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Write a summary on the article Rethinking the Social Responsibility of Business.
The article titled 'Rethinking the Social Responsibility of Business' debates the varying viewpoints of Milton Friedman, the Nobel laureate in economics; John Mackey, the founder and CEO of Whole Foods and T.J. Rodgers, the founder and CEO of Cypress Semiconductor. The debate commences with the famous quote of Friedman that increasing their profitability is the social responsibility of any business. This contradicts the ideologies of some capitalists who claim that businesses have a social conscience. According to Friedman, they are socialists who undermine the fundamentals of a free society. Mackey, who is a self-proclaimed libertarian, thinks that Friedman has only a narrow perception about the humanitarian element of business activities. Whereas Rodgers, one of the toughest American bosses, counter argues that business entities serve societies through long-term shareholder wealth maximization rather than philanthropy.
Putting Customers Ahead of Investors – John Mackey
In his 1970 article, Friedman stated that a socially responsible business utilizes its resources to conduct activities that increase profits while engaging in an open and freely competitive market with honesty and integrity. Mackey disagrees with this orthodox consideration and states that business entities have to create values for all stakeholders such as investors, customers, employees, suppliers, the environment and the society, who have a genuine need to be satisfied. According to him, Whole Foods success is not attributed to shareholder value but being a customer-centred business. Associating success with married life, he states that ensuring the wife’s happiness makes the husband happy because of his love for her. Similarly, the company's profits are centred on customer happiness.
Though he agrees that investors own the assets of the company, he believes that it is the responsibility of the management to utilize it efficiently. He argues that shareholders hold a company’s stock voluntarily and have the right to divest shares or raise their issues during annual general meetings if they have a disagreement with the company’s philanthropic policies. He adds that philanthropy is also a business strategy that acts as a benefit for investors. He claims that it is the entrepreneur who creates a company, and he has the right and responsibility to define its purpose. The real issue for the company lies in balancing the value creation for stakeholders as to how much percentage of revenue is allocated to each stakeholder's benefit.
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