Which Arguments Did You Find Most Convincing? Explain 2 of the Arguments

Assignment 1

Which arguments did you find most convincing? Explain 2 of the arguments.

I was very much convinced by Milton Friedman’s argumentation about the social responsibility of companies as well as their collective perception in the public and its importance in today’s business environment. He imposed a new way of thinking about corporate social responsibility (CSR), which I have thought of before. In the following essay, I would like to explain the two major arguments that convinced me the most.

In case managers fulfill a social responsibility and decide against increasing shareholder value in order to protect other stakeholder’s of the company without creating a positive long-term effect on profits, they are in fact imposing taxes on the firm’s shareholders and deciding how to spend the proceeds without having any legitimation to do so. Every individual in a free market economy should be able to choose how, where and when to spend his or her proceeds with the only constraint given by elected governmental representatives. There should not be any taxation without representation, which would be the case if managers decide to spend profits on charities, higher wages or to equalize lower prices. After all, the reduction of profits leads to lower shareholder values due to lower dividends or/and share prices. Besides, such actions only show that society as a whole has failed to create a shared believe in social responsibility and that a few individuals are now seeking to attain the latter by undemocratic procedures.

However, it may the case that certain reductions of profits lead to higher returns and increased shareholder values in the future. To illustrate, charitable contributions can reduce corporate taxes, improve the cooperation’s image and ultimately increase sales. Investing in the community’s infrastructure, government or educational system can benefit companies as well and lead to a reduction in wages, transportation costs or have other valuable effects. Nevertheless, in each of these transactions, the ultimate goal is the improvement of the firm’s cash flow ability in order to increase profits in the long run. Such actions are purely justified in its own self-interest and not solely in the society’s well-being. Accordingly, classifying such as “corporate social responsibilities” is misguided and a very hypocritical way of window-dressing aimed at regaining the public’s goodwill, which currently sees corporations as capitalistic and soulless parts of society. Consequently, such actions should be taken – since both the firm as well as the society profit – but should not be classified as socially responsible investments.