The demand for how businesses do their operations needs to change. As of right now, the business model suggests that we pursue profit by any entrepreneurial means and cut costs at any expense. For the most part businesses over the latter half of the twentieth century have based their idea of how to run a company off of Milton Friedman’s theories and classical neo-liberal economic thinking. I am suggesting however, that we take a different route for the rest of our time operating under capitalism and free market economics and take a look at other alternatives for the way in which we conduct ourselves in the business world. A business can be defined as a profit motivated organization that combines resources for the production and supply of goods and services. (AmosWEB). In more understandable terms, business can be understood as the way we function through a specific economic system. In our case, the United States operates with a mixed-market economy under capitalism, and our society abides. Society can be defined as a group of individuals who share a common belief system. (Shiraev & Levy). Our society as a whole loves capitalism. However, some unintended externalities have occurred because of the way we do business under the Friedman mentality. Friedman’s works tell us that in business, we should focus on the shareholder. In other words, put emphasis on the people who have shares in our business. More specifically, he states that we should simply focus on the economic and legal standpoints of a company to maximize profit margins. In terms of economics he meant does the firm create jobs? Does the firm provide services? Does the firm create products? In legal terms, he meant what does a company legally have to abide by when conducting their operations? I would like to tell you however that this mind frame has been going on for way too long and has got us in a place we should not be.
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This theory is old and outdated. We need to change how we do things in the business world. I would also like to introduce to you the ideas of another author by the last name of Carroll. Carroll states that the Friedman point of view has only caused problems in the ever greater pursuit of profit. Our business model should be looked at this way. Think of business as a rectangle, and it is allowed to function and operate inside of a circle known as society. But these two shapes are encompassed by an even larger rectangle known as the biosphere or the ecosystem. With any action there will always be an externality, an effect on a third party. Now sure, most neo-liberal, classical economists will say business is good and provides positive externalities such as products and food. But I am here to tell you that most of the externalities of our business model are negative. Everything a person does in our society is based off of profit, their motivation is money and it can be reduced to being that simple. The way our food is mass produced in factories is a negative externality on our bodies and on the way we treat animals for example. Food companies for the most part do not care if their products are bad for us, they just want to pursue profit, and we allow them to in the name of capitalism and not being held socially responsible. Another example can be what we have done to cows across our nation.
We have pumped them full of a steroid known as Posterone that increases milk production by twenty percent; and if one farmer does it they all have to do it because of profits, money, and what our society deems as success otherwise they will go out of business. However, this externality is very bad because it is incredibly painful for the cows, it swells their udders to an unnatural size and they often times get infections and secrete puss from their udders. The FDA however allows a certain percentage of this puss to be in our milk however along with all milk drinkers now building up a level of Posterone in their bodies. This isn’t even the worst part of the cow dilemma either. To counteract this puss and infection, the farmers started putting antibiotics in their feed regularly. For generations now the cows have been fed this same antibiotic and for generations we have been drinking their milk, which henceforth makes us have this same antibiotic in our bodies as well. Bacteria evolve over time and this is an extremely negative externality for humans and cows. As of now we are ok with these practices of animal cruelty and not caring where or how we get our food. Other examples include toxic waste disposal, pollution, synthetic chemicals, habitat destruction, factory farming, animal experimentation, clear-cutting, strip-mining, sweatshops, dangerous products, and layoffs just to name a few. It is abundantly clear that our way of conducting business has far more negative externalities than positive ones and it is because we allow it to happen. We have to hold companies to a high level of social responsibility otherwise they will pursue profits at whatever costs and pursue self-interest above all. The answer to the question is yes, we should without a doubt hold businesses socially responsible for their actions. The Carroll idea states that we need to go above and beyond the Friedman view of only doing the economic and legal responsibilities of a company.
He would like to add ethical and voluntary components to this theory. This is the key part in what we have to demand of our businesses. In the ethical sense, he is referring to going beyond what you are legally required to do, you must do the morally correct behavior. Carroll states that businesses are morally obligated to care about their workers, community, environment, suppliers, and customers. They must care about their actions for the benefit of society and not self-interest. The voluntary part of the theory is really where action comes into play. To really be successful in this new method, companies must voluntarily do things to notably help out the world in which they exist. Things such as donations, community service, helping out institutions like schools, and run their business in a way that can actually clean up the world from the negative externality that we have created. In my opinion I would like to see a company really focus on the cleaning up aspect in ways such as sequestering carbon, to reduce, reuse, and recycle, and end our dependency upon fossil fuels. However, those are separate issues that can be achieved if we hold our business accountable for their actions and demand that they be socially responsible. So yes, they are morally obligated to do these things instead of pursue profit and self-interest because they are here for us in the first place, they are here for the rest of society to benefit from not be hurt because we allow them to exist. I completely, 100 percent support this new rational and I believe it must be put into effect immediately or the negative externalities will only worsen and hinder our health and the environment even further. We must hold businesses accountable for their actions and they must act socially responsible.
AmosWEB. Copyright 2000-2013 AmosWEB LLC. www.amosweb.com. April 20, 2013. Carroll, B. Archie. The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders, Business Horizons. July 1991.
Friedman, Milton. “The Social Responsibility of Business is to Increase its
Profits”. The New York Times. September 13, 1970. Shiraev, B. Eric & David, A. Levy. “Cross-Cultural Psychology”. Copyright 2010 Pearson Education Inc.