The corporate executives have a direct through conducting the business in regards to the desire of making as much money as possible within the boundaries placed by law and ethical customs of society. The primary responsibility is to those who own the corporation or created the eleemosynary institution. The business must be conducted in regards to the owner’s preference – this tends to be to make as much money as possible within societal rules. Friedman emphasizes how businesses do not have ethical responsibilities to society in general, but the business does need to follow law and other societal rules. Businesses cannot be ethical, only people can. As a person, there are certain ethical duties to uphold to customers and others involved in the business. The person, not the employees, have obligations to people such as families. The employee should follow all of the laws, as well as treat people ethically and with honesty.
Not exactly, he believes investing first is the most important in creating a profit. Economically utilizing resources of the society society in return for providing amenities to that society or gov.” The profits are not given to charity, rather the shareholders decide where to reinvest and give the money to. This can be research, business, or to improving the corporation. The money may go back into the enterprise through these ways of innovation or research. Having more profits results in increased value products from low-value products, ultimately saving money for consumers. The executive is an agent of the business owner having responsibilities solely to the owner (the principal-agent system). The executive is the agent and the owner is the principal. Only as an individual does one have many responsibilities, but within the business, the executive is only a principal and not an agent.
A shareholder is the owner of stock in the corporation. They own shares in the company. A stakeholder is whomever is interested or affected by the corporation; employees and their families, the community, suppliers, customers, and others. Many people have a stake in the company, therefore they all have their own concerns or interests. The stakeholders in John Mackey’s concept of the corporation are “customers, team members (employees), investors, vendors, communities, and the environment”. They measure success on how much value they can add to each stakeholder. There is no formula deciding how much values the six most important stakeholders receive from the corporation. Over time, it evolves along side the competitive marketplace. Solutions are constantly developed for the common good in order to keep stakeholders satisfied.
Towards customers, they must deliver honesty, service and a reasonable price. The corporation owes employees honesty, reward and recognition. They must recognize and reward the employees, because this creates better team performance. Shareholders are owed shared profits, return on capital, and psychic income to stockholders. Suppliers are owed loyalty, honesty, and stability. The corporate owes suppliers a stable and honest business relationship with fair financial reward. Communities are given back to through the five percent from profits that goes towards communities causes. Lastly, corporates owe good stewardship to the environment. Through conservation and sustainable practices, the environment can be protected.
Mackey points out Adam Smith’s, a father of free-market economics, book The Theory of Moral Sentiments to demonstrate the moral behind why money is given to community stakeholders. It is this book that Adam Smith describes the notion of moral sentiments. Human nature is not simply about acting from one’s own interests, rather there is a mutual sympathy. Human nature involves empathy, friendship and love as well. These are important qualities in life for many people. Whole Foods strives to work for the common good, extending love and care towards the world, not just to one’s self. Mackey notes that this is different than the typical greedy and selfish business model many companies uphold. Acting from generosity and justice can create loyalty amongst stakeholders in the business. They are important qualities for many people that may draw people to a company if they have adopted these same qualities in their business.
I am not exactly sure, it is little grey and unclear. If a company choose to put part of their profits towards charity, this may create increased costs and lower profits. However, if customers see Whole Foods as a good corporate citizen, they may choose to shop there over other grocery stores due to their generous, caring business model. If more people choose to shop at a place they know cares about giving a portion of their profits back into their community, this leads to an increase in profit. There is an important difference between the two, which seems to come down to the root motives of the company. It does seem evident, as Mackey points out, that a business like Whole Foods acts out of generosity while most businesses tend to act out of selfish desires like maximizing their profits. However, how they approach business through these fundamental values may both lead to an increase in profit but just in different ways.
There may be a significant difference between the percentage increase, though. I suppose it also depends on how one defines social responsibility – to Mackey it is different than to Friedman. Mackey focuses on human nature defined by Adam Smith of generosity and justice which leads to giving back to the community, while Friedman sees it as maximizing profits without fraud or deception. So, Mackey may be increasing profits, but that does not necessarily mean maximizing profits. With any large monetary donation, more information would need to be obtained to understand where the money is truly going and the impact the organizations have on the places. More reasoning behind the aid would better demonstrate where the money is going and what it is being put towards. Then, a company can decide whether they want to contribute.
It would seem as though Mackey would gladly contribute, despite maybe not having any benefits for the company. The fact that contributions from businesses have been more impactful than government aid may be a driving reason for Mackey to put money towards – making a generous donation to a cause seeking justice in the world. It doesn’t seem like much thought would have to go contributing – maybe it would one of the 5% days that all that money goes to this cause this time. Corporations have an ethical duty to put a portion of the profits towards bettering society. Friedman would most likely appose the donation if company executives used them solely to support their own personal causes or reputations. Instead of company executives putting a contribution of companies profits towards the cause, the money that may be put towards charitable causes should go back into the company itself or pay it out as dividends or go directly to the shareholders who then can put the money towards whatever charities they seek to support. Friedman argues that there are not quite concrete reasons to why putting money towards corporate charity is better than putting that money back into the enterprise.