The stakeholder model should be implemented as an alternative for the Friedman’s shareholder model
In his article, "The Social Responsibility of Business is to Increase its Profits" published in 1970’s reputed “The New York Times” Magazine, Friedman debates in favor of precisely what the article's title states. He alleged that corporate social responsibility (CSR) was a diversion from the economic rudiments of business that helps in capitalize on profits and yields to shareholders. In his article, when he raised the description of advocates of CSR he stated, "The businessmen believe that they are defending free enterprise when they declaim that business is not concerned 'merely' with profit ...view middle of the document...
That means they have a post on the well fare or the outcome of the industry.
Friedman’s shareholder concept paved way for the stakeholder model wherein, no individual or entity apart from shareholder can incorporate his assertion on the business. On the other hand the stakeholder’s concept explains more than the principle relationship between the agents (who acts on behalf of the shareholder) and explains the incorporation and the significant role played by the third parties to whom the company ethically owes a major non fiduciary duty. These obligations happens attributable to; stockholders, these alternative stakeholders furthermore, build significant reserves or investment in an organization: staff invests their time and intellectual capital, customers invest their trust in the continual business, and communities give infrastructure and education for future staff in addition, as tax support, and so on, so forth.
However, one needs to understand beyond the profit maximization or the multi fiduciary in order to understand the stakeholder’s concept. In which, management of the organization holds responsibility for acquiring the balance between the stakeholders and avoiding any unwanted circumstances (clashes) between the groups or entities. Management also holds responsibility for rectifying any damages caused by the personnel or stakeholders. Besides, In this era of corporate world, the goal of the organization often pay respect in contributing to society; on top of the standard exposure of product marketing, technology and service aspects. (Lantos, 2001)
On the other hand Cosans (2008) states that the Friedman model is usually taken in a mistaken context and his claims about businesses bear a duty to seek profits rests partially on a ‘‘division of labor’’ that he fashions in his idea of communal integrities. He furthermore adds that in an independent society, there are two different ways in which an individual can invest in a resource for a purpose. According to Cosans they are “The Political Mechanism and “The Market Mechanism”. The political mechanism mainly deals with the government and obligations made by the government wherein, the politicians deal with the various issues, problems and address them politically. They in turn receive their feedback from the people through elections. The winner of an election or the politician on the stand creates guidelines, prohibitions and Laws for the people, businesses and society and these issues are implemented and address by the tax revenues. This helps people in acknowledging their limitations and acknowledging their prohibited areas to avoid unwanted cases, crimes to take place.
Whereas, “The Market Mechanism” offers members of society ways to fix things they trust that might not have enough societal support or demand to ensue in the conception of a government plan. Usually people who has savings opt to invest in shares of the business to become shareholders and earn those extra...