According to Milton Friedman, corporations are only responsible for increasing shareholder returns. They should not be conducting socially responsible activities as these do not directly increase shareholder returns. He believes that it is the responsibility of corporations only to deliver the largest possible returns to shareholders. On the contrary, Larry Fink advocates that "to prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society." David Solomon believes that financial institutions can play a pivotal role in sustainable development. As per him, financial institutions should be a vehicle used to address climate change and inclusive growth issues, while sustaining the financial returns.
If you need assistance with writing your essay, our professional essay writing service is here to help!Find out more
In this op-ed, I will counter Friedman’s position and endorse Fink’s and Solomon’s views as I strongly believe that for any organization to prosper today, it needs to make positive social impact to ensure long term profitability.
Nobel Laureate Milton Friedman propounded the idea that “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”. This idea is almost 50 years old and the world that Friedman presented this idea in was very different from the world that we live in today. The challenges that humanity faces today include social inequity and injustice, climate change, pollution, that are threatening the existence of human beings. This crisis has led to the corporations adopting measures to reduce carbon footprint and work towards other social goals of the society. I strongly believe that the rules of the game have changed massively ever since Friedman gave his views of social responsibility. Today, consumers expect more out of the business rather than profit maximization. Consumers expect additional attributes from the organization that they buy a product from or take a service from – in terms of quality, value for money, safety. Additionally, Friedman did not totally oppose or refute the idea of corporate social responsibility. He reasoned that businesses should stick to business and not pursue social goals for their own benefit and leave the advancement of social values to the society.
Larry Fink’s view is more in line with today’s day and age and this argument personally resonates the most with me. Organizations have been asking themselves questions like – What role do we play in the larger community? How are we going to manage the impact on the environment? Are we providing enough opportunities to foster inclusion and diversity? Organizations are looking at a long-term strategy for sustainable profits. When we look at organizations today, Apple has its own operating system as its differentiator. Microsoft has its own operating system, which is its selling point. But these tech giants continue to co-exist cohesively and make huge financial strides. And now, they are showing a deep sense of responsibility to the society by going green, cutting down emissions, improving human-machine interface and in helping the mankind in general. In words of Tim Cook, Apple CEO - "We have a deep sense of responsibility to give back to our country and the people who help make our success possible”. In 2019, Apple received an award from Ceres, a nonprofit that promotes sustainable energy towards its commendable sustainability initiatives.
Larry Fink believes that companies "will ultimately lose the license to operate from key stakeholders" if they ignore the pressures from their stakeholders. In today’s day and age, the commandment to increasing profits of the organization is not as straightforward as it may look. Instead, profit-making is an extremely convoluted business. Fink draws a link between social responsibility and long-term business sustainability and profitability, believing that "to sustain that performance, however, you must also understand the societal impact of your business as well as the ways that broad, structural trends—from slow wage growth to rising automation to climate change—affect your potential for growth." For instance, a lot of companies around the world are moving towards greater social impact - Mondelez International has partnered with the Ghana Government to combat deforestation and reduce carbon footprint in cocoa production, while Walmart has launched a program to fight against opioid abuse. Only yesterday, Jeff Bezos committed $10 million to fight climate change.
Our academic experts are ready and waiting to assist with any writing project you may have. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs.View our services
At the other end of the spectrum, David Solomon believes that large financial institutions need to play a critical role to address climate transition and inclusive growth, but also need to sustain financial returns at the same time. In his opinion, financial institutions should be taking steps proactively to reduce carbon footprint and become more sustainable. For instance, Goldman Sachs is a the worldwide leader in the creation of ‘Social Impact bonds’, which is a financial instrument that use private investment to support social programs. Enel, an Italian utility company has come up with general purpose bond that help link payment to its final goal of at least 55% of the power generated from renewable energy sources by 2021. I believe this is the way forward and more organizations should think of innovative methods to bring about positive impact.
To conclude, I want to say that the market has moved against Friedman’s philosophy as the Fortune 500 companies are spending more than $15 billion a year on CSR activities and this is also creating monetary value for the firms. Additionally, as customers expect more from businesses now, it becomes imperative to go an extra mile to deliver strong, long term returns through taking positive action towards climate change mitigation and other social impact projects.
Cite This Work
To export a reference to this article please select a referencing stye below:
Related ServicesView all
DMCA / Removal Request
If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: