I presented a presentation in the class of Ethics during my MBA in early 2013.

1. Rethinking the Social Responsibility
of Business : A Reason debate featuring
Milton Friedman, Whole Foods’ John Mackey &
Cypress Semiconductor’s T.J. Rodgers
By: Sunita Rai
Presidential Business School, Kathmandu, Nepal

2. Contents
• Briefing the case and the three actors
• Issues: “Understanding Corporate Social Responsibility (CSR): The Three
Perspectives”
• Alternatives: How can business contribute to the welfare of society?
• Behavioral analysis of consequences of Alternatives!
• Choosing Alternatives and Analyzing the consequences
• Conclusion
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
2

3. What do you mean by Social Responsibility of a
Business?
• Social responsibility is a concept used to describe the “obligation” of
business to consider the social consequences of economic business
decisions (Hill, 2006).
• By delivering "always better cars" to customers and contributing to the
betterment of towns and communities, we aim to be a company whose
growth is welcomed by as many people as possible. -President, Toyota
Motor Corporation
• At The Walt Disney Company the six main components of their approach
to corporate responsibility include, Business Standards and Ethics,
Corporate Governance, Community, Disney’s Environmentability, and
International Labor Standards. –www.thewaltdisney.com
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
3

4. the three
Actors
Milton Friedman
An American
Economist who
advocate free market
economics.
John Mackey
Co-CEO of Whole Foods Market,
co-founded in 1980. He is a strong
supporter of free market
economics.
T.J. Rodgers
CEO of Cypress
Semiconductor,
and a strong
supporter of
laissez-faire
capitalism.

5. John Mackey’s Whole Foods Market
• Whole Foods Market, Inc. is an
American
foods
supermarket
chain
based
in
Austin,
Texas
which
emphasizes
"natural
and organic products.”
• The company has been ranked
among the most socially
responsible businesses and
placed fourth on the U.S
Environmental
Protection
Agency's list of Top 25 Green
Power Partners.
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
5

6. T.J. Rodgers’ Cypress Semiconductor
Corporation
• Cypress Semiconductor Corporation is a Silicon Valley-based
semiconductor design and manufacturing company.
• Some of its main competitors include Microchip Technology, Integrated
Device Technology, Samsung Electronics, and Xilinx.
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
6

7. Understanding CSR: The Three
Perspectives
•The Social Responsibility of business is to increase it’s
profits. –Friedman
•Corporations add far more to society by maximizing “long-
term shareholder value” than they do by donating time and
money to charity. – T.J. Rodgers
•I believe that the enlightened corporation should try to
create value for all of its constituencies. – Mackey

8. Does Friedman’s emphasis on maximizing profits means
that he is not concerned for the welfare of the society?
• No. He puts emphasis on the economic utilization of
resources of the society in return for providing
amenities to that society or government. To make
profitable use of resources, one should invest first.
Investments come from profits.
• Larger profits will bear high-value products from low-
value products. This will save the consumers money.
• Instead
of giving the profits to charity, the
shareholders may reinvest for research and
innovations, adding up business wings, and
continuous improvement of the corporation.
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
8

9. Rodgers’ perspective of CSR
• Rodgers believes that increasing the shareholders’ value will ultimately
do welfare to the society. Like Friedman, he also believe that a company
has to increase profits and multiply them by reinvesting.
• He believes that profit is an end to satisfy social means. He opines that
his company Cypress Semiconductor is following “rule of the game” and
contributing to the stakeholders.
• For e.g.: Rodger’s semiconductor industry does-relentlessly cutting the
cost of a transistor from $3 in 1960 to $0.000003 today.
• Rodger prefers to be free market capitalist rather to be collectivist and
altruistic who pretends to care about society.
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
9

10. John Mackey’s Perspective of CSR
• Unlike
Rodgers’
Cypress
Semiconductor, Whole Foods is
focused on customer-centered
business rather than profitcentered.
• At Whole Foods, They measure
success by how much value they
can create for all six of their
most important stakeholders:
customers,
team
members
(employees), investors, vendors,
communities,
and
the
environment.
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
10

11. Alternatives: How can business contribute to
the welfare of society?
1.Putting Shareholders First
•Shareholders means Investors. Investors are businessmen who are responsible
for economic activities and for the outcome from those activities done.
•Profit plays role in allocating resources towards goods and services that
consumer desire. Adam Smith says that a merchant who strives for his own gain
unwittingly promotes the interest of the society.
•The long-term benefit of the investors will promote the capital of company. This
will generate product innovation, high-value products, and employment
opportunities.
•Friedman and Rodgers believe that it will increase the living standards of the
people.

12. 2.Putting Stakeholders First
• A stakeholder is anyone who is affected by the company.
Mackey Whole Foods’ Six
Stakeholders
Customers
Environment
Employees
Communities
Shareholders
Suppliers
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
12

13. Ethical Responsibilities of business towards Stakeholders
Customers
• Company delivers honesty, service and reasonable
price
Employees
• Recognize and Reward the employees for better
team performance.
Shareholders
Suppliers
• Share profits, return on capital, and psychic income
to stockholders.
• Establish stable and honest business relationship
with fair financial reward
Communities
• Give 5 percent of profits to community causes
Environment
• Stewardship
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
13

14. Behavioral analysis of consequences of Alternatives!
1.Profit-centered business
• If all the business started doing only business concerning only
its investors, it will make profits but the profits shared among
investors will only empower more capitalistic society. Rich
countries will become richer and poor countries more poorer.
• T.J. Rodgers’s Cypress Semiconductor is moreover focused on
strengthening investors and employee morale. Rodgers believe
that creating competition and giving awards to the employees
will attract more people to join his organization.
• The distribution of profit is limited because it is only shared
with investors. The freedom of will make them to invest in
illegal activities. i.e. Financing for War guns.
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
14

15. Q&A:
Suppose If the businesses only do business and nothing else and At the end,
if the environment didn’t exist, what will you do with your profit? What do
you think about how the company should use their PROFIT in order to
deliver maximum good for all stakeholders?
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
15

16. 2. Customer-centered Business
• Customer’s happiness is Company’s success. Mackey’s strategy to provide
organic foods to consumers is an act of social responsibility towards his
customers.
• The 5 percent of profit sharing as donation to non-profit organization will
make a positive impression on stakeholders.
• If the consumers believe that Whole Foods is a good corporate citizen,
they may be more willing to buy groceries at its stores, which ultimately
increases revenues and profits.
• Organization who has invested huge amount in CSR activities has earned
maximum profits. For e.g.: Walt Disney, Nestle, Toyota.
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
16

17. An example of Business alongwith CSR act of Recycling
by Tetra Pak
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
17

18. Toyota Eco-friendly cars
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
18

19. CSR activities in Nepal
• Surya Nepal(SNPL) has provided two ambulances and has
been helping make available anti-venom and oxygen
cylinders that are essential for saving lives in times of
medical emergency.
• SNPL has been empowering needy women through
vocational trainings such as garments sewing, weaving,
agarbatti, bindiya and candle-making, local handicrafts,
dairy products etc.
• Promoting sports & tourism and sports tournament like
Khukuri Cup and Surya Nepal Masters, Nepal’s only
International Masters golf tournament. (www.snpl.com.np)
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
19

20. Choosing & Analyzing: The Customer-Centered Business
• For the question of long-term profit making and sustainability of
the business, choosing the customer-centered business is wise and
ethical decisions to make. Customer happiness is an end in itself
while profit is only a means to an end.
• Unlike Rodger’s Profit-maximization model, Mackey’s Whole
Foods follows Robust Stakeholder Model. Besides Investors, the
other stake holders do not have property rights in the company.
Thus, it benefits investors with psychic incentives along with
company’s dividends.
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
20

21. Choosing & Analyzing: The Customer-Centered
Business
• In this case, Customer-centered business doesn’t mean
that business is done for charity. Mackey says that he
puts Customers ahead of Investors. It means he is also
considering the profits.
• A market research study found that 42% of how people
feel about a company is based on their perceptions of
the firm’s corporate social responsibility (CSR). Reputation Institute, a private global consulting firm
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
21

22. The Ten Companies with Best CSR ReputationBy Forbes 2013
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
22

23. Conclusions
• This case draws our attention on the issues about CSR. It answers queries
like what is CSR? How do general people and businessmen understand
and perceive CSR?
• Precisely, this case is about an article debate among three significant
individual: Friedman, Mackey and Rodgers published by Reason
magazine.
• Rodgers favors’ Friedman view that a Profit is the sole reason for the firm
to exist.
• The stakeholders for Friedman are only investors. He supports the idea
that increase in the private property will fulfill the society’s interest.
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
23

24. Conclusions
• The Fiduciary duties of employees remains only with the
shareholders.
• In Contrary, Mackey’s believes that Profit is necessary for
business survival, but other goals (Stakeholders well-being) are
also important to the firm.
• Mackey views that Fiduciary duties of employees remains to a
wide range of stakeholders.
• For the question of long-term profit making and sustainability
of the business, choosing the customer-centered business is
wise and ethical decisions to make. Customer happiness is an
end in itself while profit is only a means to an end.
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
24

25. Concluding Q
Corporations have provided billions of dollars in aid to victims
of Hurricane Katrina, the South Pacific
tsunami and AIDS in Africa. In some
cases, these contributions have been more
effective than government aid. What do you think would
Friedman and Mackey support these types
of donations?
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
25

26. Both men would want to
understand the reasons behind the
aid. They would approve if the donations generated good
public relations
and advertising for the firms and
caused sales and profits to rise.
But
Mackey would approve even if the
donations had no positive impact on
the company’s finances. He would say
that corporations have an ethical
duty to use some of their profits for
the public good, as long as shareholders
can question executives about such
programs at the company’s annual
meetings.
Wednesday,
November 27, 2013
Friedman would oppose philanthropic
donations if a company’s executives used
them only to support their
own personal causes or improve their
personal reputations. He would say
that the company should take the aid
money and instead give it to shareholders
by, say, raising the dividend
on company stock. Then the shareholders
could use the money to support their own
favorite charities.
Rethinking the Social Responsibility of Business
26

27. Queries, Comments and Suggestions Please!
Wednesday,
November 27, 2013
Rethinking the Social Responsibility of Business
27