Friedman assumed that focusing on open social investments was not proper for business well-being and this would divert the goals of the business. The ideal goal of the company is to provide a return to its shareholders. By focusing on external social responsibilities, the corporation is distracted from its sole purpose. Friedman asserted that corporations do not know how to properly invest in social causes (Friedman, 1970/2002). Friedman deemed this as a tax upon stockholders of which they have no decision regarding how it is spent. Consequently, he added that an individual is on liberty to pursue social responsibilities; this is because the corporate executive lacks the ability to properly perform such actions (Friedman, 1970/2002).
On the other hand, according to Archie Carroll’s, adding on to making a profit and obeying the law, a company should endeavor to improve or solve societal needs. His view is generally advocated through stakeholder theory. This theory maintains that corporations should consider the effects of their actions upon other individuals at stake or of interest in the corporation such as customers, suppliers, general public, and employees (Carroll, 1987).
Businesses cannot pursue their long term profit returns if they have poor relations with their stakeholders or the environment. Meanwhile, firms cannot meet all the needs of their stakeholders and continue making profits. It is therefore advisable that management decisions should be based on an objective ethical code of conduct.
Using the money that shareholders have invested in the businesses to support unprofitable needs of the society is clearly wrong. Therefore, businesses should make profits, obey the law, act according to an ethical standard, and only pursue corporate social responsibility activities that improve long-term shareholder wealth.
A corporation is a legal entity, meaning it is a separate entity from its