “Generals should never do anything that needs to be explained to a Senate Committee – there is nothing one can explain to a Senate Committee” (1981).
Drucker examines how today’s discussion of business ethics denies the idea of interdependence and ethics having equality on both the side of the business and ethics of the individual (1981). He questions whether ethics is a tool of the powerful or one-sided, with the possibility of rules being written “by those that have the position, the power, the wealth” (1981). Drucker argues that in order for business ethics to be workable and viable in society, they will have to “adopt the key concepts which have made Confucian ethics both durable and effective”, by focusing on the right behavior rather than misbehavior or wrongdoing (1981).
He further believed leaders should abide by a “clear definition of the fundamental relationship, universal and general rules of conduct; focus on right behavior rather than avoiding wrongdoing, and on behavior rather than on motives or intentions; and finally an effective organization ethic, indeed an organization ethic that deserves to be seriously considered as “ethics,” will have to define right behavior as the behavior which optimizes each party’s benefits and thus makes the relationship harmonious, constructive, and mutually beneficial” (1981).
Finally, Drucker considers in order for business ethics to work, “managers, executives, and professionals to demand of themselves that they shun behavior they would not respect in others, and instead practice behavior appropriate to the sort of person they would want to see “in the mirror in the morning”” (1981). Patrick Murphy – The Relevance of Responsibility to Ethical Business Decisions Patrick Murphy provides an article reviewing “the concept of moral responsibility in business ethics”, examining seven articles that look into the impact of ethics and responsibility within businesses (2009).
Murphy considers, “at its fundamental level, responsibility pertaining to an entity’s ability to respond to a person situation, or issue in a certain way” (2009). He goes on to say “one must be able to consciously understand the scope of these responsibilities and be able to act on them” (2009). Business ethics focuses on “corporate rather than individual responsibility because of the size and scope of the large business”, and implies a moral obligation to act on the side of the corporation (2009).
Higher levels of responsibility are necessary and required of leaders in any organization (2009). According to Murphy, there are several types of responsibility noted in each of the articles he reviewed. The responsibilities are, “legal, corporate, managerial, social, consumer, and societal” (2009). Legal responsibility should be viewed as the baseline (2009). Corporate responsibility is “a broad term including moral/ethical, social, and environmental concerns” (2009).
Within the concept of corporate is managerial responsibilities, which “encompass the usual planning, organizing, and executing, and daily and strategic activities” (2009). Consumer responsibility requires “consumers to have a responsibility to understand the products they buy and advertising they hear/see/read” (209). Finally, societal responsibility is a “notion of shared responsibility for the common good that may partially be borne by corporations, governments, and civil society organizations” (2009).
In the first article Murphy analyzes, “Scents in marketing”, he suggests that the use of scents to sell product to the customer utilizes covert object ambient scents (COAS) and is “questionable because it operates below the customer’s absolute threshold level of consciousness and appeals to consumer emotion” (2009). Murphy further contends that retailers must “exhibit greater responsibility in this area, or they will lose power” (2009). He goes onto say, by marketers “taking advantage of consumers, they are jeopardizing future relationships with these buyers” (2009).
The second article Murphy analyzes is “Religiosity effects on consumers and marketers”. Murphy examined the articles focus on responsibility and how it pertained to religion and stakeholders, finding “consumers as well as marketers/companies must display ethical behavior in the exchange relationship” (2009). It was determined that “religiosity did impact ethical behavior by consumers” (2009). Furthermore, it was believed that “individuals who practice their religious beliefs are more likely to be ethical than those who do not” (2009).
In the third article, Murphy looked into “IPO holdings”. The article compares investment banks and non-investment banks and the ethical and responsibility issues that follow. Murphy criticizes the lack of transparency among the investors by the fact that “investment banks hold over one-quarter of their IPO’s outside the fund objective” (2009). He goes onto discuss the various decisions investment banks have made that could be “labeled as ethically irresponsible from both a corporate and managerial responsibility perspective”, which could be attributed to the USA financial crisis (2009).
This last point, as Murphy argues, ties into all three dimensions of corporate responsibility – “the executives who made the decisions, the stakeholders adversely affected by them, and the impact on the broader financial health of the market” (2009). Furthermore, he contests “since the current problems go beyond the United States, a societal responsibility can also be seen in this situation” (2009). The fourth article, “commonality in codes”, Murphy examines the codes of companies.
He has noted that a minority of companies actually follow the “letter of the law” (2009). He goes onto question plagiarism within small subgroups of both large and small companies, calling “into question the notion of corporate responsibility regarding codes of ethics” (2009). He further finds concern with the larger picture, if managers are cheating on codes and the repercussions of how they are displaying business ethics and social responsibility in all other areas of the company (2009).
The fifth article, “Electronic health information exchanges”, Murphy found that the author did not outright discuss responsibility, however, he found insinuations that individuals within the medical community are “committed to the responsible collection and storage of data” (2009). However, in order for responsibility to go beyond the medical professionals, Murphy explains how responsibility must also fall onto the shoulders of the government who assume a level of corporate responsibility, as well as the customers and patients who “have a responsibility to monitor their records for accuracy and currency” (2009).
The sixth article looks into “Bribery and corruption”. In the article Murphy discusses the “legal responsibility in its assertion that companies, especially multinationals, are required to follow anti-corruption statutes” (2009). He further notes how “laws must be enforced before bribery and corruption are curbed” (2009). Murphy also points out that there was no Corporate Social Responsibility perspective addressed within the article, questioning “whether multinationals have a “social” responsibility to be more proactive in the bribery area” (2009).
In order for bribery and corruption to avoid transcending through country borders, Murphy emphasizes the need a higher level of social responsibility on behalf of corporations and governments (2009). The final, and seventh article, “Corporate governance and strategic financial reporting”, Murphy finds the message is clear, that “boards of directors have the primary responsibility for transparency or full disclosure in financial reporting” (2009). Murphy found responsibility can be linked to the article through, boards being involved with corporate strategy and in turn held responsible for it (2009).
He also notes how the expectations of boards are growing leaving them with a greater responsibility towards “executive compensation, environmental policies, and other CSR type responsibilities as well as financial reporting” (2009). In his conclusion of analysis of the seven articles, Murphy determines more research is needed in the area of business ethics and social responsibility (2009). He particularly see’s the importance on further broadening the research on Corporate Social Responsibility and corporate ethics statements, believing a “more useful understanding of responsibility in business will emerge” (2009).
How Friedman, Drucker and Murphy Relate Peter Drucker, Milton Friedman and Patrick Murphy have similar views in relation to business ethics and social responsibility. The authors see the purpose of having a balance of ethics and social responsibility by the individuals and the companies as a whole. Friedman contends the importance of the corporate executive involved with the majority of responsibility, and who must engage in “open and free competition without deception or fraud” (1970).
Peter Drucker mirrors that belief by arguing in order for business ethics to work, managers, executives and professionals must “shun behavior they would not respect in others, and instead practice behavior appropriate to the sort of person they would want to see “in the mirror in the morning”” (1981). Patrick Murphy believes in a higher level of responsibility being necessary and required of leaders in any organization (2009). All three authors argue there is some level of social responsibility and ethical obligation on behalf of either the business executive or the corporation as a whole.
It is interesting to note how all three authors agree on certain aspects of social responsibility and business ethics, despite the gap in generation from Milton Friedman’s publication in 1970, Peter Drucker in 1981 and Patrick Murphy in 2009. Regardless of the time gap between all three articles, the importance of social responsibility and business ethics has not changed and continues to be of great importance. How Friedman, Drucker and Murphy Contrast Patrick Murphy differs in his presentation of social responsibility and business ethics, compared to Peter Drucker and Milton Friedman.
Murphy considers six types of responsibility within the articles he examines. The types of responsibilities are: legal, corporate, managerial, social, consumer, and societal (2009). Rather than breaking down their explanation of social responsibility and business ethics into examples, Drucker focuses on the philosophical meaning of business ethics comparing Western tradition and Casuistry (1981). Whereas, Friedman examines social responsibility from the corporate executive, politics, unions and a socialist view (1970).
Patrick Murphy contrasts Milton Friedman on who the responsibility should fall on, the individual or the corporation. Murphy argues that business ethics focuses on “corporate rather than individual responsibility because of the size and scope of the large business”, and implies a moral obligation to act on the side of the corporation (2009). He particularly see’s the importance on further broadening the research on Corporate Social Responsibility and corporate ethics statements, believing a “more useful understanding of responsibility in business will emerge” (2009).
Friedman on the other hand contends, how a business cannot have responsibility, “only people can have responsibilities…a corporation is an artificial person and in this sense may have artificial responsibilities” (1970). All three authors provide an informative view and engage in a convincing debate regarding social responsibility and business ethics. Despite all three articles differing in content and presentation, they all provide similar views on the importance behind social responsibility and business ethics and the impact these concepts have on society as a whole. References Drucker, P. 1981) What is business ethics? Public Interest, 63, 18-36. http://www. nationalaffairs. com/doclib/20080708_1981632whatisbusinessethicspeterfdrucker. pdf Friedman, M. (1970, September 13). The social responsibility of business to increase its profits. New York, N. Y. 32-33, 122-124, 126. http://www. colorado. edu/studentgroups/libertarians/issues/friedman-soc-resp-business. html Murphy, P. (2009). The relevance of responsibility to ethical business decisions. Journal of Business Ethics: Supplement, 90 245-252. http://search. proquest. com. proxy1. ncu. edu/docview/365453640? accountid=28180
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