3.2 THE CLASSICAL MODEL OF CORPORATE SOCIAL RESPONSILITY
What we shall call the classical model of corporate social responsibility has its roots in free market , or neoclassical , economic theory. This perspective is perhaps the most influential theory of corporate responsibility of the past century. On this view , the role of business management is to maximize profits within the law. This management role flows from the function assigned to business institutions within free market economics. In turn , as its ethical foundation , this economics theory can appeal to two distinct tradition in ethics : utilitarianism and individual rights to freedom and property.
Perhaps the best –knows defender of the classical model of corporate social responsibility is Nobel Prize-winning economist Milton Friedman. In his book ,Capitalism and Freedom , Friedman offers this cleat statement of the classical model
The view has been gaining widespread acceptance that corporate officials … have a social responsibility that goes beyond serving the interests of their stockholders …. This view shows a fundamental misconception of the character and nature of a free economy. In such an economy , 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…. Few trends could so thoroughly undermine the very foundation of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.3
This can appear as a narrowly selfish understanding of business to some critics. On closer analysis, however, we can see the ethical roots of this view within Friedman’s quote.(It would also be useful to review the skepticism about business ethics examined in chapter 1 in light of this quotation) The social responsibility of managers is “to make as much money for their stockholders as possible” This responsibility follow from the Character and nature of a free economy. “Thus, a particular economic theory, what for simplicity sake we shall call the free market theory, provides the rationale for this managerial role. But why should we accept this economics theory ? Friedman offers hints for how he might respond to this decidedly ethical question. By disregarding the role assigned management by the free market theory we would likely “undermine the very foundations of our free society.” Managers are ethically obliged to maximize profits in order to avoid this ethical wrong.