In today’s world economy, there is only one rule that can be applied to a free market: supply and demand. In this case, the free market has nothing to do with corporate social responsibility. Milton Friedman’s philosophy was also based on the idea that despite the claims of large companies about their concern for nature, society, and ethical values, company leaders are only accountable to the board of directors. Thus, nothing but financial gain plays a role in corporate relations.
Exactly 12 years ago, there was a substantial artificial disaster, known as the largest oil spill in the history of humanity. This incident took place in the Gulf of Mexico, where Deepwater Horizon (DH) had several large oil fields in the Atlantic Ocean. DH had a reasonably good reputation as a corporation promoting social and environmental values. The company was one of the first in oil production to follow corporate ethics strictly.
However, recalling Friedman’s theory, one should not forget that such statements are not always factual. Despite the company’s image that they promoted, everything turned out to be the opposite. DH cared more about income and financial performance than about operational processes or the corporation’s environment, employee safety, and ethical standards. Thus, DH is indeed a prime example of how Friedman’s ideas correspond to the accurate picture in today’s business, where, in addition to profit, large companies do not put other norms in anything, such as caring for their employees and the environment. This is utterly inconsistent with the modern values of a socially conscious society.
On the other hand, not everyone is a supporter of Friedman’s theory. According to Eric Posner, Friedman’s theory has many limitations, which, among other things, allowed large companies to abuse their capabilities (Posner, 2019). According to Friedman, CEOs had a great idea of how best to drive the business’s internal processes, but when it came to public values, CEOs were not able to use their resources wisely. Posner appeals to this idea because, according to Friedman’s logic, companies should only care about their profits if it is worth lowering wages or increasing the final price of their product. He also believes that Friedman was mistaken in the idea that company executives are puppets in the hands of shareholders.
From a legal point of view, managers are employees of the company itself but in no way subordinate to shareholders. The latter only have the right to receive profit according to their share and to resolve internal issues of the company related to large-scale changes. According to Posner, the company’s leaders are responsible for making decisions on the social significance of companies (Posner, 2019, para. 10). Due to their position and power, CEOs pushed aside shareholders’ manifestations in the direction of benefit for the company, but not for society and its employees.
On the other hand, the triple bottom line theory, if applicable to the catastrophe described above, could have prevented it. According to this theory, an organization will not have long-term prospects if it does not care about nature and society. If DH had somehow applied such a theory within its framework of man, planet, and prosperity, the oil-spill could have been avoided. DH managers and shareholders could take into account the importance of the safety of their employees and the environment through the prism of sustainable development, which may cost them extra costs to ensure them in the short term. In the long term, this would have done more good than the harm they caused to the entire world community in 2010.
References
Posner, E. (2019). Milton Friedman was wrong. The Atlantic.