In 1970, economist Dr. Milton Friedman argued that “the sole purpose of a business is to generate profits for its shareholders.”  Do you agree with Friedman? 

Business ethics discussion | Business & Finance homework help

Yes, I agree with Dr. Milton Friedman’s assertion that “the sole purpose of a business is to generate profits for its shareholders.” Businesses exist to maximize their profitability in order to reward the investors and owners who put money into the organization or venture. In order to be profitable, corporations must have large capital investments from their shareholders. Businesses should be able to maximize their revenue and not get distracted by other causes or interests that are unrelated.

In fact, research shows that corporate responsibility initiatives can have both positive and negative effects on shareholder value (van Marrewijk & Moonen, 2016). These efforts are often unsuccessful due to poor management or insufficient resources. They also lead to increased costs, which eventually leads to lower returns for shareholders (Chen and al. (2016)). This means firms must carefully consider how much money they spend on such initiatives in order not undermine the reason why they were created – generating profits for owners and investors.

Businesses need strategies that are aligned with their main objectives. This includes creating the products or services they want. It is not enough to get lost in social causes, such as those relating to environmental sustainability. These initiatives may not be core competencies and will produce no long-term financial benefits (Gallo, et al. 2012). This is important because organizations depend on investor confidence and positive public opinions to maintain stability in the long-term, regardless of economic situation (Baron 2018).

References:
Baron D P(2018 ) The Social Responsibility Of Business Is To Increase Its Profits — The New York Times https://www ​nytimes ​com/2018/08/28 /business/the-social-responsibility—of-business–is –to_increase_its_profits . html?mcubz= 0
Chen M H , Hung S H & Kao Y T.(2016 ) Does Corporate Social Responsibility Improve Firm Financial Performance? A Systematic Review And Meta‐Analysis Journal Accounting Public Policy 34 95 – 116.
Gallo G et al.(2012) Going Beyond Profit : Implications For Organizations In The Twenty‐First Century Academy Management Perspectives 26 2 10– 20.
Van Marrewijk W7 Moonen J C ( 2016 ) Shaking Up Stakeholder Salience Insights From Research On Corporate Social Responsibiliry Long Range Planning 49 509 − 522

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