Business Concern with Profits free essay sample

On Friedman’s theory, the company’s intransigence was perfectly justified. Its directors had no right to withdraw a profitable and legal product, even though it caused innocent babies to suffer, until boycotts changed the financial equation. Similar examples abound, such as pollution in Nigerian oil fields, worker exploitation in Southeast Asia sweat shops, and bribery around the world. However, in today’s challenging global businesses, self-interest is dying though. Friedman’s theory of maximizing profit for the stockholders is fading. Companies that only pursue profit will not last long in today’s economic climate. Friedman’s theory may seem out dated, but in reality his theory is simply evolving. People believe in Freeman’s stakeholder theory as the new alterative to Friedman. A theory that considered not just the stockholders, but employees, customers, partners, governments, environments, and the list goes on. While this theory may seem to trump Friedman, it simply reinforces the theory of profit maximization. We will write a custom essay sample on Business Concern with Profits or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The Freeman Approach R. Edward Freeman is an American philosopher that did extensive work on stakeholder theory. This theory is based on a company addressing morals and values when managing the organization. Unlike stockholder theory, which Friedman believed in, the bottom line or profit is not the only concern for the company. Stakeholder theory integrates resource-based views, market-based views, political views, and societal views. These different viewpoints are used to create a specific stakeholder of the corporation. This allows the company to determine how the different stakeholders should be treated. There are 9 different groups of stakeholder (Figure 1), but there can be many subgroups. Freeman theory is not solely concerned with profit but still it has a central role. Figure 1 From both approaches by Friedman and Freeman we lay out, we strongly disagree with Friedman’s. We believe that the enlightened business corporation should try to create value for all of its constituencies. From an investor’s perspective, the purpose of the business is to maximize profits. But that is not the purpose for other stakeholder unlike for customers, employees, suppliers, and the community. Each of those groups will define the purpose of the business in terms of its own needs and desires, and each perspective is valid and legitimate. Our argument should not be mistaken for hostility to profit. We take an example and simple analogy of a marriage. A wife’s happiness is an end in itself, not merely a means to a man own happiness; love leads a man to put my wife’s happiness first, but in doing so the man also make himself happier. Similarly, the most successful businesses put the customer first, ahead of the investors. In the profit-centred business, customer happiness is merely a means to an end: maximizing profits. In the customer-centred business, customer happiness is an end in itself, and will be pursued with greater interest, passion, and empathy than the profit-centred business is capable of. Another example is a close view of a construction process. The construction process requires ethical integrity and safe guards when the bidding process is used. The bidding must be opened to all contractors that are responsible bidders that posses the required expertise, financial capacity and management skills. The bidder must be responsive and cooperate with the owner, architects, and engineers during the bidding, construction, and commission phases. The owner (stockholder) must commit the necessary time and resources to the project.