Friedman's View on Social Responsibility

Milton Friedman's View on Social Responsibility (1970)

• Businesses should focus on maximizing profits within legal and ethical boundaries
• Executives should act in the best interest of shareholders, which usually equates to maximizing profit
• Social responsibilities distract from the primary goal and resemble socialism

Key aspects raised regarding this view

• Only individuals can have moral responsibilities, whereas corporations are artificial entities
• Executives spending company money on social causes effectively impose a tax
• Governments, not executives, should be responsible for taxation and distribution
• The free market relies on voluntary exchange, but social responsibility efforts force conformity
• Executives may lack expertise in solving social issues and risk reducing profits when exceeding their mandate
• Corporate Social Responsibility (CSR) can be a self-serving PR strategy, not a genuine commitment
• Prioritizing social goals can weaken capitalism and threaten economic freedom
• Attempting to address social issues can distort markets and lead to economic harm

Adam Smith's Writings: Theory of Moral Sentiments (1759)

• Humans are naturally compassionate and capable of empathy
• Empathy is derived from imagining oneself in another person's situation
• Humans possess the ability to be sympathetic to others even if they are not similar
• Understanding others' experiences comes from envisioning oneself in a similar situation
• Experiencing others' suffering involves mentally entering their circumstances
• Physical reactions, such as wincing, demonstrate empathy
• Compassion is an emotional, instinctive response rather than a rational one
• Physical sensations can occur when witnessing another's pain, even in robust individuals

Adam Smith's Writings: Wealth of Nations (1776)

• Humans have a natural desire to engage in trade through bartering
• Only humans engage in deliberate trade
• The division of labor arises from the desire to exchange goods and services
• Specialization enables individuals to develop and refine specific skills
• Self-interest, not benevolence, drives economic interactions
• Economic cooperation arises when exchanges benefit all parties involved
• Differences in professional talents mainly result from specialized training
• Early childhood differences have minimal impact compared to specialized training
• Specialization magnifies perceived differences in human capabilities
• Market size determines the extent of the division of labor

The "Invisible Hand"

• Individuals pursuing self-interest can unintentionally benefit society
• People seldom intend to promote public good, but their economic actions often achieve it
• Government intervention in economic decisions is often counterproductive
• Individual economic agents can make efficient economic choices

Core Philosophical Principles by Adam Smith

• Inherent Human Compassion: Humans are naturally empathetic and capable of understanding others
• Economic Cooperation: Self-interest drives productive social and economic interactions
• Specialization: Ability development arises from market opportunities and trading
• Limited Government Intervention: Individual choices are more efficient than centralized planning

Practical Implications of Adam Smiths principals

• Markets foster mutual understanding and cooperation
• Economic systems can utilize self-interest for collective benefit
• Technological and transportation advancements broaden market possibilities
• A diversity of skills becomes economically advantageous through trade

Historical Context for Adam Smith

• Writings challenged mercantilist and feudal models
• Individual agency and natural market mechanisms were emphasized
• Provided foundations for classical liberal economic theories

Business Evolution: Early Characteristics

• Simple organizations were originally founded by owner-entrepreneurs
• Family-based businesses were common
• Advances in technology led to specialized production processes
• Dispersed ownership arose due to increased capital demands

Business Evolution: Emergence of Managerial Capitalism

• Management became separate from ownership
• Managers had to satisfy multiple stakeholder groups
• Military and civil service models inspired bureaucratic structures
• Predictable and rational processes became emphasized

Critique of Traditional Shareholder-Centric Model

• Resistance to Change: Prioritizes shareholder interests, changes only when shareholders are unhappy, and fails to capture business complexity
• Legal Inconsistencies: Laws evolved to protect stakeholders through product liability laws, labor rights, environmental protection, and consumer protection measures
• Ethical Shortcomings: The idea that business and ethics are separate is reinforced and ethical implications are ignored

Stakeholder Theory: A New Paradigm

• Businesses create value for customers, suppliers, employees, communities, and financiers/shareholders

Key Conceptual Frameworks: The Open Question Argument

• Critical questions for every business decision are "Who benefits?", "Who bears detriment?", "Whose rights are affected?", and "What will the business become?"

The Integration Thesis

• Business decisions possess inherent ethical aspects
• Ethical choices entail implicit business consequences

The Responsibility Principle

• People generally want to accept responsibility for the impacts of their actions
• Moral responsibility is essential for ethical business conduct

Philosophical Foundations

• Business is redefined as a network of relationships
• Emphasis is placed on value creation through stakeholder interactions
• Managers shape and manage these relationships through collaborative processes, mutual flourishing, avoidance of coercion, and dialogue

Pragmatic Implications for Capitalism Reimagined

• Shift from a competitive framework to a collaborative platform
• Fundamental economic mechanism becomes social cooperation
• Mutual value creation across stakeholder groups

New Business Narrative Conclusions

• Moving beyond shareholder-centricity is key
• Integrating economic and ethical perspectives
• Complexity of modern business is recognised
• Relationships and mutual value creation are Emphasized

Practical Applications

• Implementing holistic decision-making
• Incorporating various stakeholder views
• Balancing economic aims with ethical accountability
• Taking charge of stakeholder relationship management

Documentary: The Corporation as a Person

• Corporations are legally considered people with individual rights but lack the accountability of people
• This concept stems from the 1886 U.S. Supreme Court case Santa Clara County v. Southern Pacific Railroad

Corporate Psychopathy portrayed in the documentary

• Framework of psychopathy describes corporate behavior, as corporations are solely driven by profit, have no moral compass, and are willing to exploit for money
• Psychologists and insiders compare what corporations do to traits of psychopaths: ex; lack of empathy, irresponsibility, manipulation

Documentary: Environmental and Social Impacts

• Corporate greed causes environmental damage, worker exploitation, and social injustice
• Focuses on destroying natural resources, pollution, and worker exploitation in developing countries

Case Studies

• Nike: Labor exploitation in Indonesia and Vietnam, where workers receive low wages
• Monsanto: Over the genetically modified food industry and tactics to protect patents, sometimes impacting small farmers
• Big Tobacco: Tobacco companies manipulate information to downplay health risks and fight to avoid responsibility for damages

Documentary: Corporate Influence on Government and Democracy

• Corporations exert influence through lobbying, campaign contributions, and the revolving door between corporate executives and government officials
• Corporate power undermines democracy and public interest to turn governments into corporate tools

Documentary: Corporate Social Responsibility (CSR)

• Questions rising CSR initiatives and whether they are genuine efforts or improving corporate image without corporate accountability.
• CSR deflects attention from the harm corporations cause rather than addressing systemic issues

Documentary: Solutions and Alternatives

• Potential solutions that address issues caused by corporate power are offered. Including social entrepreneurship, breaking up large corporations, and advocating for regulations
• Calls for values-driven ethical businesses that put people and the planet before profits

Further insight to the above

• Interviews give insights into the dangers of unchecked corporate power from a range of figures; business leaders, activists, environmentalists, etc

Conclusion of the Documentary

• Modern days capitalism is questioned on giving corporations unchecked power
• While it's recognised that they have brought innovation, benefits have resulted in social and environmental repercussions
• Encouraging stakeholders to reconsider the role of corporations in society

Opioid Epidemic Case Study Notes - Key Overview

• Regarded by CDC as the US's "worst drug overdose epidemic" being greatly driven by prescription opioid abuse/misuse
• Impacts individual lives, together with the health, economy, social systems

Opioids: Characteristics and Impact

• Drug Properties
  • Comes from Opium Poppy
  • Medications like morphine, fentanyl, codeine, and oxycodone are included
  • So are substances like Heroin
  • Addictive nature with intense euphoric effects exist with these opioids
  • Brain changes come about weakening impulse control

More Opioids: Characteristics and Impact, this time, Epidemic Statistics

• 33,091 Deaths in 2015 due to overdose
• From 1999-2015 death rates Quintupled
  • Highest impact on:
    • Mid-life adults (45-54)
    • Non-Hispanic Whites
    • States like Ohio, New Hampshire, Kentucky, West Virginia

Key Business: Opioid Epidemic

• Purdue Pharma
  • 1996 - Oxycontin was Developed
  • Downplayed addiction risks leading an aggressive marketing push
  • Profits Peaked at $3.1B in 2010
  • Penalised ​​$600M in fines in 2007 for misbranding

McKesson Corporation

- ​Wholesale drug distributor
- ​Fined $150M in 2017
- ​Did not address/report suspicious drug orders
- Distributes a third of US pharmaceuticals

Pain Clinics ("Pill Mills")

- American Pain based In Florida
- Prescribed opioids under not much medical oversight, with large cash flow; attracting patients seeking drugs

Progression of the Epidemic

1. Rise of prescription opioid availability
2. Crackdown on prescription pills around 2010
3. Shift to illegal drugs:Fentanyl, Black tar heroin from Mexico, Heroin

Societal Impacts

• Economic Consequences - High unemployment has correlations to overdose rates, strain on local government budgets, overwhelmed child services , workforce decrease, healthcare costs increase
• ​Social Consequences - Strain of the foster care system, family disruption, child neglect,
• Public health crisis, increased burden regarding emergency services and law enforcement

Government Response, mainly regulation

- In 1970 Controlled Substances Act was used
- State interventions, Drug Enforcement Administration production quotas, Increased monitoring for prescriptions

Government Response, legal action

- From 2017 onwards drug companies were sued by over 25 government entities
- The base reasoning for the lawsuits were consumer protection, negligence, public nuisance, and unjust enrichment

Context

• Researchers say that the epidemic is caused by "death of despair"
• It's connected to decline of the lesser educated working class
• Economic and social struggles are reflected

Key Lessons

• Corporate responsibility goes further than what is just deemed legal
• Mutli Stakeholder approaches are needed for complex public issues
• Systemic oversight and regulation are pivotal
• Profit clashes with public health

Boeing 737 MAX Case Study Notes

• The Company, Boeing, is a major multi national aerospace corporation
  • Founded by William Boeing with a quality driven history
    • Commercial Airplane
    • Defense, Space and Security
    • Global Services

Boeing - Pre and Post 1997

• Prior to 1997, there was and engineering focus paired with innovation
  • Post-McDonnell Douglas focus shifted to valuing the shareholders, cost cutting, prioritizing modifications over new ones, reduced R&D spedning, and increases shares of buybacks

MAX 737 Development

• Decided to update the 737 due to American airlines pulling out, causing the update to cost $1-2 billion, with original plans of $10-12 billion
• In order to update and certify the process needed to be sped up

737 MAX: Critical Design and MCAS

• New engines needed to be used more fuel efficiently but, were not able to fit on set mounting locations, these engines were the CFM International LEAP-1B engines
• Because these were moved forward and higher, the engines caused a centre of gravity shift, creating a pitch causing a stall

Boeing 737 MAX - MCAS (Maneuvering Characteristics Augmentation System) Pt2

• MCAS
  • Initially planned to make small pitch corrections
  • To counter the aircraft's pitch up tendency it was developed and meant to work invisibly to the pilots T- ied to AOA sensors

Boeing 737 MAX Flaws

• At one time on AOA was connected causing a single point of failure
• Boeing Personnel were informed of changes and changes weren't communicated to Regulatory Environment / FAA
• Corrections later were modified increasing up to 2.5 degrees

FAA

• They used a system of "Organization Delegation Authorization" to allow Boeing to self certify
• Approximately 98% of their own work was certified, with only 45 engineers from FAA. (compared to 1400 Boeing Representatives

Pilot Training

• In an attempt to cut costs, A computer based (low level) training process was used; avoiding simulator training
• In addition, references to MCAS were removed

Boeing, Production challenges

• Increase of aircraft from 47 to 57 per month, pushing their Renton factory
• Exhaustion, safety sacrifices, and process circumvention were reported due to the push

With this, important things need to be considered ethically

• Cost cutting was valued to safety risks
• Changes within systems weren't successfully communicated
• Pressuring to minimise the costs of training and certification
• Internal and external warnings were discarded

So with all of that, what are the key lessons we can learn?

• Financial Metrics may be valued over safety, reducing the importance of engineering integrity. Because of this, transparent processes are needed to keep companies communicating ethically while reducing reduced regulations.