Do Businesses Have a Social Responsibility? the Students Debate Whether a Business Best Serves Society's Interests by Maximizing Profits or by Pursuing Policies It Believes Promote Social Justice, the Environment and Other Causes

Social Education, March 2009 | Go to article overview

Do Businesses Have a Social Responsibility? the Students Debate Whether a Business Best Serves Society's Interests by Maximizing Profits or by Pursuing Policies It Believes Promote Social Justice, the Environment and Other Causes


Overview

Economics

Many workers are employees of companies. These workers agree to do what the companies' owners tell them to do. In return, the companies pay the employees a wage or salary. This relationship, or contract, is an example of a principal-agent agreement: The company is the principal and the worker is the agent. The principal-agent agreement is the most common employment contract in capitalist countries. It is the basis of the economic model for businesses, most of which consider their sole purpose to be maximizing profits for owners. In a publicly traded company, the owners are the company's shareholders.

Ethics

Advocates of corporate social responsibility argue that profit is essential to a business's well-being and continued existence, but profit should not entirely define the business's purpose. These advocates believe the principal-agent agreement also has a trust or fiduciary aspect that includes a set of expectations related to honesty, loyalty, obedience and the full disclosure of relevant facts. Workers have a fiduciary duty to their employer, for example, to obey the firm's rules. A company has a fiduciary duty to its shareholders to report financial data honestly. But advocates of corporate social responsibility believe that a firm's fiduciary duty extends beyond its shareholders to other stakeholders: employees, suppliers, customers, and the community.

Lesson Description

The students read two viewpoints on the social responsibility of business: Milton Friedman, a Nobel laureate in economics, argues that businesses best fulfill their social responsibilities to society by focusing on increased profits. John Mackey, founder of Whole Foods Market, believes that a business's social responsibility goes beyond maximizing profits. The students evaluate these arguments and then decide whose opinion they support.

Concepts

Fiduciary duty
Principal-agent agreement
Profit
Shareholder
Social responsibility of business
Stakeholder

Economics Content Standards

10. Institutions evolve in market economies to help individuals and groups accomplish their goals. Banks, labor unions, corporations, legal systems, and not-for-profit organizations are examples of important institutions. A different kind of institution, clearly defined and well enforced property rights, is essential to a market economy.

14. Entrepreneurs are people who take the risks of organizing productive resources to make goods and services. Profit is an important incentive that leads entrepreneurs to accept the risks of business failure.

Objectives

The students will:

1. Describe the principal-agent agreement that governs most employment.

2. Compare and contrast two views on the social responsibility of business.

3. Analyze the reasoning behind different views on social responsibility of business.

Time Required: 60 minutes

Materials

1. Visuals 1 and 2

2. One copy of the Handout for each student

3. Five sheets of paper with "1" written on one, "2" on another, "3" on another, "4" on another and "5" on another.

[ILLUSTRATION OMITTED]

Procedure

1. Tell the students they are going to investigate whether businesses have a social responsibility beyond making profits for the company owners, or shareholders. Some people believe businesses best serve society by increasing profits--as long as they adhere to the laws and ethical customs of society. Others believe businesses have an obligation beyond maximizing profits: to improve the economic and social lives of the communities in which they operate.

2. Give each student a copy of the Handout. Tell the students that the authors they are going to read are notable figures in the debate about corporate social responsibility. Milton Friedman won the 1976 Nobel Prize in economic sciences. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Do Businesses Have a Social Responsibility? the Students Debate Whether a Business Best Serves Society's Interests by Maximizing Profits or by Pursuing Policies It Believes Promote Social Justice, the Environment and Other Causes
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.