Reaction paper - Assignment Example

In his article ‘A Stakeholder Theory of the Modern Corporation’, Edward Freeman raises a discussion on mechanism that guarantee the primary position of stakeholders in corporate activity. For this purpose, the author starts with the criticism on managerial capitalism from both legal and economic perspectives. As for his argument concerning the limitations of law, Freeman suggests that corporate management is always aware of its “fiduciary obligation to stockholders” (38). In addition, law also defines its relations with customers (Freeman 39).

In economic terms, author discusses different suppressions of excesses of power (such as externalities, moral hazards, and monopolization practices) in order to demonstrate constant existence of control over managerial capitalism (Freeman 39-40). Finally, Freeman defines his stakeholder theory by providing its definition, finding out its actors, and evaluating their influential potential on managers of corporations. After arguing on “narrow” and “wide” concepts of stakeholder, he claims that owners, employees, suppliers, customers, and the local community have their stakes in contemporary corporations (Freeman 40-42).

For him, government and “competitors” are not stakeholders, since “they are not necessary for the survival” of corporation (Freeman 42). In conclusion, Freeman recognizes manager as “King Solomon” (42) for the company, as in the given circumstances he has to satisfy different groups of stakeholders with various interests. Another article, written by Milton Friedman, raises the question social responsibility to have a direct influence on corporate profits. To start with, the author draws on the most apparent fact of responsibility; namely, manager ss “an agent of the individuals who own corporation” (Friedman 2) is always responsible for his employees.

In this case, he distinguishes executive’s corporate social responsibility from his own one by defining the core interest of his activity in serving employers and customers (Friedman 2). Furthermore, political dimension appears in the fact that social responsibility is the result of socialist perspective, which says that politicians not executives are responsible for sharing limited resources (Friedman 3). As a result, conflict of interests emerges as an additional obstacle to managerial objectivity while possessing socially responsible corporate activity (Friedman 3-4).

Finally, Friedman analyzes open protests from stakeholders whether they correspond the ideal of democratic society or demonstrate possible short-sightedness of businessmen (4-5). As for final remark, author compares ideals of unanimity and conformity; actually, he sees in the doctrine of “social responsibility” possible resolution of this conflict (Friedman 5). On the one hand, Freeman’s work presents a consistent argument towards the importance of all the interested people in the activity of contemporary corporate managers.

By referring to both economic and legal restraints in their activity, at the same time he proves that it is wrong to rely on colleagues in business and government only. In general, this works helps to understand the most important motive in the behavior of corporations. On another hand, Friedman’s article presents a deeper analysis of linkage between the personal need of executive to satisfy stakeholders and general necessity of corporation to get more profits. In this context, the work of Friedman raises important dilemmas between not only individual and corporate interests but also between overall economic ideal of unanimity and political value of conformity for the society.

Hence, it helps to understand the subject deeper than it is in Freeman’s case, but it too often refers to complicated philosophical issues and certain problem cases. As for Freeman, he is good in explaining this significant issue in a simpler manner. In general, both authors present a very important issue of social responsibility in their own manner. Works Cited:Freeman, E. R. “A Stakeholder Theory of the Modern Corporation.” In: M. Jennings. Business Ethics: Case Studies and Selected Readings.

Eighth edition. Stamford, CT: Cengage Learning, 2015. Print. Freidman, M. “The Social Responsibility of Business is to Increase its Profits.” The New York Times Magazine 13 (1970): 1-5. Web. 29 Jan. 2015.