Friedman vs Freeman - 1925 Words

This 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 do not only have the duty towards the firm’s shareholders; rather towards the individuals and constituencies who contribute to the company’s wealth, capacity and activities. These individuals or constituencies can be the shareholders, employees,†¦show more content†¦Consequently, the model of stakeholder by Edward Freeman has broadly considered as the strongest theory regarding responsibilities of a company towards society where the company is located (Freeman 2008 pp. 162-165). Nevertheless, Friedman pointed out that the profits has taken the firms in to the hand of business intellectuals by which Friedman recommend that the financial system by which the organisation run its business is in the restricted responsibility protection which makes the organisations to privatise their profits (Friedman 1970 pp. 177-184). Friedman also suggested that according to him the shareholder theory in terms of socially responsible can only increase the profit. But on the other hand shareholder theory of Edward Freeman completely support the theory of shareholder towards its role to be socially responsible in the society and maximising the profits for the benefits of shareholders within the firms and society as well (Freeman 2008 pp. 162-165). According to Cosans (2009 pp. 391-399) with the taking of limited liability (restricted responsibility) Friedman must have taken the business in a way to be socially affiliated and well-established as well which also leads and supports the ethical and logical roots of CSR and for the re-establishment of the reliability toShow MoreRelatedFreeman vs. Friedman1866 Words   |  8 PagesFreeman 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 onlyRead 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. 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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