In: Economics
Definitions
Principles of Right Action
Explain why Friedman’s Stockholder theory is a teleological theory and not an aretelogical theory
Shareholders are always stakeholders in a corporation, but
stakeholders are not always shareholders. A shareholder owns part
of a public company through shares of stock hence the name, while a
stakeholder has an interest in the performance of a company for
reasons other than stock performance or appreciation.The thesis
defends the stockholder theory as envisioned by Milton Friedman,
that the only social responsibility of corporations is to increase
its profits, while staying within "the rules of the game" which are
a set of side-constraints on profit-maximization.Stakeholder Theory
vs. Shareholder Theory. ... Also called the “Friedman doctrine,”
shareholder theory, outlined in Friedman's book “Capitalism and
Freedom,” states that a company has no real “social responsibility”
to the public, since its only concern is to increase profits for
the shareholders.Shareholder Theory: Given that businesses are
moral individuals—or at least can
be treated as if they were—we can now ask: What moral obligations,
if any, do
businesses have? This week, we will look at one answer to that
question: “None!”
Martin Friedman believes that businesses do not have any moral
obligations or
social responsibilities at all, other than to maximize their own
profit. This view is
called “Shareholder Theory”.
Stakeholder Theory: Next week, we will look at a different view:
One which states that businesses DO have social responsibilities;
for instance, businesses have a responsibility to not detract from
the well-being others, and perhaps they are even obligated to
charitably PROMOTE the well-being of others. This view is called
“Stakeholder Theory”, and is held by philosophers such as R. Edward
Freeman.