Freeman vs. Friedman - 1866 Words

Freeman vs. Friedman In their theories of how a business should operate, R. Edward Freeman and Milton Friedman hold virtually opposite beliefs as to what businesses’ responsibilities should be. In favor of the Stakeholder theory, Freeman believes that any person or organization that has a â€Å"stake† in the business should also play a role of participation in the business’s actions and decisions. In the other corner of the ring stands Milton Friedman, who holds the belief that said business is only responsible for those that actually own stock in the business – the owners, or stockholders. A strong believer in his reconceptualized Stakeholder Theory of the Modern Corporation, R. Edward Freeman believes the key to success in business is†¦show more content†¦Nowadays, after the passing of several bills constraining the actions of corporations, acting in a similar manner would pose several legal and ethical issues. This is why, Freeman argues, t his ancient idea of managerial capitalism is no longer effective. After bashing the old idea of managerial capitalism, Freeman starts explaining why his reconceptualized stakeholder concept is much more logical. Freeman modestly articulates a stakeholder theory using the â€Å"narrow definition† of a stakeholder, which includes those who are vital to the success and survival of a corporation. Specifically, these stakeholders include owners, management, suppliers, employees, customers, and the local community. As well as being directly connected with the corporation, Freeman argues that the stakeholders are also interconnected with each other as well, and that each stakeholder is vital to the survival of the corporation, and vice versa. Employees rely on the business to give them a paycheck; the business provides their livelihood. Employees return the favor because they run the business on a day to day basis. Suppliers are vital to the firm’s success because the q uality of the raw materials purchased will determine the quality and price of the final good produced by the firm. As a result, the firm is a customer of their supplier, and is therefore vital to their supplier’s success. The next stakeholder, customers,Show MoreRelatedFriedman vs Freeman1925 Words   |  8 PagesThis paper will have a detailed discussion on the shareholder theory of Milton Friedman and the stakeholder theory of Edward Freeman. Friedman argued that â€Å"neo-classical economic theory suggests that the purpose of the organisations is to make profits in their accountability to themselves and their shareholders and that only by doing so can business contribute to wealth for itself and society at large†. On the other hand, the theory of stakeholder suggests that the managers of an organisation doRead MoreEssay on Friedman vs Freeman827 Words   |  4 Pagesâ€Å"Stakeholder† theory of management, two different views about the purpose and aims of a business. Milton Friedman’s shareholder theory of management says that the purpose of a business is to make money for the owner or the stockholders of the business. Friedman says that there is only one social responsibility for the business: to use its resources in order to increase its profits as long as the business stats within the rules that are assigned, as for example to compete in free competition and withoutRead MoreAssignment Sheet : An Assignment Cover Sheet1395 Words   |  6 Pagesanywhere around the world. It’s also known that a virtual setting is more favorable to an office setting. The virtual setting also benefits a company financially as they don’t have to spend money on physical locations and transportation. (Virtual Teams vs Traditional Teams., n.d.) There is also a sense of comfort for the employees as with a virtual setting. the employees are allowed to work from home and get away from the traditional office setting. The virtual setting is overall re warding as it setsRead MoreThe First Level Of The Pyramid1491 Words   |  6 PagesLimitations of the Pyramid Shareholders vs. Stakeholders Approach One of the key objectives of business has been to create profit for shareholders, but as CSR became more widespread it has been supported that companies have responsibility to stakeholders, which lead changes in many companies’ approach to conduct business. The two prevailing approaches are the shareholder and stakeholder approach, which are going to be examined below. Shareholder Approach In 1970 Friedman wrote the much-cited article inRead More Corporate Social Responsibility Essay2477 Words   |  10 Pagesinvestigate some of the classical theories of CSR and its contribution to profit maximisation. Finally, some specific arguments that state that the introduction of social responsibility is not a good idea and how it has failed to create the ?good society? (Friedman 1970: 122-126) will be discussed. Corporate social responsibility has undergone a definitional evolution over the past half century but has always and will always remain an essential part of business language. Definitions of CSR have became moreRead MoreCorporate Social Responsibility2536 Words   |  11 Pagesinvestigate some of the classical theories of CSR and its contribution to profit maximisation. Finally, some specific arguments that state that the introduction of social responsibility is not a good idea and how it has failed to create the ‘good society (Friedman 1970: 122-126) will be discussed. Corporate social responsibility has undergone a definitional evolution over the past half century but has always and will always remain an essential part of business language. Definitions of CSR have became moreRead MoreManagerial Stakeholder Theory - Essay2991 Words   |  12 Pagesresponsibilities of the companies (Crane amp; Ruebottom 2011). This is how the concept of solicited corporate social disclosure comes into existence. Due to this confusion around disclosure principles we have a big area of research. According to Freeman the definition of Stakeholder is â€Å"any group or individual who can affect or is affected by the achievement of the organization.† Shareholders also come under stakeholders group as they are the important part of the organization. Shareholders are alsoRead MoreCompeting Models Of Corporate Governance1398 Words   |  6 Pagesshareholder method offers stronger protection for investors and shareholder democracy. [Solommon,2007] http://www.todayscience.org/JBM/article/jbm.v1i1p52.pdf http://leg.u-bourgogne.fr/wp/1041202.pdf http://sloanreview.mit.edu/article/the-shareholders-vs-stakeholders-debate/ Corporate governance theories There are various types of corporate governance theories. For the purpose of this discussion several theories have been reviewed. Agency theory Corporate governance has reviewedRead MoreThe High Demand Of Internet2847 Words   |  12 Pagesby business which focus only on maximizing shareholder wealth. Friedman (1970) strongly argues about maximizing the financial return for shareholder. However stakeholder theory is theory that saying managers have a moral obligation to balance and consider the interests of all stakeholders, the individuals that the actions and results of an organization will being affected by or will give effect to are called as stakeholders (Freeman, 1984). Stakeholder theory actually showing that stakeholders areRead More2074 Final Notes Essay6510 Words   |  27 Pagesa person’s life is valuable only inasmuch as it is a source of happiness. / You are not important to a utilitarian, only the happiness you experience is significant. John Locke-Second Treatise of Human Government Locke on Friedman: Locke does not believe Friedman is correct when he states the market is self regulating. / Without government intervention, there will be too much inequality in the market. / We need the government to redistribute the wealth. Natural Rights: Property, life, liberty