Business Ethics
Drucker's approach to business ethics revolves around the belief that business people are rational actors who, as agents for the shareholders, will evaluate all decisions on a cost-benefit basis. His view of business builds upon and only somewhat contrasts with that of Milton Friedman, who in 1971 famously espoused that the "social responsibility of business is to increase its profits." This paper will analyze these two views, showing how they are similar and how they are different from one another.
Although Friedman's editorial has been distilled into its pithy headline, his view on the subject of business ethics was complex. Friedman viewed business managers -- executives -- under the agency theory whereby they would be accountable only to the shareholders. Under this view, managers would and should only focus on enhancing shareholder wealth as the underlying philosophy of their actions. Friedman allowed, however, that the actions under this dictum should still be within the bounds of common ethics. This is essentially a Kantian perspective, where Friedman understands business to be bound by the general ethics that prevail in society -- the categorical imperative -- as defined by the legal system. Thus, the pursuit of profit for Friedman was constrained by the need to adhere to laws and common ethical standards.
Drucker's view was similar to that of Friedman, but with significant and noteworthy alterations. Drucker's view remained rooted in agency theory, in that the executives had a role that was to act as agents for the shareholder. In this role, Drucker posited, business leaders would make decisions "as a cost-benefit calculation." Drucker therefore viewed executive decision-making differently from Friedman in that he viewed such decisions as strictly rational, in the economic sense. Drucker did not subscribe to the idea...
Therefore, corporations have had to change their viewpoints and start looking at the long-term consequences of their behavior, as well as looking at the bottom line. Businesses also have to be concerned because consumers have also become aware of environmental concerns, and many consumers are demanding earth-friendly products and have shown a willingness to pay more money to competitors who observe environmentally-friendly practices. Interestingly enough, this demand has given rise
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We have come full circle to the days of local businesses, but geography has been eliminated as a barrier to communication. Companies are now expected to contribute to their local economy and culture. Whatever a company does at home will be broadcast to the world, positive or negative. Wal-Mart is highly criticized for its low wages, even though the company admits it does not expect to retain entry level
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